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Is your CFO really a Chief Financial Officer?
By Dr. Rick Johnson
Dr. Rick Johnson, founder of CEO Strategist.
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Dr. Rick Johnson, founder of CEO Strategist.

No offense to all those dedicated, competent, excellent performing CFO’s out there but I have to admit that I run into a number of individuals in business that hold the respectable title of CFO (Chief Financial Officer) that shouldn’t be the Chief of anything. Oh, some of these CFO impersonators do a good job as an accountant and some may even qualify as a Controller. But, there are also some that just shouldn’t hold the title of Chief Financial Officer.

“The chief financial officer (CFO) is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. The CFO is also responsible for analysis of data”.

So ask yourself, is your CFO really a Chief Financial Officer or did you simply give them that title due to tenure, compassion or because they are a family member?

An effective CFO starts by asking the question of all management personnel --- What needs do you have, and how can I help?'"

Real CFOs

Real CFOs today are structuring and negotiating mergers, working with division managers to cut costs, stepping in for the CEO to talk to investors and boards of directors as well as coordinating all the components of strategic planning. Being a CFO is not just about finances. And yet, you must be careful not to burden the CFO with responsibilities that they are not qualified to handle. A simple example might be putting them over information technology with no practical experience in that field to avoid hiring an IT specialist.

The CFO bears responsibility for the results of core finance activities and provides appropriate analyses. A Real CFO is both a navigator and an advisor to business managers throughout the organization. This person must be ready and willing to manage the administrative side of the business, and the strategic requirements involved in measuring and validating successful results. A key responsibility includes fighting for investments in the growth of the business. The CFO must instill confidence with all of the stakeholders focusing on particular roles and activities both internally and externally.

 A Real CFO has the ability to build consensus, to inspire confidence, and to be a navigator for the CEO and make decisions authoritatively. They must be ready and willing to provide an opinion when and where necessary, fight for its implementation and be humble enough to back off and support alternative ideas, as appropriate.

The Relationship with the CEO

How chummy should the chief executive get with the CFO? Some experts warn against developing too close a relationship with any top subordinate, because you have to make judgments that are based on what's in the best interest of the company. However, relationships are important and being able to get together and discuss critical issues informally can only strengthen the executive team.

The best situation for any CEO and CFO is a close relationship, not as equals, but the fewer formalities the better. The ability to talk on the phone over a weekend should not be considered an imposition on personal time.

Much greater demands on businesses to perform makes a company’s accounting and finance functions, led by the Chief Financial Officer, play a broader role in guiding decisions across the business in order to maximize shareholder value. In addition to broadening this role, finance departments are making strategic investments in IT solutions that automate and standardize critical processes within their own department and across all functions of the business. These investments not only help decrease costs and cycle times, but pay additional dividends in the form of strengthened compliance and improved financial returns.

So, if your CFO demonstrates not only leadership but also integrity and honesty, which objectively balances the competing needs of internal staff, the board of directors, investors, other stakeholders and maintains integrity in the face of investor or board expectations for results then you have an excellent Chief Financial Officer. If they don’t – reevaluate your thought process.

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Dr. Rick Johnson is the founder of CEO Strategist and a veteran of the wholesale distribution industry with more than 30 years of executive management experience. To learn more or arrange to have him speak to your company, click here.