As the financial leader of your company, it’s important to know, not only, what work results in bigger and better outcomes; but what work takes up the most time without providing the highest results.
Our goal with this book is to efficiently move the needle toward the biggest results for your business, while inspiring you to be a greatly successful CFO.
The role of today´s CFO is changing. Their work does not end with passive control of numbers, revenues and expenditures. CEOs have higher expectations from their CFO’s performance. With those expectations come challenges. Here are five challenges CFOs continue to face:
The CEO must trust the CFO. The CFO signs contracts, signs checks, and hires finance team members. The CFO represents the company in many public settings. CFOs make important judgment calls, so trust must be very strong. If that trust is lacking, you may see a new CEO come in and bring another CFO with them.
Good communication is paramount. It’s aligning on the strategic initiative of the company’s vision. It’s sharing a common style of working together. Is it a very informal CEO? Is it a visionary CEO? Is it a very big-picture or is it detail-of-the-week CEO? This is where the CFO must align and build trust. It’s like a marriage between CEO and CFO. If the relationship works well, it’s a wonderful experience. The CFOs are very successful, and the company will also have more successful results.
Communication is key; check in and say, “I’m doing this. Are you okay with it?” If the CEO and CFO share a sense of humor, it helps to get through the tough spots.
Suzy Taherian has more than 20 years experience as a senior executive for international companies. She says helping the CEO look good definitely pays dividends. “I always make sure the CEO knows I’ve got their back,” explains Taherian. “I’m thinking, ‘What can I do to help them? What can I do to make their job easier? I always keep in mind it’s my job to shine the light, it’s their job to shine.”
What makes a CEO look good is being consistent with the vision of the strategic plan. It becomes difficult if the CEO has a different agenda than the shareholders or the Board. Yet, if the CEO is trying to achieve what the Board and the shareholders want, it’s easier to make them look good. The CEOs appreciate that.
“One CEO I worked with traveled extensively,” recalls Taherian. “So I checked her calendar and scheduled to travel with her so we could have face-to-face meetings. It also helped that I saw the parts of the company she saw and met the same team members and heard the same issues with her. Meeting outside of work with each other’s families to make sure there’s a bond of friendship helps also.”
The relationship with the Board is like a football game. The Board is the coach and the CEO is the quarterback. The CFO is part statistician to provide the analysis and data of the plays they’re considering. They are the cheerleader, bringing everyone together around a shared vision. They also act as announcer, updating key stakeholders on successes and how the team is progressing towards the end zone. It’s important to have the Board align around a key vision and communicate that to the CEO and CFO. Then the executive team and the Board should align on the strategies to achieve that vision. The whole team should be working off the same game plan.
Don’t be afraid to ask the Board the hard questions:
It is good to have a dialogue with the Board, to understand what their vision is, where they see the organization, and how they want to challenge it. “Open communication is a great way to build a relationship with the Board,” she explains. “It’s not always an easy quick conversation. The CFO is often the sounding board for the Board and CEO. The CFO needs to listen and give positive reinforcement. One way to address that is to not only identify the problem but also recommend a solution.”
When a CFO comes to a new organization, they inherit a team. It helps to define everyone’s roles and learn what the key objectives and key metrics are. It’s also important for a new CFO to connect with their team as soon as possible, by:
Still, there will be times when you need to recruit from outside the organization. And in doing so you need to make sure those people are consistent with the organization’s strategy. This may include recruiting young people out of college, particularly if the product is simple and basic. It’s important to understand what your strategy is and what kind of people to bring into the organization.
A new CFO should always look for places where the accounting rules can be different or complicated. These are the hot spots. The accounting rules may have changed or the business may have changed. Whenever there have been accounting changes or new rules, it’s good to check to see if the company has complied with the changes. Try to find the red flags and look for places where there might be misinterpretation. And a good place to start is with the audit procedure.
“Before I take a job, I always ask for the audit reports,” explains Suzy Taherian. “When auditors have finished with a company, they produce a report that goes only to the Board. It gives you a sense of where the auditors saw weak spots or special opportunities for improvement.”
CFOs should also do a budget-versus-actual variance analysis. This is a great way to see how the company is progressing. And at the same time it allows the CFO to review and check the accounting. The budget-versus-actual review process brings a good discipline to the organization. It forces the management team to understand their budget and realize they will be accountable. It reinforces the budget which should tie to the strategic plan, assuring the organization is moving in the right direction. For a new CFO, a budget-versus-actual process review is very helpful to do month by month, line by line. This can translate into a great forecasting tool. CFOs make a big impact by looking across the organizational silos and taking the enterprise-wide view.
Risk mitigation is all about understanding and quantifying risk. And once you understand that risk, you can decide how to mitigate it. CFOs should identify and focus on risk, check the safety and risk management policies of their company, as well as the procedures. Sometime they will discover that the company is over insured or underinsured, and that there are errors in the policies. It’s kind of death by a thousand cuts; lots of sloppy mistakes are often made and discovered. It’s hard for some CFOs because they don’t have time to read every page of the policy. They’re not insurance experts. At that point it’s a good idea to seek out an insurance or risk management professional to learn ways to save money and correct errors.
According to Suzy Taherian, seeking out an expert is a wise decision. “I recently worked with a risk management professional who put together a great risk assessment book for our company. The Board loved it. It looked at other competitors and industry standards. This had not been done previously in this company. It got a lot of good support and a quick buy-in from the Board, so it was very successful for us.”
The CFO plays a critical role in every company. It’s not an easy job. But by having the tools in place to forge a good working relationship with the company’s CEO, it gets a whole lot easier.
Janice Berthold, CPCU, CWCA, PWCA, ChFC, CLU, is a senior vice president with Heffernan Insurance in Menlo Park, Calif. She has over 25 years of commercial insurance experience. Berthold can be reached at 650-842-5205 and at janiceb@heffins.com.