Customer Type: Private and Public Companies

Fractional CFOs: What They Do, Why You Might Need an Interim CFO Instead

September 22, 2023 Brad Gerick

The chief financial officer is crucial role. But not all businesses can afford – or are ready – for one.

One alternative to committing to a full-time (and expensive) C-suite financial executive is a fractional CFO.

“The biggest role of a fractional CFO is going to be high-level overview. The business is typically not going to be big enough to really justify a full-time CFO,” BluWave Head of Finance Justin Scott says. “But you do need somebody to validate the financial statements and make sure that your cash flow’s in line. Things that the controller or even a super-controller may miss.”

Let’s look at this part-time position in more detail, and explore whether a full-time temporary CFO – an interim – makes more sense.

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What is a Fractional CFO?

A fractional CFO provides high-level financial oversight for businesses that might not be able to justify a full-time CFO.

“The biggest role of a fractional CFO is going to be a high-level overview. You just need that extra set of eyes,” Scott says. “It’s more of a validation role.”

The “fractional” part of the title indicates that the person in this role is working a “fraction” of what would normally be a full work week. In fact, it’s not unusual for someone to serve as a fractional CFO for three or more businesses simultaneously.

A fractional CFO is a great option to help secure funding, and then establish the ongoing reporting process and line of communication with the funding source.

“If you use a fractional CFO because you want to establish a line of credit, that line of credit is going to have regular monthly reporting that has to be provided and you may not want your controller working on it,” Scott says.

While there are other use cases, these are among the more common ones.

How Many Hours Does a Fractional CFO Work?

This will vary, but again, by definition the role is a fraction of full-time.

That could mean as little as 5 hours per month, or as much 10-plus hours per week, which is why people in this role often support multiple businesses at once.

There are, of course, both positives and negatives to having someone work for such a limited amount of time.

Benefits and Drawbacks

Pros

1. Cost-Effective

Hiring a fractional CFO is more budget-friendly than bringing on a full-time executive.

Instead of paying a salary plus benefits, you can budget for a set amount of hours each week or month.

Even someone who charges $250 per hour, for example, would only cost $2,500 in a 10-hour month – far below the cost of a full-time chief financial officer.

“I think the larger use case is they just don’t have a need for a full-time one,” Scott says. “They probably have a controller or a super-controller in place that gets them almost everything that they need, and they just want an extra set of eyes for peace of mind. The expense is definitely going to be your primary driver.”

2. Flexibility

A fractional CFO is usually brought in as a specialist in one particular area of the finance function. In fact, CEOs could leverage multiple fractional CFOs at the same time, each focusing on different areas.

Since a part-time hire works so few hours per company, they typically have more flexibility, too.

3. Expertise on Demand

For specific tasks in advanced functionalities, a fractional CFO can be invaluable.

One person can be brought in, laser-focused on a project, and only cost the company the amount of time needed to complete it.

4. Mentoring and Coaching

Whether the person running a company’s finances full-time is an ambitious controller or a green CFO, bringing in a fractional CFO to cover their weaknesses can benefit both the company as well as the permanent hire.

The fractional CFO can not only ensure that the full-time person’s blind spots aren’t a liability, but they can train them along the way so that they’re able to do it on their own in the future.

Cons

1. Limited Business Insight

Since a fractional CFO is not fully engaged, they might lack a deep understanding of the company’s needs.

“I use myself as the example here. There’s a lot of things that I catch or help plan for because I’m intimately involved in every step of the business,” Scott says. “If I didn’t understand the complexities of what BluWave does, it would be very easy to give a vanilla, out-of-the-box opinion on something and then it blow up in our face.”

2. Less Commitment

Fractional CFOs might not feel as invested in the team and organization they’re supporting if they’re only involved a few hours a week.

“There’s no long-term commitment,” Scott says.

This means that if things start to go south, they’re not going to feel the pain as much and therefore might not be as motivated as someone whose career is on the line.

3. Lack of Focus

As mentioned, fractional CFOs are likely to be working for multiple companies at the same time.

Depending on the urgency of projects from one situation to the next, the fractional CFO may not be as locked in on your company’s needs as they would be otherwise, despite their best efforts.

