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Friday
Jan052018

The Operational CFO - Helping Improve the Score

I used to engage in the debate about whether the right structure at a certain stage of business evolution was to bring in a COO.  The argument was that bringing in a “been there and done that” executive to run much of the day-to-day operations was the right move to allow the business to scale.  Such a structure typically enabled the founding CEO to remain as a leader and a visionary, and often to continue to drive the go-to-market processes.  Over time this arrangement proved to be the wrong one more often than the right one, as decision making was often ambiguous.  People wanted to follow the CEO yet they reported directly to the COO.  Often not only the organization but also the culture became bifurcated.  

When a company is at that stage where an infusion of experience, operational focus, and financial discipline are required to take the business to the next level, I am increasingly in favor of an operational CFO.  

What is an operational CFO?  Well they come in different flavors but they are more likely an MBA than an accountant.  Their skills are in FP&A (also known as financial planning and analysis) versus GAAP.  They have business experience and often came to the CFO role from another function.   

What is it that I like about this role?   

  • This person can often serve as consigliere for the CEO
  • There is no role ambiguity.  The CFO can dig into the cost and performance of every function without ever having people stop reporting to the CEO
  • Companies get complex as they grow and the role of FP&A is about finding ways to optimize performance as the business scales 
  • The addition of an operational CFO is unlikely to change the underlying culture except to make everyone more aware of what actions are driving winning outcomes  

Bottom line.  An accountant tells you the score.  An operational CFO helps you to score more and thus increases the odds that you will win.  

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Reader Comments (4)

Nate - You nailed it! I couldn't agree with you more.

January 5, 2018 | Unregistered CommenterPaul Musselman

Definitely agree! Been in the COO + CFO capacity - so points above are right on.

January 6, 2018 | Unregistered CommenterAnanth Avva

Nate, great post. One question - do u view this Operational CFO as someone who has the same direct reports as a COO would? Or do you keep all that operational reporting with the CEO?

January 7, 2018 | Unregistered CommenterAri Raivetz

We continue to see the CFO role evolve with our 7,000+ CFO Alliance Members attempting to define ' Modern Finance.' As I offered at last month's Crains NY CFO Forecast --One of the triggers for the changing role of the CFO, and the finance side of companies in general, is the rising use of data informatics and the comfort level CFOs have with numbers to guide analysis in the decision-making process, explains Nick Araco of The CFO Alliance. “That level of comfort can now be applied across the enterprise in areas that were at one point not measurable,” he said, adding, “There weren’t metrics that were generally accepted for sales, marketing, Human Resources and other areas. Things that were once not measurable are now measurable.” 
Companies may feel more comfortable filling a new role with a somebody from the finance side rather than bringing in somebody from what might be seen as a competing team. Said Araco, “From a career standpoint, people who came up in accounting and finance now have the ability to move into new roles that involve the application and use of data and analytics to help their companies make decisions.” 

See http://www.crainsnewyork.com/article/20171222/CUSTOM/171229968/cfos-to-lead-across-the-enterprise-affecting-shareholder-value-more

January 8, 2018 | Unregistered CommenterNick Araco

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