Evolution of the CFO

I’ve been CFO to a number of growth companies and consulted at various levels with many groundbreaking UK businesses pushing the boundaries in digital business. One of the themes I’ve seen arising is that, often, I’ve been the respective companies first financial leadership. That, in itself, presents some challenges. Not only do you need to build out your finance function from scratch, cast an eye over HR and keep a close reign on legal – you also need to teach a lot other team members what it is that a great CFO does. And if you’re going to be a great team player and work closely with everyone in the company it’s better if those things aren’t a surprise.

There’s plenty of consultants who can give you some hints on a hiring process. This post sharing insights on what that amazing CFO is actually going to do.

• Own every number in the business. There is, in fact, an argument that until a business has taken the plunge and completed an IPO the CFO is really CNO (Chief Numeric Officer). By this I mean he needs to own all the metrics in the business so that he can vouch for their accuracy and steer the decision process. In the digital era it’s extremely rare for any management team to be able to review financial statements and determine what the right course of action is purely from those. You normally need to be a couple of metrics deeper into the business and typically it’s a multi metric challenge that businesses will face. The CFO can’t expect to be impactful if they just make general financial commentary such as ‘we need to make the marketing more impactful’ and then pass the buck to the CMO. A CFO with contemporary skills should have gotten under the hood on each aspect of the business. In fact, it’s more likely the great CFO will propose something detailed. Something along the lines of ‘if Co can hit a conversion level of X%, a CPA of Y will be tolerable and put us on track for new customer acquisition’. As I will explain further later on, it’s one thing to know the detailed actuals it’s another to structure the logic to allow others in the business to frame the decisions they are faced with.
• Breed a culture of justification. The ‘B’ word (Budget) gets thrown around here and in many instances, it’s much abused. In fact, the Budget obsessed CFO can be a barrier to iteration and therefore innovation. The point around justification is that the CFO applies that mindset to so many day-to-day items the leadership in the company is just drawn into the gravitation pull. The ice test is in the minutiae here – in short you know you are winning when day-to-day proposals (Flat Screens, Venue hires) come to you with alternatives and cost benchmarks. When the people around you are justifying it to themselves before it passes your desk – then you’re heading down the right path. 
• Set’s targets for the business leadership. This responsibility can so easily be a path for confrontation. Management may feel they’ll be set a target that they could never rationally meet. A top grade CFO will be sensitive to that need to set tough but achievable targets. They’ll be able to get the team members to buy into something exciting and to peel down through the layers and help those participants see how that could be achieved and buy-in to that goal.
• Communicates decision making with the purest logic. Logic is one of the great misused terms in popular business parlance. It’s hard to know why that would be. Perhaps Doctor Spock wasn’t quite the poster-boy for that school of thought or maybe it’s just, superficially, more exciting to come up with an idea or make a discovery. When decisions are made through a shared logic on, say, the make-up of the customer value proposition and what the business has to do to fulfil on that it’s more likely that business can grow in a sustainable manner
• Cuts through woolly thinking. This is a tough one – you’ll know it when you see it. In taking a growing business to the next level there are always shared assumptions. Over time some of those assumptions will cease to be valid and holding them up as cornerstone to success can be an issue. I remember one early stage company from quite a few years ago where I was FD. We had one popular application with high activation figures and strong customer feedback. This then attracted a huge amount of management attention. After some rooting around on my part we then discovered that we had no real ability to market to that demographic so taking that application down the monetization path was always going to end badly. The Company needs to be looking to your CFO to play the contrarian. There can be so many positive outcomes when the business is challenged on their thinking. Done well this kind of approach can lift the thoughtfulness and thoroughness in decisioning. 

The items described above are the generic skills that work well in almost any growth business. I’ve not mentioned technical skills, transactional experience (M&A) nor touched on restructuring. To a degree these items are experiential items and some ticking them off the CV is usually sufficient. 

There’s no-where near as many great CFO’s out there as the tech scene needs. As a result there’s a good deal of value add from getting eye-to-eye with a few candidates and weighing up what they can do. It’s not an easy hire to make and using some structured appraisal process to work through these attributes will massively improve the odds on a good outcome.