When we think of finance we invariably think of numbers, of balance sheets and the old-fashioned bean counters. Yet the role of the modern-day Chief Financial Officer (CFO) extends far beyond the realm of numbers and touches every aspect of the business.
In any business, but especially in startups or businesses on a growth journey, the CFO is an integral figure. As the guardian of the business model, the CFO is responsible for balancing far more than numbers. They will keep the whole business model in balance, ensuring long-term growth for an organisation that is successful and sustainable.
Below our CFO, Peter Ulander, explains and paints a vivid picture of the role the CFO plays, the challenges they face and how they measure success:
On the role of the CFO...
In a growth situation a company is constantly faced with new situations and challenges of "existing truths". This is valid for all parts of the organization and it thus has a significant impact on the company's business model. Even though the model may be solid as such (which in itself is certainly not often the case in a young start-up), the way it is operated will certainly have to be under constant review and adaptation. One way of looking at the CFO role in this environment is to see it as the guardian (or even owner) of the business model.
With this I mean, since revenues generated through the revenue model and costs associated with the production and delivery models eventually will end up on the desk of the CFO, it is the CFO who is best equipped with the data needed to evaluate the business model components.
Being the guardian or owner in my world means the CFO is responsible for identifying deviations or unexpected outcomes and influencing the organisation to adjust and adapt.
The importance of getting this right (including finding ways to do this proactively) cannot be understated as growth puts stress on all parts of the business; a failure to adapt on one end may lead to serious issues on another end.
This is why you so often see growing business getting into serious problems 2-4 years into their growth journeys. It’s often not the lack of revenues or uncontrolled cost growth as such that is the cause, but rather imbalances in the business model that puts too much strain on the business and the organisation.
On helping establish a culture within an organisation...
Building a positive and productive culture in an organisation is all about communication around the business model and how it’s operated. Everyone should know what the main drivers of the business are and how they are influenced and impacted. This helps create a culture of ownership and participation which is important to keep the organisation and the business adaptive.
On the challenges every CFO face…
The challenges are the very nature of what economics has always been about; managing scarce resources. Every business will always be short of some important resource at one time or another (be it money, employees, happy customers, good suppliers, office space or time).
This is where the guardianship of the business model comes in. The CFO constantly needs to know what impacts their business (and how it impacts it) and do her or his best to mitigate the risks of detrimental impact or have a few alternative plans in her or his desk drawer. But this is, of course, not only the responsibility of the CFO, this goes for all of management, but it’s great if the CFO can coordinate this.
On the skills needed to be a great CFO...
It always depends on the circumstances. But I think that as the CFO is getting more and more visible in the organisation and the business, more traditional leadership skills are becoming increasingly vital. Communication has perhaps not been the traditional core skill of CFOs in the past, but today it is key.
On measuring success...
Last year we talked about measuring success by changing the way we use KPIs. Alongside this and In addition to seeing the business perform as planned, desired or expected, I personally keep a keen eye on the amount and severity of what I call "operational issues". How "smoothly" does the business run and how quickly do we overcome the "issues".
It’s clear from Peter’s words that the CFO, at any given time, is a strategist, an operator, a catalyst and a guardian. Furthermore, it’s the businesses who strive to keep their organisation in balance and harmony who will ultimately be the most successful.