A Chief Finance Officer working with a company that has private equity funding can face a unique set of challenges related to serving two masters.
On the one hand, the CFO is accountable to the private equity company, which has invested in the business and has certain expectations for performance and returns. On the other hand, they are also accountable to the business itself, including its employees, customers, and other stakeholders.
This dual reporting structure can create conflicts.
High-pressure environment
Private equity companies are always focused on maximizing performance. The company may expect fast results and a significant return on investment. This requires a CFO with excellent communication and a flexible approach.
Short-term focus
Private equity companies typically have a short-term investment focus, which may conflict with the long-term vision of an investee company. The CFO may need to balance the short-term demands of the private equity company with the long-term needs of the business. Not an easy task.
Rapid change
Private equity companies may drive rapid changes in workforce, processes and systems in order to facilitate their return on investment and their eventual exit from the business. The CFO will need the skills to steer the business through these organisational changes.
How to navigate these challenges
Ultimately, it comes down to management of stakeholders. Private equity companies often have a complex network of stakeholders, including investors, lenders, and other parties.
Transparency, communication, and the ability to create a shared vision are key. A CFO must understand the needs and priorities of both parties and be able to balance these competing demands with tact and diplomacy. This will require strong negotiating skills, a deep understanding of the business and the industry, and the ability to build relationships and manage stakeholders effectively.
This is where interim managers excel. The nature of their work means that they are used to hitting the ground running, they need no induction, and they possess strong leadership and strategic thinking skills, plus operational expertise.
Interim managers know that they need to invest time and effort in building strong relationships with both the private equity company and the business, including regular communication, active listening, and a willingness to collaborate and share information. By their nature, interim managers are focussed on delivering results. They can pivot quickly, and they are proactive in communicating progress to both the private equity company and the business.
For more information on the world of interim management, see our website.