Article published in the Philadelphia Business Journal on September 17, 2023. Revised 8:00 am on September 18.
What are the expectations of the CEO and board of the chief financial officer? This is an update of a Philadelphia Business Journal column I wrote on this subject in October 2022.
What does the CEO want from the CFO?
Serve as a true business partner
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 who is 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 and 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, which is necessary to sustain a continuous improvement culture.
Be sensitive to the needs of business unit leaders
Finance staff need to be assigned to each business unit and treated as a member of that team. This paves the way for the finance organization to be more responsive to the needs of the business.
There is nothing more frustrating to business unit leaders held accountable for their bottom line results than being charged for increases in staff unit expenses that provide no benefit to them. Staff unit charges (plus inflation) to business units need to be held constant for, say, three years (and then adjusted) if the organization truly wants to hold business units accountable for achieving income goals. The increase (or decrease) in staff unit expenses need to be charged to a holding company account.
Part company with ineffective or toxic direct reports
Organizations staffed with poor leaders prevent the organization from reaching its potential and drive their best employees to work somewhere else, perhaps a competitor. Poor leaders need to go.
Project a proactive, can-do attitude
The CFO needs to be a person who sees possibilities and abundance, not one who sees only scarcity and limitations. The attitude of the CFO will become the attitude of the finance organization. You want it to be a proactive, can-do attitude.
What does the board want from the CFO?
Independence, integrity and candor
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 CFO 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 destroyed trust. Once trust is destroyed, it is hard to earn back.
Understand the most effective way to communicate information to the board
The number one rule for communicating information to directors is to put yourself in the place of those directors and ask am I communicating effectively? Is the communication to the point and understandable to someone receiving the information for the first time? Is what’s important in an executive summary up front, and backup information in an appendix?
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.
Permits visibility of leaders within the finance 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.
“Make us choose the harder right rather than the easier wrong”
This passage from the West Point Cadet’s prayer captures the essence of the character that boards 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 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.
