As companies compete for financial expertise, the spotlight is turning to leaders who can provide the skills and experience needed on demand.

Demand for interim executives has risen over the past 12 months, according to a report by Heidrick & Struggles' Business Talent Group (BTG),up significantly, increasing 116% year over year. Demand for on-demand financial executives has been particularly strong, up 103% year over year, driven both by ongoing economic uncertainty and the increasing complexity of the CFO role.

Sandra Pinnavaia, chief innovation officer at BTG, said the rise in demand for interim CFOs is partly due to companies becoming more aware of the availability of such short-term specialists.

"As companies learn about and adapt to the on-demand talent world, they start thinking about changes and uses they hadn't thought of before," Pinnavaia said. "I think there's a potential driver here—in a sense, supply creates demand."

The appeal of the interim CFO

For companies, interim executives can help them navigate difficult times or transition periods. According to the BTG report, requests for interim CFOs account for half of all interim C-suite requests. Companies are especially in need of financial leaders with skills in financial control, accounting, and auditing, with demand for such professionals up 76% year over year.

Jack McCullough, president of the CFO Leadership Council, noted that the increased demand facing financial leaders has coincided with rising compensation and benefits.

"CFOs who take on contract or interim work are being paid better, which is attracting more executives to these roles," McCullough said in an interview. For example, some part-time CFOs have begun receiving stock options, and he mentioned one CFO who received this benefit at three startups.

Diane Buckley, managing partner at Forte Financial Consulting LLC, believes that taking on interim roles can also be a refreshing change for financial leaders looking to apply their skills in new areas. Buckley, a veteran of Big Four accounting firm EY, was drawn to interim and part-time CFO work because it gives her the opportunity to share her skills with growing companies and "make a real impact from day one."

"It's like: 'I can bring value to smaller companies that may not yet need a full-time CFO at this stage of their growth, but I can bring that skill set to them,'" she said in an interview.

On the supply side, shifts in workforce trends may be prompting more companies to reconsider their leadership needs. Talent shortages in the accounting and finance fields mean companies may face up to a year-long search for a qualified CFO, making it more necessary to bring in an interim CFO, "even if not the ideal candidate," McCullough said.

Meanwhile, the pandemic has left a lasting impact: BTG clients are using more interim executives because "they've been forced to redefine the entire way they work over the past few years," Pinnavaia said.

"There's clearly a huge spectrum now—some companies are fully back in the office, working face-to-face every day; others have truly changed their business model and don't work in an office at all," she said. "But I think when it comes to leadership, it has broadened the range of acceptable solutions."

Finding the right talent at the right time

Hiring talent on demand also allows companies to find leaders who meet current needs—since many interim executives come into a company to solve a specific problem or achieve a specific goal, their skills are "by definition, matched to the problem," said Reed Malleck, CFO of Ratio Therapeutics.

A CFO typically needs to operate across "four dimensions," he said in an interview, including accounting, operational skills, investor relations, and the ability to participate in executing business strategy.

"If you're a permanent CFO, you have to cover all of those, even if you might be good at only one of them," said Malleck, who has held several interim executive roles and served as a partner at executive talent firm Tatum (a Randstad company). "But as an interim person, the goal is more specific, like 'We need someone who's good at operations. We need to solve this problem.'"

Being able to fit one's skills perfectly to a specific situation can be a major advantage for CFOs, especially as many face pressure from expanding responsibilities. While serving as an interim CFO isn't necessarily less stressful than a permanent role, "in a way, there's relief when you've solved all the problems; whereas in a permanent role, that never happens," Malleck said. "In a permanent role, new problems always arise."

As CFOs take on more responsibilities, such as digital transformation, managing the books, and coordinating other operational needs within the organization, "CFOs are blamed for this, blamed for that... more and more people are feeling burned out or losing trust," he said.

"There are hundreds of analysts watching your stock and performance, the market, competitors, and technology, and you're not just explaining yourself quarterly, but five times a day," Malleck said.

Succession planning is critical

Another often-overlooked benefit of on-demand talent is that they can serve as a source of expertise for future company leaders. Talent shortages in finance and accounting are intensifying, with potential accountants beingattracted to more glamorous fields like technology. Therefore, building a pipeline of executive talent with CFO skills is crucial.

Additionally, McCullough noted that the last time the United States experienced severe inflation was in the 1980s, and the CFOs who held the top financial positions then have long since retired. Today's financial leaders face a "steep learning curve."

"CFOs, through no fault of their own, haven't developed the skills needed to navigate the current economic turmoil," he said.

Shawn Cole, president of boutique executive search firm Cowen Partners, said many CFOs with decades of experience are either considering retirement or seeking advancement rather than lateral moves.

The path from CFO to CEO is "much more common now than it was decades ago," Cole said in an interview, opening up more opportunities for finance chiefs. For some companies, facing both a lack of qualified external candidates and poor succession planning, promoting an internal candidate to interim CFO may be a simpler and more economical option while they continue searching for a long-term successor, he said.

"Companies have been in boom-and-bust scenarios over the past decade or so," Cole said. "So, I think that's exactly why there's a lack of investment in the next generation."

Whether hired internally or externally on an interim basis, that executive should be actively involved in the search for a long-term candidate, Cole said. They have a fiduciary responsibility to the company and its shareholders and must "conduct the necessary due diligence to make an informed hiring decision."

While an internal interim CFO may be less costly, there are drawbacks: the most serious issue is when an internal interim candidate serves as interim CFO while retaining their original job responsibilities, Cole said.

"As a result, they're only CFO in name, but in reality they're still doing things like financial reporting," he said.

Pinnavaia believes that over time, interim executives and on-demand talent will play a larger role in companies. She noted that some clients may think they need an interim CFO, but in reality they are looking for an expert or CFO who can work with the existing leadership team on a specific project. In such cases, hiring an interim financial controller or another on-demand executive with the appropriate financial skills is the best option, she said.

"I'm very excited about the innovation in how this business operates," she said. "It's an application of aligning skills and capabilities with specific challenges or opportunities in real time."