The Numbers Count – How to Spot a Great CFO

Sooner or later as the founder or leader of any entrepreneurial business you are going to need to hire a CFO.  Whether you hire full-time or part-time help, the necessary skills of a chief financial officer are not to be confused with the book keepers you have probably retained to keep tabs on the numbers early in your businesses growth or even the finance manager you may currently employ.

These are not in any way `bean counters` to be tolerated, they are strategic hires and getting the right one can be a make or break decision if you want to succeed in the long term.  So it’s worth thinking early on about the eventuality of hiring a decent CFO.  

Amazing creativity

If you are founder of a successful business you’ll have got pretty used to keeping a tight eye on the numbers from the start. But the best CFOs I’ve worked with never cease to amaze me in their creative ability to seemingly glance at set of company accounts, read them like a book, instantly spotting the key issues, in a strategic context, and describing them in plain English.

The ability to perform laser-guided reading of spreadsheets is usually a good indicator of a person you want to hire.  Particularly if they can show that they can use this information and combine it with experience to predict potential challenges in the future, advising on the potential financial approaches that will smooth the way forward for your firm.

Crystal balls

This is vitally important for entrepreneurial businesses where the rate of change is so fast and where you and other leaders are consumed by operational issues - from hitting the sales targets to getting the right people on board.  So don’t expect your CFO to have a crystal ball, but do expect them to have an uncanny ability to tell you what’s likely to happen next in your business, or at least have a reassuring grip of financial cause and effect and which fiscal levers to pull to push the company in particular direction.

In addition to making a major contribution to running the business on a day-to-day basis, having the right person in the role is also key in maximising the value of your operation. So in hiring a CFO you need to think not just in terms of their contribution in financial planning, management and governance but also about their role in looking  for the right investment, acquisitions or when, eventually, planning an exit. This means they’ll need to be able to do a pretty decent poker face as they will be key to some of your most important negotiations.

Suited and booted

Of course, the informal environment of most entrepreneurial businesses may have your CFO wedded to their jeans but they also have to be capable of facing externally towards the more conservative elements of the business community.  So they need to be someone who doesn’t baulk at getting suited and booted when it comes to meeting with auditors, banks, investors and, eventually, the City and who doesn’t look like they are being strangled by their tie.

You certainly don’t need a CFO who is a shrinking violet.  They need to be robust and not afraid to challenge any of their colleagues to a reality check. To that extent, your CFO should be the board voice of unequivocal, numbers-backed reason about what can really be achieved with what resources and in what timescale. 

Naturally, for me, one of the things that come to my mind in differentiating an excellent CFO from a merely good one is their communication skills.  It’s a sweeping but, I think, fair generalisation to say that those that are logical and good with figures are often not the most articulate in the room; just as those who are literate and can tell a good story often find it hard to add up.

Effective communication

But a CFO worth their salt needs to be able to assemble and pick out the key elements of budgets, forecasts and accounts and communicate them effectively not just to other leaders in the business but to the company as a whole.  There is nothing worse that the staff meeting where the assembled throng sit in dread of the earnest `numbers presentation` delivered in a way that leaves no one in the audience any the wiser nor clearer about what it’s supposed to mean for their role. Or that sends them to sleep.

This is important not just for tactical reasons but to ensure that the whole company thinks constantly and consistently in terms of the key numbers and their contribution to achieving them. In the same way as the best CTOs can highlight what is important and explain it in acronym-free and accessible language, CFOs have to bring spreadsheets to life.

Powerful and inspiring

So, as well as being in charge of the numbers, CFOs need to be business leaders in their own right and be part of a powerful and inspiring team. They will need to be able drive the finance team, but they also need to approachable and be capable of explaining that numbers exist in context. So a CFO must be able to visibly connect the work of finance to all aspects of day-to-day operations and demonstrate business smarts in doing so.  And that means being engaged in the whole of the business and its people. Being comfortable with managing by walking about is a skill all CFOs should master.

Problem solvers not problem creators

In this respect I’ve found it useful to rotate internal services teams, particularly finance and HR, around the business. If they sit with other operational groups for extended periods they build relationships outside of their immediate team and become intimate with all aspects of the business, being seen as problem solvers not problem creators.

