Tag Archives | cfo

Chain of Command

Chain of CommandThe chain of command in a company refers to the different levels of command within the organization. It starts with the top position such as CEO or the business owner, all the way down to the front-line workers. Companies create a chain of command in order to flow instructions downward and accountability upward by providing each level of workers with a supervisor.

Establishing a Chain of Command

Each company has a different organizational structure, which translates to its chain of command. A company’s hierarchy starts with the CEO at the top. Following the CEO are the vice president and upper management employees who report directly to the CEO. Then, there are department managers and supervisors who report to the higher-level executives. Lastly, come the front-line workers who report to their respective supervisor and department manager. Every employee recognizes the structure of the company when a chain of command is in place.

Levels of Management 

There are three general levels of management: top, middle, and front-line managers.

Chain of Command

Top Managers

Top managers are in charge of the overall performance and health of the company by controlling and overseeing the entire organization. They are the ones who set the goals, objectives, and mission for the company. Top-level executives spend the majority of their time planning and decision-making and consistently scan the business environment for opportunities and threats.

Some of their duties include:

Some examples of a top managers include the following: Board of directors, chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), president, and vice president.

Middle Managers

Middle managers are responsible for achieving the objectives set by the top managers by developing and implementing activities. They oversee the first line managers and make sure they are properly executing the activities they set out.

Some of their duties include:

  • Report to top management
  • Oversee first-Line managers
  • Allocate resources
  • Design, develop and implement activities

Some examples of a middle managers include the following: General managers, department managers, operations manager, division manager, branch manager, and division manager.

First-Line Managers

First line managers are in charge of supervising employees and coordinating their day-to-day activities. They need to make sure that the work done by their employees is consistent with the plans that the upper management set out for the company.

Some of their duties include:

  • Report to middle managers
  • Supervise employees
  • Organize activities
  • Involved in day-to-day business operations

Some examples of a first-line manager include the following: department head, foreman, office manager, section head, shift boss, and supervisor.

Advantages of a Good Chain of Command

There are numerous advantages that can come from having a good Chain of Command, including the following:

Responsibility – Having different areas of the business can improve accountability by giving everyone a different responsibility. Everyone has their own separate duties, and their own supervisor to keep them accountable.

Efficiency – A functional chain of command helps improve efficiency when communicating with workers. As a result, this helps them improve workflow and adjusting their management methods.

Clarity – Having a good company structure makes the chain of command very clear. Furthermore, this lets everyone know which decisions they are allowed to make and which ones to present to their supervisors.

Employee Morale – Companies that have a clear chain of command create an environment without uncertainty and chaos. It improves the morale of workers leading to high productivity and low employee turnover.

Career Path – It makes it easier to create career paths for employees and track their progress toward their goals outlined in their respective areas.

Specialization – Making employees focus on narrow functional areas can create groups of specialists that heavily impact the functions of the company.

Why Chain of Command Matters to a CFO

Even though most top-level executives do not often interact with front-line operations, they still need to be aware of everything that is going on in the company. CFOs especially need to make sure their ideas/objectives are properly being executed and delegated through the chain of command. Even if top-management has the biggest impact on the company, front-line workers are the ones that interact the most with the customer most of the time. For example, ABC Co. is a company that owns office supply stores. The store employees are constantly receiving criticism for being rude and uncourteous to customers – ultimately leading to people choosing to buy office supplies elsewhere. This can directly affect the company’s revenues and therefore, the CFO‘s projections. A good top-manager should occasionally check on its bottom managers to see if they are properly carrying out their tasks to prevent problems like this from happening.

Tip: Walk in the store-front or factory floor at least every week or every other week. Get to know the people that are dealing with your customers or are producing your product. They will also let you in on the secrets that mid to upper management either won’t tell you or simply don’t know.

If you want to take your career as the CFO to the next level, then you need to start acting like your CEO’s wingman. Be the eyes and ears for the company. Click here to access the How to Be a Wingman guide.

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Chain of Command

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The Sacred Cow: Lack of Succession Planning

We have all heard the term, “The Sacred Cow”. Here is how I apply it to the business world… I am in my 28th year of working as a professional after graduating from college. I have been privileged to work in large private companies, small private companies, and large publicly traded companies. In addition, I have made the transition from accounting/finance to operations. I have also consulted for companies in a variety of industries, size, and complexity in the last 6 years. And I run into this one thing constantly – the lack of succession planning.

