Eliminate gaps and build trust to enable a fast start
The urgency surrounding the first 100 days in a CFO role is illustrated by the ever-shortening tenure that finance leaders spend in those jobs.
Numerous recent studies show that the average time CFOs spend in a role is comparable to the number of years they spend in college — and in many cases, it’s less.
“Being in a CFO role for 20 years is very rare today, so being able to quickly adapt and make a positive first impression is especially important,” said Grant Thornton Business Consulting Managing Director Ronald Gothelf. “Results are expected quicker than ever before and companies no longer have the patience that they used to have.”
That demand for quick results means CFOs need to walk in the door on Day One with a plan to start driving toward the organization’s objectives. But achieving those results requires more than a can-do attitude, strong leadership and finance skills.
Getting a CFO tenure off to a good start requires the first 100 days to be filled with learning organizational goals, creating strategies to meet those goals, and developing relationships with key stakeholders who are above, below and beside the finance director on the org chart.
Understanding objectives and current state
The newly hired CFO must immediately develop a detailed understanding of the strategic goals, objectives and financial expectations of the organization’s equity holders.
Ideally, this work already is well in process before the CFO even receives their company-issued laptop and their code to access the building. During the interview process, the finance leader usually learns at least the key bullet points about what the company is trying to achieve and the resources it will be able to deploy.
As soon as possible, it’s critical for the CFO to engage the CEO, the board, the audit committee and other key equity holders to gain a fuller view of the organization’s objectives. The CFO needs to know:
- The board’s growth targets and the timeline for achieving them.
- The strategy for achieving those growth targets and the role that organic growth, inorganic growth, margin expansion, multiple expansion and operational improvements are scheduled to play in the pursuit of growth. Measurable goals related to all these factors need to be fully understood.
To get a clear, unbiased picture of where the organization stands related to those goals, the new CFO should review the latest financial statements, quality of earnings reports, and operational and technical due diligence reports in the first 10 days — or even before that, if possible.
The depth of available information can vary widely depending on the size of the company and whether it is public or private. But in every case, the CFO needs to know exactly where the organization stands related to its goals.
At the same time, the CFO should work quickly to establish relationships with:
- Key stakeholders higher on the org chart (the CEO and the board)
- Executives on the same level (the rest of the C-suite)
- Employees at lower levels (particularly members of the finance function)
Gothelf calls this managing up, out and down. Each of those directions is critical, said Grant Thornton Business Consulting Manager Lindsey Howe.
“Trust is essential, especially during times of transition when the team is looking for reassurance about what the future holds under the new CFO.”
“Right off the bat, you need to make an effort to get to know each and every one of the primary stakeholders you’ll be working with to hit the ground running and build trust,” Howe said. “Trust is essential, especially during times of transition when the team is looking for reassurance about what the future holds under the new CFO.”
While getting to know everyone is important for a CFO coming from outside the company, a new CFO who is promoted from within needs to focus on re-establishing relationships from a new perspective. Former colleagues might become direct reports. Your C-suite peers will welcome you to a seat in the executive conference room. And a direct line to the CEO and the board must be established and maintained.
Gothelf recently worked with a chief accounting officer who was encountering these relationship changes when promoted to CFO.
“Even though they had a background perspective on some areas, there are a lot of areas and people they didn’t work with as much in the past,” Gothelf said. “Their up, out and down changed, and special attention was needed to learn more about areas they weren’t responsible for in the past.”
Filling the gaps
While establishing those critical relationships, the new CFO needs to immediately begin addressing the gaps between the organizational objectives and the current state.
Some gaps might be eliminated quickly and easily, while other gaps might require a more elaborate plan and road map.
“When there are quick wins that can be identified and implemented right away, those can be a great way to establish credibility, build momentum and create improvement as soon as possible,” said Grant Thornton Business Consulting Senior Manager Brian Ronan. “But when there are larger gaps, perhaps processes will need to be redesigned and technology will need to be implemented; that of course, will take a little longer. But building momentum and capitalizing on it is key.”
Processes and technology are key areas CFOs need to evaluate as they work to close gaps and identify any efficiency and resource gaps that need to be met. CFOs need to understand how their processes and technology support the operations in finance and across the organization — and make sure finance’s processes are appropriately supporting the needs of everyone throughout the organization
Other key areas for the new CFO to examine include:
- People: CFOs need to understand the skills their people will need in the ideal future state and work to train or hire as necessary to fill any skills gaps that might emerge. The new CFO also needs to create an environment where people will thrive. “It’s important to establish open lines of communication, maintain high morale and build trust with your team,” Howe said.
- Governance, risk and compliance: A new CFO must become familiar with the controls for all the organization’s processes and financial reporting so that the information can be relied upon.
Having the appropriate controls in place will enable the measurement of progress toward eliminating gaps and fulfilling the objectives of equity holders. Progress needs to be validated through improvement in key metrics that have been established.
“Understanding the KPIs you’re looking to improve upon is the foundational element of the current-state appraisal,” Ronan said. “That is really the launching point where you compare those against the strategy and see where the deltas are. You want the key metrics and targets established as soon as possible within the first 100 days.”
Gothelf divides the metrics into two groups: those measuring improvement processes and those measuring maintenance processes. Improvement process metrics are typically monitored thoroughly because management is keenly focused on how they display progress toward high-priority goals.
While the primary focus is on those goals, it’s important also to monitor the maintenance processes carefully to prevent slippage. For example, if payables or receivables balances creep higher while other processes are being changed for the better, the effects of the improvement will be muted.
After the first 100 days
A productive and transformative first 100 days provides a springboard for the rest of the CFO’s tenure — regardless of how long a person stays in the role.
By the time the first 100 days are complete, the CFO’s plans for meeting the organization’s expectations should be well-established, hopefully with a few quick wins already achieved and progress made toward more complicated goals. Beyond the first 100 days, there’s an element of reinvention to the CFO’s work.
“There’s a constant evaluation, a constant looking for opportunities for improvement, a constant evaluation of support of the investment thesis, and a constant evaluation of the support of all the stakeholders,” Gothelf said.
It’s also important for the CFO to set aside regular time to step back from day-to-day work and take a fresh look at the wider perspective. And as the CFO spends more time in the role, there’s a greater opportunity to work with the CEO and board on broader strategic opportunities that might exist as they map out the organizational objectives.
After the first 100 days, the CEO and board will expect this type of input to be made with a full understanding of the organization.
“Maybe someone who’s brand new will lack a perspective that might affect their strategic input,” Gothelf said. “After 100 days, when the CFO suggests a strategic direction, it needs to have a much more well-baked set of beliefs and understanding behind it.”
That understanding is likely to be firmly entrenched if a CFO has approached the first 100 days correctly. And a well-planned first 100 days will go a long way toward establishing the foundation and momentum toward a successful time in the CFO role.
Contacts:
Ronald Gothelf
Managing Director, Business Consulting
Grant Thornton Advisors LLC
Ron is a Managing Director in the Grant Thornton Finance Modernization Practice leading the U. S. Finance Transformation Capability and the Central Region Finance Transformation Practice. He has more than 20 years of domestic and international experience leading Finance Transformations of all sizes across multiple industries.
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