A solid relationship can be the foundation of long-term success: Romeo and Juliet, Torvill and Dean, Jay Z and Beyoncé, Curry’s and PC World... The list goes on. I want to talk to you today about such a relationship. One that, if properly maintained with good communication and mutual trust, will catapult a business towards success. The relationship between a CEO and a CFO.
A solid relationship may not mean skipping through a field of daisies hand in hand (I’m not here to judge your team-building exercises) but it does mean truly listening to each other and trusting one another to make crucial decisions. My colleagues at Harmonic have spoken before about the importance of the CFO and their growing role within a company but it means nothing without the trust and autonomy from the CEO it requires. This goes way beyond the CEO dishing out orders and trusting the CFO to get them done - it’s about trusting the CFO to lead the way for the entire organisation when it comes to finance.
The way you balanced the P&L made my heart skip a beat
Research suggests that the effectiveness of a CFO within a business is driven by their ability influence (and ultimately change, if needed) the mind of the CEO. This turns out to be a fairly rare phenomenon with only 30% of CFOs surveyed claiming to have managed it, but those that did scored highly across the board as effective CFOs. This does pose a question as to cause and effect however – are they effective because they change minds, or do their CEOs listen because they’re so effective and good at what they do? Either way, having the relationship in place to allow these conversations to happen in the first place is crucial to getting the most out of your CFO.
Korn Ferry’s CFO Pulse Survey indicates that a good working relationship here is not only important to success, but crucial to keeping your CFO at all. With 52% of CFOs stating that the number one reason for leaving a company would be a poor working relationship with their CEO. This is a huge stat, considering the myriad of other possible reasons – lack of compensation, inability to implement plans, lack of company progression; the list goes on.
From Korn Ferry’s CFO Pulse Survey
None of these stats answer the burning question – why? What is it about the relationship (or lack of) that is so important to a CFO that they would love or leave their job over it? The answer comes from the functions that they serve within the business. A CFO is not a glorified bean-counter, or even just the head of the finance pile; they are forecasters, risk-mitigation experts, identifiers of value and the financial leaders of your company. They’re the ones delivering reports to your shareholders and making the tough decisions that drive a business forward.
In that sense, the relationship can be boiled down to trust between a CFO and CEO – trust in the CFO to do what needs to be done, to draw up and execute strategies with the backing of their CEO. Research from Russel Reynolds indicates that CFOs in unproductive relationships fear taking difficult problems and decisions to their CEOs. This is of course, counter-productive to any business. Problems needs to be met head on and addressed with the collective weight of the C-suite as and when they arise and the CFO needs to feel comfortable bringing those issues to the table.
Without a strong relationship between CEO and CFO, your business will not be as effective as it can be. Trust, transparency and the ability to listen and change opinions is important to cultivate a good working rapport. If you’re looking for a CFO that fits your company culture and will thrive alongside your CEO, give us a call. We have plenty of experience in this department. Give yourself the best chance at getting this partnership right. After all, who doesn’t want to be the next Jay Z and Beyoncé?