Sacred Cow

The Sacred Cow

After all these years and great experiences, I still see companies that have “Sacred Cows”. That is that employee who has been in the company 20 years and knows everything and everyone. He has outlived reductions in force, down turns in the economy, is still there after 2 new ownership changes. It’s that guy no one can touch because he is a “Sacred Cow”.

Unfortunately, these Sacred Cows are oftentimes not always that good. They come with some baggage. I have seen many of these Sacred Cows. Oftentimes, they are bullies. They are the ones that are often insubordinate. Although they are the ones that get stuff done, it is done at the cost of moral – always threatening the company that on their next temper tantrum they are “quitting”. Usually, they are overpaid.

Perpetual Life of the Business

A business is created within the confines of a legal entity mostly for continuity of perpetual life. That is one of the main characteristics of a Corporation. Therefore, the business continues no matter who is CEO, CFO, or COO or if there any changes in shareholders. But the business will continue because it “has a life of its own”.  As a matter of fact, that is also how you add value to the business. If that is the case, then how do companies allow Sacred Cows to exist? I see it over and over again. Owners of companies say something like…

“If we terminate him, then how are is going to run the operation?”

“But he is our key sales person and he knows all the clients personally.”

“No one else knows what he knows.”

If your business faces any of these situations, then it is your own fault.  No business should be built around a single or two key people. Some exceptions to this rule are small startups or pre-revenue entrepreneurial companies.

The business relies on the leadership to point out the Sacred Cows and destroy the potential of them holding your company hostage. Know what your CEO wants and needs help with with our How to be a Wingman guide. This whitepaper walks you through the relationship between CEO and CFO.

Examples of a Sacred Cow

I have an example that I lived through in my career. (More stories available upon request).

Petrochemical Company – The Lead Supervisor

There is a petrochemical company that had been around over 20 years and was very successful at different levels. The operators worked on three different shifts with each shift having their own supervisor. But the “Lead Supervisor” – the one that all operators and supervisors reported to – was a gentlemen that had been in that position many years. He had a personal relationship with the President and his wife. He was also the one that made hiring decisions out in the plant and control room. Most subordinates feared him. And management played his game because he “knew where every valve was”.

This guy was the Sacred Cow, but he was nothing more than a prima donna bully. There were many other HR issues, but you get the picture.

Since I am one that believes that no company should depend heavily on one person and the company should never be held hostage, I terminated this Sacred Cow the day I was promoted to President of the organization. I terminated him for being insubordinate and for holding the company hostage with demands of more pay or he would quit. I also terminated him for being a cancer in the organization.

Shock waves throughout the organization, rumors of failure spread, and we are going down in everyone’s mind. In reality, we did not skip a beat. It has been 10 years, and I hear the company is doing great.

As the financial leader, it was my duty to protect the health of my company, support the leadership team, and protect the shareholders. Learn more about how you can become the wingman to your CEO with our How to be a Wingman guide.

Client – Fear of Sacred Cow

I recently saw a large client with a similar issue. Now, we are dealing with a management team that fears the Sacred Cow. It is the fault of prior management for allowing this to happen. As the acting financial leader of the company, I am putting up mechanisms to prevent the development of future Sacred Cows.

Lack of Succession Planning

What the Sacred Cow comes down to is a lack of succession planning. There is no plan in place to continue operations without that person (or the position).

Avoid the sacred cow by guiding your CEO in the direction of the company. Access our How to be a Wingman guide here.

Avoid the Sacred Cow (Lack of Succession Planning)

So how do you avoid these pitfalls? There are three things to focus on as well as steps to avoid the sacred cow.

Sales Person That Has All the Key Customers

One example of a Sacred Cow in your business is the sales person that has all the key customers. First, insist that you attend some key customer meetings. You have every right to ask for detailed documentation of the key customers, relationships, meetings, and the pipeline of business. Finally, develop a relationship with those key customers. Do not let one person hold all the cards.

Key Person in Field Runs the Operation

Another example of a Sacred Cow is the key person in the field that runs the operation. Make sure you have a number 2 person that is just as good; they just don’t have the title… Yet. In addition, every key person in management should drive a succession plan. In order to have that happen, the company should have a succession plan in place for its leaders from the CEO on down. Someone can have direct reports under the Sacred Cow in operations. Furthermore, this does not mean that the Sacred Cow controls everything. Have the subordinates that run key areas document their day-to-day functions. Finally, develop a relationship with those key subordinates. Talk to them about training and potentially moving into bigger roles in the future.

