Never underestimate the power of an effective partnership between a Chief Financial Officer (CFO) and Chief Executive Officer (CEO). The CEO and CFO relationship is arguably the most important relationship in any business. Together, the two can navigate through times of transition and lead an organization to greatness.
Of course… all that ‘greatness’ depends on the relationship between the CFO and CEO. If they clash heads and can’t see eye-to-eye, it won’t take long before things start falling apart at the seams. But, if the CEO and CFO relationship is a strong one, built on trust and collaboration, it’ll have a positive impact on the entire business.
If you’re a CFO determined to foster a strong relationship with the CEO of your company, you’ve come to the right place.
In this post, you’ll learn what a CEO needs from their CFO, and what you can do to support the CEO on a day-to-day basis.
- Why the CEO and CFO relationship is important
- How to build a strong CFO and CEO relationship
- Building a foundation of trust
- Open and honest communication
- Knowing the business like the back of your hand
- Challenging the business and driving positive change
- Becoming a business partner
Why the CEO and CFO relationship is so important
All the best businesses in the world have a strong CEO and CFO relationship. Without it, a company is more likely to struggle to meet goals from every corner of the business. Every successful company needs a leadership union with a solid and cohesive vision.
According to Gartner, 80% of CFOs have strong relationships with the CEO. The modern-day CFO is so much more than the financial gatekeeper. They are the CEO’s right-hand person. The CFO must support and challenge the CEO to make the best possible choices for business growth.
But why is the CEO and CFO relationship so important?
Well, studies have shown that the CEO and CFO working relationship has a direct impact on the success of a company.
When CEOs and CFOs work well together, they harness each other’s strengths to make better-informed business decisions.
The CFO comes from a financial background and although the CFO reports to the CEO, that doesn't mean they both share the same level of financial understanding. So, the CFO often has to think about how they're communicating information to the CEO. They must present data in a way that's easy to understand for someone who isn't a financial expert. Doing so will help give the CEO all the information they need to, again, make better decisions, and reach the best possible outcome for the business.
Making the CEO aware of potential risks and what needs to be done to cut those risks is vital. Building a strong CEO and CFO relationship is crucial to keeping that line of communication, trust, and collaboration open.
How to build a strong CFO and CEO relationship
The CFO role has transitioned into a business partnership role, which means the CFO and CEO are working closer together than ever.
One of the most important aspects of the CFO role is to build a trusted and effective partnership with the CEO, but how? What do CEOs want from their CFOs?
Here are five ways CFOs can support the CEO:
1. Build a foundation of trust between the CFO and CEO
98% of CFOs with “very strong” CEO relationships say they're comfortable bringing difficult issues to their CEOs. Without trust, you'll have a hard time building a solid relationship with the CEO... and anybody else for that matter.
CEOs must trust their CFO with extremely important and often highly confidential information. The two must be able to express their opinions openly and talk about company issues with mutual trust and respect.
But the CEO can’t hand their trust to the CFO just because of their job title. The CFO must earn the CEO’s trust and the best way to do that is to start with an open and honest dialogue. Speak candidly about the business when you must. And show that you're knowledgeable about the business and its financial standing.
The CEO trusts the CFO to help make crucial business decisions. If the CEO can’t trust you as their CFO, you have a big problem on your hands.
Below, you’ll find some tips to help build a foundation of trust between the CEO and CFO:
Always be honest and upfront
Humans make mistakes and that's normal, expected even. But, you’ll lose the CEO’s trust if you keep making mistakes that keep negatively impacting the business.
Mistakes happen and sometimes there’s nothing you can do to prevent them. But when they do happen, own up to your mistake and take responsibility for it. Don’t try to hide it from the CEO, that'll only do more harm than good.
If you make the CEO aware of your mistake, you can take the right steps to solve the issue and prevent it from happening again.
Be prepared and over-deliver on your promises
You can safely assume that your CEO has a lot on their plate. After all, they’re leading the entire organization. So, they’re counting on you to prepare for meetings and presentations. They want to be confident that their CFO can answer any question that comes their way and do so with confidence.
If you show up prepared and over-deliver on your promises, you’ll prove that you’re someone the CEO can trust.
Be a good person
Don’t underestimate the impact of simply being a genuine person.
If your intentions aren’t in the right place, people know it. Never get sucked into the gossiping vortex at work. Keep your opinions about others to yourself. And always treat people with kindness and respect.
Remember that you and the CEO will often discuss sensitive matters. You're trusted to keep that information confidential. So, avoid gossiping around the water cooler and keep it inside the ‘circle of trust.’
