This article originally appeared in Real Deals.
As PE-backed businesses navigate finite hold periods, investors are rethinking what transformational leadership means, prioritising outcome-led change, commercial judgement and value creation over operational initiatives. Jack Lane, Managing Director at Finatal, the human capital partner to private capital, explores.
The term ‘transformational’ is used frequently in discussions about CFO leadership in private capital-backed businesses. It sits at the centre of how investors, boards and management teams describe the kind of change they want to see delivered.
But what does ‘transformational’ actually mean in practice? When the term is loosely applied to operational improvements that undoubtedly enable change, but do not in and of themselves constitute transformation, it can create a disconnect between the skillsets being hired for and the expectations placed upon the successful hire.
A good example is an ERP implementation. No doubt highly important; they feature on the majority of PE-backed CFO job specifications and are commonplace on CFO CVs. At their core, however, ERP programmes are operational.
It requires the right lens to shift an ERP from a data clean-up exercise, or worse, a vanity project, into a genuine value creation activity.
For an ERP implementation to be transformational, it must be anchored in business outcomes and aligned to the value creation plan. It should be designed around specific initiatives such as faster pricing decisions to enable sales, reduced cash conversion cycles, or the scalable integration of acquisitions.
The transformation, therefore, is the result of the outcomes generated; the ERP transition is simply the means of achieving them effectively.
Intention and impact
A truly transformational CFO will be able to articulate both the intention and the impact clearly, being able to measure success by the value created through the change and will often have hard data to evidence it.
This, ultimately, is what investors index on. An ERP implementation with no discernible business outcomes is, in practice, little better than not doing one at all.
How those outcomes are achieved also matters. Investors will scrutinise cost, timing, and opportunity cost.
An ERP upgrade that delivers marginal gains in pricing decisions but absorbs capital better deployed into a strategic office expansion or product launch would be difficult to defend.
Equally, embarking on a programme that cannot be completed within the current hold period may not be sensible unless the projected value accretion is clearly recognised by a prospective buyer.
This distinction matters because investors are rarely searching for a single defining event or initiative that makes a CFO ‘transformational’. Instead, they look for a pattern of behaviour that consistently and coherently links financial leadership to value creation.
At the heart of this is judgement. In PE-backed environments, CFOs face competing demands on capital, time and organisational capacity, and investors pay close attention to how those trade-offs are navigated.
Transformation is less about how much change is pursued, and more about whether the right change is prioritised at the right time.
A CFO who can clearly articulate why one initiative matters more than another, and what is being consciously deprioritised as a result, can signal a level of maturity that investors value highly.
Judgement also shapes how closely the CFO is embedded in the commercial engine of the business.
Transformational CFOs are not confined to the finance function. They are credible counterparts to sales leaders on pricing and margin, engaged with operations on scalability and execution risk, and trusted by the CEO as a genuine thought partner.
Their influence often shows up upstream, shaping decisions before they are made, rather than retrospectively explaining outcomes
There is also a temporal dimension that investors are acutely sensitive to. PE ownership imposes a finite window for value creation, and CFOs who fail to calibrate ambition to that reality can inadvertently destroy value.
Initiatives that are strategically attractive over a longer horizon may be misaligned with the hold period unless their benefits are realised in time or clearly reflected in exit equity value. A transformational CFO understands this context and uses it to guide sequencing, pacing and capital allocation.
Framework for success
Finatal’s CFO assessment framework is designed to give investors, CEOs and management teams transparency on the full range of candidate capabilities – including both operational and transformational skillsets.
In the context of a search, capabilities are measured and scored on how well they align with the balance of operational needs and the value creation plan for the specific portfolio company.
Underpinned by a set of key technical skills, our framework encourages a full assessment of the most common challenges during a PE cycle and the role a CFO plays within them.
These are used to measure appropriate levels of experience in certain environments, as well as, where relevant, gauging the value-creation impact. Furthermore, we assess how well a CFO can articulate these impacts – clarity of which can often be an indicator of competency.
Anecdotally, very few CFO candidates, regardless of quality, proactively engage with all key criteria during interview or list all of them on their CVs.
An appropriate deep dive is therefore required during the process, and the framework has a clear benefit in highlighting top-tier talent.
In practice, little emphasis is placed on the CV, familiar ‘badges’ and buzzwords. Nor is a CFO’s entire performance, or their transformational capability, judged purely on the exit EV.
What ultimately matters is the pattern of behaviour, judgement and impact that defines how value is created over a hold period.
For investors, that is what separates genuinely transformational CFOs from those simply presiding over change.