When a first-time CFO or a new CFO in an organization takes the reins, they must be prepared for challenges beyond spreadsheets and income statements. In many ways, the CFO serves as the CEO’s “consigliere”, an indispensable advisor and right-hand man. An effective CFO takes full ownership of the financial aspects of decisions so the CEO doesn’t have to. And it does so in a way that builds confidence among senior management and the board, as well as investors, bankers and analysts.
One of the main areas in which new CFOs need to develop their expertise is business strategy. Understanding why a business succeeds and what it needs to do to adapt and win in a dynamic environment is of crucial importance.
Strategic thinking begins with understanding the company’s competitors and competitive advantages and how they relate to the organization’s growth, pricing and market share.
Is the business model changing, for example, from a wholesaler to a retailer or a digital direct-to-consumer model? Has the company already invested in physical stores with its balance sheet and is it now looking to more investments in intangible assets, such as brand building and digital platforms? How will the changes affect growth, margin and capital intensity? Is it bad for the company’s financials to look more like Amazon’s in its early days as the retail giant ramped up its investments?
Mastering strategy development and analysis takes time. Seize every opportunity to listen and actively participate in internal strategic meetings. Read some of the leading strategy books or take some outside courses. Don’t wait until you become a CFO to start thinking about this aspect of the business, or you may never get there.
What else do successful CFOs do? They are very active in growing their networks, both within their companies and outside of them. Outside of the company, CFOs often network with the CFOs of customers, suppliers, and even competitors. Treasurers, controllers, and others potentially vying for a CFO position can do the same. If you are a treasurer, connect with other treasurers, either independently or through networking organizations such as the Neu Group.
When you meet counterparts from other companies, ask them what made them successful. Hear them describe their relationships with their CFO, CEO, and other senior executives, and emulate best practices. Additionally, reach out to your colleagues from other disciplines to better understand their roles and challenges, and look for ways your organization can help them succeed. Networking develops interpersonal skills and signals your suitability for a more dynamic role like CFO.
The most successful CFOs I’ve worked with over the past 30 years are less busy on a day-to-day basis than their counterparts. They don’t rush from meeting to meeting with little ability to prioritize. Once these high-performing CFOs understand the various functions they oversee and build a competent and talented team, they delegate as much as they can. This frees them to engage deeply in the strategic thinking and networking efforts discussed above.
My final piece of advice for new or aspiring CFOs is the same as my advice to any leader: care more about the success of the people who report to you than the person you report to and those direct reports will do you well. appear in front of your boss.
Greg Milano is founder and CEO of Fortuna Advisors, a management consulting firm focused on strategic decision-making, resource allocation, organizational incentives and culture.