Bill Tobia
Managing Director, Strategic Finance
btobia@llrpartners.com

To support the new reality, the CFO role must evolve from fiduciary to visionary… Instead of resisting and questioning change, they must lead it.

Change is the only constant, but the pace of change has certainly achieved new velocity over the last decade. Businesses are re-inventing themselves as highly responsive, customer-centric, technology-driven organizations, and that has a trickle-down effect on every role in the organization, including the CFO.

 

The Challenge of Change in the CFO Role

For the CFO role, it presents some of the greatest challenges… and opportunities. The finance and accounting function drives the entire organizational cycle, supporting customer-facing activities such as support, sales, marketing and product or service delivery.

To support this new reality, CFOs must evolve from a fiduciary to a visionary role. They must become more involved, more strategic and more collaborative. Instead of resisting and questioning change, they must lead it.

As a long-time CFO whose career has weathered many changes, and now as part of the Value Creation team at LLR, I have had the opportunity to coach many senior finance professionals to help them fulfill their potential and deliver more value to the company and its shareholders.

 

I urge CFOs to re-examine these areas as a first step towards spearheading positive change in their organizations:

 

Change the mindset about CFOs

Becoming a change agent in the organization starts with breaking out of the limiting view many have of the CFO role. If you’ve come up through the ranks of finance—controllership, financial reporting, public accounting—you’re comfortable reporting on the numbers, keeping the books accurate, ensuring proper internal controls, keeping the board informed and dealing with lawyers, bankers and auditors. But you may not be fully versed in the language of sales forecasting and pipeline management, which means you may be missing key elements that connect your efforts to value creation and revenue generation.

Finance needs to work with every part of the organization to enhance its ability to deliver on the objectives and create value.

Gaining this knowledge requires confidence. You need to feel comfortable inserting yourself into strategic and operational initiatives and critical decision-making processes. Carving out more space for the finance function is not a question of ego—it’s about protecting the company’s best interests.

When you’re not invited to a meeting, make the case for your inclusion. Demand to know what’s going on in the company at every level. The more the CFO knows, the more value they can deliver, but the first step is to change your own limiting beliefs and the assumptions of those around you.

Ask yourself: If a significant contract was about to go south, or if the organization was on track to win a huge contract, would you know in advance? If you’re not plugged into this information, how can you prepare the company to meet its realities?

Change the culture

Everyone in a CFO role should lead the charge to create a culture of visibility within their organization—a culture in which everyone understands not just “where we are” now but “where we’ll be” in six months, a year or even longer. The CFO’s job is no longer confined to reporting on the historical aspect of the business, they need to be able to anticipate surprises and predict what the future will bring—whether it’s good news or bad.

To lead this culture change, you need to go beyond typical financial KPIs, beyond reporting and regulatory requirements, and start getting comfortable with sales-pipeline math. Forecasting is critical, and to be able to accurately run a SaaS revenue forecast model, you need to reach all the way back to the organization’s marketing leads and be able to predict the potential they represent. Every resource allocation decision is based primarily on sales forecasting, which, in turn, is based on product/service delivery capabilities.

Extend the sightlines beyond the present and take responsibility for the forward-looking direction of the business. Help the organization to make timely, educated, data-driven decisions across the marketing, sales, support and product/service delivery functions. Report on new developments quickly and accurately to help the organization understand where the business is going.

Ask yourself: Do you know your company’s renewal rate? Up-sell potential? Rate and cost of acquisition for new customers? If you know those figures, do you know (and can you trust) how they were calculated? As CFO, you should be able to see into the pipeline and feel confident in the future revenues those metrics represent. I don’t recall ever getting a “free pass” by saying the sales forecast came from the Sales organization. (For more detail on key pipeline metrics, read “The Growth Critical Mission every SaaS CFO Needs to Lead.”).

Change the relationships

The CFO role has a reputation for being Doctor No. “No, you can’t spend that money.” “No, that’s too risky.” But an adversarial approach will shut you out of the company’s strategic operations. Cultivating a personality that people can trust opens doors and gives you access to the information you need to do your job effectively.

Re-envision your role as a facilitator, not a gatekeeper. Roam the halls. Talk to other executives. Instead of focusing on reducing costs, make a point of finding out how you can help people become more successful. Reframing the conversation to focus on their needs and their objectives is the beginning of redefining the relationship. You’re there to help them meet or exceed their targets, so sit down and have a conversation about what they really need.

It’s a virtuous circle: the more you can help people, the more they’ll want you to be involved. The more you’re involved, the more you’ll learn about the organization. The more you know, the more you can apply that knowledge to the task of creating a more resilient and profitable company. The projects that are delayed, the deals that are sliding south, the big opportunities on the horizon—by engaging in open conversations with the people behind these activities, you can add significant value.

Ask yourself: How often do you talk to your colleagues? Is the interaction limited to status meetings, or do you make a point of reaching out informally and frequently to find out what’s going on? If you rely on formal channels alone, you’re not getting the whole picture, and you’re not getting it soon enough.

Change the CFO role

CFOs have historically been more comfortable making sure the numbers work than making sure the people do. But talent is an integral part of an organization’s ability to achieve financial stability and create value, and the CFO role is key in aligning talent with those goals—both within their own department and across all business functions.

Hire people who are curious, courageous and collaborative—able to look at things differently, be creative problem solvers and engage with others to get the information they need.

Start with your own team. Do you have the right people in place to support a more strategic back office? CFOs are good at hiring for integrity, discipline and numeracy, but that’s not enough. You need people who are curious, courageous and collaborative—able to look at things differently, be creative problem solvers and engage with others across the organization to get the information they need.

Looking beyond the finance function, the CFO role can help the entire organization identify talent more effectively by bringing in a performance-driven perspective. You may not know what a great trainer or a great salesperson looks like, but the financial data can tell you which employees are contributing more to the bottom line and which are costing the organization money. Being able to examine the data in the context of value creation adds a new dimension to the picture and helps everyone make more informed decisions.

Ask yourself: Are you spending more time doing hands-on financial reporting than leading, coaching or strategizing? If so, it’s time to make changes. You have a vital role to play in building and supporting your own team and helping other business functions define their talent requirements more effectively.

Here’s the bottom line.

Every member of the executive team needs to prove their strategic value to the organization. It’s an exciting time for leaders who are able to see beyond the CFO role and its traditional job function to the new opportunity ahead. But to seize that opportunity, you need to be bold, curious and persistent. Start new conversations, make new connections and outstep the typical bounds. By recasting yourself as an agent of change, you can demonstrate and deliver even greater value to the organization.

 

LLR Partners believes in sharing the wealth of experience and expertise within our portfolio companies, network and teams in order to inspire and help accelerate growth for a wider community of business leaders. We hope you find these GrowthBits helpful and share them with your network. Send us the topics you’d like to learn more about any time. 

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