You’re the CFO.
Now What?
By Christine Houde
You've eaten countless lunches at your desk, spent endless Saturday afternoons studying stacks of paperwork, taken extra coursework, networked with every finance professional in sight, and consistently outperformed your boss’s every expectation. And now all your hard work has paid off. You’re finally a CFO…but now what?
Unfortunately, there’s no cookie-cutter job description for a CFO. The duties vary widely from industry to industry, from public to private corporations, and from 20-person firms to Fortune 500 conglomerates. Not only that, but since the average tenure for a CFO can be alarmingly short, staying at the top can be a challenge. That said, there are still things you can do, and avoid doing, to increase your chances for success. Here’s a roadmap to staying on top.
Expect the unexpected “Everything takes longer than you expect it to. That’s true for FDA approvals, licensing negotiations and just about everything else,” says William Steinhauer, VP of Finance for biopharmaceutical company Unigene Laboratories in New Jersey. Not only that, but you may have walked into a situation that’s different than what was portrayed to you in the interview process. “There are a lot of times when what you thought was the problem is really a symptom. Maybe the problem is being portrayed as a cash burn that’s too high. That’s a symptom. What’s the problem? The problem is what you have to get into and understand. You have to take the symptoms and be able to get into the details enough to understand the difference between symptoms and problems,” says Jeff Fadley, a 25-year business/finance veteran, who has served as the CFO or interim CFO of a number of companies in the past 10 years.
Get informed Pick the CEO’s brain, but then dig deeper to gain an intimate understanding of every aspect of the company. “A CFO should have a sense of how the vision of the company connects with its numbers, and be able to communicate that kind of information to just about anyone,” says Dennis McIntosh, executive VP and CFO of New York-based SBLI USA Mutual Life Insurance Company, Inc., which is opening a Chicago office later this year.
“Spend a lot of time with the operations people. You don’t actually have to flip burgers, but do spend time with the business unit managers and really understand what makes their business tick,” says Martin Bozarth, senior VP and CFO at Baird & Warner, a Chicago-based real estate company, celebrating 150 years in business.
Also look beyond what your company is doing. Read national and local newspapers and industry related newsletters, attend internal status meetings as often as possible, and talk with local vendors and other contacts. “I remember when I was a CFO the first time and I suddenly realized that an important decision was my final call. It struck a moment of pause. You’re always accountable, but it’s magnified as CFO,” says Fadley. To that end, remember that the CFO role is multidimensional. It involves not only accounting and taxes, but also IT, human resources and business negotiations, to name a few. The more you understand the inner workings of the company, the better prepared you’ll be to make quick and confident decisions along the way.
Be transparent “Transparency means making it crystal clear to non-financial people what’s going on,” Bozarth explains. While being honest has always been important for a CFO, these days it’s absolutely crucial. Shoot from the hip and your career will be very short-lived. “If you’re asked a question, and you don’t know the answer to it, respond by saying you don’t know the answer,” McIntosh advises. “If someone asks how much I manage in my portfolio, I’d say $1.5 billion, because I know that. But if they ask what the return on investment is on my fixed portfolio and I estimate it’s $485 million, and it really was $495 million, I’d be off by $10 million. Don’t try to estimate and make up numbers on the fly,” he cautions. And above all, “never guess with the regulators.”
Not only do you have to be honest about the financials, but you also have to take a long, hard look at your personal ethics, if you haven’t already. “As CFO, you could find yourself being asked to do things that you’re uncomfortable with. There are a lot of gray areas in business, and it’s necessary for a CFO these days to stay further and further away from the line,” says Bozarth.
According to Richard Brenner, president and CEO of The Brenner Group, Inc. which provides interim executive management and financial advisory services, if you don’t see eye to eye on an ethical issue with the CEO, and you’ve approached the board of directors and been blocked, then it’s time to let your feet do the talking. “You need to resign. There’s no other way to handle that situation. Your integrity is all you have,” he says.
Brenner adds that, many times, the CFO is the first person to get fired if there’s a problem. “It’s a ‘shoot the messenger’ thing. My belief is that full disclosure is the best way to save your job. If the board of directors and the CEO are accustomed to everything being discussed, warts and all, and you avoid surprises, you’ll keep your job. It’s important to keep the bad news as just part of the regular news,” he says.
