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What Makes a Good CFO?
I was recently speaking with a CEO about what makes for a good CFO and it got me thinking more about it so I came up with a number of points on which I think CFO’s need to excel at to be considered a good CFO. Based on my own 20 plus year career as a Public Company CFO and a Division CFO at PepsiCo I came up with these broad points:
1. Able to build relationships with all constituencies – A good CFO has a wide array of people (s)he needs to be able to have a relationship with. Think about it, they need to have a relationship with the CEO, the Board of Directors, the Senior Manager Group (SMG) that oversees the day to day operations of the business , the CFO’s Direct Reports, the rest of the employees, the external audit firm, the company’s lenders and shareholder base, insurance vendors, management consultants and if they are publicly listed, the ISS or other corporate governance related entities. I’ve probably missed some but it’s a HUGE number of people to keep up to date on a regular basis.
2. Runs a tight ship – By this I mean the day to day finance/accounting function needs to run smoothly producing management reports in a time frame and with completeness and accuracy that the Board, the SMG and the shareholders all feel good and confident about what they are getting. Finance needs to be seen as the one and trusted source for numbers. You can’t have sales or some other function challenging the numbers or uncertainty quickly creeps in which undermines the CFO and his/her team.
3. Builds a great functional team – The CFO’s team needs to be perceived as solid. When the CFO or any member of their finance leadership team is asked a question they should be able to respond in a timely manner with accurate information. Finance has to be seen as a trusted partner and not just the Mr/Miss No. They need to be a strategic business partner to all other functions. On the other hand, no one wants surprises so finance has to maintain discipline around those processes which can affect the veracity of the company’s finance statements and since that is most processes in a company in some form or fashion that’s a lot of responsibility. Finance is the balance in the checks and balances equation and should wear that moniker proudly after all when the shit hits the fan, it’s the CFO and the finance team who get the finger pointed at them and I know that from painful experience.
4. Is seen as a key contributor to strategy – the CFO sits at the center of strategy development and if not at the core the CFO is one dot away from the CEO on that score in my view. The CFO is the one that has to translate the strategy into a financial model that withstands the scrutiny of the Board, the SMG and the shareholders so the risk is high if the model has an error in it which is often created from too many changes in the assumptions at the last minute!
5. Acts as a true partner with the CEO through both agreements and disagreements. I can’t help but think of the line “if two business leaders are always in agreement, then one of them is not needed”. In my view the CEO and CFO should always be talking to one another, bouncing ideas and comments off one another and challenging each other. From that crucible comes better thought out ideas and strategies to propel the company forward. The other key point here is that the CFO needs to be able keep confidential anything that gets said in private between the CEO and the CFO. The CEO needs to be able to trust their CFO to keep their mouth shut.
Let me know if you feel I missed anything on this topic.
I will be writing further about how to attract and retain a good CFO. Let me know your comments and what topics you would like to see posted as there are so many interesting facets of the CFO’s role.
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