People who aren't immersed in the everyday business world sometimes get hopelessly confused by the differences between a CEO and CFO.
While both executives are members of the C-suite, the roles couldn't be more different. In this article, we'll go over what exactly those differences are, how the functions are changing over time, and what today's CEOs need from their CFOs.
Let's dive in!
What's a CEO?
A CEO (Chief Executive Officer) is the leader of a company and the individual tasked with executing its vision. CEOs report to the board of directors.
The CEO's primary responsibility is to execute the vision set by the board of directors by constantly looking at the big picture.
They oversee operations in every department and ensure the company attains its long-term objectives. CEOs don't involve themselves in the minutiae of every department but maintain general oversight with the assistance of department heads.
They articulate the company's vision to the world outside the company, execute decisions made by the board, and ensure the business maintains a strong market position.
A CEO of a for-profit company has the responsibility of maximizing the value of the enterprise to increase shareholder worth. This includes revenues, market share, and share price.
In some enterprises, the CEO may also be the owner of the company. In other companies, the board of directors hires their CEO externally.
The CEO's changing role
Once upon a time, a CEO would stay with an enterprise for decades. These were the days when a business was seen as the private fiefdom of the chief executive, who ruled their companies with an iron fist. These old-fashioned CEOs would dictatorially create rules and procedures that everyone in the company was expected to blindly adhere to.
These days, this model has widely fallen into disfavor. In today's business ecosystem, there's a greater emphasis on collaboration and power-sharing. Now, more than ever, CEOs need to rely on their soft skills to thrive in the corporate universe.
What's a CFO?
CFOs (Chief Financial Officer) report to CEOs and take care of all the financial details in a business. They're responsible for overseeing fiscal operations, including financial reporting and planning. They also monitor budgeting, analysis of financial data, and sign checks.
In essence, the role is similar to that of a treasurer or controller. They ensure that a company has all the right financial resources in place to achieve its goals.
A CFO is the primary financial spokesperson for an organization, thereby playing a crucial public-facing role. A CFO typically supports the Chief Operating Officer (COO) on tactical and strategic matters concerning cost-benefit analysis, securing new funding, forecasting needs, and budget management.
A CFO also closely analyzes and monitors financial risk and gain. They tackle tasks that require exhaustive quantitative and qualitative economic analysis. For example, reviewing company expenditures to ensure they don't spiral out of control.
The evolving role of the CFO
Once, people saw CFOs merely as an enterprise's head accountant and primary bookkeeper. However, in recent years, the role has undergone a dramatic revolution.
Rather than being intensely focused on financial figures, CFOs are taking a more strategic approach to the work they do for the companies that employ them. This refocusing of job responsibilities brings immense added value to enterprises.
The CFO's role is becoming less of a functional role and more of one that leverages strategy and insight based on rigorous financial analysis. More than only being bean counters, today's CFOs make recommendations about the best course of action for their companies to take based on the financial insights they've cultivated.
Contemporary CFOs should have professional competencies that go beyond mere financial modeling. To help identify and discuss the company's strengths, challenges, and gaps, CFOs need to know the business and the strategy, as well as CEOs, do.
Besides knowing all about accounting procedures, they should possess an intimate knowledge of the company's customers and its competitors. This new way of thinking about things transforms them into tactical thinkers who profoundly understand the business that employs them.
This kind of CFO can cultivate actionable insights that transcend numbers. They know their primary value to the enterprise is offering this knowledge to the CEO so they can plot a more confident course.
Good CFOs use financial data to help other members of the C-suite understand the implications of their decisions on the company. Great CFOs have an exceptional ability to use financials to tell the company story.
What might be surprising to some is that the advice of CFOs is increasingly being sought on things that seem, at first glance, to be entirely unrelated to financial matters. However, when it comes right down to it, few things in life are unconnected to monetary concerns.
One example is social media. That's because how an organization is portrayed on social channels such as Twitter and Facebook can significantly impact product launches, employee turnover, and future expansion plans.
Differences between CEO and CFO
The CEO is responsible for formulating company strategy and carrying it out. The CFO figures out what financial support is needed to implement the plan.
The CEO is the company's public face, making speeches and meeting with community leaders and the press. The CFO also has a public-facing role. However, their interactions with external parties are primarily financial in nature.
For example, the CFO plays an essential liaison role because they forge productive relationships with investors, banks, and other financial institutions. A CFO typically attends meetings with private investors who have a financial interest in the company. They also meet with potential lenders to set up lines of credit.
The CEO grooms employees within the company for positions of management. The CFO also does this, but only in the areas of accounting and finance.
What do CEOs need from their CFOs?
These days, CEOs expect their CFOs to provide guidance and advice on a whole host of issues that go beyond only providing careful financial analysis.
Once upon a time, CFOs had it easy, merely crunching the numbers and reporting them. Today, the job is much harder, and CEOs' expectations for their CFOs have never been higher.
The relationship that CEOs have with their CFOs is rapidly changing. Rather than merely delivering financial reports to their bosses, CFOs are working in a much more proactive way. They offer keen insights instead of only handing over spreadsheets full of meticulous financial calculations.
Excellent communication skills
Today, many CEOs want a CFO who's a masterful communicator. That's because so much of a CFO's job these days involves translating financial data into meaningful narratives that can positively impact the organization's future success. For example, someone who can successfully articulate the company's vision to the investor community in a compelling yet authentic way.
Passion for the company's mission
CEOs often want their CFOs to be passionate about the company's mission and to be able to convey that infectious enthusiasm to potential donors. While this skill is particularly valuable during fundraising, it's essential to have it at other times.
One of these times is at board meetings, during which a CFO needs to present highly complex financial data to a sometimes skeptical board who might not be sure what the company is doing is the right thing.
The ability to confront outdated assumptions
Some CEOs want their CFOs to have the ability to confront outdated company assumptions head-on. That way, they can leverage their financial knowledge to come up with new ways of doing things that can boost the company culture and the bottom line.
These are the new breed of CFOs--individuals who can respectfully confront deeply ingrained corporate dogma that’s hurting the bottom line and come up with better alternatives. These are the kinds of CFOs who are adept at supporting their CEOs in public while challenging them privately.
Honesty
Many CEOs want their CFOs to be unabashedly honest. That's because the CFO is often one of the few individuals that a CEO can rely on to deliver the unadorned truth. These CFOs are the individuals' chief executives can turn to share doubts or get frank answers to tough questions.
A CFO should also have unquestioned integrity because the board, investors, and other stakeholders need to trust them. That's why in the ideal CEO/CFO relationship, transparency is paramount.
Helping CEOs get their priorities realigned
Often, nobody understands the company quite as well as the CFO does. Because of that, some CFOs play a significant role in refocusing the CEO's attention back on the big picture.
CEOs are constantly juggling many projects at once, giving even the best of them a bad case of tunnel vision. A good CFO can help the CEO realign their priorities.
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