Platt Perspective on Business and Technology

What do C level officers do? 2: the Chief Financial Officer

Posted in career development, job search, job search and career development by Timothy Platt on September 12, 2014

This is my second posting to a series on what C level officers of a business or organization do, that specifically emerge as job requirements for the senior leadership of an organization. I set the stage for this wider discussion in Part 1 where I put what I would cover here into the wider context of my ongoing Guide to Effective Job Search and Career Development and its Page 2 and Page 3 continuations (see my list of related series as included in Part 1.)

As a specific area of focus for this, I began a discussion of the sometimes conflicting goals and priorities that a C level officer has to meet and reconcile. And as noted at the end of Part 1, I begin delving into this in more detail with the Chief Financial Officer (CFO). And the logical starting point for that is with what a CFO’s department does, that this C level officer would manage as a whole.

Liquidity and available monetary resources are literally the life blood of an organization. If the total level of available funds drops to a level at which that business can no longer meet its basic, core operational needs it faces only three real alternatives.

• It can try selling off non-liquid resources to raise working capital so it can continue to meet payroll and other basic expenses and keep its doors open.
• It can relinquish independence through an acquisition process – that in many cases would mean its dismemberment as its resources of value are absorbed into another larger business’ systems.
• Or it can declare bankruptcy, which might mean simply closing down for good or might mean attempting to reorganize and try again, doing so under court ordered protection from immediate creditor claims.

But whatever path this failing business venture takes when reaching this point financially, it at the very least faces a near death experience. Business strength and the capacity to participate competitively in the marketplace call for a cushion of readily available liquid capital resources coupled with a stable, sustainable non-liquid resource base. And it is the job of the Finance Department, and of the CFO who leads it to manage and maintain this capability.

Systems and processes operationally responsible for this can be roughly divided into two categories:

• Standardized processes and practices that are generally used by essentially all businesses and that can even be legally required,
• And more business-specific processes that would go into meeting its business model and its overall leadership team and owner requirements.

The clearest and most consistently required example of the first of these categories that comes to mind for me here is adherence to Generally Accepted Accounting Principles (GAAP). But business model, market-based and other requirements can also place tight constraints on how a business’ financial resource decisions are made and operationally carried out within this department too. And collectively these parameters, coupled with the experience and beliefs of this department’s leadership, set the basic pattern for how a CFO would order and prioritize their department and set its goals and priorities for meeting their view of a business’ overall needs and resources.

But no department and certainly no Finance department can work in a vacuum. Virtually all of the incoming revenue and of outgoing expenses and essentially all of the financial resource base that is built up in support of this system are developed through the decisions and actions of other departments and services. And they have goals and priorities and preferences and biases in how funds are to be made available and for what, that are shaped by their own ongoing operational needs and their own departmental-centered strategic views, and their understanding as to how their activities fit into and support the business as a whole. And this is where conflicts of the type that I write of here are born.

The CFO arrives at the overall business-wide strategic planning table with their own department’s assessment as to what resources are there and what of them are available for operational and other immediate use, withdrawal of funds as profit included. They arrive at these higher level strategic discussions with a picture of what departments and services are using what specific levels of available funds for, and of where revenue is coming in from, and at what levels and according to what schedules, at as of their most recent reviews and analyses of performance. And they arrive knowing what is going to be coming due for payment and certainly for fixed and scheduled expense outlays and in most cases for already planned larger scale one-off expenditures too (e.g. capital improvement expenditures.)

Every other C level officer and in fact a wider range of department and service constituents that they represent at these meetings, would argue the case for supporting their functional areas and their task and goals oriented needs. The CFO holds overall responsibility for providing information on what expenditure levels are possible and with what levels of risk and with what immediate and long-term impact on liquid reserves available. They and others in the executive strategic team then argue the case for meeting their own needs, and in ways that provide an effective balance of resources for meeting the overall needs of the business while doing so. And this becomes a discussion of goals and priorities and of timetables and performance benchmarks, and from the CFO’s perspective keeping all of this fiscally prudent. And this becomes a matter of determining what levels and timeframes of risk are going to acceptable to the business as a whole too, where the CFO’s input to this discussion serves to calibrate what actions and expenditures would carry what levels of financial risk and over what anticipated periods of time. In this regard a good CFO generally takes a more conservatively prudent approach as a counterpoint to the requests and demands from others at the strategic planning table. (I add as an aside that I know CFO’s, and particularly ones who specialize in change management remediation who would say their primary job is to say “no, you can’t do that and here is why.” But I focus here in this posting on more functional and stable business leadership scenarios.) And overall business-wide decisions as to what to fund and pursue and at what levels and with what priorities and in what timeframes, is determined.

I am going to continue this discussion in a next series installment, there switching focus to that of the Chief Information Officer (CIO) and Chief Technology Officer (CTO) perspective. Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 3 and at the first directory page and second, continuation page to this Guide.

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