Make the right moves as a strategic CFO

By Mike DellaRipa, CPA, MBA, CGMA 

A survey of 549 CEOs recently published in CFO magazine showed 72 percent expect a CFO who is strategic — meaning they understand how to drive performance and growth while knowledgeable of mergers & acquisitions, talent management, regulations, compliance and innovation. The other 28 percent of CEOs seek someone tactical — they understand efficiency, internal control, managing working capital and getting the financials correct. Clearly the strategic skills are becoming more important for a CPA on a career path toward becoming a CFO and the tactical skills are becoming expectations rather than exceptional qualifications.  

The strategic CFO will be an innovative person committed to concepts of continuous improvement and the success of the entire organization (not just accounting). This person will be able to recognize opportunities, not just problems, and when problems arise be able to focus on process before people and work effectively with the CEO and senior management team. Together they will be able to get to, and solve, the root cause of problems, ultimately leading to meeting the forecasted financial expectations of the organization.   

The CFO position also requires someone who understands the role of culture in strategic success and has the skills to help facilitate culture change when necessary. This requires the CFO be a good listener and motivator.  

The CFO position must be able to certify that the organization is “on the right track” and more importantly, that it is “headed in the right direction.” The CFO must also recognize the need to support policies that can meet the needs simultaneously of four stakeholder groups involved with an organization: customers, employees, owners and vendors, all equally important.  

The CFO must contribute to policies that recognize the additional responsibilities of the organization such as corporate social responsibility, diversity, work-life balance, cybersecurity and, of growing importance, senior leadership ethical behavior.  

Customers 

The strategic CFO must have a real understanding of what unique value the organization creates for customers. How are we different from our competitors? What customers choose us and why? What is the relationship between price and the real value we create for our target customers? Why do customers leave us?  

The fast growth success of the “$1 Retail” industry, by organizations like Dollar General, Family Dollar and Dollar Tree, is an example of companies segmenting a market and targeting the right products and price points to meet the needs of a unique but large customer base, and then building a business uniquely suited to the needs of these customers through right-sized and right-priced products.  

Understanding customers requires time and effort to know, meet and listen to them. This could involve going on sales calls with reps, learning to develop relationships with key decision makers, providing them information for their success and showing your organization as a value-added business partner and not being just another supplier.  

In return, the strategic CFO should be asking for information from the customer about their future plans, their expectations from your products, services and organization and what new or innovative products or services they need.  

Never forget purchasing decision makers decide to do business with people they like and trust, but they like and trust you because your organization consistently delivers real value. Having someone answer live a customer’s phone call whenever an unexpected problem comes up can establish your company as a worry-free supplier and can differentiate your organization from your competition.  

Southern New Hampshire University strives to answer calls live or respond within 8.5 minutes to phone messages. It has personal advisors assigned to students and delivers diplomas to students across the country via bus. It is no surprise it is the category leader in the market in which they compete.  

In developing the annual strategic plan for the organization, focus on knowing what is important to your customers when they make their buying decisions, and then work with your CEO and senior management team so your organization can become world class in that area.  

Always remember when measuring your organization against the competition, focus on your strongest competitor. Your goal should be to become No. 1 or at least No. 2 in markets you compete. 

The strategic CFO understands that having excellent products and services can become an expectation as decades of industry consolidation has eliminated many weak competitors, leaving only the strong. Being able to provide customers information critical to their success is important in establishing a long-term relationship with a customer.  

Employees (Associates) 

Probably the most important factors in an organization’s long-term success are the quality of your employees and your organization’s ability to understand their needs so they stay motivated to want to go above and beyond daily. As Bill Gates of Microsoft said once, “Every day Microsoft’s most important assets leave our office building and every night I hope they come back the next day.”  

Employees desire to have the best information available so they can be successful in their roles and contribute to the organization’s success. The strategic CFO will take ownership of the responsibility to get the right information to the right people at the right time for the entire organization to optimize performance. 

This requires a paradigm shift, seeing co-workers as internal customers, measuring their satisfaction with the information they receive, and continually striving to improve the value of that information. One goal of the strategic CFO is to establish an information system world class in internal customer service.  

Employees desire to have a sense of belonging and feel important in supporting an employer’s mission and vision they believe in. They also want to have input in decisions that affect their jobs and know a fair decision-making process is in place where all parties affected by changes can be given a chance for input before changes are made. The Kepner Tregoe decision making process is one good example to consider. The CFO understands this and practices participative management.  

Another new concept requiring innovation is planning to have some fun built into working for your organization. Fun can help to foster a sense of team and a desire to remain a part of the organization 

Having mentors assigned to new employees goes a long way to getting new employees successfully through their first year and beyond. Having systems in place like the Gallup system or “9 Motivators” can ensure employee needs and feedback are heard, as they do change with time. Never underestimate the importance for employees to feel heard; it’s a key reason people stay with an organization. Knowing how your employees would respond to the question, “Does my supervisor, and the company, care about me?” can prevent a good employee from leaving.  

A recent article in Harvard Business Review discussed the importance of trust to retain employees and encourage performance. Good organizations establish trust by sharing information, recognizing performance and listening to and then properly responding to employee concerns.  

Incentives and bonus plans are important to retaining good (and especially star) employees, and should be well documented, be able to be measured and have goals in sync with the strategic plan. They are becoming necessary today to compete in the market for top talent.  

