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Dysfunctional relationship - CFO - CEO

The majority of the causes for a conflict between CFO and CEO could be on account of disconnects related to governance, operational control, processes & procedures, decisions on new businesses, acquisitions, valuations and authority (or any other reasons) Is such a conflict common and how can these be resolved. Does this necessitate that the CFO should at least have a dual reporting to the board or Audit committees.

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

You're assuming there is a Board and/or Audit Committees.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

It is dependent on the company structure/ownnership/culture. Assuming there is a Board....ANY C-level executive should have a line (formal or informal) to the Board. If not, then it is the Boards duty to make one. A good experience of mine is where a Board member routinely visits (or I can informally request one) me or have an informal lunch/dinner with me (or any other C-level executive and with the knowledge of the CEO) every so often just to get a feel of the company. It is not necessarily a formal line but something I can use if the need arises.

As far as conflicts go, my position is that you express your views/preferences to the CEO (and preferably in writing) and get or compromise on what you can get. After all, they are still the CEO and has ultimate responsibility. Your responsibility is to express those views and say what you think is best for the company. You just have to cover your ass (as they say).

I would first however request a meeting with the CEO and have a talk with him about your concerns. Most of the time, conflicts are a result of miscommunications (or the absence or real communication) or differences in perceptions of the CFO/CEO functions/roles. Lay your cards on the table with him. Especially for organizations with limited C-level executives, it eventually hurts the organization if the top 2 executives are in disagreement about their roles and how to achieve their goals for the company.

One factor that is seldom talked about is how you (the CFO) SELL your ideas to the CEO. The good ole days of CFO's saying "just because i said so" is over. One has to SELL the idea and how it impacts the organization. You might also want to look at the "conflict" from that perspective.

The real test is the ethical effects of those "conflicts" and "compromises' that you have to decide on. Is the conflict (or the cumulative effect of those "compromises") too big to ignore that you can no longer function properly? If the answer is "yes", then it is time to use your lines to the Board. If the Board does NOT resolve it, then that is a whole new decision point.

debashis ghosh
Title: President Finance
Company: Hindalco
(President Finance, Hindalco) |

Day to day dysfunctional relationship cannot possibly be resolved with Board intervention. The delivery expected from the CEO and CFO being somewhat different, the CFO needs to ensure that he does not comprise on his core areas of controls, risk management and accounting practices.

Anonymous
(CFO) |

Well said Debashis, CFO position is in a transition phase in India and even to this day, , in small to midcap and even large companies a CFO is nothing but the erstwhile bookkeeper, not due to any intention of the promoter or CEO but largely due to ignorance about the role. The role is hugely underplayed.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |

The disconnects that you speak of have nothing to do with those issues. This is a human issue and it's going to show up everywhere. Someone posted a magnificent 3-part blog on Proformative about this which I suggest you find and read.

Lloyd Davies
Title: Senior Director, Finance
Company: Jazz Pharmaceuticals
(Senior Director, Finance, Jazz Pharmaceuticals) |

I could not find the blog you mentioned. Any clues as to how to find it?

Atul Kumar Agarwal
Title: CFO
Company: Retail Company
(CFO, Retail Company) |

Yeah - in deed a lot of it to do with the human / personality issues.

Topic Expert
Samuel Dergel
Title: Director - Executive Search
Company: Stanton Chase International
LinkedIn Profile
(Director - Executive Search, Stanton Chase International) |

CFO Relationships are a key component of my recent book "Guide to CFO Success". The CFO / CEO Relationship is certainly one of the most important relationships a CFO has, and the success of this relationship is critical to the success of the CFO.

To identify when these conflicts are common, let's take a look at when this relationship works best.

When the CEO hires the CFO, the CEO chooses who they work with, and the there is a strong opportunity for having an excellent relationship.

When there is a new CEO (hired after the CFO was brought on board) or when other influences are involved in hiring the CFO (if the Board has a strong influence on choice of CFO), the probability for conflict increases significantly.

The solution is not about one conflict in and of itself, but building a relationship for the longer term with the CEO that is one of mutual benefit and respect.

It takes hard work. And it takes two to tango.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Samuel - sounds a lot like marriage.... Communication issues, money issues, interpersonal relationships with other issues....

Anonymous
(CFO) |

I experienced this situation and found that the board and audit committee were disengaged and had no appetite for involvement. After over a year of struggling with the situation which involved control issues, SOX, over a million dollars of unaccounted for inventory/purchases, questionable operating decisions, etc., I was forced out of the company. My controller and IT director were terminated within a week. The company entered Ch. 11 within 30 days but the president retained his position. It was a public company.

My advice do what is right but prepare for the worst. You might want to start looking for another position.

Sanderson Bell
Title: CFO | COO | Finance and Operations Execu..
Company: -
LinkedIn Profile
(CFO | COO | Finance and Operations Executive | Trusted Adviser, -) |

Samuel, Excellent book BTW. Like how you have described the relationship realities of the CFO role. I am recommending it to all of my colleagues.

