Pros and Cons of Hiring an Interim CFO

When should you hire an Interim CFO? As always, it depends: on your organization, the situation - and how it can help your team reach its long-term objectives.

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Does the following scenario sound familiar? Your company is dealing with a troubled subsidiary. Extracting quality financial information from the local team is like pulling teeth from an alligator without anesthesia.

The accounting systems and processes are a mess. A chilly draft is blowing through the finance department, straight from the revolving door. Seasoned financial executives from the outside who you had hoped would have the right stuff to fix the situation took one look, said thanks, but no thanks, and wished you well.

Now what? Perhaps you should bring in an Interim CFO.

Granted, this solution is not always applicable. But more often than not, in my experience, it will get the organization back on track.

So let’s take a closer look at when companies should consider it and why, and also examine the alternatives.

Focus on strategic objectives with fresh eyes

In the scenario above, you could keep searching for a permanent CFO. Most likely, given the circumstances, you’d end up with someone who wasn’t your first choice.

So rather than taking the chance that she or he can get the job done, why not take the strategic approach?

Let an Interim CFO who has successfully tackled similar situations before clear the path to a permanent solution.

Appreciation, well, it comes and it goes

But I, I'll ride that wave with you

It's human nature to miss what's under your nose

Andy Grammer, Fresh Eyes

Bringing someone on board too quickly to fill the role of CFO permanently bears the risk of unnecessarily prolonging the problem. That person’s fresh perspective on the underlying issues may get blurred by career considerations and corporate politics.

Instead, the company should let an experienced finance executive assess the situation, part-time or as a temporary assignment.

The Interim CFO can straighten out the mess so that leadership can figure out what kind of permanent CFO to look for, based on what skills already exist in the organization, vs. what skills are lacking.

An Interim CFO whose corporate track record and reputation proves he or she can cut through the fog will be able to figure out what works and what doesn't and help leadership decide who on the team helps moving things in the right direction, and who doesn't.

At a division or subsidiary that will be closed down, hiring an Interim CFO can pave the way for a smooth transition. How are the chances of finding a full time, permanent CFO if desirable candidates will figure out before long that the position is going away?

Rather than looking for a full time, permanent CFO who will expect severance when released, the organization should identify an experienced Interim CFO who has successfully navigated such difficult situations and whose steady hand and focus can prevent further turmoil.

Pitfalls of assigning an Interim CFO

No doubt, bringing in an outsider will pose a challenge for some organization. Some companies may not be ready for an Interim CFO because leadership fears resistance to change could lead to staff upheaval.

With a less knowledgeable and skillful Interim CFO, that concern may be justified. The chosen candidate may not have the authority to get everybody moving in the same direction and effect the needed change on a deadline.

One common reason is that she or he didn’t ask for that authority. It’s also possible that executive leadership just wasn’t ready to entrust an outsider with that authority in the first place.

Either problem will likely not arise with an experienced and efficient Interim CFO who has been around the block a few times.

Unfamiliarity with the processes and peculiarities of a particular industry or different enterprise levels are another possible pitfall. The longer the required learning curve, the less effective the interim CFO is likely to be.

How to choose the right Interim CFO

What kind of experience and expertise should the executive selection team be looking for when searching for an Interim CFO?

I've led finance teams in the U.S., Europe and Asia (including hiring Interim CFOs myself and working with others at various occasions) for more than two decades. Based on experience, I’ve found the following Interim CFO selection criteria to be particularly important:

  • At a minimum, the right candidate has a proven track record of overseeing finance departments in more than one mid-sized and large organization, as well as their subsidiaries.

  • The right person for this role will have a firm grasp of all relevant regulations, be familiar with GAAP best practices, and know how to put all the right policies and procedures in place from the beginning.

  • For the foreign subsidiary of an American company, rather than trying to find someone locally in (for example) Australia, Germany, China or Brazil, you would look for a professional who understands the American business culture and professional work environment as well as the local setting.

The latter point cuts both ways; the same would be true for a Chinese or German company launching or expanding operations in the U.S. Ideally, your candidate has relevant work experience in both countries.

In other words, putting in place someone who "speaks your language" on all levels is key to successful Interim CFO assignment, especially in international business. These selection criteria will make the Interim CFO selection process easier and can shorten it significantly.

After all, who has the time to figure out what level "local" person you will need on the ground to get the job done, and whether that person fully understands your objectives?

Swift and decisive moves, while keeping an eye on the overall strategy and objectives, can be critical following the sudden departure of an organization’s CFO. To keep things together until a replacement is found, more than an intricate knowledge of accounting practices and regulations will be needed.

To bridge the gap until a long-term replacement is found, choose an Interim CFO with a track record as a strong communicator with internal and external stakeholders on all levels. This quality will help stabilize the situation and counter concerns and rumors that often arise during such transition phases within an organization.

The latter problem, in particular, is often exacerbated if the last CFO’s sudden departure occurs in a foreign subsidiary with different communication styles and rules. With an Interim CFO in place who is comfortable communicating in both business cultures, you can then task that person with mentoring an up-and-coming local candidate who is not quite ready yet to assume the CFO role.

After all, who has the time to figure out what level "local" person you will need on the ground to get the job done, and whether that person fully understands your objectives?

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Does any of the scenarios described in this blog post sound familiar? Is your organization weighing the pros and cons of hiring an Interim CFO for one of its units abroad, and looking for input from someone who has been there, done that?

Drop me an email or connect with me on LinkedIn.