A recent survey of 3,400 employees by CareerBuilder showed 55 percent in the age bracket of 18 to 24 are open to searching for a new job even while employed. This situation exists also for 42 percent of respondents ages 25-34. Strategic CFOs must deal with the reality that younger employees have less loyalty to their employer and figuring how to keep them on board and engaged may be critical to the organization’s success.  

The strategic CFO should work with the talent manager to ensure the organization also proactively and continually has innovative efforts to attract and retain the top talent necessary for achieving the strategic plan objectives and staying ahead of competitors for top talent.  

Some of the new practices of successful organizations are continual recruiting and starting it at a much earlier time for college graduates; pursuing candidates through many different, and sometimes very unique sources; and being innovative in your approach to staffing.   

Use your existing employees for referrals, who know very well what type of person will, or will not, “fit” into your organization. It is cost effective and smart to provide them a financial incentive for successful referrals. Once hired, wherever possible ensure flexibility in scheduling, expectation for time at the workplace, dress code and allowing employees to work from home periodically. These policies can retain employees, especially if they have children or care for elderly relatives.  

Employees also appreciate having continual training in an age when the only constant seems to be change.  

Owners 

Owners expect management to have an exceptional financial reporting system in place supporting continuous improvement and showing accountability for results. Owners and the CEO expect the CFO to publish financial statements that show segment profitability or loss, which segments make money and which do not. 

The CFO should have key performance indicator (KPI) reporting in place to ensure the needs of the four stakeholder groups are being met. Alan Mulally, the innovative CEO at Ford Motor Company during its turnaround, operated on 14 key KPIs from the CFO.  

Of high importance to owners is not only seeing current results meeting or exceeding expectations but also that there is a realistic and continually updated long- term forecast in place for up to the next three to five years.  

The cash position forecast should now consider funds being available for stock buy backs, a more common way now to ensure delivering favorable Earnings Per Share (EPS) and dollar-per-share stock price results.  

The CFO must be able to explain to the CEO and owners that forecasting is an art, not an exact science, and that the senior management team has contingency plans to address any problems when, and if, forecast variances occur. The long-term forecast should be updated monthly or quarterly at minimum to account for the ongoing changes in the markets you compete in. Having a cross-functional sales and operations (and finance) partnership and planning meeting to get agreement on the forecast and track its accuracy goes a long way toward attaining and improving forecast accuracy.  

Owners also expect senior management is able to make tough decisions and no sacred cows exist. While being able to make tough decisions is important, being able to make smart decisions is most important.  

After taking over as CEO of a struggling Popeye’s Restaurant chain, Cheryl Bachelder implemented a policy of servant leadership with franchise owners, and in the process improved the stock price from $14 per share to $69 per share. She also challenged herself with a question “Are the people entrusted to our care better off?” Popeye’s was sold to Tim Hortons in February 2017 for $1.8 billion, a major success story.  

Ann Rohde Payes, executive director of the nonprofit Big Brother Big Sister of Richmond, Tri-Cities and Hampton Roads, discontinued a very public fundraising event due to it using a lot of organization resources and not raising enough funds to sustain it.  

Two women, in two vastly different organizations and circumstances, made two very tough but smart decisions. They are examples, along with Sheryl Sandberg, chief operating officer at Facebook, of a growing trend of very qualified and successful women in executive-level positions.  

Owners expect the CFO to know banking and have relationships in place to ensure resources are available when the right merger and acquisition (M&A) opportunity comes along.  Keep in mind the advice from Jim Collins, author of “Good to Great”: “Sometimes the best decision is saying no to the wrong opportunity.” Exercising due diligence and managing risk in a M&A are key CFO responsibilities.  

A recent Harvard Business Review article also stated one good way to ensure a successful M&A is to look first at what your organization can contribute into the acquisition to make it stronger, rather that first trying to see what you can get out of it. A different paradigm, but also very effective.  

Vendors 

Vendors play a key role in the success of your organization and strategic plan objectives. The CFO working with purchasing should strive to establish vendor partnerships to ensure that vendors provide consistent compliance to customer specifications and expectations, especially on time deliveries; ensure the organization pays the vendor on time; make sure the vendor is provided future product or service demand requirements when needed; and allow vendors to have a vendor-managed inventory system in place. 

Conclusion 

CEOs are asking for a higher skill set from their CFO, and as CPAs we are the most qualified with our training, knowledge and commitment to excellence to be able to fill the role of CFO — be it in a business, nonprofit or other organization. CPAs are, without a doubt, the “best of the best” when it comes to qualifications for a strategic CFO.  

To maintain being a strategic CFO, CPAs must be committed to continual skill updating. Spending 30 minutes a week reading Harvard Business Review is a good resource to learn how other organizations are successful in new ways. Keeping advised of the changes in technology is important. CFOs also recognize that while technical skills are great to have, having emotional intelligence and being able to communicate effectively are also necessary. A good strategic CFO will also have a good mentor in their life.  

The challenge for the CPA in a CFO role will be putting together a solid staff capable of doing professionally the important tactical work in accounting, allowing the CFO to concentrate on working with the CEO and senior management team on the strategic issues. The CFO will ensure the four stakeholder groups’ needs are met, and a well thought out strategic plan is in place with contingencies, ensuring success in the future. In closing, a CPA in a strategic CFO position is called to become more than just an excellent accountant. 

Mike DellaRipa, CPA, MBA, CGMA, has been the CFO for two companies and now is self-employed with his consulting firm, Mike DellaRipa LLC in Mechanicsville. He has also worked in sales and with operations as a facilitator for a mid-sized manufacturing and distribution organization, earning world class recognition status.