4. Risk of Losing Them

Some finance experts are content to keep their hands in multiple pots. Others, however, would be happy to jump to a full-time position if the right opportunity presented itself.

Instead of receiving notice about their departure weeks in advance, they may leave you high and dry for a business that’s willing to pay them more.

“That can almost be even bigger risk because fractional CFO by nature already has less understanding of your business, and now they also have less commitment,” Scott says.

Perhaps your business can’t justify a permanent CFO – or you’re going through a leadership transition or preparing for sale – but you still need the full-time commitment of a finance executive.

An interim chief financial officer, then, may be the perfect solution to strike that balance.

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Fractional CFO vs. Interim CFO

An interim CFO includes all the pros of a fractional CFO, but practically none of the cons.

That’s not to say that there aren’t also drawbacks of an interim vs. a permanent CFO, but they tend to be a much more impactful solution than someone who only engages with your business for a few hours per month.

An interim CFO is typically more engaged, provides a deeper understanding and is committed full-time.

This deeper involvement brings with it process improvements, better cash flow management and strategic partnership benefits to CEOs, Scott says.

“The interim CFO is going to be more of a strategic partner.”

Why You Might Hire an Interim CFO Instead

Scott says portfolio companies and private and public companies that are ready to add a full-time CFO for the first time are well-positioned to seek an interim.

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Here are some reasons why:

1. Commitment

Interim CFOs offer a higher level of dedication compared to their fractional counterparts.

“Now all of a sudden, this is their game. It’s their full-time focus, so they’re going to be digging through everything,” Scott says. “You’re going to get process improvements. You’re going to get better cash flow. You’re going to get all of the things that a full-time CFO brings to the table.”

2. Strategic Partnership

CEOs can expect more from an interim CFO than a fractional solution.

“They’re more engaged with business,” Scott says. “They have a deeper understanding of the business. They’re just going to get more out of the relationship.”

READ MORE: Interim CFO for a Financial Crisis

3. Cost-Effective in the Long Run

While the initial cost might be higher, the benefit an interim CFO brings in terms of expertise and commitment can significantly outweigh the expenses.

“The interim CFO is going to be more of a value-add,” Scott says.

Their billable hours can also be capped, and they typically don’t take benefits like health or 401ks.

Whether you seek a fractional, interim or full-time CFO, the Business Builders’ Network is loaded with private equity-grade options for all company types and industries.

The resources BluWave provides have been vetted by multiple PE firms before joining its invite-only network. It’s no surprise, then, that interim CFOs are consistently among the most requested connections we make.

When you’re ready to meet your next chief financial officer, our research and operations team will provide a short list of industry-specific candidates within a single business day. Set up a scoping call to get started today.

“It’s a big step to go from a fractional CFO to a full-time role,” Scott says, “but the benefits are undeniable.”

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Interim CFO with Expertise in Commodities, Hedging, for Manufacturing PortCo

Industry: Manufacturing

Service Area: Human Capital – Interim Leadership

Client Type: Portfolio Company – Food Ingredients Facility

Service Provider Type: Interim CFO

The Need
Expertise in Financial Management and Hedging

The CFO was leaving a B2B food ingredients portfolio company. The business, with significant operations in commodities and hedging, needed an interim CFO who could navigate the complexities of their financial landscape. This included managing large-scale hedging operations, understanding the impact of hedging on P&L and ensuring covenant calculations were accurate.

The Challenge
Hands-On CFO with Industry Expertise

The company’s operations were intricate, with 85 percent of their capacity for 2023 already booked and hedged. This created a significant exposure on their books, making expertise in commodities and hedging non-negotiable. Additionally, the ideal candidate would be someone who had experience in a private equity environment, understood liquidity and 13-week cash flow, and was more finance-oriented than purely accounting-focused.

How BluWave Helped
Short List of Industry Finance Experts

BluWave leveraged its extensive network to identify a short list of interim CFOs who not only had the required expertise in commodities and hedging but also had a track record in PE environments. The portco and its PE firm selected a candidate with more than three decades of experience, including roles in financial leadership and a deep understanding of the agri-commodity space. Their hands-on approach and willingness to be on-site, even if it meant frequent travel, made them an ideal fit.

