Welcome back everyone to another episode of Top of the OPS, a
podcast brought to you by The Drawdown.
In each episode, we explore a topic or theme impacting
operations and finance professionals in private
markets, giving you a perspective on the challenges
faced by operational leaders and the solutions available to them.
I'm joined today by The Drawdown's Deputy Editor,
Matthias Plots and reporter Tanya Kuchel. 2 journalists who
make excellence look as easy as Keely Hodgkinson and Georgina
Huttabel. Good morning, good morning.
I'm not even going to try to figure out who those people are.
It is good to have you in the office.
I googled the names. I will say thank you for the
compliment, John. Yeah, it's definitely meant as a
compliment. Yeah.
So for today's episode, Tanya, we're looking at the tricky
process of CFA succession, which is something you've been writing
about recently. So do you want to give us a
little bit of an intro and write down of the topic today?
Yeah, so I started working on this last year.
It was something I wrote about for the last December, January
cover story of the magazine, which has lots of references to
Hitchcock Bounce if you are a fan.
So before we get deeper into this topic, we're going to start
with some contacts. The CFO role is of course
changing. Traditionally, CFO, particularly
within smaller firms, has had to wear multiple hats.
They're often responsible for finance plus legal, tech
operations, sustainability frameworks, etcetera.
But some firms have it as a dual role of CFO and CLO.
But all of these functions within the CFO office are under
pressure to become more efficient to facilitate scaling,
which only further complicates succession planning.
Last year, there were notable CFO successions that we covered
in detail on the drawdown, For example, Clarit Capital, Revaya
and Flex Capital. All of them, you know, had a
range of internal promotions to external hires or interim hires.
Regardless of whether AGP is looking for an interim or moving
up a finance professional in house, the increasing demands of
the role has in a way limited the pool for GPS.
Yeah. So what a requirement to wear
multiple hats is nothing new for mid market, low mid market or
emerging managers within that CFO role.
I do think the skill set is changing particularly given how
AI is disrupting working processes and also look the
wider market conditions. So it's an LP friendly market.
Managers are having to work harder to fundraise and app
means greatest demands on reporting as we've heard plenty
of times over the last couple of years.
I mean CF OS are now much more front and center in investor
relationships. And one of the key players in
this are of course, recruiters because naturally they see this
day in and day out. I spoke to Glenn Roberts from
recruitment firm Audio Partners to find out qualities that go
beyond what is on paper for candidates, where should the
search begin and thoughts on the next generation of CFOs.
So let's take a listen. Joining us on the Drawdown
podcast is Glenn Roberts, the Co founder and director of
recruitment firm Aria Partners. Welcome to the podcast, Glenn.
Thank you, Tanya. Yeah, very pleased to be here.
So of course you work a lot with clients looking to hire within
the fund finance base and also of course finance roles and GPS,
especially the CFO role. So as on today, the, you know,
the CFO role requires an individual to be connected to
all departments of the firm. So from a recruiter perspective,
where does the search begin? You know, how can the succession
planning team and the recruiter find these sort of Jack of all
trades CF OS? Sure.
I think I'm, I mean, really, really good question.
It, it goes with the evolution of the CFO role over, over the
last definitely accelerated in the last five to 10 years.
But going from a numbers, you know, very linear back office
type role to being at the forefront of a firm's growth and
development. I think a lot of these
characters exist in the existing kind of private markets
ecosystem. There's plenty of fantastic
CFOs, finance directors I know who have embraced change, who've
moved beyond the numbers, getting behind data AI adoption
and really adding value rather than just being the sort of old
school counting room. I think the industry, the whole
really does struggle with bringing new people in.
It's it's the kind of blessing in the curse of Carrie in a lot
of private markets funds that you, you get a real entrenchment
of you kind of CFOs and finance directors who stay in a fund,
get to the top of the tree and then it becomes very difficult
for them to move on. If you have someone who's
forward thinking, who's embracing change, then happy
days, it all works. But if you have someone who's
wedded to the past, it can be a challenge for a firm to grow and
develop. So I think the industry as a
whole needs to get better at not not necessarily kind of moving
on senior folk before they want to move on, but I think having
good number twos really kind of, you know, investing in that kind
of second layer. The industry also is I think
getting better at looking outside of traditional.
