| Effective Strategies for Chief Financial Officers |
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I was recently asked by an incoming CFO to provide my opinion on what the ideal CFO should be focused on. Today, the CFO is much more than an accountant and reporter of earnings, there is the opportunity to provide strategic impact in collaborating with the management team to shape the business. The below recommendations for those aspiring to be the perfect CFO, incorporate ideas from peers and experts via a LinkedIn survey. Monitoring and Reporting Business Performance Let’s start with the basics. The CFO and the finance department should have a pulse on historical, current, and future business performance. They should know the numbers inside and out, including key factors that are driving business performance. In addition to traditional financial statements, we would suggest developing an executive level dashboard of the key business metrics that cut across areas such as finance, operations, suppliers, employees, customers, and suppliers that reflect the areas that executive leadership is focusing their primary attention (don’t forget measures of human capital). This dashboard doesn’t need to be overly complex, it can be a small number of metrics (10 to 20) that serve as leading indicators and are actionable. “For the CFO and Financial team, there are four key characteristics of a highly effective executive dashboard: direct linkage to the business plan, a limited but sharp focus, explicitly and clearly defined key measures, and regular distribution of timely information.” Leading indicators can be incorporated into an early warning system so that shortfalls can be identified in real-time and not discovered as the quarter or year is closed out. Reports should be shared regularly, and in real-time, with department heads and third parties so that they have updated information to make informed decisions. Accounting, Controls and Risk Management While accounting and controls may not seem like the sexiest aspect of being a CFO, it is still a necessary aspect of running a finance and accounting organization. For public companies, the CFO must be knowledgeable about regulation and accounting rules such as Sarbanes Oxley. We suggest a strong Controller to ensure that the control systems work. The CFO also plays a role as risk manager for the firm. This ranges from very tactical elements such as having the proper insurances to more strategic elements such as considering the risks of various business endeavors. Ideally, risk should always be considered as part of the equation in evaluating opportunities. Projects often have a range of likely outcomes and a range of risks that can be considered and modeled through scenario-planning activities. Data and Technology Today, many organizations are inundated with data. There are often challenges in getting numerous applications and systems to talk to each other and to reconcile why a system may be showing different data. While IT may not seem to fit under the CFO umbrella, a savvy CFO who understands technology can make their lives a lot easier. With the right applications, delivery of customized reports can be automated in real-time, saving multiple steps for your team. Furthermore, if you are repeatedly asking the same questions, develop queries through which the system can crunch the numbers quickly and push you forward as you seek to answer questions. With the right technology, your team can spend time analyzing data and coming up with strategic recommendations instead of retrieving it. Strategy and Analysis That’s a perfect segue to strategy and analysis. Today, the great CFO is distinguished by their ability to become a strategic weapon of the company. The CFO should be a key member of the strategy team, utilizing his/her problem solving and analytical skills to make recommendations and offer solutions to the onslaught of challenges facing businesses today. A great CFO would want to make the following statement: “CFO’s are much more than record keepers. We are able to leverage the available technology (accounting packages with user friendly drill down functions, Cognos type reporting apps, intranets, CRM packages with sophisticated dashboards like SFDC, etc.) and broadcast timely, accurate, customized dashboards to management. We are able to quickly focus management on problem issues with a sales region, a product line, degrading ASPs, etc.” With the right tools in place, the CFO can add value by interpreting results, informing decisions, and providing leadership in the conception and implementation of the strategic plan. Further, the CFO can add value by working with operations to make overhead functions more cost effective and supportive, while ensuring efficiencies in the supply chain. Finance can play a pivotal role in evaluating acquisitions, partnerships, new product launches, and even pricing decisions. Indeed, the CFO has to build a culture of project- and capability-building that serves the strategic needs of the organization. Leadership and Ethics Ultimately the CFO is a leader who bears the responsibility to establish and maintain high levels of integrity and exhibit ethical behavior which can cascade throughout the organization. A responsible CFO is willing to counsel other leaders on the viability of their goals and plans even if they have a dissenting opinion. They must have the courage to raise their hand on issues of business ethics. Ultimately, the CFO is a coach, not just of their own functional area, but of the company as a whole, that can apply best practices and influence others to raise the bar as well. Article details: 10 September 2009 http://sparxoo.com/2009/09/10/effective-strategies-for-chief-financial-officers/ By David Capece, Managing Partner |