The Result
Recipe for Sweet Success

With the interim CFO on board, the company maintained seamless financial operations, ensuring that their hedging strategies were effectively managed and that their financial reporting remained accurate. The temporary executive’s expertise allowed the CEO to focus on other critical aspects of the business, confident that their financial operations were in capable hands.

Targeted Market Research for a Software Technology Company

Industry: Technology – Software

Service Area: Voice of the Customer

Client Type: Portfolio Company – B2B Data Management

Service Provider Type: Market Research Firm

The Need
Specialized Market Research for Master Data Management

A B2B data management portfolio company sought a market research firm to conduct an in-depth survey. Their objective was to delve into market awareness, trends in Master Data Management (MDM) and the perception of various brands in the software industry. With MDM being a pivotal enterprise software tool, understanding its market positioning was paramount.

The Challenge
Quality Insights Within Budgetary Limits

Having previously approached another market research firm, the company found their offerings too costly for the intended survey. The challenge lay in identifying a service provider with profound knowledge of MDM and the capability to target specific roles such as IT, Data Architecture Management and Data Cleaning, all while staying within the budget.

How BluWave Helped
Bridging the Gap with Expert Market Research

BluWave swiftly navigated its vast network to pinpoint a market research firm that not only had a deep-rooted understanding of MDM but also boasted expertise in conducting brand-centric surveys. The chosen firm’s proficiency in targeting the desired roles ensured the survey would resonate with the right audience, making them an ideal match for the portfolio company’s requirements.

The Result
‘Good Partner’ for Great Value

With the support of the handpicked service provider, the portfolio company executed a survey that furnished them with invaluable insights into market awareness, MDM trends and brand evaluations. The research was not only enlightening but also adhered to the company’s budgetary constraints, providing optimal value.

The service provider you selected was both affordable and a good partner for our portfolio company.

-Partner at PE Firm

Transforming Big Data into Actionable Insights for Legal Services

Industry: Professional Services

Service Area: Technology

Client Type: Portfolio Company – B2B Legal Services

Service Provider Type: Business Intelligence, Analytics and AI Firm

The Need
Efficient Analytics for Transaction Lode

A portfolio company in the B2B legal services sector reached out with a specific challenge. They had an Excel dataset with three tabs, each containing 1 million rows of transaction data. Their objective was to create cohort analyses and slice and dice this vast amount of information. Given Excel’s limitations, they needed a more robust solution.

The Challenge
Large Datasets and Tight Deadlines

The company, which offers online legal services to SMB customers, had recently accessed a large transaction database that was cumbersome to manage in Excel. They needed to make use of the new data trove for an upcoming project on a short timeframe. Their previous go-to firm, which used Tableau for data visualization, was unavailable for immediate assistance.

How BluWave Helped
The Right Big Data Connections, Fast

Understanding the urgency and the scale of the data challenge, BluWave tapped into its network to identify a boutique business intelligence, analytics and AI firm with the expertise to handle large datasets efficiently. The selected firm was lauded for its ability to work at “deal speed,” ensuring that projects were completed promptly without compromising on quality.

The Result
Seamless Integration, Insightful Analysis

With the expertise of the selected service provider, the portfolio company successfully integrated their vast transaction data into a more manageable and analyzable format. The firm not only set up the database for easy manipulation but also provided rigorous analysis, offering valuable insights that were highly appreciated by the company’s management team during diligence. The entire process, from initial setup to detailed analysis, was completed within the tight deadlines, ensuring the company was equipped for its key upcoming project deadline.

Their analysis was rigorous, and a company’s management team found their work to be insightful during diligence. They operate at deal speed and frequently work late at night and over weekends to ensure clients receive quality work product on time. I’d highly recommend their services.

-Vice President at PE Firm

Matt Cole’s Route to SBJ Capital ‘A Bit Circuitous’

September 15, 2023 Brad Gerick

Matt Cole recently joined the Karma School of Business podcast to talk private equity. The managing director at SBJ Capital spoke with host Sean Mooney about data-based decisions, how he got his start in PE and much more.

Here are some of the top takeaways from their conversation.

Listen to the Episode

3 Takeaways from Matt

1. An Unconventional Route to PE

When asked about his path to the world of private equity, Cole said his journey was atypical.

