|The Role of the CFO - Financial Navigator
By Ben Cass, Managing Partner
To paraphrase, "Behind every great CEO is a great CFO".
Consider for a moment the likes of Enron's Ken Lay, WorldCom's Bernie Ebbers, and HealthSouth's Richard Scrushy, who have allegedly defrauded investors out of billions. Did they have great CFOs by their side? Now think about the great companies: General Electric, IBM, Coca-Cola, Microsoft, the list goes on. Those companies had great CEOs that worked in tandem with great CFOs.
"Good is the enemy of Great." - Jim Collins author of Good to Great
The key to a Good to Great story is the ability of the CEO to focus on the right metrics. Figuring out and tracking to the right metric takes an execution minded management team. Get the right people on the bus before figuring out where the bus is really going. They can help establish what the key metrics are and drive to them. They can help get your company from Good to Great.
CEOs of small and medium size businesses wear many hats and typically excel in one or two areas. Without a strong management team, the CEO has difficulty focusing on the business drivers. The CFO position is unique in that financial practices are more standardized than other aspects of a business, such as sales, marketing, and information systems. That standardization allows an experienced CFO to immediately add value without the typical learning curve to climb. For the small business CEO, the ability to access a seasoned CFO results in more focus on the levers that really impact the business.
The CFO is a critical part of any management team and is crucial in developing and implementing the strategic direction of the firm. The role of the CFO is really that of the financial navigator who helps stay on course to achieve peak performance, manage cash flow, and raise capital. The great CFOs assist CEOs by integrating the operating and financing strategy so that the company and its owners, investors, and shareholders are ultimately successful (even if the CFO is hit by the notorious "pick-up truck" on the way home). Maybe this is why the truly great CFOs, known for their high level of ethics and expertise, often become the trusted advisor or "consigliore" to the CEO.
Most CEOs of large companies would insist that their business benefits tremendously because of their CFO. However, most small and middle-market businesses cannot afford or justify the $250,000+ a year it might take to employ such a seasoned veteran. Instead, they stretch the limitations of their controllers, CPAs and accounting staff or more commonly, do without. Even if the capital were available for such an investment, do they really need a CFO five days a week? I am referring to that rare, proven, successful, senior-level CFO, who comes complete with excellent interpersonal skills, not to mention the "Golden Rolodex" and endless list of references vouching for his or her personal integrity. What could possibly be better than being able to access a CFO of that caliber?
Answer: Access to a stable of these elite CFOs and their trusted controllers, as needed.
That was the basis for forming Interlochen Group in 2000.
Interlochen Group provides senior-level CFOs and controllers who can immediately add value by advising and assisting companies undergoing transition. The most common types of transition include: restructuring, refinancing, merger, acquisition or divestiture, rapid-growth or expansion, crisis, change management or early-stage turnarounds, and exit planning.
Some things to review when considering a CFO or Financial Advisor:
Experience - Our CFOs are proven and have over 25 years of financial and accounting experience, having actually been CFOs and Advisors of companies with revenues ranging from $10 million to over $2 billion. Such companies include Georgia Pacific, Equifax, Outboard Marine, Value Options, Norrell, Dollar General, Alix Partners and numerous smaller companies in virtually every industry. Trust me on this one - there is a big difference between those who have actually "sat in the seat" and those who have not.
Independence - A CFO or Financial Advisor should be able to maintain a high level of independence and objectivity. In other words, they will do the right thing. This is easier when they are hired as consultants, rather than employees. Their interests are aligned with yours and they perform or you terminate them. It's that simple. Our CFOs expect to add a lot of value and then work themselves out of a job. They do not want to be your employee. Want to make things complicated? Hire more employees. They have to consider how the information they deliver to you will impact their own future.
Network - Great CFOs bring with them a tremendous network of professional service providers, capital sources, and talent. This includes accountants, lenders, investors and controllers that can help take companies from good to great. And they network with their own peers. Our CFOs meet weekly and are able to assist each other with complex issues, current information and referrals. Multiply one network by ten. This is a clear distinction between an organization and a sole-practitioner.
The bottom line - Virtually all middle-market businesses can benefit by having access to a great CFO. If you really want to be comfortable with where your company bus is going, make sure there is a CFO on board.