By Jeff Kuhn
When a company hires a Chief Financial Officer (CFO), the Board and management team have a unique opportunity to bring on a trusted partner and colleague for their CEO, and an experienced financial executive to strategically help chart a positive course for the enterprise. Many CEOs and Boards typically look for strong technical and managerial skills in the chief financial officer role along with evidence of successful milestones – from fundraising to acquisitions, IPOs to restructurings. At FLG Partners, we have even higher standards. We believe that “A-list” CFOs exhibit five important attributes which we know are highly correlated with positive organizational and personal performance. It’s also what we look for in partner candidates.
These five attributes highly successful chief financial officers are:
#1: General Management Leadership Potential
Great CFOs are a CEO’s right hand, easily able step in and represent the company in the CEO role when that individual is indisposed for whatever reason. The most talented CFOs have no trouble doing this and are fully capable of running the enterprise. They build strong relationships across company functional areas, investors, and the Board of Directors, which give them the credibility and authority to seamlessly execute this. They are proactive navigators who can “see around the corners” and plan for necessary contingencies. In public companies, strong GM skills are especially critical as the CFO is the effectively the conscience of the shareholders and must regularly brave the waves of Wall Street’s best as they communicate company performance in earnings calls and investor conferences. Public company CFOs must also be adept at selling, while carefully positioning the facts and their assumptions about market dynamics and company expectations for analysts and investors.
#2: Intensely Entrepreneurial
Maybe it’s because we’re based in the Bay Area, but we also see top-tier CFOs as having a strong aptitude (and an attitude) which we would describe as highly entrepreneurial. Talented senior financial executives are agile, able to easily keep up with rapidly changing competitive dynamics, new company partnerships, acquisitions and restructurings, and the never-ending need to model and forecast the impacts of these. They are creative and resourceful. They know how to make critical decisions in the absence of complete data. Lastly, they are experts at carefully managing the deployment of working capital and at cash management.
#3: Thriving in Ambiguity and Chaos
Closely related to entrepreneurialism is what we call “CFO A-D-D,” or a CFO’s version of attention deficit disorder. A-list CFOs tend to thrive on challenge and rapid change, and work well under pressure. They enjoy the intellectual rigor of difficult situations that require complex solutions. They are adept at being able to quickly distinguish between red herrings and the relevant truths that bear on a strategic decision. In a medical scenario, they would be the trauma center docs. They like to work fast, hard, and effectively on complex and often ambiguous problems.
#4: Risk Takers as well as Risk Managers
Another intangible characteristic of the best CFOs is their ability to make the toughest calls. As partners to their CEOs, they sometimes get into sticky situations in which this partnership is tested to the core. As pressures mount on a CEO to reach key milestones and demonstrate performance, challenges arise for CFOs. They can be asked to raise the revenue forecast, disguise negative news as inconsequential, downplay expected cost impacts and/or “massage” the numbers to paint a rosier picture of projected company metrics. At FLG Partners, we always say that our CFOs have to be willing to speak uncomfortable truths that could cost them their job. This is taking the ultimate risk, but if you can’t go there, you’re not up to the job in our book.
#5: Highly Collaborative
Our final litmus test for A-List CFOs is around personality. Even if you, as a CFO, have the first four of the attributes above, if you don’t have the fifth, you won’t be the most successful. Getting along with the management team, the CEO, investors and the Board are not optional. Great CFOs put the “me” and their personal goals second and make the needs of the enterprise and their management teams the first priority. They are unselfish in this regard, always representing their brands with confidence, maturity and without self-aggrandizing arrogance. They are highly collaborative and collegial. They know how to communicate well, manage up and down, incent and reward performance, and they are just pleasant to be around. They are universally liked as people, not just as professionals.
What’s your definition of an A-List CFO? Tell us on LinkedIn. Let’s continue the conversation.