Aligning the CFO and CEO

May 6, 2014

Last week’s “Deciphering Finance” conference in Irvine, California, organized by the SIIA was a great forum for sharing best practices among Finance leaders and peer networking.   I thought one of the many useful sessions was the discussion between an experienced CEO and his CFO which captured some of the key issues in that relationship.  Here’s a summary of the discussion:

Aligning the CFO and CEO

The CFO and CEO must be aligned.  The CFO should be a trusted advisor to the CEO, but trust can be hard to earn.  The relationship between CFOs and CEOs is often complicated by the fact that CFOs tend to be cut from the same cloth, while CEOs come from varied backgrounds, such as product/engineering, sales, finance, or a pure strategic background.

Tensions often arise between the CFO and CEO.  Conflict may come from 2 sources:  style or substance.  Style conflict can come about because the CFO and CEO have two different styles and chemistry.   One person hates to be interrupted before finishing their sentence, and the other loves to interrupt.  One person is analytical and the other is intuitive.  One likes written reports and the other likes verbal reports.  These issues can be managed with good communication and emotional maturity, but sometimes the chemistry isn’t there and the relationship isn’t going to work.

The other source of tension can be substance.  The CFO and CEO may have substantial differences of opinion about business issues.  Differing perspectives can lead to better decisions and management policies that take into account different points of view if each person trusts the other’s perspective.  However, if the CEO uses his/her power to push the CFO into the corner and doesn’t listen to the CFO, it can lead to serious problems.  The CEO also needs to be able to differentiate between differences of opinion, versus problems with accounting rules.  If the issue is a concrete accounting or regulatory rule, the CFO can’t change the rule, even if the CEO doesn’t like the accounting rule, and the CEO has to trust that the CFO can’t do anything about it, but that trust is hard to earn.  

From the perspective of the CEO, trust is earned, not granted with the title.  The CFO needs to prove his/her value-add, protecting the company, and bringing up issues of which the CEO wasn’t aware.  It is on this basis that a CEO will seek out the opinion of the CFO and listen to him/her.   A CEO is looking for a CFO with no personal agenda, someone who is focused on building the company and supporting the CEO.

Efficient and Innovative Solutions

A CFO needs to be innovative, not on auto-pilot.  SaaS is an innovative model.  You need efficient compliance, not just compliance.  Take the example of a company hit with a frivolous lawsuit, and outside lawyers say it will take $150k to fight.  Can the CFO sit down with the corporate council and come up with a creative solution?  Can they work together, figure out a way to settle out of court for $50k, have the CFO find the money from other parts of the budget, take it off the table and move ahead quickly?  That shows proactive, creative compliance, as compared to passively accepting problems that come up.  That is the kind of leadership the CEO is looking for from the CFO.