We may now be in the aftermath of the Covid-19 pandemic, but the crisis has stirred so much economic uncertainty that many notable companies are still grappling to overcome challenges. As a result, many chief financial officers (CFOs) are still under immense pressure to drive their companies’ financial plans, lead investment strategies based on cash and liquidity risks, and carry out consistent risk-management initiatives.
While several companies are facing pressures and maybe even suffering from financial mismanagement, social media has become a channel for the media to spotlight economic weaknesses. Companies as large as Tesco, Patisserie Valerie, Enron, and Carillion have all had their weaknesses exposed on social media, which showcases both the companies that are flourishing and the ones that are struggling.
This is one of many reasons why it’s vital that a company’s CFO effectively identifies the appropriate level of risk the company should take in each of its endeavours. The role of the CFO is a demanding one that requires a high level of experience and expertise. So, how can aspiring CFOs secure this role? Especially if they’re taking the leap from a private limited company (PLC) to a private equity (PE) company?
Here, the group and divisional CFO Gary McGaghey shares six strategies on how you can improve your chances of securing a CFO role. These strategies are based on insights into how companies select CFOs, how you can move sectors, the qualifications you need, and how to build up experience.
1. Remember That External Hires Are More Common Than Internal Promotions
When a company’s leadership team appoints a CFO, they’re more likely to hire an external candidate than an internal one. Gary McGaghey explains that this is because recruiting externally enables management teams to choose from a larger pool of candidates and select an applicant who can bring new experience and expertise to the company. As a result, private equity CFO recruits are often deputy CFOs from larger companies.
The Eton Bridge Partners’ 2021 CFO Pathways Report[1] suggests that this approach is still common practice. The report notes that 80.5% of CFOs from its sample population of approximately 1,000 were external hires. And 75.5% of these CFOs were external hires from listed companies.
2. Transition to Private Equity Early to Secure a Leadership Role
Lots of CFOs wonder whether they have what it takes to switch from a private limited company to a private equity company. Gary McGaghey explains that although it’s easier to switch from a private equity company to a private limited company, transitioning the other way is possible. He made this shift when he left the global consumer healthcare product provider Nelson & Co Ltd to work for the marketing production services group Williams Lea Tag.
According to the CFO Pathways Report, only 27% of the study’s private equity CFOs didn’t have any private equity experience when they started their new roles. That’s why Gary McGaghey recommends that those hoping to take on private equity CFO roles take up other roles in private equity companies as early as possible, even if that means taking a lower-ranking role than is ideal to begin with.
3. Transition From a Different Sector
When selecting a new CFO, a company’s senior management team will typically evaluate candidates’ qualifications, career history, and the insights they can bring to the table. That said, most companies are reluctant to recruit a CFO who works for a direct competitor. Instead, they’re more likely to search outside of their sector for a candidate who can offer fresh insights. To put this into perspective, the CFO Pathways Report concludes that nearly 70% of new CFOs transitioned from a different sector when they accepted their private equity CFO roles.
The same was true for Gary McGaghey, who moved from the fast-moving consumer goods (FMCG) space when he transitioned to Williams Lea Tag, which operates in the marketing industry. He explains that financial expertise is fairly sector-agonistic, which can make switching between industries easier than one might expect. However, many CFOs develop experience in a particular sector in their early careers before transitioning to a new sector later.
4. Complete an ACA Qualification
Most CFOs hold an ACA qualification, which is one of the most advanced learning and professional development programmes available to accountants. However, the CFO Pathways Report reveals that few CFOs hold ACCA or CIMA qualifications, credentials that usually lead financial experts down alternative career paths. The report shows that 46% of CFOs in the study had an ACA qualification, 7% had a CIMA qualification, and 3% had an ACCA qualification.
Gary McGaghey has completed an ACMA certification; a bachelor’s and honours degree in Accounting, Auditing, Tax and Finance; and is a South African Chartered Accountant and holds a Financial Times Non-Executive Director Diploma.
5. Embrace Growing Age and Gender Diversity
According to the CFO Pathways Report, the average age of a new CFO in the UK is 49. This is true in both private and listed companies This is two years younger than the average CFO who is already established in a listed company and six years younger than the average CEO in a listed company. The report also demonstrated that the CFOs in its population sample ranged in age from 30 to 76.
Gender imbalance is also a key discussion point in business management. The report revealed that women only make up 17% of the CFOs who have been appointed in the UK in the two years leading up to 2021. The male-to-female ratio in C-suite positions mirrors this gender imbalance. That said, although we still have a long way to go, the number of female CFOs is growing.
6. Build Up Group Finance Position and CFO Experience
The CFO Pathways Report shows that 61.5% of new CFOs in its study come from previous CFO roles. Plus, 69.9% of CFOs who are also group finance directors come from CFO roles too. Gary McGaghey explains that it’s often easier to compete for a CFO role if you already have some experience as a CFO.
He adds that if you don’t have experience as a CFO, companies are more likely to hire first-time CFOs who have experience in a group finance position than those who have experience in a divisional finance director role. He emphasises that this is particularly the case where a candidate had group finance, tax and more importantly, treasury experience. The report echoes this, concluding that candidates who have experience in a group finance position are three times more likely to secure a first-time CFO role than candidates who have experience in a divisional finance position.
Securing a Private Equity CFO Role
With these insights, you should be able to take the steps that will help you improve your chances of securing a CFO role with a private equity company. To pick up more strategies from Gary McGaghey and learn about his transition to private equity, visit his website.
About Gary McGaghey
Before securing a role as the CFO of the private equity, €1.3 billion, end-to-end marketing production and business services group Williams Lea Tag, Gary McGaghey delivered a high level of organic and M&A-driven growth for a plethora of private equity and private limited companies on a global scale. He has transformed companies in a variety of industries, from FMCG and media to beverage and pharmacy. As a result, he has a broad range of sector-specific knowledge and is experienced in applying financial expertise to different sectors. In his current CFO role, Gary McGaghey manages Williams Lea Tag’s cost-restructuring programmes, carve-outs, mergers and acquisitions, divestitures, and balance-sheet reconfiguring.