You've worked in a private equity fund since you qualified
as an accountant sort of profiles and there's been a
number of CFOs I've seen in the last two to three years come in
from banking, insurance, broader asset wealth management.
And I think that really adds more diversity to the gene pool
more than anything. And a lot of those people bring
in, you know, kind of cross functional experience, cross
industry experience and can add a lot from outside traditional
private equity or private market sphere.
But I think first and foremost, it's it's identifying the sorts
of characters who have worked across function.
By and large, a CFO finance directory is going to be a
qualified accountant. You know, I have seen instances
where people have moved from the deal team or investor relations
or those sort of related areas into the CFO function.
But I really do think for the most part, you need to be a
numbers person first and foremost.
It's more around your mentality and how much you are embracing
the world we live in now and the speed with which it's
accelerating. What qualities do you
particularly look for for the CFO role that are not just on
paper that kind of go beyond the experience of what's on paper?
Yeah, of course. I think first and foremost that
CFO role is, is a, is a hugely strategic and commercial role in
in any organization. There's a big difference between
someone who's in the trenches wedded in the numbers versus
someone who's who stepped out of that and, you know, gone, gone
to the kind of next level being being a proper business partner,
being exactly what the board need.
You know, someone who's a sounding board, someone who's
the, who's this sort of commercial wingman or wing woman
to, to the firm. It's very, very difficult
sometimes to identify that just on CV value.
You know, you need, you really do need to kind of meet people,
talk through the examples of where they have supported board,
where they have worked on strategic projects, where
they've been part of a transformation program, they've
been part of fundraisers. They've seen a private equity or
a private markets firm through, you know, a period of growth and
not just being, you know, kind of keeping an eye on things as
they kind of tick along. And again, that just comes with
meeting people and, and drumming down into the specifics of their
experience. We call it battle scars.
It's, it's the sort of people that wander around with a, you
know, an eye patch on and a dodgy limp.
And they've been through the wars and they've been through
the trenches. And it's not an age thing at
all. You can develop that experience
really early on in your career. You could be 30 and have been,
you know, 10 rounds of Mike Tyson.
But by and large, it's those collective experiences, those
collective battle scars that a board is buying.
They want someone that they know when the going gets good.
This person knows how to take it up a level when things are
looking rocky. This person has got all the
skills at their disposal to to kind of weather the storm.
So a lot of these financial battlegrounds would really just
be the 2000 eights and COVID crisis and how to deal with
those. And is that what some of these
firms are looking for? I, I think so.
I don't think, again, I don't think it's necessarily an age
thing. What's been really, really
encouraging in the last 10 years is that more and more private
markets firms are bringing in and again, maybe probably
shouldn't touch on age too much, but it, but it is true.
You don't need to be in your 50s with Gray hair to be a CFO.
You can very quickly get to that role in your in your 30s if you
have the right experience. COVID, global financial crisis,
of course that helps, but you could have been at a fund that
you know has gone through its ups and downs during a more
stable market period. It's it's more around the
collective experiences you develop at some point in your
career. You can develop battle scars
really early on in your career. You know, you could have joined
a fund that's gone through exponential growth.
You've had incredible experience in the real formative point in
your career and you've and you've made it to that CFO
position, you know, at a younger age, or you could be someone
who's moved around multiple funds to gain those collective
experiences. I think it's more how you, you
sort of sell yourself and, and again, what's been super
encouraging over the last 10 years is, is that kind of CFO
role is it is quicker to reach now in private markets partly
down to growth. You know, private credit now for
example versus where it was 10 years ago is completely
unrecognizable. So, you know, diversity, more
funds, more strategies is going to create, you know, it's role
creation. It allows these kind of finance
directors, heads of finance to step into the CFO roles.
