Interim CFOs, also known as temporary CFOs, play a crucial role. They stabilize companies in times of crisis and ferry them to better lands in times of prosperity. And, unlike fractional CFOs who can spend years supporting companies on a part-time basis, an interim CFO will spend only a few months dedicating their entire time to a single company, with the very rare engagement going over 2 years. So, this makes interim CFOs high-impact, high-velocity players.
However, hiring an interim CFO is not the same as hiring a permanent one. You look for different things and gauge the candidate’s adequacy for the role based on different factors.
In most cases, companies bring on interim CFOs during times of transition. Maybe their current CFO abruptly quit, or perhaps the company is going through some financial crisis.
Regardless of the reason, there are two main factors that you want to consider:
Let’s explore each of these factors.
Whatever transition your company is going through, the situation is usually the same. There is a lot of confusion internally (and perhaps externally), and investors might be a bit concerned. At the same time, the company leadership wants to communicate that everything is under control.
As a result, CEOs want to stanch the proverbial bleeding that comes with this transition.
Another thing to remember is that for many mature companies (we’re talking medium-sized all the way to Fortune 100 companies), having a CFO is a legal requirement. When using debt, companies need a CFO to report information on their credit lines and covenants to the financial institutions.
Additionally, if a company needs to report to its shareholders, then the CFO’s responsibilities become all the more critical. For instance, when a company is backed by a private equity firm, it needs to keep its investors informed about everything going on inside the company as well as any major financial updates. And when the company does go public, the reporting requirements become even more stringent.
So, simply put, companies need to move fast to cover both areas of exposure: operational and regulatory.
To find the right interim CFO for your company, there are a few things you should look for during an interview with a potential candidate:
That being said, let’s actually delve into each of these elements individually.
We’ve already established that you want to bring in a quality interim CFO, and you should do it quickly. You also want some flexibility in the engagement, in the sense that you should be able to let the interim CFO go should you identify a problem
With that in mind, you need to be clear on why you are bringing in the interim executive, and it all starts with identifying the transition your company is going through.
If your current CFO recently left or was let go, then you need someone to hold the fort down, so to speak. You’re not looking for someone to innovate or be a disruptive strategic thinker. You just want an executive who can keep everything moving along smoothly until you find a more permanent CFO. The interim CFO also needs to be a good communicator.
On the other hand, your company might be growing, in which case you might need an interim CFO to come in and act as a strategic partner. In this scenario, you are looking for someone who is comfortable building financial models, has ample experience with financial planning and analysis (which is shortened as FP&A), and knows how to engage with other department heads, promoting cross-functional engagement. Finally, you want the interim executive to understand the nuances of major projects that could be problematic if they aren’t included in the models.
A third possibility is that you need a project CFO. For instance, if your company is about to be part of a large merger, or your company is on the verge of going public through an IPO, then you need the CFO to come in and tackle that specific project. In this case, you want an interim executive to have experience with the particular project for which you are hiring them. In instances like these, you may already have a CFO in place, yet you can still bring in an interim CFO to help with the project.
Another possibility is that your finance department is in disarray. This might be due to mistakes a previous team member made, or there might be some other reason. Whatever the case, you want a temporary CFO to come in and fix the situation. They need to be experienced in crisis management.
Additionally, in some cases, they may need to have an extended network in the finance world. For instance, if your company is facing banking problems, a well-networked interim CFO can make all the difference: They can help you realign your lines of credit, mend banking relationships, and reach a better standing overall.
Once you know the type of interim CFO you need, the next thing to do is to list all of the priorities that you would like accomplished during this temporary period. You should, to the best of your abilities, lay down a plan that maps out what needs to happen between the date the CFO starts to the date they transition out.
Furthermore, you want to figure out what you’ll be doing as company CEO during that interim period. For instance, if you are bringing in a finance professional to fill the shoes of a CFO who has just exited, are you going to start the search for a permanent replacement immediately? Or, are you going to wait first for the dust to settle before starting your search?
It’s best to decide these things early on.
Simply put, understanding your needs and why you are hiring an interim CFO can help you develop a solid plan and strategy around how you are going to make the most out of your temporary hire.
Now that you are clear on what your company needs are, you are better equipped to ask the right questions and to make sure that you are hiring the right person for the job you need done.
Nevertheless, what should you exactly be looking for in an interview?
Well, there are two main components that you should be digging for: the functional side and the behavioral side.
There are a few different factors to consider when measuring your CFO’s functional fit:
Let’s see each one of those in action.
The first important criterion is years of experience. After all, you want your temporary CFO to get up to speed quickly and to hit the ground running. This will only be possible if they have ample experience as a CFO and have led finance teams in a variety of company circumstances. This breadth gives them a well of experience to tap into.
Going in deeper, you want to make sure that they have experience with your required project, business size, and particular industry:
Regarding industry experience, Mike McCracken, founder and CEO of McCracken alliance, puts it best:
“When a company is looking to hire an interim CFO, one of the key things to look for is industry. And you have to dig a little. What part of an industry? If a candidate says they used to work in the medical industry, that is great but what part of it? Medical devices are completely different than hospitals. Each requires a different skill set.”
In addition to their experience, you want to look at an interim CFO’s background. What did they do before they became a CFO. In most cases, CFOs will have one of two backgrounds:
Understanding this background could play a huge role in whom you end up hiring.
If your company is having problems closing its books or finishing an audit, then you might prefer someone with a controllership background. Alternatively, if you need a strategic partner and already have a strong controller in place, then someone from a finance background might serve you better.
