Outlook for the Chief Restructuring Officer Role
What You Need to Know Right Now to Level Up as a CRO
Once known as “company doctors,” Chief Restructuring Officers broke into the C-Suite in the 1990s. CROs (Chief Risk Officers and Chief Revenue Officers share the same acronym) are unique among top-executive roles in that they are typically brought in when the company faces major challenges, and their role may be temporary and filled by someone from outside the organization. Bankruptcy attorney Kenneth A. Rosen notes that “CROs are often hired to allow other executives to focus on the business” (though he observes that separating the CRO from financial, operational, or executive matters may be difficult). An alternate to bringing in a CRO is engaging a restructuring consulting firm.
Tony Horvat of the American Bankruptcy Institute describes the kind of scenario into which a Chief Restructuring Officer is recruited:
When a company’s financial resources are dwindling, delays and missteps in reacting to a corporate crisis trigger a domino effect: Falling revenue and weakening cash flow worsen liquidity, exacerbate supply-chain problems and increase employee turnover. The symptoms are common and quickly become life-threatening for the organization. If management lacks the resources and depth to adequately handle the problem, the board should consider the use of a CRO.
The larger and more complex the needed restructuring, the greater the need for a CRO, assert Bob Rajan, Jan Dettbarn, and Steffen Kroner of consulting firm Alvarez & Marsal. The authors point out that a CRO may come from a large “restructuring boutique firm.” Another permutation is the CRO who is retired and now working as an independent consultant. Rajan, Dettbarn, and Kroner note that this independent consultant “must rely on the distressed company’s workforce to deliver and implement the turnaround plan.” The authors also sum up the primary reason for the kind of failure that warrants CRO intervention – poor management. Not unexpectedly, firms look to CROs who have successfully engineered a turnaround to provide credibility. The CRO needs to be a distressed-business specialist and grasp such processes as liquidity management and bankruptcy preparation.
Two primary types of CRO exist, asserts Sheon Karol of the Turnaround Management Association. A Turnaround (or traditional) CRO is charged with restructuring operations or the balance sheet, while the increasingly common Sale CRO is “primarily called upon to shepherd an asset efficiently though a sale process.”
Key Competencies for the CRO Role
“A CRO is someone with broad operational experience as an executive in a large-sized company who has experience of driving a restructuring process,” state Rick van Dommelen and Edwin van Wijngaarden of PWC, whose article details critical success factors for the Chief Restructuring Officer. CROs generally bring a background in finance, law, or operations. Experience in the industry in which the firm resides is helpful, but a lower priority than turnaround experience.
When preparing career-marketing communications to send to employers, those aspiring to the CRO role should emphasize these qualities:
- Strategic, operational, and financial expertise
- Stakeholder management; ability to attain buy-in
- Ability to manage divestiture of excess assets
- Authority and accountability
- Ability to maintain liquidity
- Change-management skills
- Ability to improve employee morale
- Urgency; ability to execute quickly
Here are a few suggestions for those seeking to break into the CRO role, expand their horizons in an existing CRO role, or even rise beyond the CRO role:
- Discover where you fit best. Noting that one size doesn’t fit all in hiring CROs, Deloitte separates the role into Strategic CROs, Operational CROs, Financial CROs, and Crisis-Management CROs. Each has a different skillset. Research restructuring needs at firms to learn where your skills are the best fit.
- Get a leg-up as a restructuring consultant. As we’ve seen, CROs need to have a proven track record; joining a restructuring consultancy is a way to build that record. A unidentified restructuring consultant interviewed by Brian DeChesare, founder of Mergers & Inquisitions, told DeChesare that consultants in his company come from backgrounds that include Big 4 transaction services/accounting/valuation; investment banking; corporate-finance roles, such as GE’s Financial Management program or financial planning and analysis at large companies. Some of the jobs consultants at his firm moved on to included restructuring groups at banks, corporate- and business-development at Fortune 500 companies, distressed and restructuring private equity; and client companies.
- Look for bankruptcy and restructuring “hot” industries. These include retail, energy, real estate, and highly regulated industries, such as health care and skilled-nursing facilities, report Lex Suvanto and Nicole Briguet.
- Find the “diamonds in the rough.” Once in a CRO position, marshal the workforce in the restructuring process, suggests Raoul Heredia. “Employees of troubled companies can be motivated to tremendous achievements if given the proper guidance, leadership and management,” Heredia writes. He proposes seeking out employees with problem-specific technical skills “who are eager to take up the challenge as a once-in-a-lifetime opportunity to rapidly ascend the ladder of experience. “
CRO Trends to Watch
- Opportunity is increasing. Suvanto and Briguet point to “a rapid rise in corporate restructurings, insolvency issues and bankruptcies, as more than 60,000 corporate bonds with an S&P rating of BBB or below mature in 2020 and 2021, according to Bloomberg data.”
- Restructuring may begin to take a backseat to Corporate Performance Programs. The German consultancy Roland Berger’s 2017 CRO study explains that Corporate Performance Programs are implemented after a company has entered a strategic crisis in which management has not taken action once a revenue crisis occurs and earnings shrink. In contrast, restructuring is typically not implemented until the company faces a liquidity crisis. “The focus of transformation activities is shifting;” the study reports, “they often begin early on, during the revenue crisis.”
- Younger workers want to be involved in restructuring. The Roland Berger CRO study notes that “instead of submitting to a restructuring plan, Generation Y strives to help shape change processes through a collaborative approach.” The study attributes this trend to Gen Y’s tendency to attach “significantly more value to actively participating in their career development than their predecessors.”