But but I think battle scars is, is exactly that.
You don't have to be, you know, an old pirate in the sort of 50s
and 60s to reach that point. You can, you can achieve it now
much earlier in your career. And likewise, you may well be in
your 50s before you hit your first CFO role.
It just depends, you know, what experience you've had, but but
collectively you've just got to develop those experiences to
speak to a lot of people who who want to be an FD and they're
gunning for the title and they're, you know, for obvious
reasons, keen as mustered to get to that point.
But their experience has been incredibly linear and static.
They've worked in one fund. They've not had a lot of this
kind of front loan strategic commercial experience and it's
very hard to sell that as the CFO in the waiting if you, you
know, like I said, if you've not gone 10 rounds with Mike Tyson
at some point. Yeah.
And looking at of course like the, the industry's view on the
CFO role itself, the views are largely, I've heard quite split
the role as an investment or a cost to the firm.
How do you think that perception will change in the next couple
of years, or even the next five years?
For sure. I think the great thing about
private markets is I've rarely speak to a CFO who feels that
there are cost for a bird. OK, maybe sometimes you know
when the going gets tough and they look at payroll and realise
they're the most expensive employee outside the partners.
But I look, I think look, I think for the most part private
markets and private markets are wonderfully forward thinking
industry. The value that CFO creates in
terms of especially nowadays moving beyond the reporting or
at least getting the reporting to a point where it's adding
value to the portfolio. It's enhancing, you know, both
GP as well as LP value. And I think those CFOs who have
moved beyond the sort of back office reporting to being more
forward thinking, supporting the deal team indirectly create a
huge amount of value. You know, it's what the LP's
have been wanting time and time again.
It's data, data, data, data. It's a, you know, kind of a data
dopamine drip. So those CFOs who have tapped
into that mind that really, you know, are in that kind of
strategic commercial role are immediately adding value.
For sure. There are plenty of funds where
the mindset's old school that finances the, you know, kind of
back office and beyond, and it's a necessary evil to keep the
regulators at Bay. But I think that mindset was
left a long time ago and for the most part in private markets.
How important is it for the exiting CFO to be involved in
the hiring process? For sure.
Tricky one, especially if you're a CFO who is at the point of
retiring or exiting for whatever reason, and you especially if
you've been there for a long time.
It's that old, you know, big shoes to fill analogy.
I, I think it's important that the incumbent is involved in the
process, but they, they can't be the lead on the process.
That needs to be the partners or COO who who lead the charge as
far as deciding what that kind of profile is, There's been a
number of succession roles in the last few years with some
really big brand name thumbs too.
What's super interesting looking at the people who've come into
those roles, it's been to camps people.
Most encouragingly, there's been a huge amount of female talent
brought in both from within the private markets industry as well
as externally from banking, insurance for all the right
reasons. You know, the private markets
world is still very heavily male dominated and a lot of funds are
very conscious. They look at their board of
directors and it looks like a scene from the 1970s.
So bringing in good solid commercial female talent has
definitely, you know, made the world a better place.
I think in private markets, the number twos that have stepped up
have been very credible number twos as well.
I think there's a number of people I've seen move in the
last 12 months who who've been that sort of, you know that that
kind of CFO and waiting for a number of years have developed a
lot of battle scars. But they're of that newer
generation where they are, they've moved to my points
earlier. They may be on the kind of back
office numbers. It's more, you know, kind of
value enhancement, value creation using data AI tech,
accepting that the finance world will be a beautiful mass of
finance tech, IT data risk at some point in the future.
But I think that's been crucial to the survival of the industry.
But an incumbent needs to be part of the process for sure.
You know, it's, it's their sort of legacy that someone's going
to inherit. And there also needs to be a,
again, this can be for anyone who's recruited at this level
knows the biggest challenge is actually getting the partners to
agree on the sort of profile or agree that one person's going to
lead it on behalf of the partnership.
Otherwise, you know, you get sort of 2345 extremely
successful, opinionated people and they disagree on the sort of
profile that they want to want to hire.
But by and large, I think it's been a, it's been a really,
really good, you know, last 5-10 years for these sort of CFO
succession roles. But I think most firms are
pretty good at making sure they have a succession plan in place.
And there's been a number of people I've seen move a year
before the incumbent is due to retire.
So it gives plenty of time to, you know, kind of take on the
reins and gently ease yourself in.
Yeah. And so clearly we're going to
see more diversity in the senior management roles.
What do you think the next generation of CFOs are going to
look like? What would they need to like
start training now in? Really good question.
I actually had it at breakfast this exact question at breakfast
yesterday morning with a with the CFOCO I've known for for
donkeys years and he asked this exact question.
What, what is the future of accounting and private markets
look like with the, you know, the AI Armageddon that's going
to take over the world like a Will Smith film.
But I think in reality, it's, you're always going to need a
CFO there. And I think the generation, you
know, the, the people that are in their early 20s now that in
10/15/20 years will be CFOs will be a far more forward thinking
mix of numbers risk. It will have fully embraced tech
tech, especially in AI risk. You're always going to need
someone there to guide the ship, to interpret the numbers to, you
know, to kind of make sure that what if you have in the
background from an automation perspective, actually is
performing and doing its job. Where are these guys going to
come from is probably the bigger question because we're not
hiring at the junior level, are we really?
You know, the stats that are in the market at the moment about
junior level hiring across the board, all industries, all
sectors are kind of depressing to be honest.
I think the big four, big larger accounting firms, professional
services firms will be your sort of source of talent.
And those people will have come from a far more sort of nuanced
training and background that will enable them to be very
successful when they move into, you know, into a private markets
fund, into these leadership roles.
I don't think it's going to look 1,000,000 miles different.
You know, Fast forward 20 years from now, if you had a job spec
for a CFO, is it going to read remarkably different to role
now? I think it will in a lot of
respects, but you know, numbers interpretation of the numbers,
using numbers to enhance value drive performance of a business
will still be the the underlying core.
Yeah, it's. Definitely very interesting
about the junior talent aspect because even investment banks
are putting loyalty oats and check insurance with their
junior bankers to make sure they don't get, they don't go to
private equity sooner. So that's that's every very
interesting. And before we wrap up of course
for a manager right now mid market manager right now they
are just about to begin their, I guess first CFO succession
planning. What are some best practices
they should keep in mind before they begin the search?
I think as a starting point, figure out what you want.
I know that may sound like ridiculously obvious, the amount
of firms that go out to market, as I mentioned earlier with
conflicting views of what the firm needs.
You need to agree who's the point?
All those kind of communications internally need to have happened
and you need to have a very clear list of what's important
in the role in terms of background level, what skills
you're after, both technical skills, softer skills, cover of
all the obvious questions internally, it's crazy how many
firms there's someone there who's maybe thinking they're the
number 2 and that if the CFO is going to move on that they've
got the job. But there may be two junior
couple of roles I've worked like that in the last few years where
the communications internally have been a bit not been great.
So you're going out externally to the market and you've not
nipped that in the bud internally and told someone who
is the kind of, you know, the sort of the slightly more junior
but masses of potential person that they're not quite there
yet. So internal comms is key, but
but agreeing that brief upfront and making sure that you
understand the market you're going into the CFO recruitment
should always be retained search.
You need one person you trust and to go out there to sell you
to find the very best talent in the market possible.
And I always sort of worry when I hear if I mean it doesn't
happen that often, but a finance director or CFO role, it's out
with multiple agencies, you question the commitment to hire
and and that sort of thing. But that brief has to be
absolutely crystal clear because your message to the market,
white noise, etcetera, it's got to be very, very clear around,
you know what you're looking for in the hire.
That's all the time we have for today.
Thank you so much, Glenn. Thanks so much, Tanya.
Interesting to get Glenn's perspective there.
I think it's a fascinating time for recruitment, not just within
private markets but more generally across the economy
right now as businesses grapple with changing working practices
and processes. There were parallels in his
comments with conversations I've been having recently about
hiring for tech or data focus roles and the priority of
finding strategic thinkers for those roles.