The Sacred CFO Cow

The last example is the Sacred CFO Cow. Have a strong Controller that reports to the CFO. Have the CFO document key functions. In addition, the CEO should know those key contacts – legal, banker, insurance, etc. Develop a strong team underneath the CFO to prevent the CFO from becoming the Sacred CFO Cow.  It never hurts to continue networking and meet professionals that you may want to hire one day.

Do Not Allow Sacred Cows to Form

The objective is to not allow Sacred Cows to be born in the first place. We know that they take control and abuse it. But if you do have Sacred Cows in your organization, then you need to deal with it. Build out the number 2 and number 3 person. Every company should also build a succession plan for key employees. And most importantly, do not allow your company to be held hostage by anyone! Be the trusted advisor your CEO needs and access the How to be a Wingman guide.

Sacred Cow, Lack of Succession Planning

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Adding Value as a Financial Leader

Adding Value as a Financial LeaderThe role of the CFO or financial leader of an organization used to be termed as a “numbers cruncher”. For many reasons, The Strategic CFO has been working tirelessly to coach, consult, and mentor CFOs, Controllers, and others in the finance and accounting function to go from being a number crunchers to a value-adding financial leader. In addition, the role has naturally evolved to go beyond finance. McKinsey reports that 41% of the CFO’s role isn’t even in finance and accounting. As a result, adding value as a financial leader has dramatically changed.

Adding value as a financial leader goes beyond accounting and finance. The CEO needs a wingman – someone to guide them, provide strategy, and back up with a financial plan. To learn how to be a wingman, click here to access our How to be a Wingman guide.

Adding Value as a Financial Leader

We define “value”, in regards to adding value as a financial leader. But, how does one add value? They are a steward of both financial and non-financial performance. They are also responsible for partnering with other business, supporting business strategy, and sustaining value-adding strategies. In other words, adding value as a financial leader simply means supporting the organization (specifically the CEO) to do what they do best – cast the vision for the company.

Value-Adding Financial Function

In order for the finance function to be value-adding, the function (AKA the CFO) needs to have buy-in from the organization’s leadership. This buy-in allows that financial leader to oversee HR, IT, tax, finance and accounting. The finance and accounting function must support these departments or areas of business in order for it to be value-adding.

If the CFO of an organization is what we call a CFnO, then nothing will ever get done and no value will come out of that role. However, if the CFO provides data and analysis to allow the CEO to take a calculated risk, then that role will be value-adding

The Changing Role of the CFO

With technology advancements, more regulations, and additional complexity, the role of a CFO is completely different from 20 years ago… Even 5 years ago.

How Does a CFO Add Value?

Adding Value as a Financial LeaderThe three legs of an organization include sales, operations, and accounting. If one of those legs is falling short or is more successful than the other leg, then the stool risks tipping over. How does a CFO add value? A CFO adds value by understanding on each of those legs equally.

A financial leader or wingman needs to go beyond the accounting and finance function. To learn how to be a wingman, download our How to be a Wingman guide.
  A good CFO truly understands the operations side of the business.

Convert Accounting From a Cost Center to a Profit Center

Accounting is often seen as a cost center. That’s not a new thought or revelation. But the accounting department has the opportunity to convert itself from a cost center to a profit center under the direction of the right financial leader. How do you make this change? You focus on your margins, working capital and cash flow. As an accounting department, you do not have the ability to make sales. However, you do have the ability to identify waste, or better ways of buying insurance, or signing leases, reduce overhead, increase profit margins, and work to bring more down to the bottom line. In a McKinsey Special Collection, they outline that,

Valuing such initiatives often requires nuanced thinking. Although some transformations include radical changes, most create significant improvements on the margin of existing operations. That requires an understanding of the organization’s marginal economics—that is, the costs and benefits of producing one additional unit of product or service. When managers have a clear understanding of the marginal value of improving each of the activities that contribute to performance, they have the potential to redirect an entire transformation.

Streamlining Operations

Look at efficiencies in the operation. Understand the measure of throughput if you manufacture something, look at labor hours and efficiency if you provide services. Your monthly dashboards as CFO should include accounting and financial measures, but also operations metrics.

Customer Service

Working to respond to customers quicker and with more satisfactory answers should be a priority of the company. One indicator that I manage in my business is customer turnover. It’s much easier to keep a customer than it is to find a new customer. Therefore, streamline your customer service processes. This can include getting more responsive tracking software, hiring better or more representatives, training every employee to respond to customers.