“Mine is a bit circuitous,” he said. “I feel like it’s a more well-trodden path now and people have to take certain steps and so forth and that was definitely not the case for me.”

Starting in investment banking, Cole transitioned into operations, focusing on understanding the intricacies of making a company successful. His entry into private equity was more opportunistic, stemming from a relationship with a colleague.

He emphasized the importance of his diverse experiences: “It was the right combination of experience that I had to bring banking and operating set of experiences to PE.”

2. Value Creation with a Human Touch

Value creation is at the heart of SBJ Capital’s approach. Matt emphasizes the importance of working closely with family and founder-owned businesses and understanding their unique challenges and opportunities.

“These are family- and founder-owned businesses. They are not looking for someone with necessarily the shiny bulge bracket Wall Street resume to come in and tell them what the next opportunity is with their company,” Cole said. “I think it makes a big difference both in actual experience to be able to say we’ve walked in your shoes and in demeanor and approach for how we present ourselves to these companies and we call them partner companies for a reason.”

For SBJ, value creation revolves around professionalization and accelerating growth. Cole, however, is quick to point out that they approach this with respect and understanding.

“We’ll never come in pretending to know more about that business after a few-month diligence period than the people that have been there for extended periods of time or started that business themselves.”

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3. Data and Decision-Making

Cole also stressed the importance of being prepared and adaptable. He highlighted the significance of data in driving business decisions and the potential of emerging technologies like AI.

“Part of the value creation story that I didn’t touch on as much before is the use of data and how are you using data? How are you implementing systems?”

Mooney added the importance of sharing information within a company, especially in founder-owned businesses.

“A lot of times the senior member of the teams don’t even know the revenue of the business or certainly don’t know the full P&L or the balance sheet or the income statement,” he said.

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Cole’s transition from investment banking to operations and his adeptness at navigating the complex terrains of the business world make his episode well worth a listen.

When you’re done checking out his episode, head to the main BluWave podcast page for more conversations with business leaders.

Scott Becker of McGuireWoods: Insights from the Mind Behind Becker’s Healthcare

September 8, 2023 Brad Gerick

When Scott Becker speaks, the healthcare and private equity sectors listen. As a partner with McGuireWoods and the founder and publisher of Becker’s Healthcare and Becker’s Hospital Review, Scott’s insights are invaluable. Recently, he shared his journey and perspectives on the Karma School of Business podcast, hosted by Sean Mooney.

Listen to the Episode

3 Takeaways from Scott

1. The Evolution of Becker’s Healthcare

“I started it literally 30 plus years ago,” Becker began, “trying to develop a reputation as somebody who knew the business and legal issues around, at that point, surgery centers, better than anybody else.”

This drive was not just about establishing a brand but about creating a niche in a saturated market. Scott’s vision for Becker’s Healthcare was rooted in his legal background and his desire to provide thought leadership in the healthcare sector.

Over the years, the focus of Becker’s Healthcare expanded. While it was initially centered around surgery centers, it now revolves around hospitals, health systems and health IT, among other areas. This evolution showcases Scott’s adaptability and his keen sense for market needs.

2. Recognizing and Capitalizing on Opportunities

“A lot of it is not brilliant. It’s following what’s working and doubling down on it as a constant business imperative,” Scott emphasized.

This approach is not about reinventing the wheel but about recognizing what’s effective and enhancing it. Scott’s success is a testament to his ability to identify emerging trends and strategically position himself and his ventures to benefit from them.

Mooney, echoing this sentiment, added, “If you’re the smartest person in the room, you need to find a new room.”

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3. Challenges and Trends in Healthcare

Scott delved deep into the current landscape of healthcare, highlighting several significant trends: “Challenges with margins, labor shortages, especially in the physician and nursing sectors, and the increasing involvement of various players in the healthcare space.”

These challenges are not isolated but are interconnected, shaping the future of healthcare. For instance, as healthcare sites increase, there’s a projected shortage in certain specialties, like anesthesiologists. This, in turn, affects patient care, with many unable to access their doctors promptly, leading to a resurgence in ER visits.

Scott’s insights provide a comprehensive overview of the challenges and opportunities in the healthcare sector, offering a roadmap for professionals navigating this complicated domain.

