• The urgency and intense expectations inherent in a private equity-backed environment test the resiliency of the CEO-CFO relationship.
  • The magnitude of a CFO’s impact largely depends on compatibility with the chief executive.
  • Mutual competency is the essential component of a strong CEO-CFO relationship, yet the most valuable alliances are also defined by deep trust and robust lines of communication.

According to AlixPartners, PE-backed CFOs cite a clash of working styles with the CEO as their number two cause of turnover. Only a disconnect with the sponsor ranks as a more significant trigger of CFO turnover.

In order for a CEO to consider their CFO a true second-in-command, the latter must not only be exceedingly capable but also transparent, trustworthy, and wholly committed to driving the business to its full operating potential. Sponsors are quick to detect significant deficiencies in the CEO-CFO dynamic and any indications of misalignment will draw considerable concern.

PE-backed CFOs utilize several best practices when partnering with the CEO.

Diligence the CEO’s Fitness as a Partner

A major component in fostering a productive partnership with a CEO is simply steering clear of roles where the chief executive would clearly make for a poor collaborator. Assessing compatibility with the CEO should be a top priority when diligencing a PE-backed CFO opportunity.

Gauging the chief executive’s stability in their position is a fundamental component of this analysis. Many capable CFOs have suffered collateral damage as a result of a CEO dismissal, as replacement CEOs often seek to source finance leads from their own network.

Savvy CFO candidates draw conclusions about the CEO’s longevity by exploring questions such as:

  • Could the CEO be nearing any level of retirement? 
  • Does the sponsor seem to support the CEO?
  • If the company has not performed to expectations, how much blame does ownership place on the CEO?
  • Does the CEO have support from inside the organization? 

If the CEO appears to be in place for the foreseeable future, their overall perception of the CFO role must be assessed.

Do they consider the CFO a strategic ...