Days Sales Outstanding (DSO)

It is common to have a collections department if you are a larger organization. But if you are smaller the collections effort often lies with the sales people who have the relationship with the customer, and sometimes the collections effort is done by someone in accounting.  It really should be the person with the client relationship.  Either way, make sure someone is following up with collections.  You would be surprised how many times I have walked into a business and one side of the business thinks the other is following up on collections, when in reality no one is.

Want to get more tools that can help you become more profitable, streamline operations, and collect A/R quicker? You can access that and so much more in the SCFO Lab. Click here to learn more. 

Be the trusted advisor your CEO needs and access the How to be a Wingman guide.

Adding Value as a Financial Leader

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Do You Hire a Controller or a CFO?

Many people use Chief Financial Officer (“CFO”) and Controller interchangeably because they think it is the same position. In some companies, a Controller could be the top financial leader. But that does not mean they are a CFO or CFO-level. Before we answer the question of do you hire a Controller or a CFO, we need to understand when companies need to hire a financial leader.

Do You Hire a Controller or a CFOWhen Companies Need to Hire a Financial Leader

Every company needs a financial leader – depending on the stage or life/size of your company this financial leader may be a bookkeeper, accounting manager, Controller or CFO. For example, some companies over $25 million in revenue may want to consider having both a Controller and a CFO. In this blog, we will focus on the difference between a Controller and a Chief Financial Officer (CFO).

Hiring? Did you know that employee turnover is the #2 reason why most businesses fail? Learn how to hire right the first time with our 5 Guiding Principles For Recruiting a Star-Quality Team!

When to Hire a Controller

You need to consider hiring a Controller once the number of transactions in your company increase and the size of your company increases to the level of needing accounting records based on Generally Accepted Accounting Principals (“GAAP”). This may be $10 million in revenue and more. Why? At that level, you are beyond the basic cash basis bookkeeping. You need accounting records that are based on GAAP and accrual basis so that you can better manage your business. Plus, you may have bank debt that requires you to present your financials based on GAAP.

Role of a Controller

Some of the duties that a Controller has include the following:

As your company grows, you should always maintain the Controller function, eventually as the company gets big enough your company will have the Controller report to the CFO.  The Controller “books the past” and continually works with historical information.

When to Hire a CFO

Once your company gets to needing more than good accounting records based on the past, you may start considering hiring a CFO. Things that may require a CFO include forecasting, maintaining debt covenants, mergers and acquisitions, deeper analysis of the financial statements, managing capital structure, investors, banks, and/or taking your company public.

Many companies find themselves in a stage of growth that I refer to as “transitory” – that is, your company is transitioning from small to medium or large. In this stage, you wish you had a financial professional with great experience such as a CFO, but you cannot afford a full time CFO. That is where an Interim CFO makes a lot of sense. Now, be careful as the Interim CFO market has become a popular market where many have jumped in and they lack the true experience. The problem is that you do not need a license or degree to become a CFO, anyone can call themselves a CFO. If you are seeking an Interim CFO, then call us and we can certainly help you identify a solid Interim CFO.

Remember, a good CFO is a great manager, has good operational experience and is the strategic financial partners to the CEO.

Do You Hire a Controller or a CFO

Role of a CFO

While the role of a Controller puts together all the financials and focuses on the historical transactions, the CFO works with the historical information but uses it as a tool that enables him/her to be a strategic partner to the CEO. The CFO then projects what is going to happen, provide strategy for the CEO to implement, and improve profitability. This can include adjusting pricing, increasing efficiencies, identifying opportunities, and enabling the CEO to make calculated risks. The CFO role goes beyond being a trusted advisor. It also includes:

  • Managing capital structure
  • Manage risk management for the enterprise
  • Acting as a figure head for decisions and taking ownership
  • Usually manages IT, Human resources and tax functions
  • Coaching leadership team and employees to get to best results
  • Being a diplomat with third parties (banks, vendors, auditors, customers, investors etc.)

This is very much a multi-functional role within a company. It is a role that truly demands someone with not only good financial skills, but someone with excellent management skills. And as I already mentioned, a really really good CFO has very good operational experience and that person likes operations.

A fish rots from the head down… Ever heard that saying? It’s absolutely true when dealing with leadership. Learn how to hire your leadership with our 5 Guiding Principles For Recruiting a Star-Quality Team!

