CFO Vs CEO
CFO Vs CEO – What’s the Difference?
While both positions are equally crucial to the success of a business, there are some differences between the CFO and the CEO. As a company’s finance officer, the CFO is responsible for the organization’s financial aspects. Despite their similar responsibilities, CFOs are required to have a vision and inspire thousands of employees. They need to develop the confidence and skills to make tough decisions, especially when there are no black and white answers.
CFOs are responsible for the financial aspect of an organization.
The CFO’s primary responsibility is to maintain a healthy cash flow for an organization. This is done by controlling expenditures and managing both short and long-term liabilities. In addition to managing cash flow, the CFO must ensure strong return on investment (ROI). ROI measures the likelihood of a return on investment as a percentage of the project’s cost. It does not take into account all variables, though, so a CFO must add context to any evaluation of the ROI of a project.
While the CFO must understand the CEO’s agenda, he or she must also be able to remain objective and stand by his or her principles. The CFO must also be able to drive change in the organization. A CFO must be a change agent, as many organizations have a robust cultural dynamic that resists change. The CFO must also understand the company’s strategy and be able to communicate it to business leaders effectively.
Unlike the CEO, the CFO is responsible for overseeing the financial aspects of an organization. As the chief financial officer, he guides the company’s accounting and finance team. The CFO’s broad perspective lets the CEO focus on other issues and goals. Although the CEO may have a background in finance or accounting, his knowledge of the company’s finances is often limited compared to a CFO.
In today’s fast-paced, global business environment, timely reporting is crucial. This information is the foundation for sound strategic decisions and avoiding risks. For example, a P&L statement can make or break a company’s efforts to secure financing. CFOs are aided by sophisticated technology that assists with reporting and forecasting. However, this technology still requires significant human and capital resources.
While the CFO and CEO have similar responsibilities, they have different strengths. The CEO can manage the organization’s strategic vision and influence others, while the CFO primarily directs its financial operations. A CEO is likelier to have a strategic mind-set and knowledge of the global economy. At the same time, a CFO is expected to have a strong understanding of the financial side of the organization. However, a CFO needs to develop people and relationship skills.
A CFO must be capable of adaptability and agility. They must learn to make decisions and manage ambiguity. Ultimately, the CFO must work closely with the CEO and board of directors, which are key to the company’s success. The CFO has a unique relationship with key external stakeholders and investors, and should be the first point of contact for the CEO.
Aspiring CFOs often enter an operational role to acquire more management experience. In such roles, they may have a more broad experience and be paid more than a typical CFO.
CFOs must have a vision to engage and inspire thousands of people.
A vision for a business is the key to sustaining the culture and inspiring employees. The vision must be aspirational and realistic and encompass a defined time frame. It should be based on the values the CFO wants to create and promote. It should also define how the finance function will operate, including the level of delegation and collaboration. It should also establish career paths for finance talent. It should be an accurate reflection of the CFO’s ambitions.
The right mindset and emotional intelligence are essential CFO qualities. These attributes allow CFOs to read the mood and temper of their employees and take action when necessary. This trait is essential for running a company and helping the CEO lead. It also helps the CFO make tough decisions and accelerate change.
An effective CFO develops relationships with employees and fosters trust. They should be available to employees and foster open, honest dialogue. This helps the CFO develop rapport with them and encourages them to share their ideas and thoughts. They should also encourage employees to question the numbers and share their concerns.
For a CFO to implement the vision, he or she must consider potential roadblocks and develop plans to deal with them. For example, the finance organization may be too fragmented to collaborate. The CFO may need to streamline reporting lines or redefine roles and responsibilities. In addition, outdated IT infrastructure may be hampering the finance function. Investing in new digital tools is another way to improve communication and collaboration.
The changing economic situation requires different types of leaders. Boom times demand strategy and growth expertise, while slumps require more operational expertise. In times of economic decline, the CFO’s role shifts from strategic growth to operational development, putting more significant pressure on the CFO.
A CFO should also have a clear path to becoming the CEO of a business. To become the CEO of a company, CFOs must have a solid financial acumen and strategic leadership skills. Having an open mind and a drive to learn is crucial. These qualities will develop with experience and should become part of a CFO’s toolbox.
A new CFO’s introduction to the C-suite is crucial. Often, the CFO must convince the board of directors and other stakeholders of their ability to drive value. This should be accompanied by a willingness to build relationships and collaborate. In addition, it is crucial to engage external talent because it provides fresh perspectives and challenging the status quo. Internal hires should also be used to provide an on-the-ground perspective.
Once the CFO has a clear vision, he or she should decide which initiatives are the highest priorities for the finance function. It is essential to prioritize initiatives that add the most value to the business. The new CFO should collaborate with other C-suite executives and the board of directors to establish the right priorities for the rest of the first year of his or her tenure.
CFOs must become more comfortable making decisions without black and white answers.
In an age of accelerated change and exponential technology, CFOs must be agile and comfortable making decisions that are not always black and white. These changes will challenge their traditional skills, but it is possible to develop new capabilities. The skills required will include a more holistic view of the business, an ability to communicate with stakeholders, and a more extraordinary ability to mobilize a team.
CFOs must have an entrepreneurial mindset. They must be willing to take calculated risks and embrace the idea of experimentation to grow a business and improve a company’s financial position. They must have a vision for their company’s future and a keen sense of current market trends.
CFOs play an essential role in building capability in a business. By ensuring the right resources are in place, CFOs can help promote efficiency, customer satisfaction, sales, revenue, and profits. They have access to the most relevant data and cross-functional understanding of the company. As a result, CFOs are an excellent resource for identifying capabilities.
To become a CEO, CFOs must also develop their emotional intelligence to handle personal interactions. They must be able to handle difficult situations, such as giving a eulogy or a one-on-one conversation. Leadership is about how you make other people feel, so CFOs who want to be CEOs must examine themselves first.
To become a CEO, CFOs must develop leadership skills and close the gap between technical expertise and leadership. A lack of ego will not make it easy. Many talented CFOs have chosen to stay in their current positions. This allows them to develop their strategic and financial leadership skills, which is critical to becoming a CEO.
People don’t like ambiguity. As a result, they tend to hide it or start making up numbers. For example, a CFO may want to run an ROI analysis. This will require many inputs. Some of these may be assumptions, and others are hard facts. It’s not hard to imagine a situation where eight inputs are based on assumptions, and two are hard facts.