The relationship between a company’s chief executive officer and its chief financial officer is critical to its success. While every CEO is different, each will depend heavily on the contribution of their CFO to drive their organisation.
What do top CEOs want that contribution to be? Do they want a CFO who is an enabler, who will listen to the CEO’s vision and find a way to get it done, no matter what? Or do they want their CFO to be an independent voice who will rein in the CEO’s wilder ideas and add a sensible twist to the rest?
We canvassed four Australian CEOs from four very different – and very successful – organisations and discovered that, while all of them want to work in close partnership with their CFO, each has quite different needs from that role.
That’s as much dependant on the personality of the CEO as it is on the type of company, the industry they are operating in and whether the organisation is in a growing or mature market.
Many CFOs find that one of their biggest challenges is getting a clear understanding of what their CEO needs from them and adapting their style to suit.
The $4 billion CEO
Richard Bowden is the CEO of private health insurer BUPA Australia, a subsidiary of the UK-based international. Since its recent merger with MBF, BUPA Australia services over three million customers through brands such as ClearView, HBA, MBF and Mutual Community.
BUPA’s reported 2010 revenue was over $4.2 billion and the group employs around 2300 staff.
Bowden has been working with his current CFO, Joy Linton, for just six months. Linton, who is new to the health sector and was previously CFO at National Foods, says that while the financial areas of most large organisations share many commonalities, each business has its own nuances; and moving from food to health has been a big change.
“There are very different value drivers on the balance sheet, for example,” she says. But with Linton’s predecessor readily accessible, having moved into a strategic leadership role within the executive team, she says the transition has been smooth.
Bowden says that the working relationship between himself and his CFO is a critical one for the business. “The CFO must be able to have the kinds of one-on-one conversations with the CEO that no one else can have. And while they’re part of the leadership team, the CFO must also remain independent so they can stand up and argue for a proposition on its merits, particularly at board level.”
Achieving that balance between stable teamwork and independent voice is tricky, he acknowledges, and he tries to present a united front with his CFO.
“We sometimes confer on how we might play a particular meeting,” Linton says. “Obviously, Richard is influential with my peers, who are his direct reports, so if there are particular financial outcomes we’re looking to achieve in a meeting, we’ll often chat tactics before we go into the meeting.”
For Bowden, it’s vital that he and the CFO are driving towards the same goals. Right now, he says, he needs a CFO who is able to pursue a transformational agenda, which is why he recruited Linton.
“At BUPA we’re implementing a much-improved value proposition for our customers since acquiring MBF three years ago, so we are encouraging building and investing and developing the business.”
A keen Hawthorn fan, Bowden uses a football analogy to describe the role of his CFO: “Getting to the ball first and controlling the ball, that’s where I want the CFO to be, right in the centre of the game. At the same time, though, I want them to step up and take an aerial view.”
He explains further, “I expect Joy to not just look at proposals as they come forward but to really know the individuals putting them forward, to encourage some to follow through and do it and to get others to slow up.”
Bowden says that with BUPA’s flat organisational structure and strong teamwork culture, it’s vital that the CFO works closely with each of their colleagues to understand their business priorities and to offer a different perspective. “While I have expectations about the CFO being part of that senior leadership team, it’s a role that must have a certain degree of independence; that is really important for governance,” he says.
The cruising CEO
Ann Sherry is CEO of Carnival Australia, a subsidiary of the world’s largest cruise company, Carnival Corporation. The company’s brands include P&O Cruises, Princess Cruises, Cunard, Seabourn and Costa.
Sherry, who joined Carnival in 2007, is a former Bank of Melbourne and Westpac NZ CEO awarded an Order of Australia in 2004 for her leadership. She has been credited with turning cruising into the Australian travel industry’s fastest growing segment.
She’s efficient, effective, and she knows what she wants. “I like to work with CFOs who both have a handle on the detail but also are thinking about the business as a whole,” Sherry says.
“I like CFOs who speak up, and challenge both me and the rest of the executives. I like CFOs who are also focused on using their numbers to speak to the business about what they should do differently.”
She says that she values a CFO who can translate “the numbers” into the reason for taking a particular action, rather than present them as a static figure in isolation. The financial data is an active mechanism for running the business, she says, not just a passive fait accompli.
“I like CFOs who work across the team, to get underneath the way that people are thinking about their parts of the business, so they understand why it ends up like it is, because just by looking at the numbers, you can’t be sure how it got there. And from talking to them, you can understand the different priorities that leaders in different parts of the business may have. You also see the disconnects that way.”