Do You Hire a Controller or a CFO

Do You Hire a Controller or a CFO?

The big question is, do you hire a Controller or a CFO? It depends… It depends on the size of your organization. We speak to CEOs and business owners all the time, especially those under $100 million in revenue, they are not sure at what point they need a Controller and then a CFO.

Every business is unique, and I do not want to generalize. But for conversation sake, if your business is between $10 million and $25 million in revenue, then a Controller may suit you well. If you are over $50 million, then you are at the size where you actually should have both functions of Controller and a CFO. Now I left the range of $25 million to $50 million without mention on purpose. That is because it depends. It depends on your complexity, industry, number of transactions and many other things.

We have spoken to business owners of $35 million companies and determined that they can function very well with just a strong Controller.  We have also met with start ups with zero revenue but funded $75 million in CAPEX by investors, well we highly recommend they hire a CFO from day one because they have big plans and complexity from day one of their operation.  So every situation is really unique.

Roles are NOT Interchangeable

Many companies opt to hire a Controller when they really need a CFO. These two roles are not interchangeable. Although in the same area of expertise (accounting and finance), these two roles are different. You cannot hire a Controller and expect them to be your CFO. These are two very different functions.  And it is simply a fact, not all Controllers make good CFOs. As already mentioned, a CFO has certain characteristics that many Controllers simply do not have and frankly do not want to have. Take your time to understand the different roles. You are not alone because all growing companies are facing this dilemma. But we are only a phone call away and can help you sort through this challenge and assist you in making the right decision no matter where in the world you are located.

If you are hiring either a CFO or Controller, then take the time to truly understand the difference between the two. Because the financial function is a sensitive one, it’s important to chose someone who will not only be loyal and trustworthy, but will make your team star quality. Check out our free 5 Guiding Principles for Recruiting a Star-Quality Team now! Then answer the question, do you hire a Controller or a CFO?

Do You Hire a Controller or a CFO

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The CFO Guide to Your CEO

Wouldn’t it be great if we had a guide for everything we do? A guide for marriage? A parenting guide? A guide to dealing with difficult times?  Or maybe a CFO guide to understanding your CEO?

cfo guideTypically, Chief Executive Officers (CEOs) come from an operational or sales background. Naturally, Chief Financial Officers (CFO) do not always see eye to eye with their CEO. But over the past 25 years, The Strategic CFO has been working with CFOs to not elevate their status within companies, but also to make them more useful to the CEO… And therefore, more valuable to the entire company.

What The CEO Wants to Know

Just like every person in a company looks at their own focus areas (finance, marketing, operations, etc.), the CEO needs to know specific things and can go without knowing other things. To improve the way the CEO sees and respects the CFO’s role and guidance, it is critical to know what they want, why they want it, and how to communicate with them effectively.

CFO Guide to Your CEO

The first step in our CFO guide is to understand how your CEO thinks.

1. Future, Not Past

The typical CEO is future oriented. What’s the next move? What are the company’s goals for this next quarter? The CEO acts as the visionary for the company – a pilot, a ship captain, a general. They look forward at the horizon, protecting the people behind them as they march forward. Therefore, instead of focusing on past records or past performance, make the future path clearer for the CEO. The future is more important than the past in the CEO’s role. But don’t neglect past performance’s value to the CEO. Past performance can help predict the future. Although the past is the past and nothing can be changed in the past, you can change the future and that’s what your CEO wants to know.

As the financial leader of your company, you may struggle with focusing on the future, as you have been trained for so long to justify and rationalize the past. One thing you should impress in your mind is that your CEO and other executives are laser-focused on the future. Use what you have recorded to display your vision of what lays ahead.

2. Know Your Numbers

One of the top things taught in business school is to know your numbers. What does “know your numbers” mean? Think about your unit economics. Go back to the basics. If your company sells 10,000 widgets at $1 in a month but your company is wanting to increase costs to $11,000, you should be able to immediately indicate that decision would not be wise as you will then be unprofitable.

Everyone in your company, especially the financial leader, needs to know the numbers of the company. Have the facts and data to support every claim, prediction, or forecast. If the CEO is relying on your financial expertise, you better be able to lead them forward financially. Know your numbers and how they impact your company in the short-term or long-term.

cfo guide3. Cash, Cash, Cash

Cash is king. To operate the company successfully, cash is absolutely critical. Whether you are paying down debt, keeping up with growth, or allowing for flexibility, you as the financial leader need to know exactly where you are with cash always.

