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What’s next for PE-backed controllers: skills for value creation

More financial controllers in PE want to become CFOs, but can they look beyond closing the books?


In brief
  • The role of financial controllers is shifting from a transactional focus to an increasingly strategic and innovative role. 
  • As controllers navigate this new terrain, they should have diverse skill sets and a team that embraces digital tools and drive value creation. 
  • With a proactive approach to innovation and evolution, financial controllers are set to become strategic visionaries, integral to shaping the future of business.

Financial controllers in the private equity (PE) sector often wrestle with contradictions when it comes to their current and future roles. They deal with the never-ending pressures of looking in the past for closing books and results each period that is followed by audit processes, statutory filings, etc. Among this, they continue to look to develop professionally by trying to determine the skills to enhance for the next step in their careers. According to a recent EY study, which included 166 controllers at PE-backed companies, these controllers are significantly more likely (61%) to envision themselves advancing to CFO compared to controllers at other organizations (49%).

Perhaps this provides insight into why more PE-backed controllers — 74% compared to 69% overall — are seeking opportunities for business growth for their companies as an important quality for their role.

At the same time, with value creation being a top agenda item for PE firm investments, only 70% of PE-backed controllers (in contrast to 82% of all controllers surveyed), are confident about having the right skills to become key players in value creation. And just 45% of PE-backed controllers say they are already a proactive value creator within their organizations vs. 62% of non-PE controllers.

PE-backed controllers need to be able to show that their organization is progressing towards their value thesis — because the enterprise is under pressure to execute against it.

“I think PE firms have an expectation that controllers take a more active role in value creation, and there is recognition they may have to invest in those skills,” says Derek Steinhiser, EY Americas Private Equity Assurance Advisory Leader. “PE-backed controllers need to be able to show that their organization is progressing towards their value thesis — because the enterprise is under pressure to execute against it.”

 

67% of PE-backed controllers believe their teams are stuck in the back office

When it comes to the main obstacles preventing PE-backed controllers from taking more proactive roles to drive innovation in their teams, 67% believe their teams are more focused on traditional back-office responsibilities vs. 42% of all survey respondents. While some of this is due to the size, scale, complexity and history of these companies (e.g., privately owned, carve-outs, etc.) there is a clear expectation to have a more forward-looking controllership function. We consistently see that PE-backed organizations provide controllers the opportunity to be more involved in the business, which will also increase the scrutiny of the insights they bring, but also the potential for developing CFO-ready skills. 

 

“In PE-backed organizations, there is typically an opportunity to better understand the business from the controller,” says Derek Steinhiser, EY Americas Private Equity Assurance Advisory Leader. “I’ve seen controllers in these organizations be brought to the forefront because they know more about how it operates, and they reach beyond accounting to see metrics, actions and initiatives that are the most important to the business.”

 

70% of PE-backed controllers’ time is already spent making data-driven decisions

The demand for sophisticated data analysis abilities in the finance function is growing faster than most organizations can meet it. Controllers are increasingly expected to champion emerging technologies and advocate data-driven decision-making, which is due to a shift powered by the need for faster, more accurate insights to support strategic decisions based on comprehensive knowledge of financial information across the organization.

PE-backed controllers indicate they spend about 70% of their time engaged in data-driven decision-making and technology use to drive value and promote business growth, slightly higher than 67% of the time for non-PE controllers.

 

However, PE-backed controllers appear to be lagging slightly in their use of generative AI (GenAI) for tasks previously performed manually. Only 54% report accelerating manual tasks with GenAI, while 67% of non-PE controllers are doing so.

 

Non-PE-backed companies are investing about 14% more in data analytics and reporting skills than private equity-owned organizations, according to respondents. In what could be a correlated finding where this gap will close quickly, PE-backed controllers are having an easier time hiring the data talent they need. Only 42% say they are struggling to hire team members with the necessary data analytics and reporting skills, compared to 58% of the broader sample.

90% of PE-backed controllers are focused on efficiency and cost saving

For PE-backed controllers, 90% say innovating to improve operational efficiency and recommending cost-saving strategies are equally important, compared to 90% of their non-PE controller peers where the focus is solely on cost cutting.

Looking ahead, PE-backed controllers (89%) and the overall sample (87%) are similarly inclined to think the role of the controller will significantly shift over the next five years. A specifically noted area is controllers needing different and unknown skill sets.

Looking ahead

PE-backed controllers are already highly valued, ambitious, strategic players for their company leadership. However, there is a distinction between counting value and creating it. Therefore, we believe that the immediate future may require controllers to focus on business growth, data talent and skills, artificial intelligence (AI) adoption and leading the accounting and reporting function from the back office to the strategy table with confidence.

Tangible considerations for controllers with an eye to advancement into the CFO role:

  • Identify growth areas for departmental effectiveness.
    • CFO capabilities: guide the portfolio company through the PE lifecycle.
    • Operational capabilities: drive operational excellence while adapting to changing requirements.
    • Value creation capabilities: analyze, measure and mitigate the challenges to realization of value creation goals. 
  • Build on the controller team’s ability to drive value creation across key priorities.
    • Business: support commercial decisions and take ownership of related value drivers.
    • Working capital: support commercial decisions and drive strategic outcomes.
    • Strategic insights: provide actionable intelligence to enable finance to properly establish goals.
    • Cost management effectiveness: drive operational efficiency and establish governance to actively manage risk, compliance and cost control.
    • Tech deployment: leverage modern tools to streamline operations and improve real-time insights.
    • Accurate reporting: track progress against the broader value creation thesis.
Leaders believe that controllers have the competency that can drive significant change across the organization.

“It’s clear that PE firms are looking for a more aggressive pursuit of the value creation agenda, and where value can be found is beyond the efficiencies of finance and accounting departments,” says Anthony Prandini, Consulting Principal at Ernst & Young LLP. “Leaders believe that controllers have the competency that can drive significant change across the organization.”





This article was co-authored with Anthony Prandini, Consulting Principal at Ernst & Young LLP.

Summary 

A recent EY survey highlights the challenges faced by financial controllers in the PE sector as they balance traditional responsibilities with the need for proactive value creation. As they leverage data-driven decision-making and emerging technologies, controllers should evolve from back-office roles to become strategic players in driving business growth.

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