The gig economy is rapidly expanding in the United States and across the globe. Everything from physical labor to knowledge-intensive roles are now awarded to external workers with different sets of insights as internal workers. Many businesses have warmed up to the idea of outsourcing knowledge roles like customer service centers and even low-level accounting and finance personnel. But high-revenue freelancing is also growing. So what about high-level finance personnel, and the C-suite finance position itself?
Part-time CFOs are leveraged by numerous businesses every year. From small businesses that need help getting their books and finances in order, to medium-sized companies looking for assistance with major projects or debt restructuring, to large enterprises with a need for temporary assistance at the highest levels, outsourced or part-time CFOs fill the market niche of high-level gig-economy workers.
Misconceptions about outsourcing high-level, high-confidentiality roles
There are many myths surrounding outsourced work, and expectedly so for an industry worth billions of dollars and boasting tens of millions of participants. These all may have grains of truth to them and they may actually be steadfastly true for different individuals, but they certainly do not apply across the entire set of freelancers.
Myth 1: Outsourced labor is always cheaper than in-house, and therefore of lower quality
It is generally true that part-time CFOs will be cheaper than full-time CFOs for the very fact that part-time workers work less than full-time workers. It is also true that top-rated personnel will charge very high per-hour rates, as they don’t expect to work full hours. But the results of these myths are entirely dependent on the type of work needed and the type of freelancer hired. For example, a small company with a short-term need for a CFO, say during a fundraising round with investors, would benefit from the part-time, temporary nature of the work. They will have lower labor costs overall, but the lower costs do not necessarily imply lower quality.
Beyond just less work to be done, it could be that outsourcing makes the work more efficient, leading to overall lower costs. Or it could be that the expert has seen similar projects before and is able to implement more efficient decisions than an internal CFO who has only worked at one or two companies before, leading to reduced overall costs.
Conversely, a medium-sized company that needs to bring on additional help long-term can possibly negotiate the per-hour price if steady, long-term work is available. Thanks to added benefits like setting their own schedules, some part-time CFOs might actually be willing to work for lower per-hour costs than in-house personnel based on lifestyle tradeoffs.
Myth 2: Outsourced expertise is so independent that firms can step away from projects all together
Regarding independence, part-time CFOs may possess some independence because they are not tied to the hiring firm directly, but the intimate role of the CFO will likely require that the individual become integrated to the company rather than remain separate and independent. But it may be ill-advised to step away from the project entirely, because the expected and the actual project direction may diverge over time.
Moreover, sometimes this independence does lead to workflow interruptions, but working styles can easily be examined during the interview process and either accommodated or negotiated.
Independence is sometimes confused for a lack of loyalty, as well. However, an outsourced CFO who is treated well and integrated well into the company is unlikely to simply vanish because a better offer comes along. Companies with cultures that lead to disloyalty will find that both outsourced and internal workers are disloyal, and the problem lies with company culture, not whether an employee is internal or external.
Myth 3: Outsourcing means a loss of control over confidential data and workflows
Many companies are very wary of potentially exposing confidential data to part-time workers who may simultaneously work for another company. But legal repercussions can be outlined in contracts, perhaps in non-compete clauses that are agreed to before the start of work. And actual figures can be restricted to company-owned equipment or office-access only. These two solutions ensure part-time CFOs cannot simply pass confidential financial data off to competitors.
So while all stereotypes and myths may originate in truth, proper due diligence before hiring to ensure the right fit should eliminate most of these risks. It would be shortsighted to write off all part-time CFOs due to these myths as these characteristics do not apply to every worker and every project.
Finding a part-time CFO that’s the right fit
When hiring a part-time CFO, it is essential the CFO and the business mesh well. This means the company culture must be accepting of the part-time CFO, and, due to the CFO’s role as a top manager, the employees must accept the CFO’s authority. The worst possible scenario is when employees reject a part-time CFO’s position or actively fight it out of fear for their own jobs or a misunderstanding of what the “outsider” is bringing to the company or “dictating” to internal personnel. Cultural fit is essential for retaining talent, and if a new, part-time C-suite executive is shifting the culture too much from the top down, there may be some retention issues with current in-house employees.
On the other hand, when external CFOs source ideas from internal workers, engage affected individuals, and thoroughly explain decisions, even major changes will meet far less resistance, resulting in better implementation and higher productivity as employees are motivated by involvement and clear reasoning.
Different part-time CFOs will have different working styles, requirements from their employees, and, for remote individuals, circumstances about their internet reliability, time zones, and methods of communication. If any of the characteristics do not mesh with the company, its culture, or its employees, it is better to find another person to hire.
What a part-time CFO offers
The CFO role encompasses a wide range of responsibilities, and a part-time CFO is capable of delivering almost any of the services that could be delivered by a full-time CFO, albeit on a shorter timeframe and, importantly, with perhaps less intimate understanding of the business. These deliverables include full analysis and reporting of investment projects, audits and summaries of the capital structure and cash flow of companies, delegation of duties and ongoing performance evaluations, and many others. An interesting potential benefit that is often overlooked is the ability of CFOs to shape the financial arm of a company into a competitive advantage in itself.
Part-time CFOs may bring other benefits as well. CFOs who work at more than one company simultaneously are able to identify current best practices from both companies and help both companies improve. Even if the individual only works at one company at a time, his or her expertise will benefit from a wide range of changing experiences, whereas a full-time CFO will have deeper but less broad knowledge of a single firm.
Part-time CFOs might also bring in their own IT or workflow systems that can act as refreshing changes or simply be a foundation for a company that previously lacked one. And for “on-demand” professionals, the immediacy of hiring and the flexibility that generally goes hand-in-hand with such lifestyles are major positive aspects that part-time CFOs may provide.
Is a part-time CFO right for your company?
If the benefits of a part-time CFO seem enticing, it might be time to hire one. The myths of part-time workers and particularly of CFOs might be grounded in some reality, but they are not equally applicable to all individuals. And even if you don’t hire one, researching the prospect is a possible lead to a stronger financial department and eventually stronger financial performance, a key driver of every business.
Each company must make its own judgment as to whether a part-time CFO would be the best strategy, and Paro can help in making that decision.