Appointing an interim CFO
It’s an almost uncontested truth that the position of Chief Financial Officer is one of the most important titles in any company. The CFO literally holds the purse strings of the entire operation. He or she helps develop the strategy that will steer the business and map out its future, determines how finances are controlled and makes decisions about debt and financial risk that could ultimately affect the livelihood of all the employees of the company. So what happens when your CFO makes an unexpected exit, or retires before you’ve found a suitable replacement?
The answer lies in a stop-gap solution: your company needs an interim CFO.
The alternative to placing an interim CFO would be to leave the position open while hunting for a replacement. The argument in favour of this approach is that your company would not need to spend additional money on hiring an interim CFO. But there are a few major drawbacks to this solution:
- Pressure to find a replacement quickly: If you do not have an interim replacement, your company will be hell-bent on finding a new CFO in the shortest possible amount of time. This could lead to a lack of thoroughness in the interviewing process. In your haste, the chances of appointing an unsuitable candidate increase. If you thought it cost you money to hire an interim CFO, it will cost you much, much more to labour under the leadership of a badly-matched CFO.
- The company is in ‘limbo’: Most would agree that it is inappropriate to make big decisions without the input of your chief financial officer. So what does the company do while that position is unfilled? Decisions around expansion, investment, pricing, and new product lines hang in the balance until the chief accounting position has been filled. This could mean missed opportunities or projects that exceed their budgets due to lack of financial control.
- The company makes key decisions without financial leadership: The other scenario is, of course, that the company continues to forge on ahead without high-end financial input. The results could mean that important considerations and risks are overlooked, more debt is taken on than should be, and other expensive mistakes are made.
For senior executives of the company to make any weighty decisions without gaining insight from a CFO would be like embarking on an unfamiliar road trip without consulting a map.
A few recent examples of interim CFO placements include:
- Energy giant Sasol. They have spent the past year with an interim CFO, since Christine Ramon’s departure in August 2013. The post will continue to be filled by Paul Victor until March next year, when Eskom’s former chief financial officer, Bongani Nqwababa, will take over.
- RadioShack, the now-global electronics retailer with a market cap of about R840-million, lost its CFO, John Feray, in September. It elected to fill the gap with interim CFO Holly Etlin. Etlin had previously provided consulting advice to the company and had spent a period as the interim CFO once before.
- Windstream, the US-based telecommunications company, named an interim CFO at the beginning of October; the company’s former treasurer Bob Gunderman.
But now that you’ve established the need for an interim CFO, where do you find the person for the job?
Drawing from the above examples, there are a few different sources for the perfect “in-between” solution.
- Internal: As in the case of Windstream, you could look for a suitable candidate internally. This solution is more likely to be suitable for large corporates that have a wide human resources base to choose from. An internal candidate already understands your company’s processes and culture. Such a candidate would be familiar with the people acting in various key roles as well.
But you’ll need to manage his or her expectations. An internally-sourced interim CFO may use the opportunity to prove that they can perform well enough in the role to warrant being placed there permanently. This can sometimes lead to big risk taking in an attempt to appear “flashy”. Or, they might be too scared to make necessary decisions for fear of the backlash that may accompany a mistake.
If you have no intention of taking them on permanently in the new role, you’ll need to ensure that there is no loss of morale when they step back into their previous position.
- External: As in the case of RadioShack, you could appoint an external candidate. The upside of this is that he or she will have no ambitions to be appointed permanently. If an external interim CFO is thoughtfully appointed, they will also bring experience with them that will add greater insight for decision-making.
But this candidate will need to pick up the reins very quickly. Ultimately, you need an experienced individual with years of involvement in an environment similar to your own, to do the job. At the end of their tenure, the interim CFO needs to hands over efficiently and exhaustively to the incoming permanent appointee.
If you are looking for assistance with finding the right interim CFO for the job, The Finance Team could be of use. We draw from a vast network of qualified, experienced finance professionals to find the perfect interim solution for your company.
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