consensus-driven solutions.
From day one, the hands-on CFO must know the company’s P&L and work on improving cash management, credit/collection, working capital, EBITDA, and profit margins. The CFO drives value creation, guards against unnecessary company spending, and meets debt covenants and all deadlines. He alerts the PE ownership and the CEO to potential problems and will challenge sales forecasts and undocumented assumptions from the various departments and satellites.
The CFO must keep a number of different constituents satisfied which requires timeliness, execution, results, good communication skills, and adequate analytical and consensus building attributes. The CFO must share the company’s financials accurately, transparently, on time, and be willing to clarify what insights his numbers should signify to the PE ownership as well as the company’s management team.
The CFO is the strategic Partner spearheading the portfolio company towards the most attractive exit or liquidity event culminating in the greatest value creation for all the equity stakeholders. If he has any time for reading, the CFO should bone up on How to Win Friends and Influence People by Dale Carnegie. When change management collaboration is important to a company’s transformation and growth, people skills become almost as important as the numbers. Peers must be treated as people rather than just functions. Healthy debate and conflict are part of wrestling with company issues and their solutions. This consideration calls for teamwork, versus the Lone Ranger approach, to reach an action plan consensus going forward, and keeping goals and objectives on track.
Many otherwise highly qualified, interested, and desirable CFOs do not survive their peer and subordinate reference checks, giving feedback such as, “He’s caused too many personality clashes, even in routine dealings.”
The CFO has a major involvement in planning and executing an exit from the PEGs. Typically the exit was four to five years, but nowadays, given the market conditions, the exit is more like six to seven years and counting. I have read that turnover of the PE backed CFO has significantly increased from 2009 to 2013. In my twenty-eight years’ experience, if the CFO is an A player and a good fit with the portfolio company’s PE owners, and after exhaustive due diligence, job screening, and some of his skin in the game, there won’t be any CFO turnover during the typical four to five year employment lifecycle.
The CFO is usually a master in due diligence, but must keep his eyes wide open in entering into his own CFO employment situation. There are issues to flush out before accepting a job offer, even with some skin in the game.
Can you meet the board? What type of company culture are you feeling and is it giving you culture shock?
Are there too many CPAs and/or former CFOs in the PE firm overlooking your shoulder with what seems like daily requests?
Ask to speak with a few CFOs of other PE firm owned portfolio companies to learn their management style
Is the portfolio company you might be joining highly leveraged?
Can the portfolio company’s management systems deliver the data needed by all concerned?
How long does the PE ownership typically maintain its holdings?
Meet the CEO. Is he the former owner or is he new blood outside the industry? How much skin in the game do the CEO and the rest of management team have?
The above criteria for CFOs of PEG’s portfolio companies in the aggregate is overwhelming, but it is unlikely that any SITG CFO candidate has mastered them all. I am providing a hiring pattern of similar traits and requirements to help SITG CFO candidates with aspects particular to hiring skin in the game CFOs.
What do PEGs seek in their VPs of sales and marketing?
PEGs for their middle market portfolio company typically want a VP Sales and Marketing (S&M) who has been a significant part of one or more successful related portfolio companies owned by private equity and can land on his feet running. He must be a high energy hands-on leader by example who manages subordinates with a focused sense of urgency. The VP S&M champions the fact that in this age of social media, the Sales Department (and the company itself) must beware of the consequences of unsatisfied customers.
The VP S&M must:
Be marketing savvy and have an acute sales management focus embracing consultative system selling and solution selling.
Be familiar with the company’s products, industry, and markets.
Deliver business growth market validation and market entry strategy, as well as valuable analytics on sales force effectiveness and customer response.
Drive revenue, sales efficiency, Return On Investment (ROI), and close deals.
Be able to formulate a comprehensive business plan to establish strategic sales direction and if required, define product features needed to satisfy target market requirements.
Be responsible for competitive analysis, product positioning, pricing strategy, promotional materials, customer service, training, and publications.
Interface well with operations and finance in a collaborative style.
Select various appropriate channels of distribution either through independent Sales Reps, Distributor Salespeople, or Employee Salespeople as required.
Knowledge of various effective sales compensation plans is a must.
Be budget conscious, setting and achieving aggressive sales forecasts as well as goals and objectives oriented, KPI and metrics driven, and delegate well with strong consistent follow up.
Be a “no surprises” professional, a motivator, and able to hire, manage and retain a productive loyal superior sales force and a capable marketing assistant.
In certain portfolio companies, new product introduction experience would be vital. Again, PE firms tend to match VP S&M hires industry to industry, markets to markets, products to related products. Desirable background would be fluency in both social media environments and the monitoring and measuring tools for more industry visibility.
In a global PE owned portfolio company, international market development in Europe and Asia will be required, including strategic alliances and periodic overseas travel.
A VP S&M’s expected technical knowledge includes Customer Relationship Management (CRM), such as Salesforce, Goldmine, and Sugar. Also he should have general knowledge of online marketing Search Engine Optimization/ Search Engine Marketing (SEO/SEM), and web analytical tools experience such as the offerings of Adobe Analytics. Travel 30%-40% of the time is often necessary.
It can be very challenging in the confidential interview process for the VP S&M because of his normal work and travel commitments. I have a few suggestions to deal with this interview challenge (see chapter 10, SITG PEG Interviews).
The above criteria for VPs of Sales and Marketing of PEG’s portfolio companies in the aggregate is overwhelming, but it is unlikely that any SITG VP S&M candidate has mastered them all. I am providing a pattern of similar traits and requirements to help SITG VPs of S&M candidates with hiring traits particular to skin in the game VPs of S&M.
What do PEGs seek in their SITG VPs of Operations?
My
