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Habits of Successful CFOs

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Six traits of an effective finance executive

A great Chief Financial Officer (CFO) is worth her weight in gold – perhaps even more. A truly effective CFO leads to greater investor confidence and is vital to the success of any organization. On the flipside, a mediocre CFO will quickly contribute to a company’s downfall. The good news? “Bad” CFOs are easy to spot—but on the other hand, the habits of a quality CFO may not be as apparent. Below, we’ll list the essential traits that may seem obvious, but are often underestimated.

Trust, Integrity & Ethics

There is an esoteric quote in the financial business that says, “You don’t need capital in the financial business if they trust you, and you you’ll never ha  ve enough capital if they don’t,” Good CFOs are the pinnacle of trust – they are honest, ethical, and loyal to their constituents. This may require them to deliver bad news to the CEO – even if it means risking his job – because it will inevitably benefit the stakeholders.

Beyond the Numbers

Having a strong command of numbers and financials goes without saying. A successful CFO must possess a fundamental knowledge of accounting, cash management, and the financial functions. This doesn’t mean they must be a professional CPA, but they must clearly understand how the numbers are generated and be able to communicate effectively with managers, creditors, and shareholders. On top of this, they need a firm grasp and understanding of the theoretical financial environment, such as the cyclical aspects of the business. In the current market, it’s common to experience cycles that are elongated, truncated, or stalled. Knowledge of these cycles is essential for a CFO to present a confident face to investors.

Strong Understanding of Company Operations

To be effective, a CFO must possess a deep understanding of the actual company she works for and the product or service it produces. She must understand the organization’s fundamentals, basic operations, and business model. If a CFO doesn’t sincerely understand how his company makes money, she won’t be able to effectively impart this to investors. In fact, it’s widely speculated that the recent CDO write-offs on Wall Street were due to the fact they didn’t understand the product.

Great CFOs see themselves as teachers who not only grasp the knowledge and fundamentals, but also can effectively convey this information to others.

Finger on the Pulse of Strategic Operations

The best CFOs can think strategically, create and execute business plans, and demonstrate strong leadership. CFOs who stay in their offices all day, have no executive presence, hoard information, or are arrogant or condescending are generally ineffective. Great CFOs are viewed as key players strategically as well as operationally. By keeping his finger on the pulse of the organizational activities that drive the numbers, he’ll gain more credibility and confidence.

Ability to Think (& Communicate) Like an Investor

According to a report conducted by the investor relations research team at the renowned G.A. Kraut Company, “Good CFOs communicate well, which prevents volatility in the stock. They prevent misinformation or misinterpretation taking control of a stock, even if it’s only for a fleeting basis. It may not show up in a long term chart but investors don’t like volatility and they don’t like surprises.” A quality CFO can articulate what’s going on, leaving no room for judgment errors or false conclusions. Especially in turnaround situations, a CFO must be able to communicate financial performance to all key constituents, both verbally and in writing. Good CFOs sit back and think, “What are the salient issues that an investor needs to know, and how do I explain them clearly to the lowest common denominator of the people listening to this presentation?”

Problem-Solving and Reliability

In addition to doing her best to keep a company out of trouble, an exceptional CFO can get her company out of trouble, too. An effective CFO is very good in both damage control and protecting a company from itself in the future. And a prerequisite of effective problem-solving skills is reliability. A CFO who works well under pressure, resolves issues quickly, produces accurate information, and is focused on getting results is an invaluable resource.

In summary, great CFOs are harbingers of trust, brilliant communicators, committed, and above all, passionate – not just regarding financial aspects of a business, but also the strategic and operational details. Investors must know what positions the CFO is taking on behalf of the company. The CFO must be self-confident without being arrogant, and willing to admit mistakes. The best CFOs not only monitor change in an organization, they also play a key role in setting that change into motion.

If you are looking for financial recruiting services in the Pasadena, CA area, contact the experts at Conexus today. We have the experience and resources to help you land your next CFO.

 

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