The XY problem, CFO edition
A role spec asks for X. What the board needs is Y.
Engineers know the XY problem: someone asks them to do X, when what they need is Y. X is the solution they’ve already settled on; Y is the thing they’re actually trying to achieve.
A founder I worked with was evangelical about giving software engineers the business Why, not the product What. Other bits of the business hated it (“we know the solution, just build it”). Classic XY.
A perfect answer to X may well not achieve Y.
In CFO-world, a role spec for a PE CFO very often has an X. It reads “must have completed a full investment cycle as CFO”. Clean, checkable, easy to screen on.
But Y is different. Y isn’t a type of CFO at all.
Y is the business achieving something close to the investment thesis: performance tracking the plan, lender onside when it’s missed, acquisitions integrated, no last-minute price chip on exit. Everything else is a means to that.
What makes that likely is judgement built from repetition. Knowing what the buyer’s accountants will ask in week three because you’ve asked it yourself. Steering diligence away from the wrong questions towards the right ones. Knowing what a lender will tolerate when a covenant wobbles because you’ve sat on their side of that call. Understanding how the equity waterfall moves because you’ve drafted one.
None of that is learned from a job title. It’s learned from the number of times you’ve been the one in the room: with the board, the lender, the auditor, the buyer. The exit just tests it in public.
A full-cycle CFO has been through it once or twice, with one or two sponsors, in as many businesses. That’s X. It’s a plausible, but limited, way to have acquired the judgement, treated as if it were the judgement itself.
And it has a quieter flaw. A completed cycle is, by definition, one that worked. The events that teach you most are the ones that didn’t: why the buyer walked away, why the lender wouldn’t renegotiate the covenant, why existing investors wouldn’t follow their money.
You only get that education by being around enough transactions for some of them to go wrong. One or two cycles with one or two sponsors rarely provides the breadth; more than a hundred deals from the adviser’s chair does, whether you wanted it or not.
Then go into the chair yourself and do the raise, the refinancing, the acquisition, the listing, and you’ve learned Y from both sides of the table.
If you’re hiring for a cycle, it’s worth writing Y on the brief and letting the shortlist surprise you. You could do a lot worse than ask for a couple of left-field candidates.
I work as a fractional CFO for SaaS and technology businesses with a raise, a refinancing, a listing or an exit ahead. If that is where you are, I would be glad to talk.