She says that her relationship with her CFO is a strong and dynamic partnership and she relies on her CFO to be both challenging when needed but who also picks up on cues.
“If I say, I’d really like us to get to here, I want someone who can come back and say, well, here are three ways that you can do this,” she explains.
“I like my CFO to be solution-focused, too. I’ve worked with CFOs in the past who were constantly telling me why I couldn’t do things, rather than giving me options on what I could do instead, or how else could I achieve a certain goal.” She says that it’s important that her CFO is as ambitious for the business, just as she is.
“Someone who is solution-oriented and thinks about how things could be better can put in place our ambitions for the business using their numbers. The CFO has their hand on such an important lever, not just the numbers themselves, but the very dynamic that sits behind the numbers.”
Sherry says that a good CFO will be outward-looking, rather than spending all of their time looking inside the business. “I always encourage my CFOs to get involved in bigger things outside the business, whether that’s working on something with government, or hooking in with CFOs from other sorts of businesses, to get a different perspective. If you’re only looking at yourself, you can always imagine that you are right and that this is the only way of doing it.”
Carnival has the advantage of being part of a large global group so Sherry’s CFO has a natural peer group working across different markets.
The biggest challenge for the CFO in her business, she says, is managing the complexity of global supply chains while interfacing with domestic revenue. “We sell with a long lead time, so our revenue is often certain before our costs are known.”
The high tech CEO
Craig Scroggie, CEO of NextDC and former managing director of Symantec Australia, an affiliate of the US-based software company. Symantec provides security, storage and systems management technology, with Norton Anti-virus its best-known brand. With around 750 employees, its 2010 revenue was just under $200 million.
“The role of CFO is not just about finance,” Scroggie says. “It is so incredibly important to have a business-focused CFO with an understanding not just of the finance part, but of the business itself. The CFO needs to use their discipline to solve business problems.”
Scroggie says that he’s seeing that in action at NextDC. “The local CFO also has market responsibilities. I believe he will be a CEO one day. He is using his skills to drive the business capacity to execute.”
At Symantec, Scroggie says, the strategic plan is built by the senior leadership team using a planning system called the Argenti System. This focuses on a teamwork approach, where he and each of the senior leaders works with CFO to build the supporting financial strategy.
“I want a CFO who is prepared to work hard to support the team, not one who blindly accepts our plan or any plan as non-negotiable.” That includes directives from the parent company, he says, as often rulings which apply in another market don’t work locally.
“I value and expect candour in the relationship, and it is important to be prepared to challenge and be challenged by the CFO. It is far more productive to test the plan with the CFO and other members of the senior leadership team than to test it in the market.”
His big turn-off, he says, is passive-aggressive behaviour which drains valuable time and productivity. “I don’t want people to agree in the room, and then disagree or work against the plan when they leave. We should be able to debate until everyone is satisfied that we have exhausted all options to arrive at the best possible plan, then once the decision is made, everyone is on-board and relentlessly focussed on execution.”
The fast-growth CEO
Don McKenzie is CEO of Stream Group, an insurance claims assessment business which he started in 2008 and which now has around 200 full-time staff across Australia and NZ. Total revenue for 2011 is forecast at over $100 million, with around $30 million of that in professional fee revenue.
McKenzie says that the company’s extraordinarily fast growth has been a challenge and his biggest need has been for a CFO who can be very flexible.
“We have been able to grow so fast because we are nimble, but we don't want that structure to hold back,” he says. “At the start, the CFO reported to me. It was my company and my money. But now, we have other shareholders, and we need to ensure that we have a very robust and accountable financial structure.”
McKenzie says he needs a CFO with a broad skill-set, who can grow and change rapidly.
“I needed someone who has been in the game before, has a diverse background and has learned things from other industries that can then be brought to our situation.”
He has put in place an audit and risk committee chaired by an independent person to assist with governance and reporting, and that’s an important adjunct to his CFO’s role.
“In the early days, it was all very well for me to fly down a new path, because I understood all the data and I had all the information at my fingertips. But now it’s too big and the CFO role has moved from control and budgeting to being very much about providing supporting information to allow me and the rest of the management team to progress.”
And the view from the top?
A CFO must offer analysis, not numbers. They must be confident to offer advice, and sometimes contrary advice. They need skills that go beyond traditional financial management, and often from industries other than the one they work in. And they must be part of a team – with the CEO, with their own office, and importantly with other key members of management.
Got it? Then it’s good for you.