We find that the role of the CFO is one of the most critical executive positions in a private company. It is also often the most misunderstood, underutilized, and under-invested. So that we don’t get hung up on titles, for the purpose of this post we’re using the term “CFO” to imply the highest-ranking financial person at a company.
The reason this critical position is so often underutilized is that many owners do not understand the potential role the CFO can play in building and directing the business. There are commonly three key executive positions reporting to the owner of a private company: VP of Operations, VP of Sales, and CFO. Often, the CFO is not viewed in the same manner as operations and sales because he or she is not directly involved in the value chain of the business – meaning, the string of activities that make money for the company. As a result, many owners view the finance role solely as a cost center and don’t have the proper expectations about how the finance seat adds value to the company’s results. Many owners just see the CFO’s role as only recording and reporting history and, therefore, do not make the proper investments in talent and systems to really allow the CFO to make an impact.
The most successful companies we work with have finance professionals who do make a meaningful impact because they spend most of their time on forward-looking activities, rather than solely accounting for past history. A CFO who has the ability to participate on the same playing field with the operations and sales executives provides a needed counter-balance in discussions about the company’s strategy, as these three roles tend to have different objectives. The best CFOs also have broad business skills that allow them to use their detailed knowledge of the accounting data and numbers and apply it to help the company make better long-term, strategic decisions.
Many owners of these successful companies often comment that they don’t know what they would do without their CFO because of the critical role they play in determining the company’s strategy and making decisions about its future.
Here are some important questions to ask yourself about the top finance role at your company to determine whether you are getting the greatest value from it:
- Do you view your finance role as a key executive or someone who just records history?
- How much of your CFO’s time is directed at historical activities versus forward-looking activities that focus on the company’s future?
- Have you invested properly in supporting personnel and technology systems so that your CFO has the time available to do strategic work rather than accounting details?
- Does this person have the skills and abilities to help you drive the business forward for the next 5-10 years?
- Are you giving your CFO the latitude to do more and play an important role in your business?
Many owners reading this have taken the steps necessary to allow their CFO to drive a great deal of value in their business; they already know the CFO is indispensable. But if you don’t have the same sense about the finance role in your company, perhaps it is a good time to reassess your situation so you can see a more positive impact from your CFO in 2016.
Mario O. Vicari is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.
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