Very little of a CFO’s job is accounting — that’s why we have controllers and staff accountants. In my own career as an operational CFO, I estimate that accounting took up less than 5% of my time.
An operational CFO has never been more important to the growth of companies. But it’s also among the most difficult competencies to source and develop. However, increasingly you are seeing the CFO take on the COO responsibilities and title.
I spent nearly three decades as a CFO and COO at a variety of companies. I dedicate much of my time now to coaching and mentoring financial chiefs at our portfolio companies. I try to help them grow beyond just a numbers person and become both a strategic finance and operations leader. This is rarely an easy transition. Many CFOs rise from the accounting ranks, so it takes time to evolve their mindset and ultimately earn their place at the strategy table. The important first step in this process is to let your CEO know that you want to take on additional operational responsibilities.
When coaching our CFOs, there are three key areas that I challenge them to address:
Build a solid team and don’t be afraid of a highly skilled controller
In order to take on greater operational responsibilities, a CFO has to free up time to explore different functional areas of the business. If he or she is mired down in the day-to-day, it’s very difficult to step away to tackle more strategic initiatives.
To do this effectively, a CFO must put in place a strong financial and administrative team, led by a highly skilled — and ambitious — controller.
Too often, I’ve found CFOs are hesitant to hire or support a controller they perceive as gunning for their job. They should understand that every controller wants to be CFO, so why not hire the best one. But by taking a protectionist stance, CFOs can get in their own way.
Over the course of my career, I’ve always sought out ambitious controllers who wanted my job because I knew they would jump at opportunities to take on pieces of my CFO responsibilities to get experience.
I never worried about a motivated controller taking my job. Rather, I saw it as an opportunity for mutual benefit: Controllers knew that if they stuck with me, I would help them move forward into a CFO role; and I would have more time to take on more operational responsibilities. Today, four of my former controllers are now CFOs.
Trust and delegate – that’s why we have accountants
I frequently tell the CFOs I coach: “Sometimes a CFO’s job is not to do anything; it is to make sure everything gets done.”
But for CFOs to really embrace this mindset, they must learn to trust their teams and delegate some of their responsibilities. They also must be willing to let their teams make mistakes as part of the process. Tasks related to banking, risk management and audits are low-hanging fruit that can easily be delegated out; once a CFO has done it once, it is not that exciting, but to a Controller it is new and interesting.
Sometimes a CFO’s job is not to do anything; it is to make sure everything gets done.
In the M&A process, I often let my Controller and FP&A manager ride shotgun so they can gain experience from the process. In the past, I have delegated management of the data room, financial modeling and some integration planning. It is hard to get this experience without seeing it up close and being an active participant. The intangible benefit of trusting your team results in them understanding that you are vested in their career growth. It creates a fiercely loyal team.
For many CFOs, especially those that have risen from the accounting ranks, this is a challenge. They struggle with the idea of giving up control. What they don’t understand is that these duties are still within their span of control, they just don’t have to be involved on a day-to-day basis.
I remind the CFOs I coach that very little of a CFO’s job is accounting — that’s why we have controllers and staff accountants. In my own CFO career, I estimate that accounting took up less than 5% of my time.
Build strategic credibility as an Operational CFO
Among the more important — and most challenging — aspects to becoming an operational CFO is being viewed within the organization as a strategic partner. If you’re not, it’s very difficult to make that transition.
Part of this relies on the CEO to recognize the unique perspective and insights that an operational CFO can bring to the organization and empower his or her CFO to take on greater responsibility. But the CFO also must demonstrate the capability of being a strategic partner. This trust and additional responsibility have to be earned, and it takes time. The first step is for CFOs to change their own view of the role, and how they react to key situations.
For instance, traditional CFOs tend to focus primarily on not spending money, keeping headcount in line and expenses down. As a result, the CFO often can be seen as the arbiter of “no” — the executive who tells the business what they cannot do. Operational CFOs take a broader view of investment spending and gain a greater appreciation and understanding of business needs. This may mean making investment decisions that impact the bottom line in the short term but are crucial to achieving longer-term goals.
Operational CFOs take a broader view of investment spending and gain a greater appreciation and understanding of business needs.
In a similar vein, it’s equally important that CFOs look for opportunities to partner with other senior leaders within the business where natural friction points occur, like sales and marketing. A situation inevitably will arise where sales will miss a revenue target or where marketing overspends. Responding to these situations as a helpful strategic partner who is understanding and solution-oriented can go a long way to changing the perception of the CFO role.
An operational CFO also can build credibility by leveraging opportunities to bring strategic thinking to the table. M&A is a great example – the CFO should already be heavily involved in the process by way of contracts, negotiations and funding. But there’s also an opportunity for a CFO to run post-closing integration activities and take on new operational or functional responsibilities arising from the transaction.
Board presentations are another strategic opportunity. Most of the CEOs I know are eager to delegate board decks, and that presents a great window for a CFO to step up, marshal senior leadership together, and gain exposure to the board. This exposure enables the CFO to take a more trusted and strategic role in investor relations.
Here’s the bottom line.
Operational CFOs are becoming ever more critical to company success. They have the ability to bring a unique perspective to the table — one that marries knowledge of financial metrics with strategic thinking. The transition from traditional CFO to operational CFO is challenging. But by building a solid team, delegating more, and capitalizing on opportunities to partner with other senior leaders, CFOs can gain both the time to become more operationally focused and the experience to earn strategic credibility.
Learn more about LLR’s Value Creation Team, purpose-built to collaborate with portfolio companies and help them define and execute on high-impact growth initiatives.
