People
Interim CFOs often operate in an environment characterized by significant transformation and exceptional transactions. This provides numerous opportunities for companies that are navigating a business world that is being disrupted and evolving at a rapid pace. Acquisitions, post-merger integrations, whole-company transformations, and the unique challenges that arise when entering the world of private equity all point to a role that can deliver successful solutions to manage short-term pain and build for longer-term gain.
The CFO agenda this year includes high-pressure, time-sensitive items that require a focus on transformation imperatives. Softening demand, rising interest rates, higher levels of debt to service, and a tightening focus on cash all indicate the macro-economic environment is changing rapidly. Business priorities must adapt in response. The CFO role is back in the spotlight, as traditional CFOs may not always have the flexibility and exposure to discontinuity to drive rapid and effective responses.
These challenges are not atypical for interim CFOs. They generally bring a broader knowledge base from more varied company and industry scenarios. Rapid transformation is normal for interim CFOs, while for the companies they work for it is often stressful and uncertain. Private equity owners strive to transform companies from underperforming or good to great, and transitioning quickly within their investment cycle timeframes is critical. Interim CFOs must build trust and confidence fast to tackle immediate priorities. While working with healthy companies affords them some time to think beyond cash, acting decisively in both scenarios demonstrates how disruption is "normal" for those experienced in this role.
Our experience in Interim CFO roles in highly transformative circumstances shows that five consistent actions should be taken to supercharge company performance:
- Accelerate initial financial control and jump-start transformation: In the first 100 days, Interim CFOs lead the overall project management office (PMO) for transformative projects initiated by private equity. They must quickly translate value creation theses into actionable plans. Interim CFOs operate in a "super partes" role, with no ties to legacy corporate politics, which allows them to make impactful reorganizational choices based on robust rationale with reduced resistance from the company. Interim CFOs are well-positioned to become the control room for several teams across multiple workstreams, such as pricing, operations, and procurement, as a coordinator and enabler for different teams involved in company transformation.
- Reimagine management reporting: A common concern for private equity firms is the lack of robust financial and operational reporting in portfolio companies. Interim CFOs can bring a fresh perspective on the business because of their impartial view of historical management practices and previous experiences gathered working with private equity.
- Instil a performance/data-driven culture: PE firms require a regular, in-depth business review process where portfolio company management and the fund discuss company performance and progress towards value creation objectives. Interim CFOs are experts in setting up a structured business review forum across different corporate functions. The need for a more sophisticated level of performance information requires data literacy to be boosted and sales, operations, and finance at the table to validate business cases and promote a holistic approach to performance management.
- Seamlessly manage extraordinary processes: Interim CFOs hold a unique position to navigate the ambiguity of complex, multi-stakeholder processes. Their experience can be vital in fast-paced build-up strategies, where multiple M&A transactions can happen simultaneously and integrating new acquisitions becomes part of day-to-day business. They can structure internal post-merger integration (PMI) processes and foster the company itself to own effective integration of new targets. This is also true for other transactions such as carve-outs or complex refinancing operations, normally not part of the daily role of a permanent CFO.
- Drive digital transformation in Finance: Interim CFOs can significantly boost the adoption of digital tools for finance in an organization across multiple domains and ensure that ROI targets are met. These include data visualization and reporting; forecasting and machine learning; RPA; and analytics automation. ERP systems gaps may also be identified in relation to consolidating them within PE group set-ups which, when filled, can harmonise financial information to report at a group level, focusing on the key value creation drivers relevant to the fund. Digitalization in finance will also incorporate the review and simplification of daily processes, in turn finding new capacity to be focused on urgent projects.
In summary, companies are buying specialist knowledge when they hire Interim CFOs. To achieve sustainable long-term success, it is essential that accelerated finance transformation, greater fiscal transparency, and robust people development programs are all executed simultaneously.
Interim CFOs are experts in making Finance functions a central challenger within companies. In a world that is anything but normal today for investment managers, the level head and experience of an Interim CFO, for whom consistent disruption is simply "part of the job," cannot be underestimated when it really matters.
You can read additional articles from our CFO series below:
