Why CFOs seek help from consultants

Denise Berry is used to dealing with exceptional circumstances.

She experienced them frequently while serving previously as a US Army Reserve combat medic in Iraq. However, Berry, CFO of Alabama-based Medical Industries of the Americas, also knows her limitations.

Berry admits she is good with numbers but lacks knowledge and expertise when it comes to helping her company streamline its factory operations — where utility costs run to hundreds of thousands of dollars per month — by improving processes, reducing costs, and increasing cash flow. So Berry expects to hire a financial-services consultant to assist her with that goal.

"If it's something that's more specialised and the person has done a very specific craft and is very good at what they do, then I'll bring them on to specifically do that job," said Berry, who works out of Los Angeles. "I'm not opposed to bringing on consultants just for the fact that sometimes they're better than I am. I'm open to constructive criticism. I'm also open to added value."

Berry also counts on consultants to help with regulatory compliance and other matters. She is among many CFOs who increasingly look to consultants for assistance.

Nearly 70% of CFOs in North America, according to surveys by Robert Half Management Resources, rely on external resources or a combination of external and internal experts for major one-time initiatives, such as a merger or acquisition. Meanwhile, 61% of US CFOs relied on external resources to access specialists' expertise for assistance with such matters as regulatory compliance and new lease reporting requirements, among other tasks, while 49% sought support for full-time staff.

"Every company is going to be different in [the ways it contracts financial-related consultants] but, certainly, every company needs to outsource consultants — especially if they're bringing in a CFO from a different industry," said Berry. "I think they're going to need some additional consulting to make sure that they don't come up against issues that could have been overcome with a consultant in that tranche."

Berry, who has also served as CEO of a foreign-exchange-services company and technology firm, has hired consultants for financial reporting and other tasks with her current and former employers. She has also served as a consultant to CFOs during her decade-long career as a financial-services professional.

Flexibility matters

Iris Snyder, CFO of Reed's Inc., which owns brands such as Reed's ginger beer and Virgil's natural craft soda, said consultants appeal to CFOs because of their flexibility and expertise.

"They're experts in their fields," Snyder said. "So rather than hiring a full-time generalist, we're hiring a contractor that's going to help us in a specific area, for a specific project."

Another appealing point: "They're flexible. They can likely start right away."

Reed's sought a consultant in 2018 to serve as a controller as the company began to relocate its headquarters from Los Angeles to Connecticut and create a new division. Snyder also wanted to fine-tune the controller job description. That consultant has since become part of the company's permanent staff. Snyder also hired a contractor to focus on financial reporting for regulatory-compliance purposes.

"We still have somebody [in house] to do reporting, but we don't have to focus on it as much as our contractor [does], because that's their sole project," she said.

Snyder expects that she will continue to contract out financial-reporting services until the company gets bigger and may need to hire a permanent employee for the role. Reed's also plans to bring in another contractor over the next year to help it become self-compliant on regulatory matters.

Setting proper expectations

Sometimes, she and others warned, a consultant can be a bad fit culturally. Extensive communication between the consultant and company is required to ensure that sought-after goals are met, and the time and energy spent can take a toll considering that the consultant will leave eventually and no longer be part of the company's team or financial-management system.

Tim Hird, executive director of Robert Half Management Resources, said the CFO must strive to avoid communication breakdowns between staff and the consultant.

"Ensuring a good consultant [is hired] is one thing. Proper communication is another," Hird said.

If done right, he added, the hiring of a consultant will not sacrifice internal staff's skill development. Consultants with the right experience can provide a positive experience for the company. If part of the consultant's role is to transfer knowledge to a company, the consultant will be accountable to the CFO. However, if the consultant does not have the right skills, it will be difficult to transfer knowledge. To ensure that the right consultant is hired, the CFO must be clear on what needs to be done and involve stakeholders in the process.

Hird said CFO demand for consultants is being driven by leaner middle-management teams than those present five or ten years ago, corresponding labour and skill shortages, and white-collar professionals' desire for more flexible work and quicker exposure to more industries and projects.

Hird said he has noticed an increase in CFOs hiring consultants during his two decades with Robert Half in various international outposts. A native of the UK, he started with the firm in London and has also held positions in Germany, France, Belgium, Singapore, and the US.

"These trends that I'm talking about, I've seen them all across the globe," he said.

CFOs covet consultants because contractors enable internal staff to focus on day-to-day business demands and provide flexibility when professionals' views on work are changing.

"The flexible labour force is really the new labour model of the future," Hird said. "This is the way the economy is going. It's driven by companies and it's driven by the employees. It's the perfect storm."

Filling a knowledge void

Jonathan Simnett, director of London-based Hampleton Partners, whose firm facilitates tech mergers and acquisitions, said CFOs are increasingly contracting out financial services in response to rapidly changing business conditions caused by technological change and economic and political volatility. CFOs may lack sufficient internal resources to divert financial specialists from regular operations.

Because of those resource shortages, finance teams sometimes lack the skill or market knowledge necessary to value target companies or manage transactions to completion, Simnett said. 

Startups often contract out a greater range of services, including basic tasks such as bookkeeping, because it's not economically viable to bring the experts in house. Additionally, there are an increasing number of financial-services apps aimed at small businesses. Such apps may, in turn, delay further in-house hiring.

"There will be more contracting out of M&A support services as corporates spend increasingly more on M&A versus R&D as a route to innovation," Simnett predicted.

CFOs also see value in consultants because they have concern about the abilities of their team to drive digital transformation. Just 10% of CFOs say their finance team has such skills, according to a report published by Oracle and the Association of International Certified Professional Accountants.

By hiring consultants, Simnett said, CFOs can also control internal headcount. However, CFOs must ensure that contractors deploy the correct level of personnel to achieve the goal sought and that internal structures are in place to manage contractors effectively. 

CFOs must be careful when choosing service providers and seek guarantees on contractors' expertise, function, availability, and ability to deliver services as specified in contracts. Deals must be structured so that they can be forgone and compensation can be applied if contractors fail to deliver. CFOs must also insist on regular reviews of projects and progress reports using videoconferencing to bring contracted teams closer to the core corporate team and keep everyone focused.

Increasingly, CFOs, like all of their C-level colleagues, will be managing a workforce that includes a mixture of directly employed and contracted resources, Simnett said.

"It's the only way that firms can maintain the skills base and agility required to succeed in rapidly changing, technology-driven, politically and economically unstable global markets," he said.

"[CFOs] should keep their employees close — but their contractors closer still."

'Never one that's exactly the same'

Vancouver-based consultant Marlyn Won, CPA (Canada), said much of her work is project-oriented and involves supporting implementation of various strategic initiatives for her clients. Contract commitments vary depending on the scope and complexity of each project.

Won's clients operate in diverse sectors, including higher education, utilities, professional associations, and manufacturing. Their annual revenues range from $30 million to hundreds of millions of dollars. She often works in a cross-functional team, including senior management from finance, information technology, human resources, and operations.

Won worked with KPMG in Vancouver and Toronto before becoming a consultant 19 years ago. She enjoys the variety of assignments that a consultant role offers.

"I know it's not for everybody, based on feedback from some of my colleagues who have tried consulting," Won said. "There is uncertainty and constant change that comes with this career choice. They prefer jobs where there's more stability. What I like about this consulting role is that every assignment is a new and different project with a set of unique nuances for each client. There may be similarities, but there's never one that's exactly the same."

Won said her experience working with diverse industries and groups of people enables her to demonstrate best practices and tailor solutions that suit the client and its culture.

"Each project requires a certain skillset," said Won. "It may be expensive for the company to hire someone with that skillset when they don't need that individual on a long-term basis. Hiring a consultant allows the company immediate access to the required skillset for the length of time they need it."

— Monte Stewart is a freelance writer based in Canada. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.