Cork Van Den Handel
Title: CFO
Company: Transition
(CFO, Transition) |

Having been in a dysfunctional relationship with a new CEO, I can say that it is not healthy for the company or for the CFO. If the two personalities and visions are that different, the best option is to find another role elsewhere. My 18-year career at that firm ended as a result of our continual conflict, and leaving was the best thing that could have happened for me.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I agree. I was involved in the same type of relationship. Leaving was best.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

Your assuming there is an interested and functional board and that that CEO isn't a dictator. In most instances, the CEO has complete authority over the CFO but the CFO has fiduciary responsibility to the board and the shareholders or taxpayers. That's what makes the CFO position so difficult and many don't understand that.

Try being a CFO in a public agency where the board consisting of local politicians who's only interest in the agency is junketing on the taxapayer's dime and a CEO who feeds these political desires while lining his own pocket in nefarious ways.

But, even talking to the board without the CEO's permission and presence would get any employee fired. I am admonished before any presentation I make to the board to: "not be negative", "provide only good news" and, "be boring so they don't ask any questions".

The disfunction isn't CEO/CFO, it's a completely disfunctional entity. The board, the CEO, the auditors and legal counsel are all pretending to interact functionaly but really just milking it for their own gain. If there is any disfuntionality it is that there is absolutely no oversight.

I regularly work with finance officers at other public agencies like municipalities or water districts and many have described similar situations. It's always been interesting to me that much of this would not go on at a public corporation due to strong controls and an emphasis on ethical and legal behavior. Part of the reason I find this interesting is because so many in the public sector bad mouth the profit motive of the private sector and beleive it is all about corruption and malfeasance.

If the CFO positon had been an NEO in my agency's charter when it was offered to me, I would have had to turn it down. It was actually our auditor who pointed out to me that it wasn't an NEO and thus, although I could be fired, I couldn't be held legally responsible for the misdeeds of the CEO or the board.

This CFO gets along fine with our CEO by simply going along to get along. Sometimes, that's what one must do.

Anonymous
(Principal) |

Has anyone seen a dysfunctional relationship between the CFO and the COO?

Anonymous
(CFO) |

very rare ! Also it is important to note that the challenges are different. While the CFO has a fiduciary duty, he is also responsible to the state for governance and compliance directly while the COO has more operational or business related accountabilities.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

I would think that is something the Board/Audit Committee would need to decide. If there are fiduciary issues, the CFO should make sure the Audit Committee is aware. A change in reporting relationship should be something they consider for resolving. In my opinion, the CFO should not request the change in reporting relationship.

Anonymous
(CFO) |

What happens when there is a weak Audit Committee..

Carla Gordon
Title: Accountant
Company: Govt
(Accountant, Govt) |

I, too was involved in that kind of relationship. I was originally hired by a president who retired the next year. I don't believe this was his original intent when I was hired but needed budget cuts were too stressful for him.
Then a new president was hired who had terrible relationship skills and poor judgement. Most of his cabinet left. I hung on for five years but ultimately left. I was tired of stretching ethical boundaries or realistic boundaries projections.
He was on his 4th CFO in 9 years before he "retired."
If this is a constant friction, it's probably not going to change. And trying to CYA with paper never works. If he wants to blame someone, you'll be the first in line.

Thomas Sabath
Title: Controller
Company:
LinkedIn Profile
(Controller, ) |

I have just lived, actually died this dynamic. With that said my philosophy has always been that the CFO is there to support the CEO in achieving the strategic goals of the company. Conflict with roles and responsibilities are uncommon and are typically resolved with instructions from the board. However this is irrelevant if the CEO’s perception is that they are not getting the support that they need then there is not much the CFO can do. A dysfunctional relationship between the CFO and CEO is almost always a personality issue. Overcoming personality issues are very difficult and usually are resolved by someone leaving.

Topic Expert
Alan Hart
Title: Consultant
Company: Pacific Shine Group
(Consultant, Pacific Shine Group) |

Another disconnect between a CFO and a CEO often results from the company having poor planning and inability to effectively monitor their actual financial results against their planned results. The CEO might have certain expectations, but without a good working system, actual results is the only information the CEO sees and not having good and timely analysis of the actual data, compared with the planned results will not allow upper management and particularly the CEO to make reasonable, informed decisions.

Here is another example why every company, regardless of size or complexity should employ and rely on a sensible and practical planning and business intelligence solution where the CFO, overseeing all accounting and finance function and the CEO, responsible for the entire company and its performance, can have similar expectations and work together to ensure that the company continuously aligns itself in response to the available business intelligence.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Great discussion. I have been in a situation a couple of times where there was lack of synergy between the CFO/CEO or CFO/COO and it never ends well. As Thomas points out, when they can't agree or get along on every issue one must leave as it then becomes a personality issue and that is rarely changed.

My philosophy is much of what others have said: The CEO (in my case is the owner) ultimately pays me to report issues on financial/accounting/HR and inventory related items. I can report my findings, areas of opportunity and my recommendations. He can choose to accept my recommendations or choose his own path. Either way, I am going to own it because that is what creates a strong team.