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4. Impact, Not Progress

You are painting a picture… The CEO doesn’t need to know the type of paint, the kind of paint brush, or the size of the canvas. But they do need to know the big picture and how it’s going to look after it’s finished. They don’t have enough time in the day to know all the details about progress; however, they do want the big picture updates on the impact of what is happening.

Remember, progress is still important. The managerial level needs to know the progress of projects. When you meet your CEO, have the project’s progress in the back of your mind in the case the CEO wants to know anything more specific.

Try to summarize all outcomes and updates on milestones concisely. Their high-level thinking does not need to be clouded by minute details and the nitty gritty of day-to-day operations. Sometimes details are necessary for the CEO to know when deciding the future of the company; so in that case, don’t hesitate to expand on the details.

What does impact mean?

Impact is defined as the “measure of the tangible and intangible effects (consequences) of one thing’s or entity’s action or influence upon another” (Business Dictionary). Think about it this way… Whether you are the CEO, COO, CFO, Controller, manager, community leader, a parent etc., you are responsible for people. Your worry should not be focused on the past but on how your decisions will impact people in the future. The CEO is responsible for everyone underneath him or her so a decision that will change the future for their employees, partners, stockholders, family, etc. is a big deal. Adjust your mindset from past performance to future impact.

5. Understand the Big Picture

Unfortunately, your CEO does not have all day to listen to you. The quicker you understand why your CEO acts the way they do and what they need to run the company successfully, the better you will be able to perform in your role as a financial leader. Align your goals/decisions/recommendations with the visions and priorities of the company.

For example, cash is tight but you want to get a software program that will report more timely and accurately the things you need to do your job. If you approached the conversation by trying to convince the decision maker (i.e. CEO) by sharing all the features, you will most likely get a “no”. But if you understand the big picture, communicate how this investment will serve you better long term versus the current software. Hint: Show some numbers of how this solution will improve cash flow, profitability, productivity, time, and money.

Conclusion

You should be your CEO’s partner, wingman, guide, confidant. Know what your CEO wants, thinks, and needs. To get started on improving your relationship with your CEO and to improve cash flow, download the 25 Ways To Improve Cash Flow whitepaper for free. Find other ways to improve your cash flow within 24 hours.

cfo guide

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Do you need to be a CPA to be a CFO?

cpa to be a cfoNot too long ago, the Academy Awards took place, and they played reels of the Academy Awards that happened in the past 80 or so years. It reminded me of the time when I showed my grandson an old western movie… I thought some of the parts were hilarious, but my teenage grandson was horrified by the social commentary.

What do the Academy Awards and Old Westerns have to do with traditional CFO practices? There are norms that are acceptable now that were never allowed before. When the audience changed, the Academy adapted to the audience. So when the new generation steps into your office, you have to re-evaluate what it really takes for them to advance their career. Some might have capabilities of a CFO, even though they haven’t traditionally trained for it.

In the past, there was a certain path that you take to become a CFO. Some think the key is being a CPA to be a CFO. But now that times are changing, is it really necessary?

We like to talk about technology, millennials, current events, and politics, but they pretty much all say the same thing: if we constantly live in the past, we won’t have much of a future.

Timeline for a CFO

My friend’s nephew is graduating in accounting, and he’s wondering… “Do I need to get a CPA or MBA?” In other words, do you need financial expertise to be a financial leader?

Now don’t get me wrong… some people are really successful in this path. In fact, I definitely agree that CFOs, or any financial leader in general, should have a broad range of skills other than financial skills. Here is a pretty common path to CFO success:

cpa to be a cfo

Earn a CPA to be a CFO (and/or MBA).

Some might say you won’t have a successful financial career without a CPA license. The primary purpose of a CPA is for financial authorization, such as auditing and reviewing financial statements. Careers in finance such as accounting and auditing mostly require a CPA. Benefits of a CPA include larger salary potential, more career opportunities in larger companies, job security, and trust within larger companies. Larger and older companies with more revenues require more tenured and experienced employees.

MBAs are more broad. Studies show that those with MBAs have higher employment rates (around 60-70%) and higher base salaries. With MBAs, you can specialize in skills in addition to finance, such as supply chain, marketing, management, etc. So if you’re looking to gain new skills other than finance, MBA might be a better choice.

Gain Financial Experience Within the Company

Typically within the first few years, new hires will learn the basics such as budgets and accounting. As time and experience grows, new opportunities are formed, such as capital investments and larger accounts. Financial employees will gain expertise in skill sets before moving on to the next step.

