Characteristics of a Successful CFO: What Makes a Great Chief Financial Officer?

John Baule

A Successful CFO is Like an All-Star Point Guard

These concepts and approaches can also be applicable for VPs of Finance and other finance executives heading their respected finance function. Successful CFOs deliver reliable metrics and insights that drive strategic conversations to reach business objectives. They are also responsible for managing cash flow, revenue, forecasts and setting the business up to overcome any number of scenarios. When you boil down the responsibilities and characteristics of a CFO, it’s much like a point guard in basketball. 

The point guard is the individual that handles the ball most of the time and orchestrates the offense. They dribble the ball up and down the court, and think about how to start each play. They have to determine who's going to get the ball next, who they are going to pass the ball and when. 

A CFO is like a point guard in basketball

In business, the CFO is very similar to a point guard in these respects. They initiate the process of strategic discussions regarding the business. They are responsible for all the transaction processing and every metric that's involved in the business.

As the point guard must determine where to put the ball, so too does a CFO in regards to where they need to put necessary information for it to be impactful and make a difference. 

Just like when the point guard recognizes his teammates making a lot of shots, and they are wide open, so I'm going to throw him the ball, a successful CFO realizes they need to give marketing this information about the impact of their advertising programs so they can decide how to allocate their funds across different channels more effectively.

The other thing that a point guard does though, is sometimes a point guard has to take a shot themselves, and a successful CFO is also able to do that. By that we mean a CFO is at the management table with a Finance perspective, but also the ability to take the Finance hat off and look at things from a business standpoint overall.

They might suggest an action which may affect our net income negatively; however, it's the right move for the business. Maybe we should spend this money now, even if it will impact our ability to achieve our budget because the benefits are so great going forward.  We saw that a lot during the beginning days of the COVID-19 pandemic. CFOs had to make a lot of decisions that kind of go against everything they were trained to do, because, from a business standpoint, they were the right decisions, even though they were not necessarily the traditionally appropriate decisions.

A successful CFO, handles the information, decides what information is needed when and understands the cross-functional needs of information. Every function within a Company has a grasp on their given metrics, potential issues and KPIs, and through Finance, they translate it back into centralized metrics that become a common scoreboard for the business. Ultimately CFOs are in a great spot because if you think of the one function that transcends any other function it’s Finance.

A CFO Must Provide Structure For Finance and Accounting 

Without repeatable processes, defined structure and detailed workflows, a Finance Function is inefficient and could lack the necessary impact it should have on a Company. When determining the different roles within a team, it’s important to first consider how you should organize a Finance Function. One thing to realize is, the types of people you generally have in accounting vs. finance are vastly different. 

They typically have very different ambitions, interests and motivations. This is one of the things that makes being a CFO really interesting because you're dealing with people with a lot of different perspectives and a lot of different needs.

For example, your typical accounts payable clerk, I think of what, what is involved in their job every, every day they come in invoices come to their, into their queue. They look at them, they process them. They make sure that they should be paid and get the appropriate approvals and they pay them.

It's pretty much an ongoing job. It doesn't change dramatically from time to time, though hopefully, it gets more productive over time. In my experience, accounts payable roles are ideal for those seeking more balancing work-life balance and not necessarily fond of ambiguity. Of course, this is not always the case, because there are always exceptions, but this is the case the majority of the time. 

On the other hand, the typical FP&A professional tends to be driven by curiosity and you find that a lot of them are fairly ambitious. Not that those in accounting aren't, but you'll find a lot of big companies will bring someone in out of an MBA program as an entry level FP&A role because they want people who can take information and continue to grow, who can keep moving up that hierarchy into greater and greater analytical interest. 

When you think about that, you think about those different kinds of people. It kind of stands to reason that you want your Controller Functions to be as automated as possible and simple in nature. You also want to complete them with maximum efficiency. This is where dedicated Controller and Accounting tools come into play. 

Build a mature finance function

Similarly, when you hear Six Sigma, it usually doesn't apply to most companies, but that level of quality control is really important in Accounting. You cannot allow for many errors in the Controller Functions, and that's why you have to maintain control over things, like debits equalling credits. Therefore, you need staff and tools that are process-oriented and people who are comfortable manning that assembly line of getting you to point zero each and every. 

Accounting and Controller Functions should operate like a classical orchestra. Their goal is not to write new songs, but rather to faithfully interpret the composition, however Bach or Beethoven wrote it. They must work within the framework, but not change it. On the other hand FP&A operates more like a jazz musician. Jazz musicians have the ability to improvise and can connect a wider variety of dots. Like FP&A, they are very comfortable going outside the normal range or scope and look at information differently. 

Additionally FP&A is increasingly reliant on understanding and using business intelligence tools. This requires a deep understanding of data collection, warehousing and integrations to connect sources of truth. Therefore, when building a mature Finance Function, a CFO needs to realize they are usually hiring two completely different people for these roles. 

Set Up Your Finance Function For Success

If you think about organizing your Finance Function, you're going to typically attract people in FP&A who tend to be curious, who want to solve new problems and make a bigger impact on the Company. Due to this, you're going to have higher attrition in FP&A than in an accounting function, most likely because you've got people who are typically looking to move up or even move on.

In my 30+ years of Finance experience, the FP&A functions tend to be a little bit younger and tend to use the role as more of a stepping stone. One implication of this, is the added importance of implementing structure and systems within your Finance Function to avoid bottlenecks when you inevitably lose team members. 

High-performing employees are going to move on in your company to bigger roles, or they're going to move on to other companies. So, if all your analytical knowledge is in the head of an FP&A professional or in a batch of hundreds of spreadsheets that only they understand, you will be in a dire situation if they ever decide to leave. 

It’s imperative you have dedicated Finance software tools, processes and a structure for forecasting, budgeting and reporting. A departure of an Accounting or Finance employee without established processes, documentation and an internal team understanding of tools to complete tasks can be catastrophic to the overall management information system.

In this era dubbed, ‘The Great Resignation’, with a 20% increase in resignation rates in 2021 compared to 2020, too much of your Company’s success can’t be left to chance. A successful CFO has visibility into each of their processes and has control over disparate data to conduct meaningful analysis and provide strategic insight.

If you’re looking for an FP&A Platform with battle-tested methodologies baked-in, are considering or in the process of a Finance transformation and wish to make an impact sooner, rather than later, please don’t hesitate to reach out. Our team of Finance experts are here to help. Contact us or schedule a personalized demo at your convenience. 

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