The CFO'S Perspective

Understanding the Relationship Between a CEO and CFO - the Ultimate Partnership

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Some say that CFOs are now more important than CEOs and the financial crisis in 2008 made companies more dependent on CFOs in order to focus on accumulating cash as a brace against further turmoil similar to the credit implosion. A corporate CFO is a professional who must find ways to protect the bottom line while instilling confidence in their company's financial statements. Beyond their financial expertise, CEOs of leading companies are looking for a CFO who can help them manage the business, complement their skills, and offer leadership.

The most important and ever-evolving relationship in a company today is that of the CEO and CFO.  There is no other professional business relationship closer to the CEO than the Chief Financial Officer. To remain competitive in the changing business landscape, these two leaders must forge a relationship based on trust, collaboration, and a shared view on how to move their company forward. Together they define the commercial, strategic, operational, and financial blueprints. With the right chemistry, the relationship grows, and the business maximizes its opportunities.

“A Korn Ferry (NYSE:KFY) survey of 321 Chief Financial Officers (CFOs)/heads of finance shows that a strong working relationship with their company’s CEO and board of directors is critical to achievement and career longevity.

The 2017 CFO Pulse Survey found that a CFO’s strong working relationship with their company’s CEO and board of directors is critical to achievement and career longevity. When asked why a CFO would voluntarily leave his or her position, more than half (52 percent) of respondents said the top reason is a poor working relationship with the CEO, and 41 percent said not working well with the board and CEO is the top reason a company would ask a CFO to leave.” – Source: Korn Ferry 2017 Pulse Survey

Recently Russell Reynolds surveyed more than 100 CFOs at leading U.S. companies. The survey found there were strategic benefits to a strong CFO-CEO relationship:

  • 82% of CFOs surveyed gave their CEO high marks for overall effectiveness.
  • A majority of CFOs said they trusted their CEOs.
  • Less than half of the respondents gave CEOs a high score when it came to their ability to coach and develop the CFO.
  • 49% of CFOs surveyed said they had a “very strong” relationship with their CEOs.
  • The survey found that structural factors have surprisingly little impact on the relationship.
  • 70% of CFOs rating their CEO relationship as very strong say they provide their boards with exposure and access to their direct reports.
    • For CFOs with weaker CEO relationships, only 40% say they do the same.
  • 98% of CFOs with “very strong” CEO relationships say they are comfortable bringing difficult issues to their chiefs.
  • 29% of CFOs who reported weak relationships with their CEOs said they are comfortable tackling tough topics with their bosses.

Sharing dissenting opinions is often a sign of a strong strategic partnership,” says industrial psychologist and Russell Reynolds leadership expert Amy Hayes. “By creating the space for healthy debate, the CEO is signaling directly and indirectly that the CFO is an ingrained, enterprise-level member of the leadership team. In turn, this allows the CFO to operate at that level. By contrast, without strategic partnership, the CFO can be constrained to more transactional thinking and responsibilities, which can undermine the relationship and under leverage the CFO’s ability to make a positive impact on the business.”

Here are tips for making the relationship between these top executives work or to explore how a broken one can be mended.

  • Both must be open with each other, have mutual trust and respect, and a shared vision.
  • The skills and personality of the CEO and CFO need to complement each other.
  • The CFO should maintain a self-awareness and realize how they are perceived.
  • The CEO gets to deliver the good news, and the CFO is charged with delivering bad news.
  • Healthy tension at times can be productive - Accept that rifts are going to happen.
  • Always present a united front.
  • The CFO is a strategic partner and advisor, not a bean counter.
  • A CFO is not expected to be the CEO’s ‘best ' friend.
  • The CFO needs to have very high integrity, independence, and courage.
  • A good CFO should easily offset his or her cost through value creation, direct cost savings, and risk mitigation.
  • The CFO must have a mindset to deliver business results, as opposed to primarily managing the financial organization, and reporting the results.
  • Cultivate the relationship from day one. The CFO reports to the CEO except in extraordinary cases — it’s the single most important relationship CFOs must get right from the outset.

When it works well, the collaboration between a CEO and CFO creates a value greater than the sum of its parts, giving the company the power to leap past the competition. If the relationship goes bad, it can tear an organization apart.

Ultimately, a CFO becomes an agent of change, improving results throughout the organization with insights that drive performance. The most talented financial executives can succeed in this demanding role, and they are in short supply. If you want to harness the power of a strong CEO/CFO partnership, developing or finding such talent will be well worth the effort. Please contact us here to learn how we can help.

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