Everyone has their own habits… how do you know which is the best for your company? Download our free guide, How to be a Wingman, to be the best wingman to your CEO.

Take on Bigger Roles Outside of Your Comfort Zone

This is where getting an MBA and taking initiative comes in. CFOs are more than financial experts – they are leaders. By this point, basic accounting practices should be like reciting the alphabet… it’s that easy.

Financial leaders should always want to learn more skills. Taking on bigger roles outside of their comfort zones reflects that mindset and makes them stand out against their competitors.

Hold Controller Positions

This is pretty self-explanatory. The controller positions create more responsibility for the financial leader. After all, how can they handle a C-level position if they can’t handle a standard leadership position first?

This seems like a pretty solid path, doesn’t it?

Looking at companies now, however, aren’t as “solid”… and here’s why:

Modern-Day CFOs

When you think of a CFO after 2012, what do you imagine? Long gone are the days of bluetooth-talking, pinstriped suit-wearing CFOs, white-haired males. When I picture a modern-day CFO, I picture someone in a plaid long sleeve, young, and focused on multiple aspects of the company. That seems like an exaggeration, because it is! Overall, it is also a representation of how different the CFOs of today are, compared to Generation X and Baby Boomers.

The Past 5 Years

In our survey held in 2015, the average tenure for a CFO is 3-5 years. This contradicts the timeline above… Why would a CFO want to work 3-5 years after 15+ years of building his or her career?

As generations evolve, the tenure decreases. For example, the average tenure for millennials, according to our survey, is around 4 years.

cpa to be a cfocpa to be a cfo

2015 Survey Results: https://strategiccfo.com/blog/results-average-tenure-of-a-cfo-survey

Over the past 5 years, the CFO role has proven to be more complex and centered on leadership ability. CFOs now are more adaptable to change, hence the short tenure of a CFO.

The Next 5 Years

Ever heard of the “gig economy”? It’s the growing trend that contract workers and short-term “gigs” are commonly practiced. A great example of this influence is a friend of mine, who has 35-40 years of financial leadership experience. He recently quit his job, and is now looking for contract work. This puzzled me at first. He is a great person, and a very knowledgable asset to any company. As you can see, the gig economy is not only for the millennial generation. It’s a growing trend, for all leadership types.

Is this a reference for the trends to come? In the next 5 years, we can expect more contract work and less “climbing the ladder”… like getting your CPA to be a CFO.

Conclusion: Learning to Adapt

One of the ways we can grow as companies and financial leaders is to learn to adapt. If the world is shifting closer to a gig economy, explore that theory. If the average tenure for a CFO is less than 3 years, maybe we should change our hiring and training practices. Anything is adaptable if you’re constantly taking initiative and thinking one step ahead.

Don’t forget… the CFO is the CEO’s wingman. Learn how you can be the best wingman with our free guide!

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Are You Wearing Too Many Hats?

Do you sometimes feel that the value you bring to your company is worth more than your salary?  In the business world, often expectations exceed compensation, especially with financial leaders. What does the role of a CFO actually look like?

Before we dive deeper, it’s important to ask some questions:

Are you the person that your CEO contacts to “fix the problem”?

Have you been told to figure it out even if you don’t know how to fix it?

Are you responsible for learning the skills to fix that problem?

If you answered “yes” to any of the above questions, you may be someone who is “wearing too many hats.”

Wearing Too Many Hats

Often, CFOs will find themselves wearing too many hats due to problems within the company.  The CEO’s solution is usually to generate more volume, but resources don’t generally increase proportionately.  Most of the time, this means that the CFO takes on more responsibilities in response.

This isn’t always a good thing. Sometimes the company depends so heavily on the CFO, that the CFO feels unappreciated or that he/she deserves more money or esteem.

This past Friday, I moderated a panel of 3 financial leaders in various industries to discuss the issue of wearing too many hats. I’ve put together a summary of what issues were raised among our panelists as well as the Houston CPA Society’s Conference attendants.  The discussion was so interesting and enlightening, we’re dedicating the next few blog posts to the highlights of what the panelists shared.

Life Cycle of a CFO

At the heart of this juggling routine is what we call “the life cycle of the CFO“.

too many hats

The notion that CFOs had a “life cycle” came to me through observation over 25+ years of consulting with entrepreneurs and their companies. This cycle is comprised of 4 stages: a problem arises, cleanup occurs, new duties are assigned, and the CFO burns out or looks for greener pastures.