It seems to me that across private markets right now, a
greater emphasis is being put on personality and soft skills even
within the back office and the expense of some of those
technical skills, which maybe would have been seen as, you
know, the priority in the past. And actually, I suspect that
this might be a wider trend across the economy, as you know,
the consequence of AI adoption in the years to come becomes.
You know, more embedded and more apparent.
Something else I thought was interesting from the
conversation was his point about the need to bring new thinking
into firms as the CFO role evolves.
We have heard in the past concerns very experienced
operational leaders that younger generations are yet to build up
their resilience having lived through relatively mild
macroeconomic environments today.
So in that context, I thought his point that so-called battle
scars are being highly valued was interesting.
Yeah, absolutely. Agreed.
In particular, the point around experience with crisis
situations is a big one. It's brought up every time at
the Operational Leaders Summit on different panels.
Actually. I think there's just the general
Bori that sort of the post 2008 professional generations, they
haven't had to navigate early choppy waters and therefore lack
the experience to do so in a leading role when history
inevitably repeats itself one way or another.
And navigating those crisis situations is not something that
you can really teach someone. It's one of those mistakes you
have to make for yourself if you want to apply that metaphor to
other points. And I found particularly
interesting are the remarks about individuals who want to
move from the front to the back of his roles.
Because last year I'm moderated a panel and they brought up
almost the opposite point where in the hiring process you have
to spot the people who actually clearly want to sit on the
investment team and are hoping that the back office is actually
sort of a back door into those roles.
And one and that on with this other point that Steve a highly
St. strategic and commercial role, to me, these two together
kind of suggests suggests a change in perception about how
these roles are viewed. Because I think there previously
was the image of in air quotes, just an accountant where it's
clearly waning away in favour of one which is more in tune with
what the role demands and function fulfills.
And I think that the reality of what CFOs do day in, day out has
sort of been also reached the the industry perception around
them. Yeah, I definitely agree with
you both. I guess on the point of the next
generation, there's already a level of anxiety on what the
future holds for them across industries.
And, you know, all these aspects of change in perception to
change in skills required for these roles are all intertwined.
We cannot talk about 1 without the other.
Right. We're pretty out of time.
So before we wrap up, do you both want to give us a little
bit of a preview into what to expect from the drawdown in the
coming weeks? So I'm working on another long
form feature about the challenges of standardizing
processes. Accounting is largely
standardized across the industry, but can the same be
said about investor attack onboarding or data processes?
I'm also looking at potential risks of not standardizing some
functions at AGP. And, as always, there are also
some upcoming GP profiles. Yeah, I have two sort of
features to often note. One of them is a bit of an
answer to cover feature I wrote last year about fund
administration and its PE backers.
And in that cover feature was pointed out to me that the role
of fund administrators needs to evolve.
So I've now gone and spoken to fund administrators on how they
think about this. And then there's another feature
I'm working on on the difference between climate risk and ESG,
which is becoming their own different functions almost
within GP. So I'm looking at the
operational implications of this divide.
And completely unrelated to all of those, but going back to
Tanya's A reference to Hitchcock in the intro, I'd be very
curious, what is your favorite Hitchcock movie?
Putting me on the spot there. I don't know.
Yeah. Yeah, I'll have to think about
that. Yeah, I like.
So I'm always looking for the smart choice, right?
Like pretentious choice. So maybe I'd say something like,
right? Fact that that is definitely the
pretentious choice. The technical aspects right of
the kind of workshop idea that would be my suggestion for Tanya
some time. You know, because the title of
the cover story on CFO succession planning was to Catch
a chief. I will say to Catch a thief.
OK, that's fair. Yeah, yeah, very good.
OK, that's definitely enough from us today.
So all it leads me to say is thank you, Tanya.
Thank you, Matthias. Obviously, a big thank you to
Glen, our guest today as well. And most importantly, thank you
to everyone for listening.