By SVenkat
Ease of Doing Business for MSMEs: Most enterprises pick customer retention, well-executed go-to market, ability to raise funding at competitive rates, superior brand positioning, talent acquisition etc as determinants of their success. An important, but often underrated and poorly understood success factor is the relationship dynamic between the company’s CXOs, particularly the dynamics between the CEO and CFO.
The key for a CEO is to see the CFO not as a ‘finance’ person but as a business problem solver who brings a finance perspective. Here are three things a CEO can do to make the partnership with the CFO successful:
Create platforms to build business context
The single biggest thing a CEO can do to help the CFO become truly effective is to create platforms that allow the CFO to understand the business better. Consider for instance: is the CFO part of all management committee meetings (and not just the ones which involve Finance as the agenda item). Is the CFO encouraged to visit the market and interact with distributors, meet customers, join sales visits, input on discussions with vendors, sit in on critical hiring decisions of departments other than Finance? The more the CFO understands about the business context, the better perspective she is able to build around business opportunities and challenges and better is the quality of her inputs to decision-making processes.
Also Read: Top cybersecurity trends small businesses should be paying attention to this year
Empower
Evolved CEOs empower CFOs beyond conventional budgetary controls, PO signing and cheque signing authority matrices. CEOs who have empowered CFOs involvement in actively designing oversight frameworks and monitoring deviations from agreed control parameters in ‘commercial’ areas like marketing spend payback, sales and distributor incentivization plans, discounting schemes, credit control, capital allocation plans, make versus buy decisions, buy versus lease decisions, have reaped rich benefits. Smart CEOs realise that the CFO has tremendous value to add in partnering with and improving the effectiveness of other CXOs.
Sounding Board
CFOs, thanks to their training and instinct, tend to think ‘quant’, stay objective, separate the wheat from the chaff, and most importantly stay independent and unafraid to articulate what they think is in the best interest of the company. A good CEO leverages these traits by making the CFO his/her sounding board. Regardless of the function, SBU or geography that a major decision needs to be made in, a discussion with the CFO will help the CEO in developing a more balanced perspective; this helps in building confidence in the decision-making process for the CEO. From a CFO perspective, knowing that her counsel is being depended upon by the CEO, knowing that she enjoys a position of trust, is a highly motivating and energizing factor for the CFO, helping her to bring out her best for the company
And what can a CFO do to make the relationship with the CEO ‘tick’?
Solution builder, not ‘nay-sayer’
Good CFOs realise that being an Accountant, Controller and risk manager while a core component of their role is not their entire role. CFOs who go beyond and propose alternate solutions become valuable business partners to their CEOs. For instance, its easy for a CFO to say that the proposed ROI on a new capex project does not meet approval criteria. But if the CFO is willing to go the extra mile, explore ways to convert some of the capex into opex via leasing/ hiring, find ways to reduce the capex itself by possibly outsourcing some manufacturing processes to external vendor partners, the financial viability of the project could look very different. CEOs appreciate solution-minded CFOs.
Articulate via stories, not numbers
Good CFOs are willing to put themselves in the shoes of their internal customers, i.e. other CXOs and the CEO. They realise that while she herself might be comfortable with numbers, the CEO might prefer a simpler, easier way of understanding performance. Evolved CFOs rely more on charts and graphs to ‘tell the story’. Most importantly, they don’t just present the numbers, they interpret it, go to the root causes underlying the performance and come up with what their recommended plan of action is to rectify the situation. For instance, an accountant would say “Sales increased by 15 per cent in relation to last year”. A CFO should be able to say “Sales increased by 15 per cent in relation to last year, contributed around 70 per cent through volume growth and the balance through price increases. Volume was driven through 12 per cent improvement in same product volume improvement, six per cent in new product introductions, compensated by three per cent drop in product discontinuations. Price increases while muted have been in line with what competition has been able to achieve. Customer churn at 11 per cent is at its highest in the last eight quarters; sales teams will do well to deepen customer engagement in the next quarter”. CEOs love CFOs who ‘spell it out for them’!
Engage on the right matters
A CFO will have her CEO’s ear if she engages with the CEO on the right issues, at the right time, for the right time. Most CEOs lose interest if conversations get too operational, too technical, and too short-term. A CFO understands her CEO’s personality, what interests them, what bores them, their leadership style and modifies her engagement with the CEO accordingly. Regular engagement is a must; a good way to get disciplined about this is 30-minute weekly call or meeting with the CEO to go over critical matters. Looks like a simplistic thing to do, but its surprising how many companies do not have this basic check in place.
A seamless, collaborative, transparent synergistic CEO-CFO relationship based on mutual trust and respect for each others strengths has worked wonders at scores of companies in the past. The good news is that there are several places to learn from past precedence. Press coverage of success stories of award-winning CEOs CFOs and professionally-run networking forums where participants can meet and engage are good places to start.
All the very best to make your own CEO CFO jugalbandi successful!
SVenkat is the founder of performance improvement consulting firm Practus. Views expressed are the author’s own.