I saw a post recently by Allison Allen that said “If your strategy can’t survive a CFO’s questions, it isn’t a strategy.” She went on to say “Too often, leaders pitch “strategic initiatives” that sound inspiring but collapse the moment ROI enters the conversation.” It immediately made me think about the great CFOs I have had the honor of working with, and how they naturally performed the role of the voice of reason. I have also worked with not so great CFOs who viewed their job as requiring them to say ‘no,’ regardless of the strategic value of whatever was being proposed.
In my CEO positions, I came to appreciate the special relationship between the CEO and CFO, and I learned to respect the different roles they perform in leading a company. As a CEO you fall in love with your company and exude unbridled enthusiasm for your business. In good times, you see no limit to success, and in bad times, you are the eternal optimist looking for a way out of trouble. The staff takes their cues from the CEO about the health of the business, but the CFO is typically the steady hand of reason. The staff often looks to the CFO for a reality check on the CEO’s cues.
It made me think about the contrast of what makes a great CFO, versus a not so great one. Once you get past basic competence, it is really about the CFO’s fit with the CEO and the company. It starts with the CEOs personality and behavior, and how they create an environment for a CFO to succeed. There is a spectrum of comfort zone for CEOs, and depending upon where an individual falls on that spectrum, they need a CFO to complement their strengths and abilities. On one end of the spectrum, some CEOs are numbers people and detail focused, they need a CFO to be the score keeper that produces the numbers that drive their actions. On the other end of the spectrum are the CEOs who are more vision and strategy oriented, and they need the CFO to keep the wheels on while they paint big picture ideas.
As a CEO, you have to start by knowing who you are and where you fall on that spectrum. You need an honest self-appraisal of your tendencies and your strengths and weaknesses. Once you know who you are, you are equipped to write the job description for your great CFO who will complement you. If you hire a CFO who does not fit with your skills and needs, you are sowing the seeds of discontent. Like buying the wrong size shoes, you will always be uncomfortable. By contrast, with an honest self-awareness, you will recognize what you need help with and what you are looking for, so you will be able to give the CFO a clear understanding of their role and responsibilities . A great CFO will become the CEO’s business partner, and in fact they will become a business partner for all of the operating executives.
In my experiences, great CFOs start conversations with “how can I help you,” instead of starting with rigidity or skepticism. They do not create an environment where they are perceived as the gate-keeper protecting the corporate treasury from those crazy executives. Instead, they see their role as finding a way to help executives and the company achieve their goals. They do not sit across the table from other execs, they sit side by side with them. In order to do this well, great CFOs need to have a deep understanding of the business and the market. They have to be part of developing the strategy and they have to be great business people with understanding and empathy for every operational role in the company. The not so good CFOs in my past were more focused on the mechanics of their role - legal, accounting, HR, and insurance details, and they did not leave a lot of room to become knowledgeable and a part of the actual business. They acted like bean counters, and gatekeepers, rather than business leaders.
In addition to figuring out who you are as a CEO, it is important for the CEO to also figure out who the board members are. The board works closely with the CEO, but in a healthy environment, the board and investors will also have a lot of direct interaction with the CFO. When creating the job specification for a great CFO, the CEO has to take into account the personalities on the board and what they will expect of the CFO. The CEO will also need to consider what s/he will expect of the CFO when they interact with the board. The CEO needs have confidence and trust the CFO when they fly solo with the board, and that requires a high degree of mind-meld, trust, and a close alignment and positive working relationship.
When I think about the great CFOs I have worked with, and I consider what I had to learn about myself in order to make room for a great CFO to succeed, I realize how it shaped the CFO job description and the ideal candidate. I learned that I was better at the big picture than the numbers. I had an intuitive feel for the metrics and numbers, but I was not particularly adept at keeping all of the specifics in my brain. Therefore, I needed a CFO who was rock solid on the numbers. I had board members who only saw numbers, and I needed a CFO I could trust to meet their scrutiny with absolute control of the details and the facts while I focused on the operating characteristics of the business. I also learned that I had eternal CEO optimism. When I added up the numbers, I always rounded up, and rarely saw the holes in my analysis. I needed a CFO who would round down and find the flaws, but who would also help to chart a path forward that aligned with my optimism. I learned that I needed a CFO who I could trust to be my sounding board, and who would be able to give me honest feedback. I have written about how the CEO job is a lonely role that sits between the executive team that works for the CEO and the board who the CEO works for. A great CFO business partner is a member of the executive team that works for the CEO, but is also able to be that sounding board and assist the CEO to lead the executive team.
There are tons of job elements and specific knowledge that define whether a person is equipped to be a CFO. However, once you get past the skills, the differences between ‘great’ and ‘not so great’ are a lot more complicated. Business acumen beyond finance and accounting is absolutely necessary, but job success will be driven by the ability of the CFO to align with the leadership needs of the business. How well they complement the CEO’s skills and support the operating executives will establish their ability to become an integral part of the business, and not just the score keeper.