Today's financial officers must possess an impressive skill set and be a strategic partner and advisor to the CEO. They must have strategic finance skills in capital planning, mergers and acquisitions, business planning, investor relations, tax, and FP&A - as well as the operational capabilities to grow a business and manage change. In addition, they must be able to guarantee the integrity of the organization's financial condition and reported results, enhance shareholder value, establish optimal risk management, and keep a sharp eye on costs - all while under scrutiny from the government, the board directors, and the shareholders.
The ability to identify qualified CFO's and other key financial leadership roles has become one of our hallmarks and unique competencies. CFO's have become a mission critical part of our practice, because when it comes to monetizing a business, hiring brilliant leaders is key, with the chief financial officer among the most critical - and most often replaced. This is especially true in private equity, where 75 percent of CFOs are let go after transactions. We've developed an Enterprise GPS and LeaderShift playbook on how to approach this critical hire.
To find the right CFO for any C-suite, we begin with the end in mind. We get crystal clear on the investment thesis and strategy to most effectively achieve the value creation plan. "Is it going to be a horizontal or vertical rollup strategy?" "Is it going to be restructuring or transforming an existing business?" "Is an exit likely to be a public or private transaction?" and "What specific LeaderShift and technical skills are most important in the specific business?"
Having answered these questions, we define the CFO role ideally suited for the company. Regardless of the particulars unique to a business or market, all CFOs must be able to:
Be the CEO's strategic right hand.
Many CFOs stay in their lane, feeling more comfortable in the finance box. But CFOs must think more broadly. Especially for PE-backed companies.
They need to be well-rounded business partners, not only financially savvy but also able to support CEOs in defining how to drive growth, allocate resources and increase profitability.
Deputizing for the CEO is important to create leverage, so we someone with strong charisma and communication skills. Being able to tell the company story and translate the strategy internally and externally is critical.
A public exit adds complexity, so direct experience with investors, what it takes to go public, public reporting, and listing rules is invaluable.
With PE firms increasingly using aggressive buy-and-build strategies, it has also become imperative to find CFOs who are skilled at evaluating acquisitions, making investment decisions and providing integration leadership. A track record of successful exits is a gold standard.
Convert analysis into action.
The level of analytics and rigor that's required in a PE environment is greater than that of a typical enterprise. And even in typical enterprises, business leaders are overwhelmed with the volume and complexity of information.
CFOs need to digest, simplify and transform data into insights to inform decisions and take actions. The leader that's going to help you execute on your investment strategy must have a track record of doing that.
PE-backed CFOs need real business analytical skills - not just the ability to analyze numbers in financial statements. We want people who can take a more consultative view of the business and understand the profit drivers, cost structure, key customers impact and levers that impact the strategy and outcome.
Thrive as cross-functional leaders.
Any role for a PE-backed company demands operationally minded people with good cross functional collaboration skills. We need CFOs who are willing to work closely with other department heads to understand the best allocation of resources to shape the culture, manage data, and drive efficiencies.
Getting out of the finance box and working as collaborative leaders across functions enables CFOs to be taken more seriously and seen as peers who can get involved in discussions beyond debits and credits.
Deciding who should take the financial helm of a company can be a daunting task. But by starting with the end in mind and recognizing the CFO's crucial role is the key to identifying and selecting the right financial leader for every company at any particular place and time of their lifecycle.
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