What is in a title you ask? When it comes to a CFO, the answer is more than most organizations probably realize. As the abbreviation for chief financial officer, CFO is the title most closely associated with the finance leader of an organization. Yet often it is overly used and incorrectly applied to other positions in the finance function such as financial controller, finance manager, or chief accountant. That's not a problem, you may be thinking. However, on the contrary, it's a potentially huge problem, as you are about to find out if you read on.
As we are all acutely aware, the business environment around us, both regionally and globally, is undergoing rapid changes. The terms and conditions for attracting and accessing local and international capital markets are being rewritten. Governance rules the day. In this reset world, the constituents of an organization (bankers, financiers, market analysts, shareholders, board of directors, family members, governments, and regulatory bodies) need to know who is leading the organization financially, what their responsibilities are, and what their authority is to act thereon. When there is a lack of transparency with regard to this information, the organization's financial situation could very soon be compromised.
With this in mind, any organization should undertake a thorough review of the title held by its financial leader to ensure that it accurately reflects and communicates the depth and breadth of purpose of the role both in the organization and in relation to its constituents. Equating the title CFO with other positions - such as financial controller, finance manager, or chief accountant mentioned above - results in an unclear (and misleading) description of that person's place in the organization. Even more compelling is the fact that this indicates that an organization's governance standards need improvement.
When an executive carries the title CFO it communicates that this person exercises financial leadership in the organization through four key dimensions or "faces": Strategist, Operator, Steward, Catalyst. When a CFO is active and eminent in their organization in all four dimensions, they can be considered "the Real Deal". They are a trusted strategic adviser to the CEO and are recognized and authorized by the board of directors as the organization's leader for corporate governance. They extract value from the finance function in terms of services and scale and are active stakeholders in any new major initiatives within the organization. Other functional leaders actively seek out guidance from this person rather than avoiding them. They are skilled at conflict resolution as well as focusing alignment and driving value from the various functional elements of the organization.
However, when a CFO is missing one or more of these four dimensions from their role, then they are more likely executing in the capacity of a finance manager or possibly even a chief accountant. The following represents a number of possible such CFO profiles where there is a need for reconsideration:
• - This type of CFO is qualified and capable of being impactful in all four dimensions but because "politics" is tolerated in the organization, they are relegated to being active in only a couple of dimensions. Another possible reason is that the board of directors or CEO do not recognize the limiting effect on delivering shareholder value and the negative message it sends out when there is an under-empowered CFO leading the organization. Ultimately the capital markets are going to send a clear message to these types of organization that continue to resist the need for a "Real Deal" CFO.
• - This CFO is blessed with a silver tongue and manages to keep everyone satisfied through their gift of the gab and "yes man" persona. But behind the scenes many dimensions are left lacking and under-developed because there is no pressure placed on the CFO to address the needs in these areas and/or they simply do not have the skills or experience to address them. Negative shareholder value is the end result here but most likely the CFO will talk their way out of it and continue gainfully employed.
•- Like a tenured professorship, this CFO has "earned" the title through years of service as a book-keeper and administrator. They manage to account for every item in the organization but are vacant in the areas of strategy and as a catalyst in building shareholder value. Lost market opportunities, poor strategic execution, and internal misalignment within the organization are the result. However, since the bank reconciliations are completed monthly, many players in the organization are satisfied.
• - This CFO is all about "my way or the highway". Typically they are strong technically and in controlling activities but have zero emotional intelligence and alienate everyone around them in the process. They are an element usually avoided in the organization and are one dimensional in their focus on controlling activities at the expense of driving shareholder value and strategy execution. Because a culture of poor communication results, many risks are not identified and dealt with in a timely manner. This CFO is a destroyer of shareholder value rather than a builder. Although everything may continue to look great for some time, a nasty surprise will be bubbling up beneath the surface.
The CFO as Strategist
