Date : 18-11-2015 Platform/Online Media: Business World : Your Story Source
CEO’s role in developing CFO
"Almost in every mid to large cap organization, a CEO is supposed to be the key figure; a pivot around whom is created where organization departments are plotted across the X-axis and the Y-axis is left on the CEO itself for his choice of metric which could be profitability, productiveness, effectiveness etc. as long as the metrics have cross comparability across the corporate functions."
When metrics for any organization purpose get adjudicated, a CEO's dependency relies solely on the Finance function and this dependency is seen as widely across all strata's of organization sizes in terms of revenue or even across borders in all markets of the world. To help this dependency on the Finance function it is imperative for the CEO to have someone trust-worthy to helm this important role.
In comes the CFO who is always observed to share a love-hate relationship with all his peers while trying to maintain a pragmatic approach on the business for the CEO to make the best informed and advocated decision possible.
In my opinion where an organization wants to undertake progressive planning for high ticket position like the CEO, two options exist: to procure externally or prepare and train someone internally and most organizations globally choose the latter, for the simple reason; 'A known devil is better than an unknown friend'. In such a scenario it is but natural that an organizational CXO would be handed over the coveted position and it has been observed that six out of ten times, the CFO would be chosen to step into the shoes. There are three obvious reasons for such a high probabilities wiz:
1.Being a numbers man him/her self, a CFO could easily make more sense out of business metrics and the language they speak.
2.Being used to taking decisions catered to increased value of the organization both intrinsic and extrinsic in nature.
3.Overall bird's eye awareness, if not in detail; of other department functioning's in the organization.
However this transitioning is not an easy one and requires lengthy and regular sessions of interactions between the CEO and CFO. Hence it is widely said that 'A CEO makes a CEO'. This aspect of the CEO's role to successfully carve out his shadow from his/her CFO makes the CEO more of an execution mentor than just a reporting boss.
In my professional opinion, a few specific areas which a CEO should not miss while mentoring a CFO are:
1.Numbers are 'Not' the only thing that matter
A CFO is generally coming with an educational background of a CA/MBA (Finance)/CFA, where the life's learning and practice has traditionally always been to look into details and that numbers never lie. This however is one factor which can hold back a CFO too, if not molded to see beyond the numbers into the reason behind them rather than just base facts. In short have the CFO needs to have empathy towards the causes behind the numbers as in long term the empathy could take the business many more places than it is currently.
2.Strategically to think out of the box and yet practically staying in the box
A CEO is ideally supposed to be blessed with the skill of foresight, as being a visionary goes hand in hand with being a CEO of an organization. This is trait which does not develop without practice and needs to be put into at good levels by a CFO; however one should never take a flight without realizing on how hard a ground they are standing.
3.Develop a deeper understanding of functioning of all organization departments
A CFO could really benefit by deeper knowledge of functioning of all departments within an organization, as this would then supplement his/her experience to find out real reasons for their over/under performance and take measured calls rather than just facts put forward by an excel report.
4.It is not possible to make all happy at all times
Though this seems a very obvious life philosophy, a CEO should definitely depict this in practice to the CFO. Being a CEO is not easy and it is this foremost reason. All stakeholders within the organization feel that the CEO holds the key to their happiness and success and this painfully is not practically possible. A simple "NO" is sometime a very hard option which needs to be taken for business interests.
5.All that matters in the end are decisions that make the business succeed.
If a CEO's professional existence were spread on a canvas, one would see a sincere practice of this point. Business is always of primal importance and nothing comes before it. Decision making keeping all macro, micro and ethical factors in mind; have to be in overall organization interests in the long run even though they may not seem financially feasible and/or profitable in the short term.