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5 Reasons Hiring Strong Interim Resources Benefits Private Equity Portfolios
When working with private equity firms, I am surprised at the lack of working knowledge on how to utilize interim resources in an efficient and effective way. Identifying experienced interim support can play an important role at private equity (P/E) portfolio companies for a variety of reasons that are often overlooked. An interim professional can be strategically added to a company’s team for a variety of needs, such as to navigate a merger or acquisition, implement new systems, or serve as a critical stop gap between incoming and outgoing management.
According to a 2019 survey by Deloitte, the turnover rate for P/E CFOs is greater than 80 percent, and finding new permanent talent for a P/E-backed company takes a lot of time and consideration. To avoid rushing the decision, a lot of private equity firms will hire a temporary or “Interim CFO, VP of Finance, Corporate Controller, etc.,” who can come in and help execute the 30-60-120 day strategic plan, supporting the company during this key executive transition. Selecting interim talent is also an important decision, so it is wise to understand the unique circumstances under which a temporary resource is engaged, and how it can have the greatest benefit at the portfolio company level.
- Ability to Quickly Adapt
Interim support is brought in to a P/E-backed company for a short period of time, typically one to three months. This means the interim associate has to hit the ground running when introduced to the P/E-backed company. The ability to quickly adapt to business needs and tasks is an essential capability every project professional should have, and is consistently employing in their role.
Adaptability does not just come into play for completing work tasks, either. An interim professional’s ability to adjust to a new setting can also be very useful when it comes to addressing company culture. A quality, interim resource should be able to seamlessly adapt to working with various departments within the company as well as understand best practices for interacting with the private equity board.
- Exceptional Interpersonal Skills
A key component of adaptability is superior interpersonal skills. Being able to effectively communicate, and update team members is part of what makes an interim executive successful. By bringing in a resource with a positive attitude, the experience to know why they are there and what they need to solve, they’re able to integrate into an existing team much faster than someone who lacks the necessary interpersonal and communication skills. Demonstrating the ability to have effective communication across all levels also lends credibility to the interim executive’s ability to perform well with the new team(s) they are interfacing with on the project.
Private equity leadership also benefits from an interim executive’s interpersonal skills because clear communication allows the associate to interpret financial data in a clear, concise manner that will result in constructive, streamlined interactions when reviewing financials and finding solutions.
- Focus on Specific Goals
One big mistake of many private equity firms when hiring interim support for a portfolio company is looking for someone who has the same skill set as a full-time CFO. The interim resource should be hired to complete critical and short-term goals for the company once the transaction is completed, and the skill set of this resource will be dependent on the specific tasks that the P/E-backed company needs completed.
For instance, the company may need help transitioning from a cash to accrual accounting basis or are they are transitioning to a new ERP system implementation. Often, the P/E firm desires an Interim CFO, but the skill set might be better served by bringing in a strong Controller or Financial Project Manager which may provide more hands-on ability to execute the plan and will provide significant savings to the portfolio company. In many cases, the best answer is to bring in an Interim CFO when the short-term needs are centered in the more complex areas of finance such as restructuring the debt, liquidity, cash management, etc. The key to a success interim resource is to hire the most impactful and specialized talent necessary to tackle the 30-60-120 day objectives for the specific needs of the firm during that transitional period.
- Objective Overseer
Since an interim solution typically only stays with a company up to three months, it is easy for the resource to remain objective and avoid office politics. A neutral point of view regarding company processes and procedures is incredibly valuable. This objective viewpoint can clearly see which areas can use improvement, additional support, and/or where cuts need to be made without an influenced stance or existing internal relationships. A benefit to the P/E sponsor is that the interim executive does not have the emotional attachment to decisions that have been made in the past by the management team. Even when the feedback is negative, the right interim executive brings confidence and impartiality to the position in order to honestly assess and comment on the state of the portfolio company.
- Experienced Interim Candidate
Interim solutions might not have the same prototypical resume as the permanent executive you seek, but they still have a high level of expertise, supporting similar companies in the roles you are looking for them to provide expertise. Ideally, the associate will have experience supporting an organization that is private-equity owned, with the technical and functional skill sets and category and/or industry background to make an immediate impact in the organization. An appropriate interim resource will also be able to demonstrate previous experience in financial or accounting functions of sizable companies with a similar scope of needs. They may not have the exact same background required to fill the executive search mandate, but they are still an extremely competent professional familiar with the financial reporting and performance demands of private equity portfolio.
The right interim resource for your portfolio company can make a huge difference in a short amount of time, can help streamline processes and identify key internal needs. Whether you need transitional talent to help during a business acquisition, to implement new systems management procedures, or to just temporarily fill the gap between permanent hires, an interim resource is a great choice and meaningful investment for your private equity backed company.
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About the Author: Dan Hafetz is the Managing Director, Private Equity – Interim Resources at StevenDouglas. He’s spent the majority of his career in professional services and has built a strong reputation for his uncompromising client service orientation. His long-lasting business relationships, coupled with his Big 4 background and knowledge of project-based professional services gives him the credibility that has enabled him to recruit top-tier talent to join the StevenDouglas team.
Prior to joining StevenDouglas, Dan spent 10 years in progressive accounting, human resources and recruiting positions. Most recently he was a Client Services Director, responsible for building the South Florida office of a global project-based professional services firm. His role encompassed management of the associate base, service to existing clients, proactive recruitment of accomplished professionals and management of project resource allocation.
Contact Dan for questions at <a href=”mailto:[email protected]”>[email protected]</a>