There is also an important distinction between the two backgrounds to bear in mind. Controllers are used to looking backwards, meaning that their work relies on looking at historical data, arranging them, and trying to discern the story they tell. Alternatively, finance professionals are trained to look forwards, in the sense that they are always trying to predict what the numbers will look like months and years from today.
The best CFOs are the ones who can look both backwards and forwards, allowing each view to inform the other. Yet, this is easier said than done, so looking at a CFO’s background can tell you a lot about the skillset they have.
If you are willing to get down to the nitty-gritty of things, you could ask your candidate about which systems and technology solutions they have used in the past.
Now, all accounting and ERP systems are designed to do the same job with some variation: help you keep track of your company’s resources. However, these systems differ based on the industry and company circumstances they were designed for. So while any tech-savvy professional can quickly assimilate to a new system, they won’t immediately know exactly how to generate reports or navigate the system.
For instance, when it comes to ERP systems, two of the biggest solutions out there are Netsuite and SAP. Suppose your company uses SAP. In this scenario, if an interim CFO candidate has been using Netsuite for their entire career and has never used SAP, they may struggle on an integration project where SAP is the target platform.
So, unless you have someone on your finance team who can help your interim hire figure out how to use the new system, your temporary CFO will need a little extra time to get up to speed.
The interim CFO candidate you are interviewing should have proper credentials showing that they are fit for the job. This becomes an all more pressing need if you have an investor group that is concerned about the company’s current lack of a CFO.
Some credentials you might want to look for are a CPA or an MBA. CPAs understand regulatory requirements and can effectively manage compliance issues around financial reporting and controls. This is critical for maintaining proper compliance in all companies, particularly in public enterprises.
In addition, when you get an interim CFO with a CPA, you signal financial prudence and stability to investors and shareholders.
When assessing the behavioral side, there are a few questions you want to answer for yourself during the interview:
In addition to the above questions, you should assess the candidate’s energy during the interview. Would you describe them as high energy? How important is it for them to leave their mark?
Remember, you don’t always want someone who is hungry to leave their mark because an interim position is by its very nature temporary. Unless you are getting someone to help with a special project or you anticipate the interim CFO staying on full-time afterward, your temporary CFO should help keep the ship balanced until a more permanent solution comes in.
This goes without saying but you should always make a couple of phone calls after the interview, talking to the candidate’s previous employers. And even though you are hiring for an interim role, you still want to make sure that the candidate has some support behind them and that their previous employers are happy to vouch for them.
Also, when talking to the candidate’s references, you should ask about the challenges the company was going through and how the candidate was able to help them work through it. It is important to look for two things when talking to references:
And while you are doing a background check, you should see whether this candidate has been implicated in anything unfavorable in the past. For instance, you might want to think twice about hiring an interim CFO who just came out of a company that was accused of fraud. Even if the interim executive was completely innocent, the decision to hire them might not sit well with your board or your investors.
Based on experience, we can tell you that there are a few mistakes companies make time and again when interviewing interim CFO candidates. So, to help you avoid making those same mistakes, let’s go over them together
When talking with a potential hire, you really want to listen to what they are saying and try to dig a bit beneath the surface. Try to notice the following things:
This might indicate that they are purely a functional player, focused on just the nuts and bolts of the job. Hence, they might not make a good strategic partner.
Another common mistake we see all too often happens when HR departments take on the responsibility of hiring an interim CFO. The problem is that HR usually makes permanent hires, and they aren’t used to making temporary ones. So, what ends up happening is that the HR team will apply the lens used to judge a permanent applicant and use it to scrutinize an interim role candidate.
The perfect example of this is the overemphasis on cultural fit.
At the end of the day, an interim CFO is only there for two to six months, which is the average duration of such an engagement. Does it really make sense to focus on cultural fit when the interim hire will leave shortly?
Instead, a larger emphasis should be placed on the required skill set as well as the other necessary behavioral traits. Now, if you can find someone who checks these boxes and is also a cultural fit, then hire away.
But it is also worth recalling that time is of the essence when hiring an interim CFO, so if you have to choose between someone who can functionally fill the role of CFO and someone who is a cultural fit, you would do better opting for the functional option.
It is worth bearing in mind that hiring a solo interim CFO, i.e. a freelancer of sorts, is different than hiring one that comes from an organization.
When you bring on a solo temporary CFO, that CFO comes into the job already aware that their days are numbered. So, it isn’t long before they start looking for another job or another paying interim stint somewhere else. In most cases, the solo CFO will start the job hunt while they are still working for your company, sending in resumes and accepting interviews. Moreover, if they do land a more attractive opportunity somewhere else, they might hand in their two weeks' notice.
On the other hand, an interim CFO coming from a company or organization will rely on their company to find them their next opportunity. As a result, they won’t be looking for another job while working for you.
If you take anything from this article, then let it be this:
Interim CFOs and permanent CFOs are two different things, and you need to hire them using two different lenses. With permanent CFOs, among your main focuses should be cultural fit and leadership capabilities. On the other hand, with interim CFOs, you should be more concerned about getting someone who can be a solid communicator, maintain the business, and settle any uneasiness owing to the transition.
That said, many interim CFOs are also great leaders thanks to their decades of experience and their proven ability to handle financial crises in different industries. So, if you can also find an interim hire who can walk through the door, lift everybody’s spirits up, and help you rally them behind your company’s 3 to 5 year goals, then that interim CFO is the right choice for you.
That being said, if you are about to interview a candidate for an interim position and would like some help, we would love to assist you. Feel free to reach out to us, and we would love to help you make the best decision for your company.
And, as a little extra assist, we’ve added a list of questions based on the information in this article:
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