Over the years I’ve worked with some CFOs who have been genuinely fascinated by all aspects of the business and its people.  This, in itself, is delightful but it was also vital to them not being seen as the head of the numbers ghetto as much as it was valuable in gaining an all-important real-time perspective on what made the company tick. And it’s that passion to understand everything about the business that ultimately marks out the leading CFOs from the also-rans.

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One, Two - That’s Creativity for You

One of things I like about the precious two weeks most of us reserve for our summer holiday it that it gives me some time to be alone.

Being no diva-esque Greta Garbo in my search for solitude, I do this best by climbing up and down Greek mountains on a bicycle or by being out in the Mediterranean hanging off a catamaran.  Occasionally, it’s just lying about catching up on a few books for which my normally frenetic schedule and atomised time doesn’t allow.

The myth of the lone genius

In between the sweaty and scary moments that some of these pastimes provide, solitude, whether physical or mental, gives me time to think.  It helps develop some perspective, and come up with new approaches to problems and ways to develop businesses or people.

The reality, though, is that many of the better ideas I’ve been associated with and, certainly their implementation, have ultimately been group efforts. But the best have been a result of a series of partnership with people with complementary skills and personalities I’ve enjoyed over the decades.

This may be one reason why I don’t hold with the cultural concept of the` lone genius` whether they be Edison, Einstein and Faraday or Jobs, Zuckerberg and Welch.  Many are extremely driven and have ruthlessly planned self-deification convinced of their own uniqueness, others had it thrust upon them by outside interests.

Attractive though the idea of the entrepreneurial hero may be, I’ve long held the view that alongside the most effective CEOs is a great COO; that the most successful start-ups combine at least a sales and technical skills leader from the outset whilst great communications campaigns come out of pairings of the visually and verbally literate. The need to sustain and evolve creativity is why even the most successful artists have muses.

Creativity is a social process

To be clear, I’m certain, then, that creativity of all sorts is the key to consistently generating innovation and is the social process which underpins successful entrepreneurial leadership.  This issue lies at the heart of Joshua Wolf Shenk's new book, ` Powers of Two: Finding the Essence of Innovation in Creative Pairs`.  In this tome, which draws on sources including academic research and historical evidence, he explores what makes creative partnerships work, those where people can be `as alike as identical twins and as unalike as complete strangers. `

Shenk believes that in successful pairs lies a special combination of similarity and mutual interests alongside differences.  Creativity, he argues, is driven by `encountering difference`. But this seems to work best when only two players are involved.  Crucially, it's a social unit but it's also very flexible. Two people can take and switch roles, forming a balance that is also part of optimising the creative process.  

Effective partnerships are rarely symmetrical, with both people in the same role, even if, like Google’s Larry Page and Sergey Brin they have the same title. For instance, it can commonly be the role of one partner to be the public face of the company, whilst the other maintains a lower profile.

This can be for more than pragmatic reasons of skill or time availability.  It may be that the `face` gets their ego gratified by public attention, and that need  not be destructive so long as they respect the other person’s contribution.  It may also be that the more recessive personality has to realise their interests too are being met by the more extroverted skills of their partner.

Fight

But such issues may be difficult to navigate and any student of business history knows that entrepreneurship is full of tales of co-founders fighting, especially if their enterprise proves successful. This can start as soon as a third person enters joins the firm. The culture then starts typically to become less dynamic and more structured at the expense of rapid, informal and often intuitive communication.

Also, as anyone that’s been in a start-up will attest, when you're struggling to break through, you're all in it together and it's fun. There is a common enemy - failure.  In the presence of a common enemy focuses the mind and the surrendering of individual ownership, either metaphorically or literally is easier because there is not so much at stake.

Of course, creative pairs exist in a context, and when you look at those that survive and continue to be creative together, what surrounds them becomes a really critical part of the story. Shenk points out that, often, creative partnerships have a stable team of co-workers who've been with them for decades. Each in the pair has the freedom to play to their strengths because they're being supported consistently by a group that understand how it benefits them and have evolved mechanisms that make the most of any situation.

Trust, faith and belief

But ultimately great creative partnerships are built on trust.  You have to be confident that your partner is going to do what they say they're going to do, and that's something that’s developed over time.  Eventually trust evolves into faith, where you really believe in someone. 

But as I like to think my holiday schedule demonstrates, creative partnerships are not at odds with solitude.  A lot of people need to have time alone to give their best to another.  And that’s something  every partnership needs to work out.

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