The functions of the Chief Financial Officer go beyond balancing the books and comparing inflows and outflows. Increasingly, the CFO has become a crucial partner in determining the direction of the firm, especially in terms of what it invests in and how soon it realizes returns.
Armed with tools that enable a company to use real-time information for competitive advantage, chief financial officers (CFOs) are becoming key collaborators with their chief executive officers (CEOs) in an ever-evolving relationship that can have a major impact on their organizations.
The professional service company CFO Selections notes that to remain competitive in the changing business landscape, CFOs and CEOs must forge a relationship based on trust, collaboration, and a shared view on how to move their company forward. Together they define the commercial, strategic, operational, and financial blueprints, and with the right chemistry, the relationship grows, and the business makes the most of its opportunities.
A 2017 CFO Pulse Survey found that a CFO’s strong working relationship with their company’s CEO and board of directors is critical to achievement and career longevity. When asked why a CFO would voluntarily leave his or her position, more than half (52 percent) of respondents said the top reason is a poor working relationship with the CEO, and 41 percent said not working well with the board and CEO is the top reason a company would ask a CFO to leave.
Recently, Russell Reynolds surveyed more than 100 CFOs at leading US companies and found there were strategic benefits to a strong CFO-CEO relationship:
* Eighty-two percent of CFOs surveyed gave their CEO high marks for overall effectiveness.
* A majority of CFOs said they trusted their CEOs.
* Less than half of the respondents gave CEOs a high score when it came to their ability to coach and develop the CFO.
* Forty-nine percent of CFOs surveyed said they had a “very strong” relationship with their CEOs.
The survey found that structural factors have surprisingly little impact on the relationship.
* Seventy percent of CFOs rate their CEO relationship as very strong, saying they provide their boards with exposure and access to their direct reports.
* For CFOs with weaker CEO relationships, only 40 percent say they do the same.
* Ninety-eight percent of CFOs with “very strong” CEO relationships say they are comfortable bringing difficult issues to their chiefs.
* Just 29 percent of CFOs who reported weak relationships with their CEOs said they are comfortable tackling tough topics with their bosses.
Sharing dissenting opinions is often a sign of a strong strategic partnership,” says industrial psychologist and Russell Reynolds leadership expert Amy Hayes. “By creating the space for healthy debate, the CEO is signaling directly and indirectly that the CFO is an ingrained, enterprise-level member of the leadership team. In turn, this allows the CFO to operate at that level. By contrast, without strategic partnership, the CFO can be constrained to more transactional thinking and responsibilities, which can undermine the relationship and under leverage the CFO’s ability to make a positive impact on the business.”
CFO Selections offers the following tips for making the relationship between these top executives work or to explore how a broken one can be mended:
* Both must be open with each other, have mutual trust and respect, and a shared vision.
* The skills and personality of the CEO and CFO need to complement each other.
* The CFO should maintain a self-awareness and realize how they are perceived.
* The CEO gets to deliver the good news, and the CFO is charged with delivering bad news.
* Healthy tension at times can be productive. Accept that rifts are going to happen.
* Always present a united front.
* The CFO is a strategic partner and advisor, not a bean counter.
* A CFO is not expected to be the CEO’s “best friend.”
* The CFO needs to have high integrity, independence, and courage.
* A good CFO should easily offset his or her cost through value creation, direct cost savings, and risk mitigation.
* The CFO must have a mindset to deliver business results, as opposed to primarily managing the financial organization, and reporting the results.
Ultimately, a CFO becomes an agent of change, improving results throughout the organization with data-driven insights that drive performance. Increasingly, CEOs of leading companies are looking for a CFO who not only have financial expertise, but who can help them manage the business, complement their skills, and offer leadership. Modern CFOs are able to leverage advanced analytics and other data-driven tools from cloud-based enterprise resource planning systems to provide strategic value and provide CEOs with the ability to make more accurate and better informed decisions on new product lines, mergers and acquisitions, and opening up new lines in a particular market, among others.