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The CFO As Strategic Catalyst

Today CEOs must execute with speed and accuracy. There is very little margin for error.Teams with clear missions, a sense of urgency, the stillness of a master, and explosive targeted actions are the ones that will win in the 21st century. A strong partnership between the CFO and the CEO are critical to this success.

Targeted Fast Break Execution

Companies must target and execute strategic opportunities before the competition, while being sure not to waste limited capital. False starts, not acting soon enough, or chasing windmills can create serious damage to a corporation. During a recession, many companies will take market share by taking advantage of weak competitors. But these actions must be well-targeted and fast to achieve strategic advantage.

How Does The CFO Help or Hinder

Saying “no” is easy for a CFO, and saying “yes” after uncomfortable conversations with your CEO can cause sweat to come out of hidden places in your body. For example, acquiring competitors with a good strategic positioning and a weak capital structure and/or using capital to create new capabilities while competitors are cutting back is risky, yet could lead to a dominant position in the future. Over-leveraging to do these and similar things can destroy a company when deals do not work out as planned. What is the balance, and what are the priorities for the CFO in the volatile 21st Century?

A recent study by Deloitte & Touche USA found that, “While most CFOs are still striving to master their roles as steward, operator and strategist, one of the most significant challenges to becoming a catalyst is often getting other executives to agree that this is a role finance should be playing. It’s not something you can simply ask for, but rather something you grow into as other leaders recognize the value of finance’s contribution and increasingly turn to you for assistance and support with execution.”

CFO Roles

Steward: The steward protects and preserves the assets of the company by effectively managing risk and keeping the books accurate.
Operator: The operator conducts basic financial operations efficiently and effectively.
Strategist: The strategist influences the company’s overall direction.
Catalyst: The catalyst instills a financial mindset to execution and risk-taking throughout the company.

When the CFO talks does the Executive team, and/or the board, lean closer in, or do they check their smart phones for email? Alfred H. Drewes, the CFO and senior vice president for Pepsi Bottling Group, says one of the things that “we talk a lot about here is creating financial literacy in the company.” Indeed, he continues, “that sounds like a lofty term, but what it really means is making sure that when the sales guy goes into a store, he has the tools to understand what the right price points are, what the right package mix is.”

How To Be Seen as A Strategic Catalyst

Having been a leadership consultant and business advisor to CEOs for the past 25 years,I have found the following to be key to becoming a Strategic Catalyst.

• Know the business operating dynamics as well as the COO
• Study the market opportunities of the business and find ways to finance entry
• Always present creative financial solutions with several options
• Continuously recruit motivated investment partners to bring to the table
• Have strong long term relationships with the financial community outside the company
• Do not set yourself up as the budget police, be part of the team
• Never say no, always present the opportunities, risks, and suggested mitigations

What Got You There Will Not Keep You There

Most CFOs reached the top of an organization by being excellent with numbers, a great Controller, and being counted on by the CEO. But what gets you to the position of CFO, will not keep you there. Instead of providing accurate numbers, now you are expected to:

• Work with and between the CEO and the Board of Directors
• Have excellent pattern recognition that points to potential problems and opportunities
• Help empower business strategies with financial partners from outside the company
• Use your reputation in the financial community to create interest in investing
• Help the CEO sell strategies to the Board, Management Team and the employees

The bottom-line is, you have to move from “Steward” to “Strategic Catalyst” by integrating yourself into the team both professionally and interpersonally. For example: during one of my engagements, a bottoms up budgeting process was about 20% short of the goal the CEO and the CFO thought would increase the stock price. The CFO presented three graphs that showed the relationship between the targets they suggested and reduced value of the teams stock options, and the increased value should they commit to 20% more. These charts were so compelling that the management team committed to the higher goals instantly, as did the BOD later, even though it meant a lot more work.

You will know you are succeeding when the team brings you into new business development meetings early, instead of waiting until they are done with their plans, and then trying to convince you and the CEO to invest the money.

The CEO does not have time to teach you, and you cannot expect the Board to be teaching these skills. I strongly recommend you join a peer group of CFOs with strong a facilitator so you can learn from your peers, and experts on how to be a Strategic Catalyst. It will be an excellent investment in time and money.

-Paul David Walker, Faculty Executive Next Practices.