I often write about the CEO role and the Board of Directors, but behind every great CEO is usually a tireless Chief Financial Officer (CFO). In my experience, the CFO is the hero who keeps the wheels on while the CEO paints the vision and inspires the troops to strive for greatness. I have had the honor and pleasure of working with a few awesome CFOs during my CEO and board roles. I have also worked with a few that were not so awesome, and the difference was stark.
A CFO job description one CEO shared with me was “Keep us honest, under control, and don’t let us run out of cash.” The role probably has the broadest scope and range of responsibilities of any executive position. Depending on the stage of the business and its executive structure, the CFO domain may include: accounting, treasury, financial analysis, operational performance reporting, human resources, insurance, regulatory reporting, investor relations, legal, administration, real estate, tax, M&A, and pretty much anything else that does not neatly fall into one of the other operating roles.
For me, and for many CEOs, the CFO was my closest business partner. The CEO and CFO have a unique relationship. Other than the CEO, the CFO is typically the only other executive with prescribed legal and fiduciary responsibilities. They are the scorekeeper, and they are subject to intense scrutiny through the formal annual audit process. Board members look to the CFO as the ultimate source of truth, and as a confirmatory source for whatever the CEO says about performance. As such, it elevates the CFO role as a frequent participant with the board and investors, unlike other executives.
I am an optimistic, strategy and vision person, and while I am very comfortable with numbers, I tended to do CEO math. By that I mean my optimism pervaded my outlook, and my math generally resulted in a rosy outcome. The Yin to my Yang was a strategic CFO who understood the business deeply and would do real math and produce a more conservative outlook. With that conservative grounding, we could work together to create a path forward to achieve a realistic optimal outcome. This was one of the key differentiators between an awesome CFO and one that was not so much. Awesome CFOs see their role as a strategic participant to make things happen. They search for the supportive ‘yes’ answer. Less awesome CFOs define their role to be the guard or parental control to prevent those crazy execs from going down the wrong path. They start with a ‘no’ answer and occasionally are convinced to get to ‘yes.’ Traffic cop versus business partner.
Almost as important as the CEO/CFO relationship is the CFO relationship with the board and investors. An awesome CFO is a trusted voice in the boardroom. Board members expect the CFO to be on top of all the details and metrics, and the degree of confidence they have in the CFO is reflected in the degree of confidence they have in the operating plan the CEO is presenting, or the story being told in the board meeting. Board members turn to the CFO to explain the results, and to explain how the path the business is on will result in corporate financial success.
One last measure of an awesome CFO becomes evident when the company decides to go to market to raise capital or be sold. This is one of the most stressful times, and everything has to be in order for it to go smoothly. An Awesome CFO will have run a tight ship all along, and the company will be well prepared in advance. With a not so great CFO, it can be a goat-rodeo nightmare.
For the CEO, the board, and the investors, a great CFO is an imperative. When you find one, make sure they know how much you value them.