Competitive threats from new market entrants and established competitors are forcing CEOs to develop a greater appetite for risk. CEOs see danger in maintaining the status quo; to achieve growth, CEOs believe they need to be more aggressive about taking on risk. In fact, according to a study done by KPMG, one in three CEOs think they are not taking on enough risk as it relates to their growth strategies.
With risk can come great reward, but it can’t be approached with reckless abandon. Today’s strategic CFO plays a vital role in being the conscience of the organization, balancing the risks and rewards inherent with various initiatives. To this end, the role of the CFO has evolved from number cruncher to that of a strategic partner working with the CEO to help navigate the right course for growth.
This means the CFO role now encompasses greater depth and breadth than ever before. That includes knowing product development and release strategy, growth strategy, and customer experience.
While every business activity has an outcome that eventually can be boiled down to a number in a report, the CFO must be in lockstep with the CEO, not only to provide advice, but also to act as the steering committee in charge of piloting corporate growth. Of course, a strategic CFO must also maintain a firm grasp of financial fundamentals and compliance issues, but this is now table stakes — the ability to qualify, quantify, and “right size” risk is the new yardstick by which today’s CFOs are measured.
CFOs become strategic advisers to their CEOs by building trust and communicating effectively and often, making it a point to understand how each business unit functions to properly understand what changes to make to drive results. This process may not happen overnight, but here are some steps to take to move in that direction.
Dig Deep. The CFO can’t just focus on numbers. He or she must understand the business and key drivers and have conversations with the CEO that focus on these topics. The CEO will come to respect and appreciate the fact the CFO has a broader knowledge of the company as opposed to just debits and the credits and how the numbers are flowing. That allows the CFO to be an independent, objective sounding board on what’s happening in all parts of the business.
Build a Great Team and Delegate Responsibilities. To be a strategic business partner to the CEO, a CFO needs to have great teams underneath her. Developing a great team and then delegating responsibility for reporting and day-to-day running of the finance department allows the CFO to focus on business transformation, growth areas, and investors. In essence, the CFO needs to make the shift from tactical expert to strategist.
Avoid Politics. The CFO can’t have a political agenda and must portray objectivity, independence, and the ability to listen. So, while there will be different sides to every issue and conversation that is happening in the company, the CFO must be able to listen with an open mind and be willing to change opinions based on what is heard, all while keeping the company’s goals in mind. That builds the CFO’s reputation, showing the CEO and other business leaders that decisions are based on what is best for the organization.
Be Prepared to Course-Correct Strategy. There is more data to be analyzed than ever before, so it’s critical for CFOs to clearly define key performance indicators (KPIs) and then track the key metrics against expected outcomes. CFOs should then go beyond providing raw data to provide advice on when to course-correct if performance is lacking. Part of this involves establishing reasonable timelines (and associated metrics) for return on investment on business initiatives to provide unbiased measurements.
The World is Watching. Companies and their leaders are subject to ever-greater scrutiny by the media, social media audiences, and stakeholders. CFOs must be aware of customer and consumer behavior and cognizant of public perceptions of all key decisions and consider not only what is financially possible but what, from a customer perspective, is socially acceptable.
The Cult of Personality. CEOs come in all shapes and forms. To develop the right partnership, it’s important to understand individuals and their hot buttons. How do they like to work, and what information do they want to know? What do they need to know, and how often do they want talk? How do they like to have information presented? By learning the CEO’s personal preferences, a CFO gains the understanding of how to best collaborate.
Always Be Transparent. The primary function of the CFO is to make sure that the CEO can see the company’s true performance. Discussions about performance management disappear when numbers are regularly reported and measured. Providing transparent data is not enough, however; there also has to be some ability to convert the data into actions. The CFO must also help the CEO in ensuring the right processes and values are in place across the company while ensuring the data provided is accurate.
Know All Roles. Just understanding the KPIs that measure a group’s performance isn’t enough to provide added value for CEOs. Meeting with leaders across divisions to understand both what drives and hinders success gives the CFO an extra layer of data to help make the best and most holistic decisions. Digital transformation has placed even more urgency around integrating functions. Collaboration between the CFO across all company areas can determine how and where digital can help grow the company, drive customer retention, and reduce costs.
Ultimately, the CFO must become an agent of change for the organization by both providing insights across business units and executing on strategies that drive higher performance and better business results. The best CFOs will be adept at implementing all of the above to become the CEO’s trusted strategic adviser.
Kathy Crusco brings more than 20 years of experience to her role as executive vice president and CFO of Epicor. Crusco came to Epicor in May 2011 following the merger with Activant Solutions.