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Modern Qualities a CFO Must Have


The traditional definition of a CFO is that he or she is the senior manager of all things financial for a company or corporation. The CFO monitors the company’s cash flow, analyzes its financial health, suggests recommendations for possible improvement, and oversees the company’s financial accounting, including timely and accurate reporting.


The important point about this definition is the word “traditional”. Although it is critical for a CFO to have a strong understanding of basic finance, they are now forward-thinking team leaders and visionaries, evolving to be involved in strategies and all aspects of the company’s operations.


Here are 9 qualities that define a successful CFO:


Role Clarity


Role clarity, according to the best CFOs, is critical for their success. It can be agreed that a successful CFO should have a forward-thinking attitude. He or she must recognize that while knowledge of the past is vital, they must be able to impact the future and take calculated risks. “It’s more of a leadership role” says Philip Rewcastle, CFO of the Consumer Lending Group at Wells Fargo, “versus the support role it was 10 years ago.” Today’s CFO is uniquely positioned to take on this challenge. He or she is the only leader of the company whose role combines a high-level strategic overview (supporting the CEO) with a direct line of sight into everyday execution.


Apart from all the things mentioned above, an excellent CFO must maintain a strong and trusting relationship with the CEO. This is critical for a company’s success since CEOs regard CFOs as their co-pilots and expect them to assist in directing the business. Because the CFO frequently finds him/herself acting more like a COO, they must be viewed as a strategic partner to the CEO if they want to be the best in their industry. For example, if the company they work for is undergoing substantial changes or transitions (becoming public or private, etc.) the CFO’s functions, talents, and skills are extremely important.


Creating a Strong Team


If the company’s success is the main goal, every good CFO must assemble a strong team. He/she must be mindful of things they don’t understand and not surround themselves with others who can “cover” their weaknesses. “As I look to fill positions on my team, I put a premium on adaptability and a thirst for continuous learning.” said Pete Shimer, CFO for Deloitte. “I need people who are focused on looking forward rather than backward, who are ready to adopt new technologies, and who want to produce insights that help the organization.”


Constantly Accommodating your Communication Style


A good CFO must be able to communicate in a variety of ways depending on who he or she is speaking with. When he/she works for a company owned by a PE firm (Private Equity Firm), it is expected that they communicate in a transparent manner.


When it comes to leadership, the most successful CFOs agree that open, honest, and frequent communication is essential to avoid surprises. It’s also critical to deal with problems as they arise. The best thing to do, according to Brian Beckwith, CEO of Formation Capital, is use a “Flex Communication Style” - using different styles for different audiences. The CFO’s ability to provide information with his audience, with confidence, is also a very important skill.


When engaging with colleges, some CFOs easily fall into the trap of releasing too much information. So, especially if you’re speaking with the board, investors, peers, or employees, you should be concise, short, and to the point.


An Environment Built on Trust


If you want to be a successful leader, understanding the importance of forging connections and trust is key. “A common mistake they (CFOs) make is that they are purely driven by hard metrics,” said Fredrik Lyhagen, a consultant and executive coach at Oxford Leadership in Prague. Because of this CFOs tend to focus on the financials, processes, and strategies - and the softer side of cultivating relationships with employees falls low on their priority list.


One thing CFOs should start doing is maintaining an open door policy and setting aside time to listen to what their employees have to say. To do so, CFOs should encourage them to communicate freely and to always express their opinions. Start by making an effort to get to know them and letting them know that they play an important role in the business. Never forget that your primary function is that of a leader, followed by that of a financial officer.


Get Involved in All Aspects Of Your Business


The difference between an average CFO and a great one is that the latter prioritizes becoming involved in corporate issues, attending sales and marketing meetings and visiting clients.

The majority of CFOs spend significantly more time reviewing updates than they do asking questions and sparking dialogues. If you want to be a great CFO rather than just

an ordinary one, you must broaden your horizons. It’s essential that you have a thorough understanding of the analysis that goes into financial choices, as well as the ability to predict potential corporate challenges and risks. Aside from that, you should be eager to resolve your concerns and provide constructive criticism.


