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Defining the CFO role with the CEO

One of the more interesting discussions/issues that I've batted around with fellow members of FENG is defining the CFO's role with the CEO - as many have experienced struggles in doing so.

In short, the discussion centered around two points.

First, the CFO is faced with a balancing act between managing the financial requirements (accounting, risk, audit, etc.) and business requirements (management reporting, strategic view, etc.)

Second, despite SOX, the pressure to perform is always in the forefront of a CEO's mind.  So the 'maintenance' of a rock-solid financials only gets attention/interest when it does not work.

This is somewhat an extension of the other discussion on whether or not a CFO needs a CPA.  But what I am interested in hearing is how fellow members have managed the role definition discussion with the CEO.

Best regards,



Topic Expert
John Kogan
Title: CEO/CFO
Company: Proformative, Inc.
(CEO/CFO, Proformative, Inc.) |

Them's fightin' words, Mark. In jest, of course, but the topic has often led to some very real tension between my CEOs and I. I think the more "enlightened" CEOs expect and welcome the conversation and those folks have a good idea of how to work with a CFO to draw appropriate lines of command. Other, especially less secure or more ego-driven CEOs have a hard time addressing the issue b/c they see the CFO as a direct threat and therefore want to a)keep you under their purview and direct control and b)control your communication and independence vis-a-vis the exec team and the board of directors.

Regardless of how they feel about it, I believe that to be an effective CFO you have to have discussed this topic with the board and the CEO BEFORE coming on board, and then once on board you must follow-up immediately with all parties to ensure everyone understands what's going on and who does what. I find my first month at any company comprises of a series of breakfast and in-office meetings with the CEO having this very discussion. I think that, short of board direction/intervention, you will end up with something that falls between your and their zone of comfort. If you are both CFO-happy then you will end up with everything, admin, IT, HR, legal, F&A, etc.. If not, then it's up to what they are used to and what you can convince them to do.

As a side note, one thing I have used with great success at many companies which takes a big money issue off the table up front is a general operating resolution. You can find a good one here: This takes financial approval off the table as a potential bone of contention and provides good visibility to the board and CEO. It's a great example of setting clear boundaries in a critical operating area.

Another thing I have had success with is encouraging a board member to have the CFO in closed session w/o the CEO for part of board meeting once a quarter or half year. This lets the CEO know that the board sees you, the CFO as at least partially independent AND responsible - both healthy things.

Bob Newton
Title: President
Company: The Corporate Finance Group
(President, The Corporate Finance Group) |

An intellectually honest CEO with persona integrity will demand that the people around him give him a clear picture of reality and will gladly hear out their opinions. Anything less is an indication of a bad CEO who will eventually hurt the business. After all, CEOs get direct, unflinching feedback from customers and investors- why not get it from teammates first and avoid the negative consequences of screwing up publicly?

Bert Wasserman
Title: CFO/Controller
Company: New York Merchants Protective Co Inc
(CFO/Controller, New York Merchants Protective Co Inc) |

As a CFO you are a business partner with the CEO. It is your duty to explain financial implications of actions and or decisions. At times you have to be the one to say why or no, that action can be bad for the company. The CEO has the final decision but you must make your views heard. It's the only way to gain respect and confidence of the CEO.

Patrick McCann
Title: Independent Director
Company: Union Bankshares Corporation
(Independent Director, Union Bankshares Corporation) |

I have recently joined an organization that has never had a CFO. The CEO and the management team is not used to the "healthy tension" that is part of the CFO role. Any comments?

Topic Expert
Mark Pieper
Title: Director, SCS Finance
Company: Premiere Healthcare Alliance
(Director, SCS Finance, Premiere Healthcare Alliance) |

Take it slow. Take incremental steps to build that relationship with the CEO and rest of management team. Right now they probably view you as an outsider and questions you may ask that are well inside a CFO's scope may seem out of scope to a management team that has not had a traditional CFO at the company.

Topic Expert
Mark Pieper
Title: Director, SCS Finance
Company: Premiere Healthcare Alliance
(Director, SCS Finance, Premiere Healthcare Alliance) |

Patrick...I am in the same boat as you. I am first CFO at a small company owned by PE. The CEO is owner and founder and we are definitly still in that mode of "adapting" to each other. Some things I assumed I would have complete autonomy to do as CFO still require his approval, but we are getting there bit-by-bit.

One quesion I wanted to throw out to anyone with this experience: I have been at my company about 4-5 months now. I was excited to come here to work at a more "strategic" level but we are a portfolio company of a PE firm and the message I am getting from my CEO is that the PE Firm is in no need, nor has any desire, for my strategic input right now. PE firm is directing the strategy - we simply execute. I am occasionally feeling like what they wanted was really someone to act as an uber-controller plus cover Treasury functions. I am just hoping to assume a more strategic position in the company over time, but I will have to see how it develops. But hay, they compensate me like a CFO so I guess there is some upside.

Phil Murray
Title: VP of Finance & Administration
Company: Kimbia, Inc.
(VP of Finance & Administration, Kimbia, Inc.) |

Mark and others,

Assuming the CEO does have proper incentives in place to grow revenues and profits, then those are things (particularly the latter) that both of you can agree on, and so I would focus on helping the CEO understand how you can help them do that. A CEO that doesn't have to think about the day-to-day issues of controlling spend, capex replacement spending, and reporting is really an empowered CEO.

Often the tension is around investment - the CEO wants to spend on new salaries, equipment/assets, marketing campaigns, etc. because he or she believes those decisions will enable and lead to greater revenues. On the flip side, the CFO will often be a bit more cautious. That's where the tension, and help, comes in.

But, if you start with something you both agree on - for example, lowering overhead spending in your current scope of business, then as you execute on those goals that will build trust that will carryover to other issues the two of you are at odds around.

There was an interesting article in CFO magazine/ a few years ago demonstrating how the size of the organization ($ of revenue) impacted the CEO's pay far more than the profit margin or any other profitability or cash flow metric. My experience has also been that the CEO often, without realizing it, will put their attention on the top line much quicker than on the bottom line. The assumption is that if the sales come, the profits will be there too. But how much will you spend to generate on those revenues? And will the new customers and/or new product lines be as profitable as the CEO is assuming?

Heavy questions, and ones that a CFO must absolutely work to influence the answers.

William Schink
Title: Managing Partner
Company: Dixon Capital Partners, LLC
(Managing Partner, Dixon Capital Partners, LLC) |

Mark, Do your best to maintain visibility with the partner of the PE firm who is most directly involved with your company. There may be tension between the CEO and the PE firm, which is all a part of the process. (The CEO may feel like you are trying to usurp his turf). Also, the PE firm may not presently have the capital resources to pursue new strategic initiatives. My advice would be to diplomatically develop a relationship with one of the PE partners.

Topic Expert
Mark Pieper
Title: Director, SCS Finance
Company: Premiere Healthcare Alliance
(Director, SCS Finance, Premiere Healthcare Alliance) |

I think you've probably correctly assessed situation. There is some tension being worked-out...CEO is founder that started the business and now a PE firm is majority shareholder directing strategy. It is only natural some tension would develop. I think they are getting there bit-by-bit.

Bill Chorba
Title: CFO
Company: NineSigma, Inc.
(CFO, NineSigma, Inc.) |

Mark, do you have regular board meetings? I imagine you have one or more PE firm members on your Board. If so, perhaps you can get increased visibility during those meetings. If you are given the opportunity to present the financials and the budget, you can inject strategic insight at the appropriate times. If the PE firm is interested in your strategic input, they will encourage it. If not, then they will validate what you are hearing from the CEO. It will be a steady plod but you can do it.

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