What does the C-suite really expect from its Chief Financial Officer? The answers vary considerably. Not only does it depend greatly on the organization’s overall goals and strategy, but it can also hinge on the personalities and working styles of the other leaders surrounding the CFO. Whatever the case may be, it is critical that the entire C-suite is aligned around expectations and boundaries.
There are obviously some core functions associated with the CFO position, such as producing clear, accurate financial statements, attending to cash flow and the efficient use of working capital, risk management, responsibility for tax and compliance, and ensuring that the necessary internal controls are in place.
Beyond that, expectations of the CFO position begin to diverge. In many organizations, the CFO serves an important role in setting the strategic direction of the company, identifying and assessing opportunities, and communicating strategy and company performance to key stakeholders, including the company’s employees.
In Four Faces of the CFO, Deloitte outlines four fundamental orientations often associated with the CFO role. The operator focuses on organizational efficiency, balancing the company’s capabilities, costs, and service levels to achieve primary financial objectives. The steward focuses largely on risk management, safeguarding the business and producing clean, accurate financial statements. The catalyst orients toward enabling and accelerating execution throughout the organization, and the strategist fills a larger role in the long-term success of the company, including mergers and acquisitions, working with capital markets, and otherwise addressing the strategic needs of the organization.
Visionaries and Implementers
Many C-suite relationships are highly dependent on the interpersonal dynamics and the relative strengths and weaknesses of the various C-level executives in an organization. For example, visionary founder CEOs are the lead for many companies. It is often the case that such founders are creative and ambitious, with a lot of new ideas, but sometimes lacking in focus and operational discipline.
The visionary CEO often requires a counterbalancing influence–someone who is focused, disciplined, and immune to distraction. Business guru Gino Wickman, creator of the Entrepreneurial Operating System (EOS), calls this person the “implementer.” The implementer’s role is to keep the CEO’s creative juices in check and to help the organization remain focused, challenging new ideas and bringing a strong dose of reality to conversations among the executive team.
Most CFOs are naturally well-suited to the role of implementer because they tend to be fact-oriented and data-driven. They are often the ones asking hard questions about the viability of the company’s financial plans. They tend to challenge assumptions and provide a healthy dose of skepticism around forecasts.
CFOs tend to do a better job at due diligence as well. In a study by Deloitte on the role of CFOs in M&A, for example, the authors concluded that “directors were more inclined to rate the finance team’s risk-related M&A abilities as ‘extremely effective’ than CFOs.”
CFOs have a similar role to play in evaluating new business opportunities: challenging assumptions and asking difficult questions to ensure that risks are clearly understood in advance, expectations are realistic, and targets are achievable.
Strategically oriented CFOs will often ask questions about which products and markets show the greatest potential for growth and/or profitability. They seek financial structures and investments that optimize the efficiency of working capital. They look for opportunities to leverage strong financial reporting to empower management with the information they need to execute and deliver on the company’s strategy.
Symbiosis: Agreeing to Disagree
To the extent that the CEO and the CFO provide counterbalancing personalities–one visionary, the other down to earth–they need to develop a mutual respect for the importance of both of those roles. When the CEO is clear about the need to have a healthy skeptic close at hand, they can develop a better appreciation for the benefits of that counterbalancing point of view. A good CFO, likewise, should be able to appreciate the value of a visionary’s creative impulse in spurring innovation and enabling the business to advance beyond its comfort zone in the status quo. As the world around us changes, that kind of innovation is more important than ever.
In this respect, the alignment between many CEOs and their CFOs becomes a kind of symbiotic relationship in which both roles play a vital part in the ultimate success of the company.
Analytics Enable Focus
Aside from the obvious need to generate accurate and timely financial statements, the CFO position has a great deal to do with reports. A data-oriented, “just the facts” approach to the world drives most CFOs. In this respect, reporting plays an important role in the finance function, especially insofar as the CFO serves as the counterbalancing “implementer” to a visionary CEO.
There is a common complaint that we hear from many of the C-level executives we speak with, namely, that despite all of the sophisticated information systems at their disposal, it seems harder than ever to extract meaningful answers to the important questions about their business. When several different systems are generating reports–each one essentially an isolated silo–inconsistencies often emerge as a result of timing differences, lack of integration, or human error.
A global 2020 FSN survey of senior finance leaders reported that 70% of respondents were unhappy with the amount of time they spent on analysis, with only 12% saying they are “data masters” who treat data as a strategic asset and have the right tools and processes in place to exploit the value of their data, which is essential to becoming a value contributor.
C-suite alignment necessarily begins with agreement on the facts. That requires a single source of truth. All too often, though, we hear about time wasted in executive meetings arguing about which numbers are correct. When the VP of Sales declares that revenue is on track for the quarter, but the CFO’s numbers say otherwise, the executive team spends its valuable time arguing about which number is true, rather than focusing on the important strategic decisions necessary to move the company forward.
In this respect, effective, holistic reporting provides the linchpin for functional alignment within the C-suite. Access to accurate, timely, and consistent information about key performance indicators is critical to effective management. Identifying and assessing new business opportunities, likewise, requires clear visibility to trends and patterns, as well as the capacity for quickly and accurately pulling together forecasts and building “what if” scenarios.
That, in turn, requires robust reporting tools capable of accessing multiple software systems, bringing real-time information together from those various silos in order to create a holistic view of the business. Here at insightsoftware, we help finance and accounting teams develop clear visibility into important metrics across their entire organization, increasing efficiency and performance while managing risk. To learn more about how superior reporting tools can benefit your organization, contact us for a free demo.