Be humble enough to accept the decisions or you may have to decide if the company is the right place for you (the only caveat would be if the decision could have any negative financial or legal concerns).

Patrick Min
Title: CFO
Company: Community Education Partners, Inc.
LinkedIn Profile
(CFO, Community Education Partners, Inc.) |

I've been in a couple of these and they are really hard to resolve through the Board of Directors, particularly in middle market companies. The Board doesn't want to take sides and many times wants the individuals to find a way to work it out.

The lesson that I'm learning from this that the right fit into company values and culture is just as important as the job responsibilities. Patrick Lencioni discusses organizational health in his book, The Advantage. I truly feel that the premise of this book is correct. Companies have problems, typically because they can't get people to work together to resolve them vs. not being smart enough to determine what the problems are. This dysfunction begins many times with the relationship between the CEO and the CFO.

The motivations of the CEO and CFO, although seemingly different are not. They are both trying to make a company as healthy as it can be and to invest their resources wisely. This involves a give and take in the relationships that most seasoned CFO's understand and handle.

The relationship has become more complicated in recent years due to the number of CFO's becoming CEO's. This has caused some friction due to the insecurities of CEO's.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

That was one of the best books I have read!

David Kellogg
Title: CEO
Company: Host Analytics
(CEO, Host Analytics) |

The CEO runs the company. The CFO works for the CEO. Unless you are talking about governance, compliance or "whistle blower" type issues, the CFO needs to make the relationship work. End-running the CEO to the board is career suicide.

While board members can and should develop relationships with all executive staff, the board's primary (and arguably sole) operational concern is whether the CEO should keep running the company.

It is far, far, better to work with the CEO 1-1 on addressing the issues in the relationship than escalating to a board who has only a partial view of the company, no real operational responsibilities, and sometimes little operational experience.

If that doesn't work, I would ask the CEO to hire a team coach to help facilitate things, particularly if other exec staff are in the same situation.

David Kellogg
Title: CEO
Company: Host Analytics
(CEO, Host Analytics) |

I think you need to be careful here. With the exception of whistle-blower type duties, the CFO reports to the CEO who runs the business. If the CFO has a dysfunctional relationship with his/her boss it should be treated no differently than if, say, the EVP of Sales or Marketing had a similar relationship issue.

While the CFO often does get special access to the board (e.g., more board meeting and/or closed session exposure) that relationship should not be used to end-run the CEO in the event of either conflict on operational issues or a style mismatch / other dysfunctional relationship.

End-running your boss is usually one-time play that either works or results in your leaving the organization. And you can't conceptualize the board as "the CEO's boss" because even there the relationship is different. Regular bosses are a part of the organization, participate in it every day, and have a plate full of operational duties. Board members are not a part of the organization, participate infrequently, have a partial, filtered view, and have but one operational duty: to decide if the CEO should still run the company.

While good boards may and will often develop relationships with key executive staff, those relationships are used to help complete the board member's picture of the company. Their existence should not be seen as a temptation to end-run a CEO in the event of operational disagreement: it's a protocol violation, it won't work, and may well cost you your job.

bruce cooperman
Title: managing partner
Company: nereus advisors
(managing partner, nereus advisors) |

The CEO/CFO relationship must be curated. Communications should be frequent and honest. Reviewing monthly financial results in a one-on-one meeting can provide another avenue to find and resolve issues. The Board/audit committee should not act as a counselor. If there seem to be a standoff on an issue, it should be resolved, and outsiders (experts, consultants, coaches) should be engaged if needed.

Bob Gold
Title: Chief Financial Officer
Company: Atrenne Integrated Solutions
(Chief Financial Officer, Atrenne Integrated Solutions) |

With a well functioning Audit Committee, the CFO already has a direct reporting relationship through his/her executive session with the Audit Committee. I have even been in executive sessions where the CEO sits in...but the CFO must have the strength of conviction to raise issues (fact based) regardless of the setting.

A dysfunctional relationship between the CEO and the CFO typically comes from "alignment" issues, not from accounting issues. There are always discussions of accounting issues and how to maximize EBITDA or earnings. The CFO MUST be strong enough to determine the proper accounting regardless of the P&L impact. Alignment issues are tougher. If the CEO and CFO are not in alignment on "operational control, processes & procedures, decisions on new businesses, acquisitions, valuations and authority" then there is a more basic issue within the relationship. At the end of the day, the CEO sets the direction of the company. As long as the CFO fulfills their responsibility of providing both "point and counterpoint" for any decision and is heard by the CEO, then there can be no argument. It is the CEO who sets the strategic direction of the company.

Anonymous
(Principal) |

My suggestion is ascertain whether this is a difference or a conflict. A difference can always be worked out. Maybe in a longer term than one would want but very much doable. A conflict, however, not. It's too late, then. Run for the hills, perhaps. CFO must leave or swallow it and show a pleasant smile, if in conflict. Even then, those scars may never be fully ignored. Start looking for another job, you are not going to be right even if you are. Life is too precious and short to engage in losing battles.

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