Deal with Sarbanes-Oxley Without a doubt, one of the biggest concerns facing CFOs today is the government’s new compliance regulations, otherwise known as Sarbanes-Oxley. According to business advisory firm The Hackett Group, companies are struggling with Sarbanes-Oxley compliance; monthly closing cycles have been extended over the past two years, upping financial costs and bucking the long-term trend. In 2004, both median and world-class companies were taking more than a week to close their books each month.
“It requires a lot of effort from the business to become compliant, whether documenting your control processes or testing your control processes. CFOs have to put in a lot of mental energy to make sure that they’re proving and executing the financials the way the law has laid it out for them to do,” says Greg Cameron, CFO of GE Commercial Finance Healthcare Financial Services, which has nearly 1,000 employees and $13 billion in assets.
While many larger public companies have been reporting Sarbanes-Oxley-like information for years, smaller companies are still struggling with the demands. “It’s a nightmare to comply with it. It will be a huge expense dollar-wise for outside consulting and auditing fees. It’s also a huge time burden, especially for a small accounting department,” says Steinhauer.
The demands on private companies are heating up as well. “I think that Sarbanes-Oxley-type expectations of companies are pervading all kinds of relationships—banking relationships, customer relationships, vendor relationships. The expectations have changed and it needs to be more ‘what you see is what you get’ than it ever has been,” Bozarth explains.
Learn to prioritize Distinguish quickly between what needs to be done and what’s right to do, McIntosh advises. “A CFO could need anything from new systems to a new outside auditor or a new tech system or general ledger, but what’s right for the business at the time he or she is there is where the focus needs to be,” he says.
Fadley agrees, cautioning against always being a hard charger. “Sometimes I can solve 80 percent and then I button it up, I give it a kiss, and I wait until I can solve it. I do it with the foreknowledge that I’ve only put a band-aid on it. But sometimes you have to acknowledge the reality that not all problems can be solved within the current limitations of staff or finances.” He adds that sometimes completing a small project can be extremely beneficial, not because it brings tremendous results to the bottom line, but because it frees up internal resources that can be deployed on other things. “I’m really doing a short-term thing in order to have a better long term,” he says.
For Bozarth, the key to staying on track is resisting the temptation to micromanage and get involved in every detail. “Develop a team of people you can trust, and delegate to them as much as you can.”
Value your staff Like it or not, a big chunk of your success is not in your control. It’s dependent on the people working for you. Gain their respect, and they’ll work harder and smarter for you and the company. Take the time to get to know your employees and recognize their accomplishments—even the small ones.
“When I go into a meeting and something has gone well, I will immediately pass the credit onto whoever on my staff did it. It’s expected of me that I’ll get the job done. I don’t need the credit. However, if it goes wrong, I take full responsibility because it’s my staff and I should know what they’re doing,” Bozarth explains. And again, admit that you don’t have all the answers. “Your people are often going to know more about that specific issue than you are, so empower them to piece the puzzle together; then, have them run the final assessment by you before you pull the trigger,” he advises.
According to Cameron, business and industry acumen are just as essential as technical skills if you want to be an effective leader. “It’s tough to drive results when you don’t understand how the business works. People see through that,” he says. “If I’m talking to someone in sales about how we can structure deals, but I don’t understand what they do all day, I lose credibility with them.”
Fadley, who as an interim CFO almost always walks into a stressful situation, tells the staff up front that things will get worse before they get better. “This isn’t management by pixie dust. It’s going to take hard work to get things done, and people have to believe where you’re going,” he explains. “Staff respect and appreciate the truth.”
“If you come into a situation where you are the new CFO, but there is an experienced staff member, approach them and let them know that you need their help, you need their knowledge, you need their training. You have to let them know that you need their assistance as much as they need yours,” says Steinhauer.
Other than long hours and potentially stressful decisions, the CFO faces few constants. The key to success lies in never being complacent—and to learn from those who have been there.
“My cautionary tale is to understand your weaknesses and work to make them your strengths. You can’t ignore your weaknesses; there are too many hats you have to wear,” says Fadley. Steinhauer simply recommends: “Stay hungry; always, always go after more—and never settle.”