The role of a chief financial officer today extends far beyond the balance sheet. CFOs have to stay up to date on macroeconomic trends, market and product fads, customer preferences, and even phenomena like “quiet quitting.”
They also need to set an example for everyone else, especially during times of trouble, not unlike a flight attendant.
“In a time of turbulence, [employees are] going to look and say, ‘If they’re panicking, I better panic, too.’ Now more than ever, all eyes are on the CFO,” said Janelle Gorman, CFO of York IE, an investment firm based in Manchester, New Hampshire.
Gorman appeared on the panel “Effective Traits for CFO Impact” at the most recent MIT Sloan CFO Summit, along with financial executives from Spindrift Beverage Co., Oxurion, and Akamai. Moderator Ankur Agrawal, a partner at McKinsey & Co., asked the group about some of their most important strategies. Here’s what they had to say.
Be transparent to gain trust with investors and employees alike
When Spindrift wanted to rejigger its marketing strategy and begin selling sparkling water in cans rather than in glass bottles, transparency with investors and employees was crucial.
CFO Scott Chandler explained that Spindrift terminated the glass line “because we were dealing with a little bit of consumer confusion in the market.” Customers thought the glass bottles contained soda, not the healthier sparkling water. Even though the product line was the company’s largest and most profitable part of its portfolio, leadership decided the packaging switch was essential.
“Telling that to teams, especially talking with some of our teams that basically had spent five years selling one product and then now had to learn to sell something different, was a big transition,” Chandler said. “But because we had laid some of that groundwork upfront … they very quickly pivoted and took all of their relationships and all of the best traits that they’d been spending years developing and applied that to a new product line.”
Chandler acknowledged that investors “might have reacted a little bit askance” when Spindrift said it was going to terminate its most profitable and biggest product line. “But they trusted us, and they basically went with us and have followed us all the way through to today.”
Be prepared to wear many hats
To thrive as a CFO, especially at a startup, “you need to be more of everything,” York IE’s Gorman said. With fewer resources and hands on deck, “there’s less time, there’s a shorter runway,” she said. “The stakes are incredibly high, and so I almost think of the hard skills as the minimum.”
Having hard skills means having accurate data and choosing key performance indicators that will identify the trends and “tell you what’s going to be around the corner,” Gorman said.
In addition, she said, finance leaders must have the strategic skills to identify which opportunities to go for.
“The value of what a CFO brings isn’t just accurate data — that’s the minimum compliance,” Gorman said. Equally important is “helping the leadership team to interpret that data and action it.”
Use your role to hold a mirror up to the organization
One of a CFO’s most important jobs is to question the CEO when appropriate, said Tom Graney, the current CEO and former CFO at Oxurion, a biopharmaceutical company. CFOs have plenty of opportunities to challenge how decisions are made because they are closer to the objective financials, whereas CEOs can be mired in outdated assumptions and the competing needs of various stakeholders.
“If a CEO is making a decision that’s different than the decision I would make, they’re definitely going to know about it,” Graney said, underscoring his desire to “really engage in a conversation.”
“I think an important part of our role is to be the one that holds up the mirror to the organization and initiates ‘positive conflict’” as well as challenge assumptions, Graney said. While such role-playing conversations aren’t always comfortable, most CEOs would prefer to be challenged by their finance officer than an investor or analyst.
Graney emphasized that “it’s not personal” when he goes head-to-head with a C-suite colleague, saying, “Either way, we’ll come out with a better decision.”
Free up time by building a team of experts you can rely on
Every CFO wants to have a good team, but it’s just as important for CFOs to coach their people and give them the chance to grow and try on different roles, said Ed McGowan, CFO of Akamai, a web and security services company.
McGowan likes to bring his team to board meetings and let them present. “I also allow my team to do some cross-functional changes and try different roles,” he said.
It helps to surround yourself with people who are experts in their fields, whether it be accounting or financial planning and analysis. “I inherited a very good team, and I try to find people that are better at a skill than I am,” McGowan said. Doing so will free up your time so that you can better support your CEO.
“It’s really important that you do get time, because the CEO does need somebody who is a good, trusted advisor who can bring in the data and help them make decisions that aren’t emotional,” McGowan said.
Especially in a startup environment, he said, “you need a good team you can trust to free you up to do that, because it’s one of the most important roles, especially as the company gets larger.”