READ MORE: Specialized Healthcare Recruiters

Becker’s keen insights offer a deep dive into the intricacies of healthcare and private equity. His journey from attorney to entrepreneur and his ability to recognize and seize opportunities make him a voice worth listening to in the industry.

When you’re done checking out his episode, head to the main BluWave podcast page for more conversations with business leaders.

Mastering Board Recruitment: Strategies for Attracting Top Talent

August 22, 2023 Brad Gerick

Strategic leadership forms the crux of organizational development and success. Just as the driving force of a car is its engine, so too is a high-performing board the engine of an organization, guiding strategic decisions and growth.

The assembly of a board requires careful selection of individuals, each possessing diverse expertise and perspectives that complement one another, fostering a rich ecosystem of leadership. This is where the concept of board recruitment becomes essential.

“Bringing on a board member who comes from that industry and can bring in-specific experience is a value add to any organization,” says Scott Bellinger, BluWave’s co-head of research and operations. “They can work closer to the management team and give outside insight of someone who’s been there and done that previously.”

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It’s a process that goes beyond filling seats. It’s about attracting the top talent that can steer your business. For organizations looking for professional support in this crucial process, BluWave is ready to connect you with industry-specific resources that can guide your process with expertise and precision.

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Defining Your Board Member Needs

The journey toward effective board recruitment begins with understanding your unique needs. An assessment of the specific gaps in your current board composition and identification of skill requirements helps direct the recruitment process.

By aligning the desired attributes and expertise of potential board members with the organization’s strategic goals and challenges, you can ensure the recruited individuals will provide the most value.

Job Description

When beginning your board recruitment journey, a comprehensive job description serves as your map. By clearly outlining the board’s purpose, responsibilities and expectations, you set the course for attracting qualified board candidates.

A well-crafted job description, complete with the organization’s mission, board member roles, committee involvement and time commitment requirements, helps filter in individuals who align with your needs. To maximize impact, use concise language, focus on essential qualifications and illuminate your organization’s unique value proposition.

Benefits, Responsibilities and Skills

The board position comes with a wealth of benefits, including opportunities for personal and professional growth, networking and the privilege to make a significant impact on an organization. These benefits should be presented upfront to attract motivated individuals.

Board members shoulder several responsibilities, such as fiduciary duty, strategic planning, risk management and providing guidance to the executive team. Ensuring these duties align with your organization’s needs and strategic direction helps attract the right talent.

“They can be a great outside partner to the CEO – and it’s a portco, the PE firm – to ensure everyone is growing in the same direction and on the same page,” Bellinger adds.

Term and General Duties

Board member terms typically have a defined duration, and adopting staggered terms brings a mix of continuity and fresh perspectives into the proceedings. General duties could span from regular attendance at board meetings and active participation in committees to fulfilling fiduciary responsibilities. Clear articulation of these expectations can help potential members better understand their role.

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Time, Legal and Financial Commitments

Time commitments for board members can range from regular board and committee meetings to additional engagement requirements. Alongside time, potential board members should be aware of any legal or financial obligations, such as adherence to regulatory compliance, potential liability issues and the expectation of making personal financial contributions or securing sponsorships.

Strategies to Find Potential Board Candidates

Sourcing potential board candidates requires a multifaceted approach. Utilizing board posting programs and matching platforms, such as LinkedIn and Executive Search Firms, can offer access to a pool of qualified board candidates. Local Chambers of Commerce can also serve as valuable resources for finding candidates.

Oftentimes, though, you can save time and resources by connecting with a service provider who already knows exactly who you need and where to find them. The Business Builders’ Network from BluWave is full of exact-fit third parties who know how to do just that.

Word-of-Mouth and Referrals

Existing networks and relationships form a treasure trove of potential board candidates. From board members of other organizations and industry leaders to professional associations and community influencers, your network contacts can be a rich source of referrals. Clearly articulating your organization’s mission and the specific qualifications you seek in potential board candidates can help garner more suitable referrals.

Publicizing Within Network and Local Community

Promoting board opportunities within your network and local community allows you to target individuals already familiar with your organization or industry. Email newsletters, social media platforms, industry events and community-based publications can be effective channels for publicizing these opportunities. A compelling announcement combined with engaging storytelling can pique interest and attract potential board members.

