Your internal adviser Featured

7:00pm EDT November 25, 2009

Many CEOs view their chief financial officer as just the numbers person. But the right CFO can be much more for your organization, and business leaders would be remiss to overlook the broader strategic role that their CFO can and should play. Navigating today’s trying environment puts an even bigger premium on having such a person by your side.

“An effective CFO will make a business better,” says Stephen W. Christian, managing director of Kreischer Miller. “They will contribute in many ways, including managing financial risk, identifying opportunities and serving as a sounding board for the CEO.”

Smart Business spoke with Christian about what to look for in a high-performing CFO.

What defines a high-performing CFO?

A chief financial officer should be a leader within an organization. They utilize good interpersonal skills to effectively work across functional lines with the CEO, HR, IT, sales and operations and pull everything together for the good of the company.

Finance people often have the persona of looking to the past and ‘keeping score,’ but CFOs need to be forward-thinking and solution-oriented. Another characteristic of a high-performing person in this role is that they have a deep knowledge of the business and the industry in which they operate. Intellectual curiosity propels CFOs to question processes and better understand operations. They possess awareness of the business’s critical success factors and respond proactively to operational challenges.

CFOs must have a commitment to learning and constantly bettering themselves. They can accomplish this by networking with peers in industry and trade associations, reading, attending seminars and spending time with the company’s advisers. One of the best ways to learn is to talk to people in your company. Learn from technical staff, engineers, and sales and marketing people.

How has the role of the CFO changed?

Effective CFOs expand the role of the financial recordkeeper responsible for preparing financial statements and tax returns and developing budgets to that of an operations adviser.

They add value by directing strategy, improving profitability, identifying opportunities and alerting all to the financial consequences of actions taken or planned. The position is viewed more as an investment in talent than as overhead.

For growth-oriented companies, CFOs are much more actively involved in merger and acquisition strategies, integration issues and due diligence. In addition, they are viewed as key contributors in the expanding international aspects of a business.

How do you define the performance and value of a CFO?

An organization’s credibility is enhanced by an effective CFO. They allow those dealing with the company, including lenders, insurance underwriters and suppliers, to feel confident in the business’ strategies and positions, which may result in better pricing and other terms.

The CFO also effectively utilizes the company’s professional advisers, such as the accounting and law firms, to supplement their skills.

Studying and reporting on trends, opportunities and growth initiatives, developing corporate-wide action plans to increase profitability and implementing efficient and effective tax strategies are additional ways a CFO demonstrates value.

The ultimate litmus test for a CEO to assess a CFO’s value is to ask, ‘Is my job easier and is the company better because I have this person in my organization?’ If the answer is no, perhaps the wrong person is in the position.

A high-performing CFO is a key component of building and maintaining a successful business that will overcome challenges and obstacles and take advantage of opportunities. View your CFO as an internal adviser, not as an accountant.

What are the more significant challenges CFOs have to overcome today and in the future?

There is a host of challenges resulting from the current economic climate, and a high-performing CFO is ideally situated to tackle such issues. Efficient working capital management and related bank financing matters are critical to a company’s success. Those overseeing these matters need to be more vigilant, creative and prepared.

Today, almost all companies operate globally in some way. A CFO must develop and maintain a base level of expertise in international issues, including international accounting standards, foreign exchange transactions and transfer pricing strategies.

In many organizations, the CFO either oversees or is actively involved with the IT and HR departments. Today’s CFOs need to know how to leverage technology throughout the organization for the greatest return on investment. In addition, they must be conversant on the impact of employment law and employee benefit initiatives to better understand and quantify the financial consequences of HR actions.

The challenges facing today’s CFOs are significant, but at the same time create opportunities for meaningful contribution and impact. High-performing CFOs are up to the challenge and see the opportunities available.

Stephen W. Christian is the managing director of Kreischer Miller. Reach him at (215) 441-4600 or schristian@kmco.com.