The CFO'S Perspective

A large part of any Chief Financial Officer (CFO) role is strategic decision support, whether those decisions are related to staffing, pricing, selling, manufacturing, or any other area of the business. A CFO’s forward-looking point of view combined with their financial acumen makes them ideally suited to provide actionable information to their CEOs and other corporate decision makers and integral to the success of the organization.

Leaning on a CFO for strategic decision making support offers the following benefits:

• Adding value to the company in the short-term as well as the long-term
• Providing data-driven guidance during business shifts
• Aiding in weathering a crisis or downturn

Last week we shared the first article in our two-part series on today’s top challenges for CFOs. That article discussed the pressure that inflation has put on companies nationwide as well as the problems with expense reduction strategies and the added complexities of usage-based pricing models.

If you missed it, you can find it here: The Top 6 Challenges Faced by CFOs Today

Today we will jump right in with the last three challenges for CFOs:

The pressure on CFOs today is more intense than ever before. Their roles have become increasingly complex amid an uncertain financial landscape, resulting in the kind of financial challenges that CFOs 10 years ago could never have imagined they would be facing today.

Rapidly changing consumer and business purchasing habits have caused demand to fluctuate wildly, nullifying forecasts and ongoing financial projections. At the same time, rising costs on raw materials, packaging, and transportation have cut deeply into the profit margins that CFOs are tasked with managing. And soaring inflation has only exacerbated the challenge of rising costs across all industries.

As executive financial recruiters we work with companies every day who have lost their CFO for a variety of reasons. The CFO may have left to pursue a better opportunity, retired, or made a career change. And in some instances, the CFO may have been shown the door due to subpar performance.

In all honesty, the latter scenario is the least common. Most organizations are hesitant to let their CFO go because of the inherent doubt in the process of doing so. First, there is the big question of how to determine whether your CFO is making the grade. (You certainly do not want to let your CFO go if you cannot be certain that someone else will be able to do the job better!) And, secondly, there is the daunting prospect of needing to find a replacement that is going to be better performer.

But just because it is not very common in practice does not mean it should be. Companies, especially those with owners and CEOs that do not have strong financial acumen themselves, do not typically evaluate their financial leadership as thoroughly as they should. Unfortunately, if your CFO is underperforming, not identifying this in a timely manner or not doing anything about it, can be extremely costly. When your financial leadership is falling short of expectations, strategic planning can fail, affecting revenue and profitability.

As a CFO you live in the numbers. And like Neo in The Matrix, who can see falling green lines of computer code and read them to construct a picture of the world around him, they make sense to you.

However, when you sit down to present to your CEO, COO, CTO, CRO, CMO, or any other c-suite executive, you need to understand that they may not have the same affinity for numbers that you do. This is especially true when the executive leaders you are presenting to are less financially savvy or new to their roles or the industry.

When “non-numbers-people” see numbers, typically all they take away from it is the numbers themselves. However, when “numbers-people” see numbers, they see the whole picture – the story that the numbers are telling, how the metrics are related, and how they fit into the larger framework.

Knowing how to present to your audience is key in bridging the gap to move the business forward.

Knowing when to hire employees and how much to pay them can make or break a hiring strategy. However, this is not the entire picture. Benefits are just as important to your strategic hiring plan. In light of the growing number of people leaving their jobs in recent months, which has been dubbed The Great Resignation, understanding this concept has never been more important than it is these days.

Attitudes around FP&A (financial planning and analysis) are kind of a mixed bag – everyone agrees it is important, but many people do not know what it really entails. As a result, businesspeople form their own opinions about who should handle it and what owning it should look like.

Some business leaders downplay the complexity of FP&A and mistakenly task their accounting and finance teams with this crucial function. This can be a mismatch because many accountants are not equipped to handle this level of financial responsibility and organizational oversight. Alternatively, some business leaders put FP&A on a pedestal and assume its critical role in the success of an organization necessitates a dedicated role.

Have you ever tried to find something when you could not adequately describe what you were looking for?

Imagine going to buy a pair of pants and when the salesperson asks what you are looking for all you tell them is “gray pants.” How long do you think it will take to find exactly what you are looking for? And how likely is it that you will end up getting tired and frustrated settling for something that is not really what you wanted? In this example, the best outcome is that you find the perfect pair of pants after an arduous search, and the worst outcome is that you end up with pants that fit poorly or are too formal or casual for your needs.

Now apply that same scenario to hiring and think about how difficult it is to find the right candidate for the role when you do not have a clear vision of what you are looking for and what your expectations are for the role. The difficulty is ratcheted up and the likelihood of a negative outcome is much greater.

When the role you are hiring for is a senior leadership position a bad hire can derail the company’s strategic plans. A CFO is in an especially critical role to support growth initiatives, making a hire into this role even more critical to the overall success of the organization. As a result, a job description for a CFO should be customized to fit the specific needs of the business and incorporate the nuances of the role.