How an Interim CFO Differs from a Fractional CFO

Organizations exploring outside high-level financial support are often presented with three types of executives, frequently referred to as fractional CFOs: a consultant, a fractional leader, and an interim leader.

Each serves a different purpose.

An interim CFO steps into the finance leadership role during a period of transition and helps move the organization forward while that change is underway.

You could call the leadership transition a project.  It has constraints of time, cost, and scope, and it’s temporary.  It ends when the new CFO is successfully onboarded, which fits my definition of what a Strategic Finance Consultant does.

But, unlike consulting, an interim CFO is responsible for leading the finance function from within, not advising from the outside.

Many of an interim’s responsibilities are similar to those of a fractional CFO, but the role is not intended to be long term. 

An interim leader sits between a consultant and a fractional.

If you think about the three models we’ve discussed:

Consulting completes a project.

Fractional CFOs provide long-term strategic leadership on a part-time basis.

Interim CFOs guide the organization through a leadership transition.

Many fractional CFO firms offer all three services, which is why the term fractional creates confusion.

Each serves a different purpose and provides value to organizations.  Understanding those differences helps companies bring in the right kind of financial support at the right time.

What an interim CFO does

Interim CFOs are typically brought in during moments of change. That might include an unexpected leadership departure or preparing the organization for their first CFO.

During that time, the interim CFO assumes full responsibility for the finance function, evaluates the people, processes, and systems, and moves the organization forward so the next leader inherits a stronger situation.

They lead the finance team, support the CEO and board, and oversee the financial operations of the organization. From the outside, the role looks very similar to a permanent CFO. Two key differences are that the interim is temporary and that the interim also helps onboard the right long-term leader.

When organizations bring in an interim CFO

Organizations bring in interim CFOs for a variety of reasons.

Sometimes a CFO has departed and leadership needs experienced support while conducting a search for the next executive.

In other situations, the organization is installing its first CFO and wants experienced leadership while determining how the role should function within the company.

Interim leadership can also be valuable when the organization wants to better understand the type of financial leadership it needs going forward. During that period, the interim CFO leads the finance function while helping leadership evaluate the structure of the team, the information being produced, and the systems that support financial decision making.

That evaluation may ultimately lead to hiring a full-time CFO. In some organizations it may reveal that a fractional leader is the better long-term fit.

Why interim leadership works

Interim leaders bring a different perspective to the organization.

They are experienced executives who step into the role with a clear mandate and a defined time horizon. Because they are not seeking a permanent position, they can approach the work with a level of objectivity that is often difficult to achieve internally.

An interim CFO evaluates the finance function, strengthens the information leadership relies on, and builds the structure the organization needs going forward. The focus is not on creating systems the interim prefers to manage, but on putting the right structure in place for the next stage of leadership.

During this time, the interim CFO also provides the CEO and board guidance on what they should be looking for in their next finance leader. Every organization reaches a point where its financial leadership needs evolve. The interim period provides an opportunity to clarify the responsibilities of the role, the capabilities the organization needs next, and the type of leader who will be most effective in the position.

When to consider an interim CFO

Organizations often bring in an interim CFO during periods of transition or growth.

Sometimes a CFO has departed and leadership needs experienced guidance while searching for the next executive. Interim leaders are also useful when an organization’s finance executive needs to be on a leave of absence.  In other cases, the organization is installing its first CFO and wants support determining how the role should function within the company.

Interim leadership can also be valuable when the organization wants an experienced perspective while evaluating the finance function and determining what type of financial leadership it will need next.

If your organization is approaching a leadership transition or preparing to install its first CFO, that is the right time to bring an interim leader into the conversation.