Above all, always be able to put solutions into action. In other words, you should be willing to go above and beyond the call of duty, be well aware of internal processes and if required assist in changing the company’s direction.


Be Ready for Change


Every dedicated CFO should consider the future at all times. To reach the ranks of the finest CFOs, you must strike a balance between long and short term objectives, and never allow your company to become a slave of stagnant and ingrained patterns. You must be the company’s voice and the one who is constantly pushing and encouraging change.


Take the COVID-19 pandemic for example which made it very clear to us that business conditions can change instantly and oftenly, making the need for information far more frequent than just at month end or quarter close. To acquire that information, CFOs must move away from structured forecasting and embrace a more agile approach that allows them to ask new questions on the fly and reforecast as circumstances change. As a result, they will be more likely to take a proactive approach to the change and to seize new possibilities as they arise.


Improving Profits and Cash Flow


Most CEOs want their accounting department to be in charge of all financial meters in their company and to keep all expenditures under control. A CEO’s job is to profitably grow the company, while the CFO’s job is to supply the necessary fuel for this expansion. Profits and cash flow provide that critical fuel. CEOs aim to preserve the financial function as the sole method to protect the company’s profits as long as feasible. As a result, the financial function is continually working twice as hard in order to provide information, leaving little time for analysis. Because of that, company owners frequently blame the CFOs for tough economic times and dismiss them as overhead.


If you want to be a successful CFO, you must see yourself differently (more like a salesman) and as a number driver rather than a number cruncher.


To put it another way, you have just as much of a chance to increase earnings as the top salesperson in the company.


Let the Controller Do it’s Thing


The fundamental distinction between a CFO and a Controller is that the controller must gaze in the rearview mirror while the CFO must stare out the windshield. In other words, concentrate on the future and leave the past to the controller. The CFO, as has been explained, plays a significant role in strategizing for the company’s future, pushing it ahead, and advising stakeholders on critical business decisions. The Controller, on the other hand, is more likely to implement strategies that aid the accounting department’s day-to-day financial operations.


Knowing When to Buy and When to Build


Growth of every company usually comes in these three ways:

  • Organically increasing core business volume

  • Building new capabilities, products, or lines of business

  • Making acquisitions


You are now probably wondering how you, as a CFO, might assist your company in determining when to buy and when to build. The first choice is preferred by a majority of businesses. When the skills you need to add are a natural extension of your business’s foundation, organic growth makes sense. In that situation, the time and money required to implement these capabilities will almost certainly be beneficial, and meeting rate-of-return standards will be easy. However, developing capabilities in-house can often be prohibitively expensive or time-consuming.


As a result, you’re allowing your competitors to gain crucial competitive advantages, and acquisitions become more appealing. So, instead of buying market share, make sure to buy capabilities. Also, try to avoid the bait to make trophy acquisitions. The majority of acquisitions are made to fill in gaps in capabilities that companies don’t have and can’t easily build. Capabilities tend to last longer than market share spikes.


Furthermore, when acquisition madness hits your industry, your company may be tempted to make a trophy acquisition or possibly a few of them. Paying a premium for a premium company can be a decent solution only if you do your research.

The more common situation is that anticipated cost reductions and revenue synergies do not materialize due to incompatible cultures and competing business models. So, acquiring a smaller, less expensive company that is deemed a fixer-upper can pay off more if you agree to go a longer route.


Regardless of whether the company chooses to develop or purchase, the strategic CFOs must act as a neutral arbitrator, performing modeling and presenting financial implications and risks for each new growth opportunity.


Conclusion


To conclude, the traditional title of a CFO has expanded tremendously over the years and only continues to evolve as time goes on. If you incorporate these 10 qualities mentioned above in your role as a CFO you will definitely be on the right track to become a successful modern CFO.