Globally, in the best managed companies, a CFO (Chief Financial Officer) is primarily responsible to assess and manage an organization’s business risks. What exactly does a CFO do or should do? A CFO supplements the promoter/management in driving strategic decisions (setting pricing for products/services, decisions relating to acquisitions, drawing up business plans/ growth projections etc), assisting the company in negotiations with suppliers and vendors, dealing with external advisors like auditors, tax consultants, statutory authorities, funding agencies and bankers, setting up and maintaining internal systems and processes (building up MIS systems, bringing in standard processes across functions, corporate governance standards etc) and in general acts as the sounding board to the Promoters/Management.  In well managed companies, the CFO is a business advisor to the Promoters.  The CFO is not an accountant!

The Indian economy is currently in a state of rapid development and is burgeoning with small-medium family run businesses. It is estimated that close to 95% of all Indian companies are family owned and managed. The close knit structure of families which fosters teamwork and respect to family values and elders has been one of the positives to the success of many Indian family businesses. Will this work in today’s day and age and continue in the future? Read on ……
Family businesses have been making way for modern companies with no family ties in the boardroom or the management. Many of the modern companies seek to create family type values in the businesses since a large part of the time of employees is spent at office. In a sense this was/is also the hallmark of family run businesses where there is a high degree of trust amongst themselves and commitment to the business.  There are a number of issues being cited by Business School alumni, management gurus and experts and the most commonly cited reason is the ‘Lack of Professionalism’ in such businesses. We need to applaud and appreciate the role of family and family businesses here and if professionalism could solve all problems, none of the ‘professionally’ run companies would face issues.  However that doesn’t mean that family run businesses should not change. The real issue here is not family owned vs. professional. It is about how businesses adapt to the changes made through professional management. Reliance and Samsung are family owned businesses but they are professionally run. Family run and professionally run companies should not be treated as antonyms since it is possible for companies to be family run and yet be professionally managed. The time and energy of experts should be focused on well run companies rather than those which are family run or professionally run. The important point to remember is that family run companies have been ‘inclusive’ (stickiness with customers, good relationship with suppliers and loyal employees) and with better adaptability to changing times can start, grow and successfully manage companies.

The role of a CFO has undergone significant change over the last 2 decades worldwide with some of the biggest and the most challenging events taking place in the last decade (dot com bust, 9/11, recession in late 2008 and so on). The role of a CFO is no longer restricted to that of accounting, compliance and reporting requirements. The CFO plays the role of a ‘Business Manager’, an ‘Intrapreneur’, sounding board or risk officer to the board of directors/management. A CFO’s analytical skills are being sought and used by organizations to take strategic decisions including that relating to pricing of products and services. Cost reduction is another aspect closely linked to pricing that the CFO needs to evaluate.  In order to input on the pricing, a needs to analyse historical data relating to sales, margins and costs associated with the production/servicing of such products/services. This leads to identifying future sales opportunities and definition of growth avenues/markets/services. Benchmarking of costs and margins with industry standards is essential since this also helps the company to understand the value differentiators between themselves and the competitors (quality of goods/services, value added etc) which could help them to command a price premium. A CFO should also be constantly working to improve efficiencies in costs, analyse and refine business models, re negotiate with suppliers, look at the overhead structure and drive process improvement changes. This ensures that the business remains competitive, margins are in line and prices are justified.    

WealthTree assisted a large family run Fragrance and Flavours company in the process of obtaining good valuations from a Private Equity investor.  WealthTree’s role included generation of MIS reports, preparation of financial statements, analysis of product and business profitability and liaising with auditors appointed by the PE investor to check the client’s financial health.  WealthTree’s assistance helped the client prepare well in advance of the auditor’s visit, build a credible case for the valuation with the PE investor and in understanding and interpreting business results.  For more details on how WealthTree’s MyCFO services assisted this Fragrance company, please contact Deepak Narayanan at deepak@wealthtree.in for more details.

WealthTree is happy to share key findings from the WNS 4th Annual CFO survey report 2010. The study was conducted in October 2009 through a series of 100 online surveys and interviews. The respondents were director level and above in the finance and accounting group or executive management in organizations with minimum $ 3 billion in revenue.
The results of the survey quoted the CFO’s as stating that the 3 most important tasks that they are focused on were growing the business (62%), preparing to compete against new competition (45%) and preparing for the upturn (44%). It is interesting to note that none of the top 3 tasks have anything to do with accounting and tax, which are traditionally considered to be main areas for a CFO. This survey shows the evolving nature of the CFO’s role in larger and well managed companies. For more details of the survey, please visit http://www.wns.com/financeandaccounting/Resources
/WNS_CFO_Survey_Report.aspx

The ‘Game Changer’ - How You Can Drive Revenue and Profit Growth with Innovation by A.G. Lafley and Ram Charan  talks about how one can increase and sustain organic revenue and profit growth...whether you’re running an entire company or in your first management job. Their inspiring lessons can help you to learn how to make consumers and customers the boss, not the CEO or the management  team, innovate to grow a mature business, develop higher growth, higher margin businesses, create new customers and new markets, revitalize a business model, reach outside your own business and tap into the abundant brainpower and creativity of the world, integrate innovation into the mainstream of your managerial decision making, manage risk and become a leader of innovation.  For more information on the ‘Game Changer’, please visit
http://www.ram-charan.com/game_changer_excerpt.htm

As a part of its Wisdom in Action Series, WealthTree in collaboration with the Chanakya Institute of Public Leadership (www.ciplmumbai.com), Department of Philosophy – University of Mumbai (www.mu.ac.in) and the Alkesh Dinesh Modi Institute of Management Studies (www.mu.ac.in/alkesh) organized a seminar which combines the ancient wisdom of our scriptures (Arthashastra) with the modern and professional implementation methods practiced by some of the world’s best managed companies.  The Seminar on ‘BRIDGING THE GAP BETWEEN INTENT AND RESULTS’ was held at the University premises on October 2 (Saturday). The Seminar was attended by Promoters of Mid sized family run businesses and had practical and relevant case studies with speakers from WealthTree, Chanakya Institute and Alkesh Dinesh Modi along with a self development session by Ms. Jaya Joshi (Corporate Trainer). The session featured a presentation by a senior official of Reliance Industries, India’s best example on bridging the ‘Intent – Result’ gap. For copies of the presentation made, please contact Deepak Narayanan at deepak@wealthtree.in.



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