External Promotion

Expanding your search beyond your immediate networks through external promotion can attract diverse candidates. Digital platforms and industry-specific networks can reach individuals with the desired expertise who might not be in your immediate circle. In addition to LinkedIn, Twitter and Facebook can be effective platforms.

Screening and Selecting Board Members

Choosing the right candidate requires a structured process. An efficient application process, including resume, cover letter and reference submission, can facilitate the evaluation of potential board candidates. Initial screenings through phone or video interviews can help narrow the candidate pool. Utilizing behavioral-based interviewing techniques and strategic questions can further help assess the qualifications, values, commitment and potential contributions of board candidates.

Short-listing and Final Selection

The final stage of board recruitment involves short-listing and selecting the ideal candidates. Reviewing candidates based on predefined criteria and qualifications ensures an objective selection process. Thoughtful deliberation among board members, consensus-building, conducting reference checks and considering overall board dynamics can further aid in the selection of the right candidate.

“The main thing is getting someone who’s willing to be an active board member and not just meet once a quarter, but actually help with some value creation plans throughout the period and stay engaged between quarterly meetings,” Bellinger says.

A successful board recruitment strategy is a meticulous process. It doesn’t have to be an uphill task, though. BluWave’s research and operations team can be your ally in this process, connecting you with exact-fit service providers. Connect with us here to start your journey to master board recruitment.

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Best Practices for Board Recruitment

August 22, 2023 Brad Gerick

An outstanding board is invaluable to an organization. The power to make strategic decisions, the ability to drive innovation and the capacity to inspire stakeholder confidence is all within its power. Having helped countless businesses with this very process, BluWave has a unique perspective into the fundamentals of the board recruitment process and the best practices that make it efficient and effective.

Start Your Board Recruitment

Working with one of the expert third-party resources in the Business Builders’ Network can save you time and money while ensuring that you make the right selection for your company.

Let’s take a deeper look at the details that go into this critical decision.

Understanding the Board Member Recruitment Process

Board member recruitment goes beyond the confines of structured interviews – it is a crucial facet of organizational governance. A well-executed process determines the structure of leadership, influencing decision-making and strategic oversight.

“We’re starting to see some PE firms look for those board members during due diligence to help with some of those diligence opportunities as senior advisors then convert post-close to board members,” says Scott Bellinger, BluWave’s co-head of research and operations.

Industry-specific third parties not only know how to run the process for your business, they’re also connected with the most qualified candidates for your specific situation. Access to these resources can save businesses from the headache of sifting through unknown or unproven options.

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Best Practices for Recruiting Board Members

Identifying Desired Board Member Attributes

First, you must identify the qualifications, skills and diversity that board members need to possess. These attributes should be aligned with the objectives of the organization, facilitating its growth trajectory.

Developing a Comprehensive Recruitment Strategy

A clear blueprint and timeline form the foundations of a robust recruitment strategy. Tapping into various channels – from professional organizations to networks and referrals – can greatly enhance your reach to potential board members.

Navigating these channels can be intricate, though, highlighting the need for expert third-party resources to guide the process.

Implementing an Effective Screening and Selection Process

The backbone of successful board recruitment is a comprehensive screening and evaluation process. The stages – ranging from interviews, application reviews, reference checks, background investigations, to skills assessments and board observations – require careful execution. Thorough due diligence, particularly during reference checks and interviews, should never be rushed or downplayed.

Utilizing a Board Recruitment Matrix

A board recruitment matrix can be a game-changer. This visual tool evaluates the current composition of the board, unveiling gaps that need to be addressed. The matrix ensures that new board members are appointed based on the required skills, expertise and diversity, fostering a team that’s well-equipped to navigate organizational challenges and stimulate success.

READ MORE: Effective Board Recruitment Strategies

So what does a great board member look like?

“Someone who has scaled a business in the same space at a larger size company,” Bellinger says. “Someone who knows what best-in-class looks like in this industry.”

BluWave is prepared to connect you with an exact-fit service provider, equipped to streamline and optimize your board recruitment process.

When you’re ready to elevate your board recruitment process, get in touch with us. Our research and operations team will scope your needs and provide best-fit candidates for you to evaluate within a single business day.

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