Preface: If you’re hiring your first CFO for your fast developing entrepreneurial momentum, this blogs is to help you appreciate the skills a CFO can and should bring to your business.
Skills Every Chief Financial Officer Needs
The Role of a chief financial officers (CFO), requires an ever increasing need in the bandwidth of financial acumen. Here are a few skillset your CFO should have expertise in, develop expertise in; and skills to look for when hiring a CFO.
Strategic Thinking. A CFO should have the skill to help achieve the strategic vision of the business, i.e. a map of the business purpose, objectives, strategy, and the steps necessary to achieve that vision. Creating a vision, plan or strategy on paper is not that difficult. Yet even a realistically achievable one is challenging, when working to implement. You need decisive acumen on your team and with its leader (CFO) to take action, to keep believing in the vision, and work tirelessly towards the achievement of that vision.
Your CFO must be committed. With strategic thinking skills, your CFO should have the expertise and experience to evaluate your businesses, e.g. where did you begin, where are you today, and where do you want to be in the future. This will lead to an assessment of strengths, weaknesses, opportunities, and threats. Your CFO needs to think through outcomes, while simultaneously making necessary adjustments in implementing when marketplace warrant, i.e. adapting to new market conditions, innovations, opportunities, and risks. Like Jack Welch says, who lead GE from $4 billion business to nearly $500 billion, “When it comes to strategy, ponder less, and do more”. The key is do more of the strategic. What is strategic? If you don’t want to answer that question, your CFO certainly better have an answer. Typically for entrepreneurs, the same strategy that got you from zero to say $5 million in revenue (typically the sales volume when small business begin to think about hiring a CFO) won’t get your business to $15 million. You will probably place significant reliance on your CFO when working through strategy. Whether or not you’re a strategic entrepreneur, your CFO needs to be strategic.
You need your CFO to not only ask the right questions, but address them. Questions like i) will the vision and strategy meet our objectives? ii) Can we successfully implement the strategy? iii) Is the strategy consistent with core values of the business, and our customers or clients culture? iv) Does the business have the resources – financial capitals, intellectual capital – to succeed in implementation? V) Can we clearly envision and communicate the strategy?
Business Risk Planning. A CFO should have experience and expertise to work to identify inside and outside business risks with collaborative discussion among company personnel. Your CFO should quantify and assess these identified risks, and likelihood of the risk occurring. The risks should then be prioritized in regard to probability and impact. Monitoring the risk should assigned to a company personnel to and be reviewed periodically. As importantly, the mitigation strategies should be developed for the risks. Your CFO will need to balance the strategy implementation with the associated risks. 60% of increases in business value is built from revenue growth, so an understanding of risks in the marketplace will improve calculations on your businesses mineral vein.
Deloitte published in the summer of 2010, a white paper titled “Risk Intelligence decision-making: Ten essential skills for surviving and thriving in uncertainty. The paper on risk management shows where things wrong. The paper names the following as top risks 1. Relying on false assumptions 2. Failing to exercise appropriate vigilance 3. Tending to ignore velocity and momentum 4. Failing to make key connections and manage complexity 5. Failure to imagine failure 6. Placing reliance on unverified sources of information 7. Not maintaining adequate margins of safety or cushions 8. Focusing only on the short-term 9. Failing to take enough of the right risks 10. Having a lack of operational discipline. Read and act on these ten items each month, and your business will probably be in the top 10% or 15% of small business risk managers. Other risks include – shortages in capital, supplier quality or concerns with timeliness, processes that are too complex or result in ineffective quality, inability to meet customer demand, HR issues, i.e. finding the right people for key roles, and the list goes on.