Value Creation Summit 2022: “The role we find the hardest to recruit for is the CFO”
Leading PE and VC investors speaking at the Real Deals Value Creation Summit discussed how finding the right CFO for their portfolio companies can be a tough ask, and how the war on talent within the tech space is still rife.
Getting the most out of management teams starts with the CFO, but it is also one of the hardest areas to get right, speakers at the Real Deals event noted.
Soho Square’s investment thesis is to take minority stakes in businesses, as they back winning management teams and entrepreneurs. Because of that, it can be tricky to “crack the whip” with implementing changes to the management structure. In light of this, Steven Ferris, director at Soho Square, explained: “The role we often find the hardest to recruit for is the CFO. in the market we invest in, we find that these businesses don’t tend to invest a lot in the finance function.”
However, John Hammond, director at NorthEdge, remarked that “getting the CEO and chair right can be one of the most important factors in building a management team.”
Speakers also discussed how appointing interim hires can provide short-term solutions to senior roles, especially when PE firms eye up a route to exit.
“One of the ways we work is by finding a consultancy CFO. This individual has usually worked their way up the ladder. We bring them in as a way of displaying to the greater management team what good in that position actually looks like,” Ferris explained. “We have to explain to management that bringing these guys in is a benefit and a good idea. A lot of the time it’s an educational point.”
Steve Deverill, managing partner at Eton Bridge Partners, agreed. Backed by a PE firm themselves (Elysian Capital backed Eton Bridge in July 2021), Deverill observed that interim senior hires support the bigger picture plan the PE firm is trying to implement. “The management team don’t necessarily think of the bigger picture, because they spend so much time looking at their particular area.”
Meanwhile, speakers noted that the war on talent within tech is still rife, and might be here to stay, as they discussed the difficulties in recruiting quality talent within tech-focused portfolio companies.
James Prebble, CEO at Palladium, noted that there are challenges at the most senior level, especially in regards to clearly defining the roles of members of the senior management team upon entry.
“If the CEO is the CTO, then this is something you need to reconsider early on. You have to work out if you want them to stay devoted and focused to the tech itself, or if you want them to focus predominantly on leading the business. You need to separate them away from one or the other. It’s one of the most complex decisions to make,” he explained.
Separately, NorthEdge’s John Hammond noted that GPs are likely to face further difficulties in recruiting. However, cross-pollination and communication are key for starting to overcome this, he said.
Reporting by Jennifer Forrest (Real Deals)