Driving business growth: Why every CEO needs a stellar CFO

But a solid partnership between a company’s chief executive officer (CEO) and its chief financial officer (CFO) isn’t optional if you want your business to grow and thrive – it’s essential. And here in the UAE, the challenges involved in getting that partnership right can sometimes be complicated by the presence of different nationalities, cultures and alternative ways of doing business.

For their part, CEOs must learn to transition into embracing an equal relationship of healthy mutual influence, honesty and trust, with somebody who’s often referred to not as a chief financial officer but rather as a ‘chief future officer’.

But where do you start, and what are the key features of that partnership that will foster enhanced productivity and deliver growth for your company?

What’s expected of a CFO today, and how have things changed?

The remit of a CFO has evolved from a role dedicated to financial analysis in which finance directors acted in a support function and as financial gatekeepers to one in which a CFO must communicate the risks and opportunities behind the numbers. In fact, the relationship is arguably as dynamic as it is proactive, and it must be grounded in mutual trust. A good CFO must be willing and able to challenge a CEO and present uncomfortable, unvarnished truths where necessary.

As one industry insider put it, “the CFO must be somebody that can speak clearly, not about the numbers, but about what the numbers mean”. And all this must be done with an independent-minded approach; only then can CFOs question assumptions and challenge pervasive groupthink.

The CFO-CEO relationship: why is it so important?

The development of an effective partnership between a company’s CEO and CFO doesn’t happen overnight or by magic. Moving from a purely reporting relationship to an equal partnership of mutual trust, influence and co-dependency takes time, effort and emotional intelligence. From startups to large organisations, CEOs mustn’t underestimate the CFO’s importance when it comes to filling a key strategic function, as well as inevitable knowledge and skills gaps.

Of course, that partnership must be built on some solid foundations; as the finance and business magazine Director of Finance notes, “every CEO needs a CFO that can be their second in command, providing the financial analysis to ground their decision-making process.” But the evolution of the role beyond pure financial analysis has become crucial to a company’s success, and CFOs and CEOs must work together to build that partnership from the ground up.

CEOs are now expected to dedicate time and effort to building and maintaining a strategic management team that plays equally to a CEO’s strengths, as well as their weak points, in tandem with their CFO.

Relationship with investors and board

CFOs have to engage with various stakeholders with varying degrees of understanding regarding strategic, financial and regulatory issues. McKinsey reports that by 2021, the number of CFOs reporting responsibility for investor relations had grown by around 50 per cent compared to just five years earlier.

That makes the delivery of effective and timely communication more critical, especially when it comes to uncomfortable or bad news. In short, CFOs must be adept at explaining financial issues, risks and opportunities in good time, and in a language all stakeholders can understand.

Does the GCC region present additional challenges?

In the GCC, CFOs will interact with employees and stakeholders from a wide range of differing nationalities. This is just as true in the UAE, and with different nationalities and cultures come distinct and often contrasting ways of doing business.

Understanding those differences is key to a CFO’s ability to establish effective ways of communicating with stakeholders of all backgrounds. This means CFOs must grasp the need to adjust their own management and communication styles to adequately reflect cultural differences and maintain enterprise productivity.

As an example, in the GCC, the extent to which employees are comfortable with varying degrees of autonomy on the one hand or micro-management on the other, will often largely depend on the dominant cultures in which an employee’s experience has been gained.

In short, an effective CFO in the GCC must understand and act on the nuances of the region’s unique culture to guarantee success in the region.

CFO as a bridge to the future: capability-building and long-term strategic leadership

CFOs should be able to establish and maintain productive relationships right across their organisations and help communicate to other stakeholders how calculated risk can drive growth. Again, a CFO and CEO need to speak clearly and in tandem, not about the numbers, but about what the numbers mean.

The role, however, doesn’t stop there: as far back as 2018, CFOs were already reporting that much of the value they created for their enterprises came from their strategic leadership. That evolution continues to gather pace, as the way in which organisations operate changes almost daily.

For example, the streamlining of business processes, supply chains and manufacturing is charging ahead at breakneck speed through the widespread adoption of digitalisation, automation and artificial intelligence (AI).

Given their importance in establishing and maintaining the strategic direction of their organisation alongside the CEO, CFOs must have the ability to understand these changes and challenges, spot opportunities in a highly dynamic market, and communicate those risks and opportunities to their CEO, board, investors and other stakeholders.

Things to watch out for: where can it go wrong, and what can you do about it?

It’s implausible to think that, even with a perfect fit between CEO and CFO, there won’t be challenges and hurdles that might strain the relationship and test the strength of that essential partnership. Power struggles and internal politics are sometimes the cause, but there are a few additional potential flashpoints that company boards would do well to anticipate.

And although a breakdown in trust might be difficult to predict, a plan to mitigate that at board level never goes amiss. Clear guidance from the board on a company’s strategic direction and priorities can help take the heat out of those potential clashes. And it helps to have some kind of agreed framework for resolving issues that might endanger communication and trust between a CFO and CEO.

The right fit

The role of CFO has evolved rapidly from providing the financial analysis to ground a CEO’s decision-making process – essential as that is – to incorporate a level of performance management and strategic input that goes far beyond the traditional role of financial gatekeeper.

As a trusted second-in-command, it’s now a CFO’s responsibility to communicate the risk and opportunity behind the bare numbers and to be prepared to deliver the unvarnished truth to the board and investors, ideally with proposals for mitigation or improvement, where appropriate.

As such, this essential role is now more pivotal, dynamic and challenging than ever before. But it also makes the important task of getting the right fit in the CFO/CEO partnership vital for the success of your business.