By: Sean Mooney, founder and CEO of BluWave
If a business hopes to differentially grow and develop, it needs as many “self-actualized” functional leaders as possible. This requirement is especially critical when it comes to the CFO position. During my time as a private equity partner and now as someone who leads a company that connects top resources like CFOs with growing businesses, I’ve developed tremendous respect and gratitude for the power that an exceptional CFO brings to an organization. But not all CFOs are equal.
For a company to be great, it needs a CFO who is process-minded, detail-oriented, tactical, good with people, has a keen understanding of how data and strategy tie together, and can bring it all together to empower insightful decision making. Just like Maslow defines a hierarchy of human needs and Jim Collins describes Five Levels of Leadership, there is a pyramid of actualization that a CFO must ascend to optimally impact a company. If you’re a CFO, these levels are what you should strive to reach. If you’re a CEO, these attributes are what you should look for in a CFO partner:
Level #1: Bean Counter
At the most basic level, CFOs must be able to tabulate accurate historical results on a monthly and year-over-year basis. They should be able to put these results together within two to three weeks after the end of each month. Additionally, at the end of the fiscal year, if they’ve done their job well, minimal audit adjustments will occur.
Level #2: Hunter Farmer
In the most fundamental sense, “basic needs” for a CFO include the ability to develop sufficient rapport with others in the organization so they can gather key information, then disseminate that information to the rest of the organization. If they don’t work well with others, or don’t have a track record of being able to efficiently extract and share factual data points for decision making, chances are they won’t be able to move your company in the right direction. Or if they do, it will be an extremely slow, excruciating process.
Level #3: Truth seeker
It’s one thing to be able to gather factual information and disseminate it within an organization. It’s quite another to have the intellectual curiosity and analytical capability to share with your team why something happened. Level three CFOs should not only be able to accurately tell you what variances were, but why they occurred. They should also be able to tell you the select few key performance indicators that drive business performance.
Level #4: Nostradamus
The best CFOs are not only able to gather information and understand why things happened in the past, but also harness insights from across the organization to form perspectives on what will happen in the future. Every good company needs to have a sense for where they’re going financially. If a company doesn’t have a clear lens aimed at the future, it won’t know if the light at the end of the tunnel is a new horizon or a freight train. To assess these skills in a CFO, look at how accurate their projections are. Business conditions do change, so variances will occur. However, there should not be a pattern of variances and, if they happen episodically, the CFO should be able to seamlessly inform the team why they occurred.
Level #5: The Strategic CFO
Fully actualized CFOs understand not only what happened and what will happen, but also what should happen. They leverage data, experience, and insights to form perspectives that enable and, at the right times, persuade the rest of the team to make the right decisions. This is a financial leader who not only knows how to say “no” when a project isn’t right, but also to get the team to “yes” when it could be so much easier to just not take a risk.This is the ultimate unicorn that I was in constant search for during my nearly 20 years in private equity and the type of person we introduce to top PE funds today. This is the Strategic CFO: both data-driven and emotionally intelligent, they are a true thought partner to the CEO and other executives. Not all CFOs can reach this level due to the rare attributes required. Furthermore, not all CEOs are comfortable with true “peer CFOs.”
As someone who has analyzed the CFO pyramid for over two decades, I fundamentally believe a company that harnesses the full power of a strategic CFO will not only have a competitive advantage, but will also create value much more quickly. In the end, it’s a win-win.
