The Truth About Good CEO & CFO Relationships

Finance teams

Here's how to leverage the evolving CEO & CFO relationship to transition from traditional reporting to strategic business partnership.

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Priyaanka Arora
December 2, 2022
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The Truth About Good CEO & CFO Relationships

Summary

The CEO-CFO relationship is critical to the success of the business. Finance business partnership could define if a company crumbles under pressure or can handle crisis situations while pursuing a strategic vision. 

This is why the CFO is becoming the second most important executive after the CEO, amongst well-run businesses. However, if the finance function focuses on number crunching or plays a traditional reporting role, the potential benefits of this powerful collaboration are muted. 

The purpose of this article is to outline the new age CEO-CFO relationship, the roles and challenges faced by this dynamic duo, and focus areas for successful finance business partnership

The roles and responsibilities of next-generation CEOs and CFOs 

Today, the CEO-CFO relationship is so much more than the CEO overseeing the organization on the whole while the CFO controls the company’s financial health. 

In the past, the CFO would focus entirely on compliance and carry out endless cycles of financial reporting. A successful CFO was one who maintained control of financial data and helped avoid compliance issues. 

But today, the CFO and finance team serves as strategic advisor to the stakeholders and has a seat at the decision-making table. 

Here are some other ways CEOs and CFOs differ in terms of duties:

CEO CFO
Sets the direction for the company. Supports that direction and drives it forward taking into consideration the financial health of the company.
Decides the budget. Prepares a detailed plan to implement the budget, department-wise.
Generates and approves new projects and businesses. Prepares case studies and implements them.
Sets the mission and vision. Presents complex data: financial and otherwise and provides insights beyond numbers.
Chief Financial Officer (CFO) Chief Financial Officer (CFO)

However, as the lines between CEO and CFO relationship blur, there are challenges aplenty as modern leaders learn to navigate these murky waters. They include: 

  • A strong communicator: The CFO needs to convey how the financials tell the company story to not only the CEO but also to investors and board members. 
  • An agent of change: The CFO needs to help the CEO be the driver of change, continuously. 
  • Build relationships with business leaders: The CFO, as a strategic business partner, needs to identify and discuss company strengths and challenges and establish solid relationships with other business leaders. 

With the above roles and challenges in mind, take a look at how technology plays an instrumental role in establishing a successful CEO CFO relationship. 

The pillars of a successful CEO CFO relationship 

Resonating the words of Jack McCullough, the president of The CFO leadership council:

Jack McCullough on the CEO and CFO relationship

In terms of a working relationship, a successful collaboration between a CEO and CFO depends on four important pillars:

  • Open dialogue
  • Mutual respect and trust
  • Well-defined goals and objectives
  • Willingness to collaborate on both sides

These four pillars form the foundation of any successful CEO-CFO relationship because they create a platform for open communication, trust, respect, accountability, collaboration, and unified goal setting that drives better business results over time.

As such, CEOs and CFOs should strive towards cultivating these essential components in order to ensure their partnership remains strong over the long-term. Doing so will enable them both to continuously improve their individual capabilities while also helping their organization thrive by building a more successful future together.

Open dialogue

Both the CEO and CFO must be able to communicate effectively without fear of judgment or criticism from either party. Open dialogue allows for constructive feedback and ideas to be exchanged, which leads to better decision making and sets a great example of healthy professional relationships for employees of the company to aspire to.

Mutual respect and trust

When the two leaders are able to rely on each other’s expertise and knowledge, they are able to make the right decisions at lightning speed. Mutual respect also encourages honest conversations free of blame or finger-pointing which leads to greater harmony within the team.

Well-defined goals and objectives

Both parties should have a clear understanding of what needs to be accomplished in order for the company to succeed. Setting measurable goals ensures that both the CEO and CFO are held accountable for their performance to their teams, customers, and the board.

Willingness to collaborate on both sides

The CEO and CFO should not only be obligated, but also look forward to working together on projects that benefit their expertise and skill sets. For example, the CEO should look at the CFO as a champion in spreading the culture of wise spending, instead of as a roadblock to growth at all costs. The CFO, in turn, should enlighten the CEO on the best ways to exceed company goals while remaining cost effective.

Modern CFOs must raise their game in analyzing and presenting data in a format that generates the greatest value for the business. A great starting point for this would be replacing spreadsheet-based reporting with modern business planning tools that enable data storytelling and bringing numbers to life by explaining how those numbers will impact strategic decisions. 

At a time when CEOs expect so much more from their partnership with the CFO, a collaborative planning platform is the key to meeting those expectations. 

The benefits of using financial planning software for a strategic business partnership

Automating data collection 

A major roadblock keeping finance leaders away from understanding the “why” behind data is lengthy and complex data collection. Often, it takes weeks to manually collect data from sources like data lakes, CRMs, Business Intelligence software, and other tools. This leaves hardly any time to convert numbers into business insights. Pigment’s business planning software automates financial data collection and cleans and enriches this data in seconds, freeing up your time to build a compelling narrative. 

Adopting dynamic financial modeling 

The limitation of spreadsheet-based financial modeling is that the models aren’t flexible enough to keep up with the dynamically changing business landscape. For CFOs to share candid plans and predictions with CEOs, they need to analyze financial data proactively to identify trends. Flexibly model scenarios using an Excel-like syntax and speed up modeling using autocomplete formulas and calculated items. Even better is that these models are scalable and easy to maintain. 

Visualizing data for effective board reporting 

Financial reporting, in the form of in-depth reports, actionable insights, automated imports, and stunning presentations give decision-makers the details they need to make more confident and informed decisions. 

Pigment’s comprehensive financial modeling and reporting tool is the CFO’s go-to platform for all financial reporting requirements. 

Aligning the vision across the organization

Pigment’s business planning software breaks down the silos and gives teams a single source of truth that helps align the whole organization. Finance organizations can get everyone on the same page by: 

  • Showing the dependencies of their formulas 
  • Gather feedback and analysis in one dashboard
  • Ensure data integrity and consistency across models

Better headcount planning 

One of the critical responsibilities of the CFO is to ensure optimal headcount planning for the organization. This involves cross-functional collaboration to optimize the strategy based on the current needs of the organization and with inputs from stakeholders from other departments with varying needs and metrics. 

Pigment allows agile headcount planning to keep the business on track even through uncertain times and sail through with sustainable growth. 

Embedding finance across the organization 

As a strategic business partner, finance should be embedded throughout the business, providing decision-making support to key functions. The prerequisite for this is a better flow of data between different areas of the business. 

What’s more, a strategic business partnership makes departments more accountable for their financial metrics and enables financial planning and analysis (FP&A) teams to provide more insights through a better understanding of the business. 

It is not enough for the finance department to provide static snapshots of the financial health. Instead, the CFO should paint a picture for the business by translating data into meaningful trends and actions. 

CFOs need a modern tech stack to improve and accelerate strategic decision-making. The effectiveness of the CEO CFO relationship will depend on the accuracy, availability, and consistency of data. 

Pigment’s integrated business planning platform connects your most important business sources to automate data collection. The CFO can analyze data from cross-departmental functions to create data-backed reports that highlight the issues affecting the business’s financial health. 

If you’re looking to leverage collaborative business planning to achieve profitable growth and achieve a competitive advantage, book a Pigment demo

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