2. Strive for open and honest communication between the CFO and CEO
The best CFOs are effective communicators. CEOs want their CFOs to communicate openly and honestly with them. So, if you’re not the best at communicating ideas, problems, solutions, etc., start practicing.
The CEO needs to trust that their CFO knows how to not only deliver data but communicate it in a way that they (and other stakeholders without finance backgrounds) can understand. With the role of the CFO constantly evolving, communication skills have climbed to the top of must-have CFO skills.
The CFO and CEO must be able to speak openly to each other about everything from budgets to strategy and important business decisions. Effective communication between the two roles is crucial.
89% of executives said the leadership trait they valued most was honesty. This means being always upfront and transparent with your CEO. Don’t keep secrets from them.
Communicate complex issues in simple terms where possible. And always strive for open and honest dialogue.
3. Know the business inside and out
CFOs need to develop a good understanding of the business and the strategy. You’ve got to know how the business works across each department. Learn where the CEO sees the business going, and how they plan to get there.
Aside from handling the data and finance side of the business, CEOs expect their CFOs to know how different departments operate. And, how all their strategies tie into overall business goals.
The best way to get to know the business is to build strong relationships with other members of the team.
Take time to get to know who you work with. Learn about their growth strategies. Find out if they have any obstacles getting in the way of their goals. And, offer solutions for any rising issues when you can.
Getting to know the business, the people, and the strategy, is vital to identify the company's strengths, challenges, and any gaps.
Here are a few key areas of the business to familiarise yourself with:
- The company’s goals and aspirations – What does the company want to achieve?
- What products or services does the company offer? - Clarify the purpose of those products/services and get to know the marketplace for each one.
- Competitors - How can the company gain a competitive advantage? And what can sustain that advantage long-term? How can the company differentiate itself from its competitors?
- Existing systems and processes - What is in place now? What needs to be replaced with better systems or processes? Are there other options that’ll help streamline processes, cut costs, and increase productivity?
Armed with this knowledge, you’ll be in a much stronger place when brainstorming possible solutions and growth strategies with the CEO and other members of the C-Suite.
4. Challenge the status quo and drive positive change
The CEO doesn’t expect their CFO to enter the business and blindly accept the status quo. CEOs want their CFOs to voice their opinions and challenge the business to push towards a more profitable future.
For example, if the numbers don't support an existing strategy, see if you can offer alternative solutions to drive positive change.
Speaking of change, the CFO is often the one leading finance transformation within an organization. Adopting new technologies to streamline processes and increase workplace productivity is just one area of the business where the CFO can drive positive change.
The CFO is responsible for looking ahead and seeking opportunities to improve the bottom line. With automation and technology always evolving, CFOs must prepare to install such technologies and develop an effective change management strategy in the process.
Of course, not all changes are huge distributors of the status quo. Some changes are improvements to the current state of a company’s systems and processes, as noted by McKinsey:
“Although some transformations include radical changes, most create significant improvements on the margin of existing operations.”
For a CFO to drive real change, they must develop a good partnership with the CEO. Identify what areas of the business need to change. Diagnose sources of resistance. And, work together to come up with the best solutions to overcome obstacles and achieve positive change.
5. Become an effective business partner
Demands on finance teams are increasing. CEOs need more than a C-Suite member who's good with numbers. They need their CFOs to be strategic business partners and help them make strategic business decisions.
As the CFO, you’ll partner with both the CEO and other senior executives/executive assistants. Maximizing business performance will be at the very top of your priorities. And the CEO will be assessing your capabilities as a strategic business partner.
So, how can you convince the CEO that you’re more than capable of stepping up to the challenge?
Here are a few tips to help you step into the role of a strategic business partner and continue building a strong CFO and CEO relationship.
Automate mundane tasks
If you want to focus more on strategy and less on numbers, look for ways to automate mundane and repetitive tasks that don’t take a lot of thought or… human interaction.
More CFOs are leveraging technology to automate time-consuming tasks and for good reason. Automating and delegating tasks will help free up your time so you can focus on more important things.
Focus on strategic planning
The role of a finance business partner involves embracing strategic planning. The CFO and CEO spend a lot of time strategizing for growth and a huge part of that relies on the CFOs ability to strategically plan. This involves forecasting potential risks, asking critical questions, and coming up with plans to help mitigate as much risk as possible.
Develop strong leadership skills
The CFO leads the finance team and therefore must become great leaders themselves. Being a key and valuable member of the C-Suite also means the CFO must build solid relationships with not just the CEO, but other members of senior management.
1. Build a foundation of trust
2. Aim for open and honest communication
3. Get to know the business like the back of your hand
4. Don’t be afraid to challenge the status quo and drive change
5. Take steps to become a strategic business partner