Leadership Styles of Top Chief Financial Officers
CFOs face challenges that demand a mix of leadership styles. For example, a sales team might press on revenue recognition criteria, or a CEO might embellish critical facts in an investor presentation.
When these styles conflict, the CEO and CFO must find ways to resolve them. Spencer Stuart’s leadership style framework helps leaders understand their strengths, blindspots, and how they fit into company culture.
Autocratic CFOs: Pros and Cons
Autocratic leaders assign specific tasks to each team member and provide clear rules for them to follow. This leadership style facilitates fast decision-making and prevents delays when time is critical. It can also increase productivity levels by eliminating waste and frustration among employees. This leadership style may be more beneficial in emergencies or highly regulated industries that require prompt action and clear guidance.
The primary concern with autocratic leadership is that it focuses on discipline and order rather than creativity, independent thinking, or new processes. It prioritizes consistency, which helps corporate success but can also detract from employee morale.
Additionally, it can be difficult to correct poor performance under an autocratic leader. The lack of trust between the boss and the employee can create a hostile work environment. In this scenario, it is essential to establish a culture of respect and encourage employees to take risks in good faith. This will help them to build a positive work environment that allows them to develop their leadership skills without fear of losing their jobs.
Democratic CFOs: Pros and Cons
Democratic leadership styles give team members a voice in decision-making and focus on building teamwork. These leaders will take the time to consider each employee’s perspective and often delay reaching a final decision until all opinions are considered. This allows everyone to feel like their contribution is valued.
However, a downside of this style is that it can slow the decision-making process and cause confusion when multiple voices are heard. Ultimately, it’s important for CFOs to use their best judgment and decide whether this leadership style is the most appropriate for a particular situation.
The most effective way to foster a democratic leadership style is to make sure it’s one of the company’s core values and communicate these to management and employees. This can be done through a variety of methods, including leadership coaching. Instilling these values will encourage managers to use a democratic leadership style and promote a culture of collaboration, equality, and idea-sharing.
Transformational CFOs: Pros and Cons
According to research from MIT Sloan, one of the best CFO leaders collaborates well with others. This leadership style is often used in businesses where the CFO is an outsider, hired to bring fresh perspectives into the company during a change or crisis. This kind of leader may be able to see blind spots, circumvent sacred cows, and ask questions that longtime employees are busy with just keeping the company running.
This CFO leadership style is effective when the leader wants to help teammates build the strengths and skills necessary for success. It’s also a good choice when the leader is uncertain and needs fresh ideas from qualified teammates.
The ideal CFO leadership style depends on various factors, including the company’s strategy, industry context, and culture/dynamics. For example, a company with an inorganic growth strategy might prefer to hire a CFO with great experience and market insight. In contrast, a company pursuing organic growth might prioritize a finance chief with strong Results, Caring, and Enjoyment leadership styles.
Laissez-faire CFOs: Pros and Cons
Depending on how it’s used, laissez-faire leadership can benefit teams that can handle structure well and have high confidence in their abilities. This leadership style can promote team cohesiveness and encourage individuals to highlight their strengths. However, leaders must ensure transparency with their expectations and offer guidance when needed. Otherwise, a lack of role awareness can develop. This can also lead to a breakdown in the leadership chain, as employees might try to take on roles they are not qualified for.
A good laissez-faire leader knows how important it is to hire the right employees. They search for people with specialized expertise who can work toward decision-making. They also help team members discuss decisions and act as consultants or mentors when needed.
On the other hand, if this leadership style is not implemented correctly, it can cause frustration and slow progress. Without proper support and supervision, employees may lose motivation or make poor choices that harm the company.
Transactional CFOs: Pros and Cons
CFOs with this style often have solid finance-function expertise across a broad spectrum of activities and typically have extensive experience in global operations. They may be a good fit for decentralized organizations with stand-alone businesses or early-stage companies scaling up and professionalizing their finance function.
They also work well in companies with a burning platform strategic imperative that requires swift action and where the company culture values top-down decision-making and ruthlessly prioritized actions. However, Dess says they are less suited to long-term, continuous improvement initiatives or consensus-driven company cultures.
As a result, it’s essential to consider how these CFOs’ styles align with the overall organizational environment and the strategic imperatives the company is pursuing. If they don’t, misunderstandings and miscommunication will likely occur. This will require the CEO and CFO to work together to flag situations where their leadership styles conflict. Then, they can work to develop working processes that mitigate those clashes. In doing so, they’ll create a strong partnership and enable their organization to reach its strategic goals.
Servant Leadership in CFOs
This leadership style emphasizes serving others first, including employees, customers, and the community. A servant leader strives to meet the needs of the people around him or her, build relationships, and develop talent.
The team members of a servant leader are often empathetic, which can create an atmosphere of trust and cooperation. A servant leader can also be a great communicator, fostering open discussions that are respectful and honest.
However, it’s important to remember that servant leadership requires time and effort from the leader. The leader must focus on relationship building and consider every perspective before deciding. This leadership style is inappropriate for life-or-death choices that must be made quickly.
CFOs should aim to utilize a mix of leadership styles to address the needs of their organizations. Using the right management approach for each challenge can maximize your effectiveness and boost employee morale. As a final note, Vistage chair Francine Lasky suggests studying the leadership styles of other managers in your industry and asking peers about what works (and doesn’t). Observing how different leaders make decisions can help you cultivate your leadership style.
Charismatic CFOs: Pros and Cons
A charismatic leader can inspire employees with their likability, which helps build morale. They are also a good communicator and can articulate the company vision well. This leadership style is best for high-energy work environments where the team needs a boost in motivation.
They are big-picture thinkers who can see potential solutions to problems others may not be able to envision. They can adapt in the face of change and remain steadfast with core values. They’re also comfortable challenging traditional methods and can withstand pushback from within the organization.
However, charismatic leaders often have a large ego and can be overbearing. They can also be unable to delegate responsibility because they believe no one else can do their job as well as they do. This can leave the company without experienced and capable leadership should the charismatic leader decide to move on to another position.
Sometimes, these leaders are too eager to get in front of the media. For example, when Chipotle’s food safety crisis hit, the chain’s CEO, Steve Ells, was on broadcast television apologizing to consumers directly while its CFO, Jack Hartung, plugged in the numbers.
Situational Leadership in CFOs
Situational leadership is a flexible and adaptive model that helps leaders to adapt to their surroundings and team members. It also encourages leaders to use a combination of leadership styles, rather than sticking to one single style that may be ineffective.
According to Hersey and Blanchard, situational leadership involves assessing several factors, such as the development level of a team member and the type of task. A leader who adopts this leadership style will decide the appropriate leadership behavior. This includes directing, coaching, supporting, and delegating.
A directing style is used when a team has little or no experience performing a task and requires step-by-step instructions and close supervision. A supporting style is used when a team has moderate competence but low commitment. It is a collaborative, participative approach where leaders provide support and guidance to help their team achieve goals.
Finally, the delegation leadership style is used when a team has high competence and high commitment. This leadership style aims to empower team members to work independently and develop their capabilities.