Renee’s Rule™: “Bigger” may not be “safer.”

May 17, 2009

When is it “safer” to hire a “big” professional firm rather than a smaller one?  This is a topic I’ll be exploring in several different posts.  For the moment, here is an instructional story. (The names and some details have been withheld to protect the guilty.)

Some time ago, a principal from PE (private equity) Firm A, with investments across the country, called me to take the place of the CFO they had hired because he was a consultant with a national (“big”) consulting firm.  Why was the PE firm replacing him?  When the portfolio company’s lender conducted its audit, guess what they found?  The “F” word: Fraud.  (I did not accept this engagement for a variety of reasons I’ll discuss in a later post.)

Several months later, PE Firm B interviewed me for a turnaround in an industry in which I had successfully turned around more than one company.  Did they hire me? No.  Why did they pick someone else?

  • He’s from a national firm, so that’s “safer.”
  • He has industry “experience.”
  • We know him.

Here is what I know about this person:

  • He IS a consultant with a national firm.
  • He was involved with a company but definitely did not lead a successful turnaround in the “industry.”
  • He was the person who was removed by PE Firm A because bank fraud occurred while he was CFO.  (Evidently, PE Firm B didn’t really “know” him.)

I also know that the company was not, in fact, successfully turned around.

Let me be clear:  There are some times that a bigger firm really IS safer; nonetheless, there are many lessons to be drawn from the above story.  Stay tuned for further posts.

In the meantime, remember these Renee’s Rules™:

  • When hiring, RESULTS are more important than “experience.”
  • Always check references.
  • There is no substitute for common sense.

3 Responses to “Renee’s Rule™: “Bigger” may not be “safer.””

  1. May 17, 2009

    Great post. This example makes me ask what type of due diligence PE firm A or B will undertake when deciding which consulting firm or which consultant to have as their CFO? In most cases ‘management’ is/should be held accountable for under performance or unethical behavior. You have to wonder if the consultants manager has excused this type of behavior in the past. If I was a partner at PE firm A or B I think vetting the manager of the consultant would be important as professional references.

  2. June 1, 2009

    Hi, good post. I have been wondering about this issue,so thanks for posting.

  3. June 4, 2009

    da best. Keep it going! Thank you

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