Problem

The CFO’s life cycle begins with a problem within a company. The company has grown beyond the capabilities and skills of the current employees. To solve these problems, the company hires a CFO on the team (either temporarily or permanently).

Clean Up

From there, the CFO cleans up the company’s financial processes and gets the systems up to speed. The problem is fixed – so now what?

Often, the CFO finds himself/herself filling time and justifying their existence once a problem is resolved.

New Job Duties

The CFO will pick up new job duties, help out other departments, etc. It’s only a matter of time until the CFO realizes that his or value is worth more. The real question becomes how to add value as a CFO.

At this point, the CFO is wearing the janitor hat, the insurance agent hat, the HR hat, the banker hat and the CFO hat (and possibly others depending upon how good/willing they are).

You can probably guess what happens next.

Say Bye-Bye!

So the CFO leaves, either for a more challenging position or, if they’re too stressed out with multiple duties, settle for something less. Most companies won’t rush in to fill the void left in their wake, and so the cycle begins anew…

What Hats Do You Wear?

As I mentioned, I recently moderated a panel discussion at the Houston CPA Society’s CFO/Controller Conference. During this session, I asked the panel many questions including what hats they wore within their companies, and how that posed challenges in their work experience.

Determining your Role

One panelist, Derek, mentioned that he had to balance both operational and financial roles in his company. They hired Derek to handle both of these roles. This illustrates how the role of a CFO has evolved over the past 25 years. As the role of a CFO changes, the relationship between the CEO and CFO changes.

Learn more about how to guide your CEO as a trusted advisor by downloading your free guide on How to be a Wingman.

Derek mentioned that the job was particularly difficult because he had no definitive role or expectations. He found it challenging that he didn’t know how the typical day is, what reports were required, or where to find the information to solve these issues.

Determining his daily role within the company become a task in itself. Especially as he stepped into higher levels of financial leadership, there were more moving parts that hadn’t been defined.

Finally, he concluded that delegation was the hardest because he was bogged down in cleanup.  He felt like a janitor; going behind people and literally cleaning up their messes. Delegation is extremely important as a financial leader.  In Derek’s words, “Delegation was important to me to further my role in the company, and to take on multiple other jobs.”

“The Job Man”

The next panelist, John, had a different situation than Derek. John is the CFO of an engineering firm. Rather than working an operational job, John calls himself “The Job Man.” He receives all the jobs that nobody else wants.

John looked at this from a positive standpoint. In order to continue working as a valued asset to the company, you must learn not to say no. In this ideology, there is nothing in your realm that you cannot do. This stance is interesting; not everyone is usually as optimistic.

If there is a problem left unaddressed, it will grow into something uncontrollable. John commented that he prefers that the issue is resolved so he can go on with his business. Take action; address it; knock it out.  John’s thoughts, “I’m the one that gets all the jobs that nobody else wants.  You’ve got to learn not to say no.”

How high can you stack the hats?

Paul, the third panelist, mentioned a great point: in any small to medium sized company, you’re always going to stack hats. The questions is, how high can you stack them before they fall (or your neck snaps under their weight)? 

Upon hiring a CFO, a company interviews to see what you can bring to the table (i.e. the right amount of relationships with banks, the IT skills required to be a financial leader in the company, knowledge of your financials).  You’re sharing everything in your bag of tricks not realizing that they are listening most attentively.  How can you be surprised when they take you up on your special skills?

Despite your amazing skill set, you can’t do it all.  So to keep the hats from crashing down, which hat would you give up?

The Most Important Hat

No matter what hats you wear in your company, the most important hat is wingman to your CEO.  Business owners care more about the value you help them bring to their company and your financial leadership than they do compliance and caution.

To extend the life of a CFO, it crucial for the CEO and CFO to partner together.  As a CFO, you are in the unique position to understand all that is necessary to keep moving the company forward.

Conclusion of Part I

Our panelists highlighted the importance of determining your role, taking action to learn new skills, and focusing your skills within the company.  While you may sometimes feel like you’ll topple over under the weight of all the hats you wear, remember to focus on what’s really important – having your CEO’s back.

Next week, get the panelists take on what millennials bring to the table!

If you’re interested in becoming the trusted advisor your CEO needs, download your free How to be a Wingman guide here.

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Click here to access your Execution Plan. Not a Lab Member?

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