Interim CFOs and Controllers Fill a Widening Gap

By Meta L. Levin

Reprinted with permission from the Wall Street Journal, Tuesday June 17, 2008.

They’re experienced, like a challenge and don’t mind working for many masters. Meet the new generation of interim chief financial officers and controllers. They work for small to mid-size companies or large corporations, who are finding that there are times when it makes good sense to outsource CFO or controller duties.

“The demand has gotten explosive with the new regulatory environment,” says Cindie Jamison, a partner and national director of CFO services for Tatum LLC, an Atlanta-based executive services firm that provides interim CFOs, controllers and information-technology professionals for mid-size companies.

CFOs are corporate officers responsible for the financial health of a company or public agency, usually reporting to the CEO. Controllers report to the CFO and their job is to implement and monitor internal controls. 
With increased governmental oversight, where mistakes and omissions can result in severe penalties, companies cannot afford to be without a CFO or controller. In the early 1990s, when Tatum began offering interim CFOs and controllers, it was considered cutting edge, says Ms. Jamison. Today it is standard operating procedure for some companies.

“We first identified the need in 1997,” says Paul McDonald, executive director of Robert Half Management Resources, headquartered in Menlo Park, Calif. “Since then it has grown into a $620 million division of Robert Half Inter-national,” he adds. And all that money comes from fees for providing temporary CFOs and controllers.

Interim CFOs and controllers typically go into a company in one of three situations: there has been an unplanned exit of the full-time employee and the company needs someone to keep things moving smoothly during the search process; the CFO or controller is out for an extended period due to illness or other problem; the company isn’t large enough to hire someone full time.

Experience and personality count, says Tatum’s Ms. Jamison from her Chicago office. “You have to like the adrenalin rush of coming into a new situation and have a proclivity toward problem solving,” she says. “I always liked coming in when something was not working and fixing it.”
Serving as a CFO for several different companies usually is valued more than spending 30 years at the same one. “We want them to have been exposed to such situations as installing new IT systems, mergers and acquisitions, divestiture and restructuring,” says Robert Half’s Mr. McDonald from his Los Angeles office.

They also want someone who understands how to handle a client relationship and who is involved in the business community. Often the temporary CFOs and controllers are expected to build their own “book of business” through networking.

Companies get the opportunity to work with professionals who not only bring varied experience to the table, but who also have access to others with specific expertise in other areas, says Tatum’s Ms. Jamison.
For Larry Schmitt, managing partner for BIK & Co., a 45-person certified public accountant and management consulting firm with offices in the Chicago suburbs of Libertyville and Palatine, the step into this world came as a way to serve clients who needed a top-notch CFO, but were too small to have the money or enough work to permanently hire the talent they wanted.

“I said I could do this on a sort of a-la-carte basis,” says Mr. Schmitt from his Libertyville office. “We tried it and it was successful, so we looked at other clients and asked where else could this work?”
Five years later Mr. Schmitt heads a staff of five former full-time CFOs, each earning $100,000 to $150,000 a year, working full time for BIK. He is building a business within a business servicing companies in which annual sales are under $100 million.

Often, because they are outside employees, part-time CFOs or controllers become confidants for small business owners. “I can provide objectivity that they may not always get from a full-time employee,” says Tony Battaglia, BIK’s director of outsourced accounting services. Most of the businesses for which he works have $5 million to $25 million in annual sales. It is, he says, “fun, challenging and varied.”

Compensation is a touchy subject. Tatum’s Ms. Jamison and Robert Half’s Mr. McDonald say only that their employees make the going rate. The “2008 Robert Half International Annual Salary Guide” shows that full-time CFOs for companies with sales under $100 million earn from $91,000 to $138,250 a year. CFO compensation for companies between $500 million and $1 billion of sales is put at $257,500 to $370,500.

“I’m a big believer in the concept,” says Bruce Moeller, president and chief executive officer of San Diego-based DriveCam Inc., a company that provides software to monitor driving practices for trucking and other fleets, as well as offering safe-driving coaching. Mr. Moeller has used interim CFOs from Tatum three times for DriveCam and other companies for which he has worked. In one instance he needed a CFO who had the expertise to help ready a company for a public offering, and was able to get one through Tatum.

Although Tatum’s Ms. Jamison estimates that six-to-12 months is the average tenure of those they place in a company, Mr. Moeller says the last CFO Tatum supplied stayed with DriveCam for three years. “If I find a high-quality person and build a bond with him and trust him, then the CFO becomes a partner. The men and women with whom I’ve worked have been first class,” he adds.

Contrast that with the companies with which Mr. Schmitt and his crew at BIK typically work — they expect to have a long tenure at the client companies. While they may not be on site every day, depending on the individual needs they may be there quarterly, a week or two each month, or a few days a week.

“We outsourced IT and found that being treated like a customer was a good thing,” says Rob Osmond, CEO of Benchmarc Display Inc., a Vernon Hills, Ill.-based company that supplies displays to retail stores. In 2002, when he needed to cut costs, the opportunity to outsource CFO duties offered the same advantages. He estimates he has saved 50% in salary and benefits and he gets someone who has worked for other companies and can bring in a different view.

Banks often refer clients to BIK. “When we go in the quality of the financial statements is not good,” Mr. Schmitt says.
Getting the financial house in order usually is the first order of business, but the needs can go much further than that. For instance, three years ago Mr. Schmitt started with a manufacturing representative who wanted to buy the manufacturer and the BIK-supplied controller helped him do that.

Now the company produces $10 million in annual sales, compared with $2 million when it was bought. But Mr. Schmitt is realistic about the future. “If he grows, there may be a point where he would want someone full time,” he says.