Interim CFOs: Who’s Using Them and How?

Interim CFOs: Who’s Using Them and How? - financial overlays of an office

In recent years, the role and responsibilities of Chief Financial Officers (CFOs) have grown greatly beyond their historical boundaries. No longer seen simply as stewards of the company’s financial management, compliance, and reporting, CFOs today are taking an increasingly prominent role as key strategic partners to the CEO, tapping vast troves of data generated by the organization to provide actionable insight on company priorities and offer early warning of risk on the horizon.

As businesses upgrade and expand their finance capabilities, they’re adding complexity and operational scope to the CFO role—requiring ever-greater expertise to succeed within it. One survey by Heidrick & Struggles found that two thirds of CFOs said new responsibilities have been added to their team’s plate since the pandemic began, from new reporting requirements to real estate evaluation and employee health and safety.

According to Alyse Bodine of Heidrick & Struggles, “The broadening spectrum of factors shareholders expect companies to pay attention to, along with their rising complexity, has elevated the importance and scope of the CFO role. Today’s CFOs are expected to have broad business and commercial acumen to develop and execute enduring strategies for creating shareholder value, measure their impact on stakeholders, and address various forms of risk—particularly global risks—as companies move into new markets. Add in issues such as social responsibility, and it is clear that CFOs are expected to function at a higher level than ever before.”

At the same time, incumbent CFOs often lack the skills or experience necessary to meet the evolving needs of the business. The search for a new permanent, full-time CFO can be lengthy, especially in this dynamic market where the The Great Resignation has impacted the supply of CFOs—particularly those with the in-demand data and digital skills that are now essential for senior leaders. To ensure that organizations have access to the specific financial skills they need and are able keep moving on key initiatives and daily operations, leading companies are increasingly engaging interim CFOs.

Anchoring the finance function with interim CFOs

The case for interim CFOs is stronger than ever. During periods of transition, an interim CFO can help maintain continuity, provide guidance, and contribute specialized expertise when assessing new opportunities. Their timeline is limited, which makes the urgency of their goals that much greater. They are highly motivated to accomplish essential tasks and put specific processes in place quickly. Interim CFOs can guide innovation, and their experience may pad out the potential lack of experience within internal teams that could be uncovered during the search for a long-term candidate.

By tapping a skilled interim CFO, companies can do more than just keep the seat warm until a permanent hire is made. They can take the opportunity to advance the finance team’s capabilities, allow more time to find the perfect permanent CFO—while refining their criteria for what exactly that means—and complete short-term initiatives that set the long-term leader up for success.

What’s driving the demand for interim CFOs?

According to Deloitte, early in the pandemic, many CFOs were resolved to staying put because many felt a renewed sense of loyalty and weren’t about to abandon the business just when it needed them most. Plus, internal candidates suddenly gained extra appeal, and some companies even enticed retiring CFOs to stay in place. In fact, from March – May 2020, some search firms reported seeing new searches drop by as much as 25%.

The current surge in demand for CFOs is a complete reversal from those early days of the pandemic. Within a short timeframe, several market trends turned the field in CFO’s favor with “breathtaking volume and velocity.”

A Need for Support in Rapid Growth or “Challenging” Financial Situations

The pandemic presented opportunities for many companies to acquire weakened competitors or grow organically—requiring finance leaders with experience in turnarounds and M&A integration. Other companies in less resilient industries found themselves facing never-before-seen economic challenges.

While incumbent CFOs are experienced at “running” the finance function under normal conditions, they often struggle to “build” the function to support rapid growth, debt restructuring, or operating under tight cash flows. The right interim CFO can bring much needed outside perspective and experience acquired in other engagements to assist companies with whatever their current financial situation may be.

Widespread Transformation and Critical Transitions

The pandemic accelerated workplace trends such as virtualization, the changing pace of work, and the integration of new automation tools. Moreover, transformation took hold in almost every corner of the business. And CFOs are now a more critical component of these transformations than ever before, with 42% of CFOs saying their primary role in their companies’ transformations is to serve as co-leader.

In situations where a company needs strong leadership from the CFO, but they aren’t yet ready to make a full-time hire or can’t hire fast enough, interim CFOs can step in to help companies keep these critical transformations on track.

A Boom in Public Exits

Planning for and going through an IPO demands experience with SOX, IR, etc., and many private company CFOs lack this expertise. Furthermore, the special purpose acquisition company (SPAC) market took off in 2020-2021, offering a whole new route to a public offering while creating new companies all requiring seasoned CFO leadership.

With experience operating across the public-private divide, interim CFOs can help companies button-up their financials and lay the groundwork for the more rigorous finance function that public companies require.

Sudden CFO Departures, Unexpected Gaps, and Executive Exhaustion

Fatigue, burnout, and the changing role of CFOs are fueling a Great Resignation within the finance function. While some CFOs who steered their companies through the pandemic found they lacked the energy to gear back up for a growth sprint in 2021, others seized upon a sustained rally in the equity markets to cash out and pursue retirement or pivot into full-time board careers. In fact, the number of retiring CFOs in S&P 500 companies rose almost 30% between 2019 and 2020, while the average CFO tenure dropped sharply—decreasing to 4.58 years compared to 5.3 years in 2015.

As the supply and demand curve for skilled finance leadership grows ever more steep, interim talent can provide steady hands to help companies bridge the gap until an ideal long-term CFO can be found.

How companies are utilizing interim CFOs

The expertise that a skilled interim CFO can offer is increasingly critical as companies upgrade their financial capabilities and the CFO role grows in scale and scope. No surprise then that demand for interim CFOs leaped by 74% last year, according to BTG’s 2022 High-End Independent Talent Report.

In our experience delivering highly skilled interim CFOs to leading companies, there are four ways that organizations are leveraging interim resources for the role:

  1. Traditional interim CFO
    In what is considered the most traditional scenario, interim CFO talent can step in to provide steady leadership and keep workstreams moving during a temporary leave or gap in the org chart.
  2. Support for acting finance leaders
    In scenarios where internal resources have already been redeployed to fill the CFO role, it’s common for companies to tap experienced interim CFOs to consult, guide, and back-stop acting CFOs along the way.
  3. Backfill for internal talent currently acting as CFO
    During leadership gaps, companies may also seek on-demand CFO-level talent to provide targeted support in roles such as interim treasurer or VP of FP&A.
  4. Projectizing critical near-term components of the CFO role
    By carving out certain workstreams and objectives, the interim role can be hyper-focused on special projects and niche needs.

So what are organizations looking for in their next CFO, whether interim or for the long-term?

“About 90% of our clients place a strong understanding of operations at the top of their list, along with organizational leadership skills. The focus on operationally capable CFOs, who have worked at the business unit level, transcends industry sectors… Business partnering, leadership, and experience interacting with the board are also among our clients’ frequent ‛must haves.’” Bodine said in a Wall Street Journal article on current market demands.

Jeremy Hanson of Heidrick & Struggles adds, “There is a need for CFOs who are adept at taking customer data and analytics and using that information to improve business and the way they market products and services. There simply aren’t enough of those executives on the planet right now.”

Find the interim CFO you need

With Business Talent Group, you can access an on-demand talent marketplace that includes more than 10,000 top finance executives. Whether you’re experiencing a moment of rapid growth and transformation, undergoing financial challenges, dealing with unexpected gaps, or entering a new phase in your company’s progression, BTG can help you find right-fit finance talent for any situation. Reach out today to discuss your interim CFO needs.

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