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3 Not-So-Secret Reasons to Outsource Your Next CFO

Posted by Celene Robert to Business Advice, Budgeting, Coronavirus

Outsource CFO


CFO turnover this year has been a major hurdle for companies navigating an unpredictable COVID-19 world. Some companies are promoting from within to fill the finance chief seat but outsourcing a CFO instead of an internal hire is more than a stopgap measure—it is a strategic solution.


Many assume that promoting from within to fill the CFO seat will save precious time on onboarding and building trust within the company. Time spent in the fold is valuable, no doubt, but thinking this way puts a premium on how things have been done at your company versus how business needs to be done in the future.


Your next CFO should be an outsourced CFO because it is better for your business.


You need ROI from your next CFO

A CFO search is a critical investment in your company’s future. The average salary range for a CFO in 2019 was $290,000 to $463,000 annually and traditional CFO executive searches cost 30–40% of the hire’s first-year earnings. Considering that the average tenure of a CFO is just under 5 years, what kind of return on your investment could you expect to see in the next five years?


Determining the ROI of a CFO is tricky because it is dependent on several factors like their role and responsibilities, their innate ability to engender trust and to lead, their professional experience with crises and downturns, and their perspective. In the face of CFO turnover during the pandemic economy, your corporate board has both a challenge and an opportunity to rethink what the CFO of the future looks like for your company.


What to look for in a CFO

The CFO Leadership Council predicted a recession in 2020 back in January. The priorities keeping CFOs up at night included attracting and retaining talent, company culture, growth without sacrificing innovation, cybersecurity, and finally, regulation and the political climate.


That’s a heck of a lot more on a CFO’s mind than the finance function.


The modern CFO is influencing change inside companies by leading finance, technology, and talent management. They are thinking far ahead rather than focusing on a company’s last four quarters. A new Korn Ferry study of top-performing CFOs and culture found that “traits like collaboration, adaptability, tolerance of ambiguity, and emotional intelligence that were barely a consideration in the past are now front and center.”


A modern CFO role is evolving into a leader of transformation and innovation.


Your business needs a CFO that has the right combination of background, skill, and perspective for growth in uncertain times. Ask any executive recruiter and they will tell you that hiring a CFO over video is a challenge. Many companies searching for a new CFO assume that best options are to promote from within or wait to hire this critical position for a better time.


There is another option to find the right CFO that is better for business. An outsourced CFO with financial and management skills, tech know-how, and a depth and breadth of experience is the smart alternative for your next CFO.


3 most important reasons why an outsourced CFO is better for business

If you find yourself without a CFO during COVID, you are in good company. Over the summer, Korn Ferry found that turnover among S&P 500 and Fortune-500 CFOs suddenly jumped after no departures for several weeks in the spring of 2020.


There is a third option to your search for a new CFO: outsourcing. Here are the three most important reasons why an outsourced CFO is better for business.


#1 An outsourced CFO is a partner in your business for as long as you need it

Today, the finance chief is the CEO’s right hand. That does not mean that the CFO has to be a decades-long employee to have a solid working relationship with the CEO and the board. Outsourced CFOs are your CEO’s partner in growing your business for as long as they are needed.


There are many examples of successful CEO-CFO partnerships that did not start from working for the same company. Twitter hired its CFO and COO from Goldman Sachs which had been Twitter’s underwriter for its initial IPO. In fact, promoted and externally hired CFOs have nearly the same strength of relationship with their CEO. The Russell Reynold’s survey found just a five-point difference (52% for those promoted and 48% for externally hired CFOs) in how each perceived their working relationship with their CEO.


Remember, an outsourced CFO can be on board for a crucial stage like an IPO or stay on until it's time to exit.


#2 An outsourced CFO is expertise when you need it

As a company grows a CFO will need expertise in critically important transformations such as, implementing a cloud-based ERP, guidance through an IPO or bankruptcy that an internally promoted CFO might not have under their belt. An outsourced CFO often has many years of experience helping organizations through critical stages of growth and through challenging periods like recovering from crises.


Korn Ferry found that 40% of first-time executives fail in the first 18 months. Outsourced CFOs are more seasoned and proven as managers, technicians, and coaches so that you get expertise everyday and in those critical periods when you need it most.


#3 An outsourced CFO is a leader of innovation

A CFO is not a magician who will upgrade your accounting system overnight or make hundreds of thousands of extra dollars appear. They are, however, in a much better position to help your company innovate because of their perspective.


A CFO’s ability to objectively assess the efficiencies and deficiencies of a company is critical to implementing changes and incentivize innovation. An outsourced CFO does not have the implicit bias of an internal hire. They can better optimize the cost-cutting measures utilized at the beginning of the pandemic when outlooks were most grim and also shift focus to the top-line growth for a (cautiously) optimistic recovery in 2021.


As the economy continues to surprise us, CFOs will be leading innovation such as guiding a company to make strategic pivots in products and services and invest in cybersecurity as remote work remains the new normal that will promote recovery according to a PwC survey. CFOs will need clear eyes and a global perspective to guide companies through a second wave of coronavirus and a changed world.


Outsourced CFOs can offer a better solution for your business needs and should be considered for any business looking for their next CFO.


inDinero is a leading provider of outsourced CFO services. An inDinero team offers industry experience, financial expertise at every (start-up, fundraising, IPO, and exit planning) stage, and the leadership capabilities that clients need to grow. Get in touch to learn more about our CFO services.

 

How much of your future time will 30 minutes with a financial expert save you?

About the author
“Celene

Celene Robert

Content producer by day, movie guru by night, Celene Robert is a PNW native and proud owner of eight pairs of Birkenstocks. She's passionate about giving inDinero customers a voice and enabling the dreams of innovative entrepreneurs.


Disclaimer: The inDinero blog provides general information about tax, accounting, and business-related topics. It is not intended to provide professional advice. Read more in our Terms of Use.