The dawn of the interim CFO - SystemsAccountants

Estimated reading time: 7 minutes The dawn of the interim CFO

With companies fighting for financial know-how, a spotlight is beginning to shine on leaders who can bring the skill sets and expertise firms need in the moment.

Demand for interim leaders shot up significantly during the past 12 months, a report by Business Talent Group, a Heidrick & Struggles company, found, rising 116% year-over-year. Requests for on-demand finance chiefs in particular saw a considerable spike, increasing by 103% YoY, boosted by both continued economic uncertainty and the growing complexities of the CFO role.

The rising demand for interim CFOs is also partly due to growing awareness of the availability of such short-term expertise, said Sandra Pinnavaia, Chief Innovation Officer for BTG.

“Companies, as they get more comfortable and aware of the fact that there is this on-demand talent world, it allows them to contemplate different kinds of changes and uses than before,” Pinnavaia said. “So I do think there’s an underlying driver here, that is in a sense, supply creates demand.”

The interim CFO’s appeal

For companies, interims can help firms navigate through tricky periods or transitions. Requests for interim CFOs made up half of all interim C-suite requests, according to the BTG report. Companies are specifically searching for financial leadership skilled in financial controls, accounting and audit. Demand for such expertise rose 76% YoY.

For finance leaders, the higher demand coincides with gains in the compensation and benefits that accompany the role, said Jack McCullough, President of the CFO Leadership Council.

There’s better money available for CFOs who do this type of contract or interim work, leading to more executives interested in these types of jobs, McCullough said in an interview. For example, some part-time CFOs have begun to receive stock options, he said, referring to a CFO who received the benefit at three startups.

Taking an interim role can also be a refreshing change for finance leaders who want to apply their skills in new areas, according to Diane Buckley, managing partner of Forte Financial Consulting LLC. Buckley, a veteran of Big Four accounting firm Ernst & Young, was drawn to interim and fractional CFO work because it afforded her the option to share her skills with growing companies and “really be impactful day one,” she said.

“It was like, ‘I can bring value to smaller companies that may not at this point in their growth warrant a full-time CFO, but I can bring that skill set to them,’” she said in an interview.

On the supply side, shifting workforce trends may be prompting more companies to take a second look at what they need from their leadership. Talent shortages across the accounting and finance space mean companies may be facing a year-long period to find a qualified CFO, making it more necessary to put in an interim “even if it’s not the ideal person,” McCullough said.

Meanwhile, the pandemic has also left a lasting mark: BTG clients have tapped more interims because “they have been forced over the last few years, to redefine their whole way of working,” Pinnavaia said.

“Now obviously we have a huge spectrum — there are companies that are back full-time, in-person every day, and there are companies that have really changed their business model and they’re not in-person at all,” she said. “But I think that has loosened up the aperture for what would be an acceptable solution” when it comes to leadership, she said.

The right talent at the right time

Hiring on-demand talent also allows companies to find a leader who can meet their needs in the moment — and since many interims come into a company to solve a particular problem or meet a specific goal, one’s skills are “kind of by definition matched to what the issues are,” said Reed Malleck, CFO of Ratio Therapeutics.

CFOs often need to operate in “four dimensions,” he said in an interview, including accounting, operational skills, investor relations and the ability to participate in the execution of strategy for the business.

“If you’re a permanent CFO, you have to cover all of those, even though you might be really good at only one of them,” according to Malleck, an experienced interim executive who took on several such roles as an engagement partner with executive talent firm Tatum, a Randstad company.  “But as an interim person, it’s more targeted, like, ‘we need a guy who’s really good at operations. We need this thing to be fixed.’”

Being able to slot one’s skills perfectly into the situation can be a huge benefit for CFOs, many of whom are dealing with expanding job creep. While becoming an interim is not necessarily less stressful than a permanent CFO position, “in a way, you get relief when you get to the point where you fix everything, and when you’re in a permanent role that never happens,” Malleck said. “When you’re in a permanent role, there’s always something new that’s a new problem.”

With CFOs taking on more responsibility for areas like digital transformation, keeping up with the books and juggling other operational needs across the organisation, “the CFO is blamed for this and blamed for that … increasingly, people get burnt out or there’s a loss of trust,” he said.

“Hundreds of analysts are looking at your stock and your performance, the market and the competitors and the technology and you have to explain things not once a quarter, but like five times a day,” Malleck said.

Succession planning is vital

Another often unexplored benefit of on-demand talent is as a source of expertise for future company leaders. A shortage of talent in the finance and accounting fields is worsening, with potential accountants lured away by shinier fields such as technology. As a result, building a pipeline for executives with CFO skills is crucial.

Moreover, CFOs who were at the top financial seat the last time the U.S. saw serious inflation in the 1980s have long since retired, McCullough said. Finance leaders today face a “steep learning curve.”

“CFOs, through no fault of their own, they haven’t had to develop the skills” necessary to navigate current economic turmoil, he said.

Many CFOs with decades of experience are also either looking to retire, or seeking promotion rather than lateral opportunities, said Shawn Cole, president of boutique executive search firm Cowen Partners.

The jump from the CFO to the CEO seat is “way more commonplace” today than it was just a few decades ago, Cole said in an interview, opening up more opportunities for finance heads. Promoting internal candidates to an interim chair can be an easier and more affordable way for certain companies — faced with both a dearth of qualified external candidates and shaky succession planning — to fill the seat while they hunt for a long-term replacement, he said.

“For the last decade or so, businesses have been in like a boom or bust kind of scenario,” Cole said. “And so I think there’s just this lack of investment in a future generation.”

Whether an internal or external interim hire, the executive should also be a welcome and engaged part of the search for a long-term candidate, Cole said. It is part of their fiduciary obligations to a company and its shareholders to “do the necessary due diligence to make an informed hire.”

While internal interims can be an affordable choice, there can also be drawbacks: the “most damning issue” being when an internal interim pick is acting both as interim CFO as well as retaining the responsibilities of their original role at the company, Cole said.

“So what they wind up being is CFO in name only and they still are fulfilling the role of financial reporting or something like that,” he said.

Interims and on-demand talent will probably play a greater role in a company as time goes on, Pinnavaia said. She pointed to clients who might think they need an interim CFO, for example, but who are really searching for an expert or CFO who is able to do a specific project with the existing leadership team. In such a scenario, hiring an interim controller or another executive on-demand with the right finance skills would be the best way forward, she said.

“I’m very excited about this as an innovation in how business gets done,” she said. “It is a way of applying … real time alignment of skill and capacity against particular challenges or opportunities in the business.”

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