Article published in the Philadelphia Business Journal on October 24, 2022.
I recently spoke at a meeting of the Financial Executives Networking Forum about what CEOs and boards expect from their companies’ CFO. My comments were based on years serving as a CEO and board member of public, private, private equity and non-profit boards, as well as serving on many board audit committees.
These were my comments:
What the CEO wants from the CFO
Serve as a true business partner of the CEO
Quoting Jim Collins from his iconic book, “Good to Great,” “If we get the right people on the bus in the right seats and the wrong people off the bus, then we’ll figure out how to take it someplace great.” Having a CFO as a true business partner on the bus is the first step in taking the company someplace great.
As a CEO, I recall many conversations with my CFO on how to address the operational and strategic issues we faced. When we debated the issues as equals, we found the right path forward.
Ensure accurate financial reporting
Having to restate quarterly or annual earnings is every CEO’s and CFO’s worst nightmare. It undermines the board’s and investors’ trust in the company’s financial reporting systems, and in the CEO and CFO.
Material weaknesses and significant deficiencies indicate weak financial controls. If either are identified, the company’s financial control systems need to be fixed immediately to avoid a future misstatement.
Break paradigms, champion continuous improvement
“We’ve always done it this way” has been labeled the most dangerous phrase in business by Forbes. CFOs need to be aware of the best practices regarding financial and cyber security systems for companies of their size and type. If the company’s systems fall short, what are the resources needed to close the gap?
Continuous improvement is the lifeblood of competitive advantage. CFOs need to be a champion of continuous improvement by empowering their employees to improve their work processes. Empowered employees feel a sense of ownership in what they do, a necessary key to sustaining a continuous improvement culture.
Develop strong partnerships with the company’s business managers
When I was CEO, finance people were assigned to each business unit and treated as a member of that team. This paved the way for finance to be more responsive to the needs of the business.
Part company with ineffective or toxic direct reports
We are all familiar with organizations staffed with poor leaders. They prevent the organization from reaching its potential and drive your best employees to work somewhere else, perhaps a competitor. Poor leaders need to go.
In my experience, when these people depart, the organization cheers and asks what took the leader so long to get rid of them.
Project a proactive, can-do attitude
The CFO needs to be a person who sees possibilities and abundance, and not one who sees only scarcity and limitations. The attitude of the CFO will become the attitude of the finance group. You want that attitude to be a proactive, can-do attitude.
What the board wants from the CFO
Independence, integrity and candor. No surprises
These are the most important attributes of any CFO. As a board member, I want to hear what the CFO has to say about the business. Board members have a fiduciary duty to the stockholders of the company, and that duty cannot be fulfilled unless the chief financial officer has the attributes of independence, integrity and candor.
As a CEO, I highly valued transparency with my board, so there was never an issue with having the CFO tell it like it is, as I would do. I have served on boards where the CEO and CFO were not transparent with the board, which destroys trust. Once trust is destroyed, it is hard to earn back.
Comply with all applicable regulations
This goes without saying. The reputation of the company is on the line, as is the reputation of the board members.
Permit visibility of leaders within the financial organization
The board needs to know that the company’s financial organization has depth. The CFO should invite members of their team to make presentations on areas they are responsible for and on initiatives they are working on. This usually occurs at board audit committee meetings.
“Make us choose the harder right than the easier wrong”
This passage from the West Point Cadet’s prayer captures the essence of the character that board’s like to see not only in their CFO, but in all senior leaders of the company. Unfortunately, this is not a common trait.
CFOs who meet these expectations will be very effective in their roles and will play a key part in the company achieving its goals.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership. He can be reached at Stan@SilvermanLeadership.com.