There’s an eyebrow-raising C-suite title showing up in the news lately, and when they do, oh boy it is usually a sign that there is trouble brewing in the boardroom. CROs, or chief restructuring officers—not to be confused with the other CROs, the chief revenue officer or chief risk officer—have been brought on to tackle some of the biggest business implosions in recent months.
Numerous companies have tapped these interim executives including defunct startup lender Silicon Valley Bank, cryptocurrency exchange FTX, psychedelic startup Field Trip Health, and infrastructure services provider QualTek—to oversee operational and financial restructuring.
But what is a chief restructuring officer, and what do they do?
Quick…get me a CRO! There’s a variety of reasons for a company to bring in a CRO. They are usually facing financial troubles, such as decreased financial performance, shrinking cash reserves, a decline on a new round of credit from a frequent lender, or most commonly, lack of trust in management of a company’s CFO, CEO, or COO, Luke Stephenson, associate director at management consultancy MorrisAnderson, which offers fractional CRO services, told CFO Brew.
“[These companies] need someone right here and now that can take charge, handle the situation, stabilize things and, of course in the background, you’re looking to go find someone that can come backfill that need,” Stephenson said.
Deciding to hire a CRO usually is prompted by a company’s stakeholders, namely lenders or attorneys, rather than the company’s executives, according to Stephenson.
“Business people aren’t usually going to our website and filling out a form saying, ‘Hey, I need a CRO’; it’s usually coming from a stakeholder of our client’s business,” Stephenson said.
In most cases, CROs are a temporary solution. It’s common for CROs to be interim executives while companies search for a new CFO or CRO, but some relationships are more complementary. Some companies, usually those with at least $500 million in revenue, will hire a CRO to manage specific restructuring projects due to time constraints of company leadership, Stephenson said.
Putting the “restructure” in chief restructuring officer. CROs—like many fractional CFOs, which have been on the rise in recent years—are usually hired on a short-term basis for their expertise about finance, but often have to spend a substantial amount of time learning about the specific company.
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The top priority for CROs would be to stabilize company operations while also developing a restructuring plan to set the company on a better path. This can range from streamlining operations to repairing a company’s balance sheet reporting process and identifying cash-saving opportunities for the company.
But CROs can also transition into permanent roles as well. Hostess Brands former CEO Gregory Rayburn was originally hired as the company’s CRO in 2012 after it came out of bankruptcy in 2009.
Vibe check? On average, CRO tenures vary in length, averaging four to six months, Stephenson estimates, but some can last for up to three years, or slightly longer than a Gen Z employee’s average stay at a job.
Navigating the social dynamics and communications remain a tremendous challenge for CROs arriving at a company, according to McKinsey. Beyond building a restructuring plan, CROs are tasked with communicating the plan to a company’s board of directors, employees and often, creditors. This responsibility usually comes as emotions run high.
Executives, Stephenson said, usually face embarrassment at their company’s need for a CEO. “There’s really no one else to blame…those are the folks that have been running the ship,” Stephenson said.
Employees outside the C-suite often witness the CRO hire after the ousting of another executive or news of the company’s poor performance is released. This, Stephenson says, is often the first sign of major uncertainty among mid and lower level employees in a company.
Naturally, he said, many employees search for information about the CRO or the company that has been hired, like MorrisAnderson, and begin to jump to conclusions. “They’re going to see, ‘Okay, these guys help distressed companies; we must be a distressed company,’ and there’s certainly a reaction there,” he said.
Stephenson says that it’s most important for CROs to gain the trust of employees by showcasing that both their and the employees priorities are aligned.
“We want you to do well and to get this thing turned around,” Stephenson said. “We’re going to figure this out together.”—LR