How CFOs and CEOs collaborate best
The CFO has long been considered the CEO’s right hand, a belief that has only grown in prominence as the finance chief role has veered more and more into strategy.
On a panel at last year’s MIT Sloan CFO Virtual Summit, vice president and managing director at the Association of International CPAs, Ash Noah, shared the "Three C's" of earning a CEO's trust. The first is capacity, which he defines as making time and investing in side projects that advance the company's mission. This leads to the second C, competency, which is earned by balancing CFO duties with out-of-the-box thinking. This culminates in the third C, credibility, which is when the CEO trusts you to help him or her strategically lead the business.
But the approach to collaboration is not always clear-cut. Both executives want strong performance, but the CEO often focuses on opportunities and potential, while the CFO emphasizes realism and honest risk assessment.
The main question becomes: how does the partnership work best? In which ways can CEOs support CFOs and vice versa?
Asking the experts
“As a former CEO, I understand that one of the toughest things to deal with is getting people to tell you the truth,” Todd Thomson, CFO-COO of private equity firm Kairos Venture told CFO Dive. “Everyone’s career and compensation is affected by the CEO and everyone has an incentive to tell the CEO what they want to hear.”
A CFO’s great relationship with their CEO means always telling the truth as they know it, providing your unvarnished opinion, and being the source of unbiased data to help drive every decision, Thomson believes. “The right CEOs will appreciate this approach and you will become the trusted right-hand person as you build the firm together.”
At Dallas, Tex.-based marketing and customer relationship management (CRM) firm Hawkeye, CEO Joe DeMiero and CFO Brian McIntyre say they “never do anything that would communicate to our team we’re anything but in lockstep.”
“Our partnership is better because our roles and responsibilities are more like a Venn Diagram,” McIntryre said. “I know every client [...], every project happening in the agency, and every person we hire. Joe is deep in the numbers, and pushes spreadsheets back and forth with me.”
“I don’t think you can be a successful CEO without knowing the business of your business,” he added. “Joe dives in, asks the tough questions, and constantly challenges the team during the planning and budgeting cycle.”
At New York-based real estate tech start-up Compass, CFO Kristen Ankerbrandt also works in lockstep with CEO Robert Reffkin.
“It’s so imperative that [Robert and I] work together in lockstep in working to deliver for our agents and employees and as we work to deliver for investors,” she told CFO Dive. “We are very well-coordinated in terms of our decisions and the plans we have for the business not just for the near-term but over the next few years. We have very ambitious plans and one of our principles is to dream big and execute.”
The COVID-19 pandemic has posed new issues entirely, further complicating leadership and the limits of executive power and decision-making.
The pandemic hit the advertising industry hard, McIntyre said. “Hundreds of thousands of our peers were losing their jobs, and we were in the midst of relaunching the agency,” he said. “We [had to decide whether] to lay-off a small percentage of the staff, or require pay reductions of all staff [and] whether to close-down office spaces. But because our values are so tightly aligned, and our foundation of trust is so solid, these were decisions we made in unison, with relative ease.”
Navigating varied experience levels
The relationship can also look differently when the two executives join the company at different times. Jack Hartung has been CFO of Chipotle Mexican Grill since 2002; Brian Niccol became chairman and CEO in 2018.
“One of the first things Brian did [was meet] with the early workings of what later became the full executive team,” Hartung recalled. “We spent all day collaborating on our purpose and values. This was during a time where there's a lot of work to be done, and yet we devoted a lot of time to being with each other.”
This day, which Niccol insisted on, was critical in ensuring their alignment on the brand’s purpose and hopes for the future.
“I think if you're aligned in those two important things in your purpose, like, what is the company meant to do, and how are you going to make the world a better place? And what values are you going to bring to the table? When you then move into strategy, you can have really healthy debates and discussion about the strategy, because you're aligned on the most important thing,” Hartung said.
The entire executive team, as a result of that day, can have good debates about strategy, because it agrees on the important things, he added.
Right when he began in the role, Niccol also took time to comb through every single report, in an effort to learn and understand the key levers that make the business work. “That impressed me, and showed me he was going to invest time, not just to make sure that we're aligned on the important things, but also that he was invested in getting to know the company,” Hartung said.
Trust and instincts
At legal technology processor InCloudCounsel, CEO Troy Pospisil primarily focuses on high-level strategic goals and priorities, CFO Jeff Bohl said. Together, Bohl and Pospisil organize and communicate using the OKR (Objectives and Key Results) goal-setting framework pioneered by Intel and later made famous by John Doerr of Kleiner Perkins and Google, Bohl said.
“We spend a lot of time debating strategic alternatives, discussing associated trade-offs and agreeing on a set of corporate OKRs,” Bohl added. “At the leadership and board level, the budget conversation focuses on what investments we want to make in the business, what returns are reasonably associated with those investments, and whether we are willing to invest beyond our current means.”
Key to the business’ success is Pospisil’s trust in the quality of Bohl’s work, experience and instincts. “And based on our personal relationship and economic alignment, he also had confidence that I was working on his behalf,” Bohl said. “My job is streamlined enormously because of the trust Troy has in me and my team. He relies on me to highlight material issues when they arise and get him involved where appropriate and necessary.”
As part of that trust, Pospisil doesn’t assert himself except where it's strategically important for him to do so, as with board-level discussions or fundraising decisions, Bohl said. This gives Bohl, as CFO, the autonomy to do what he thinks is best for the finance and accounting function, and gives him the confidence to make ordinary course decisions without a CEO’s input.
“Were that not the case, I would be slowed down by management and reporting frictions, at the expense of business and team building, and at the expense of my personal happiness and satisfaction,” he added.
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