Transforming Private Equity’s Approach to CFO Recruitment

The March 2025 Private Equity Investors (PEI) Operating Partners Human Capital Forum gathered leaders from across the private equity landscape to discuss pressing talent acquisition challenges. Among the most vibrant conversations were those centered on recruiting CFOs, a critical function that continues to evolve in complexity and strategic importance.  

Since CFOs are our most frequent search assignment, with JM Search successfully placing nearly 350 financial leaders at high-growth businesses from January 2023 to January 2025, I was thrilled to moderate a panel discussion with PE Talent Partners on CFO recruitment, assessments, and incentives. During this engaging conversation, we identified five key themes that are reshaping how PE firms approach the acquisition and retention of financial leadership: 

1. Unlocking Potential: The Compelling Case for First-Time CFOs  

A thoughtful conversation emerged around the merits of first-time CFOs. The panel discussed several compelling reasons lower/middle market firms in particular might be compelled to invest in a first-timer:   

• These “step up” candidates typically demonstrate stronger motivation and more hunger to prove themselves. In an environment of longer hold periods, CFOs earlier in their careers may be more willing to stay the course. 

• They are often willing to roll up their sleeves and engage deeply with operations. 

• They bring fresh perspectives unburdened by “how things have always been done.”  

The key qualifier is meaningful exposure to PE environments, typically gained through roles like VP of Finance with direct sponsor interaction. This experience helps ensure candidates understand the pace, reporting requirements, and value creation focus essential in PE-backed companies. 

2. Valuing Execution: Why Today’s Firms Demand “Hands-On” Financial Leadership 

Perhaps the most surprising consensus across discussions was that regardless of company size – from $5M to $500M in revenue – today’s PE firms uniformly value hands-on CFO capabilities. Companies are favoring: 

• Executives who have personally managed or executed key financial processes rather than those who have merely supervised teams. 

• Candidates who demonstrate tangible experience with transformative financial initiatives like M&A integration or systems implementations. 

• CFOs who can operate effectively without extensive infrastructure support. 

This trend reflects compressed value-creation timelines in PE today, requiring CFOs to actively implement strategies rather than merely directing from above. The focus on execution over delegation also plays directly to the strengths of first-time CFOs, who are often more willing to immerse themselves in operational details, creating an unexpected advantage for these motivated step-up candidates in today’s PE environment. 

3. Securing Stakeholder Alignment: The Critical Foundation for CFO Success 

Panel participants also emphasized that aligning all stakeholders in the recruitment process makes or breaks successful CFO placements. Many firms are leveling up by implementing more sophisticated scorecards to ensure PE sponsors, executive teams, and board members share a unified vision of the ideal candidate.  

CEO involvement is a critical element of this alignment process. Since the CEO-CFO relationship directly impacts company performance, determining when and how deeply to involve CEOs in CFO selection requires careful consideration. Some PE firms prefer to involve them early to ensure chemistry, while others wait until later stages to avoid bias. This timing decision must be deliberately managed as part of the broader stakeholder alignment strategy. 

Facilitating proper alignment among all parties—before and during the search process—is as important as identifying qualified candidates. Without this foundation, even the most talented CFO may struggle to succeed. Conflicting expectations create unnecessary obstacles that can derail performance from day one. 

4. Elevating Evaluation: Next-Generation CFO Assessment Strategies 

Once stakeholder alignment is established, the next critical step involves evaluating candidates through increasingly sophisticated methods. Traditional evaluation methods are giving way to more customized assessment frameworks in the CFO search. The panel highlighted several innovative approaches:  

• Proprietary assessment tools designed specifically for financial leadership roles 

• Working sessions where candidates demonstrate problem-solving capabilities in real time 

• Extended evaluation processes that include presenting strategic plans 

In our experience, we’ve found that having final-stage candidates develop and present structured plans after familiarizing themselves with the business creates valuable insights for our clients while ensuring candidates truly understand what they’re stepping into. While these enhanced methodologies are extending typical search timelines, they are yielding successful matches between executive and opportunities. This approach helps firms evaluate strategic thinking and establishes clear expectations on all sides, consistently leading to more successful placements. 

5. Navigating Longer Horizons: Retention Strategies for Extended Hold Periods 

The reality of longer investment cycles is creating new dynamics in CFO retention and career planning. Preliminary data from our recent CFO Insights and Compensation Study uncovered that 42% of experienced investor-backed CFOs have considered new opportunities in the past six months, primarily due to extended hold periods altering their equity timeline expectations.  

While financial incentives remain important, panel participants emphasized that relationship quality has become equally crucial for retention. Maintaining genuine connections with financial leadership throughout longer hold periods requires intentional effort from PE sponsors and boards. 

Looking Forward 

The shifting dynamics highlighted at this year’s forum suggest that PE firms should review their CFO recruitment and retention strategies to ensure alignment with today’s market realities rather than yesterday’s assumptions. Firms that develop sophisticated approaches to identifying, evaluating, and retaining financial leadership will create meaningful advantage in an increasingly competitive landscape. 

JM Search is a trusted partner to leading private equity firms seeking to optimize CFO recruitment and drive portfolio company value creation. Our proven methodologies and unrivaled network enable us to deliver high-impact financial leaders with the right combination of technical and operational expertise to achieve your goals. 

The Private Equity Investors (PEI) Operating Partners Human Capital Forum took place in March 2025 in New York City. This panel was facilitated by Brian Dwyer, Partner and Practice Leader at JM Search and explored CFO recruitment, assessments, and incentives. Panelists included Sean Dougherty, Principal, Talent and Operations, Inverness Graham Investments; John Knapp, Operating Director, Talent, Berkshire Partners; Dan Meyer, Talent Partner, Align Capital Partners; and Kristin Brown Patrick, Senior Operating Partner, Human Capital, New State Capital Partners.