- Author: Jon Brett
- Posted: October 9, 2023
Things a New CFO Struggles with when Interacting with a Board
There are two types of ‘new CFO’.
The CFO appointed from outside the organisation and the CFO appointed from within the organisation.
Both have distinct advantages and disadvantages.
An internal appointment always appears easier: there is no acclimatisation period and he or she is a known quantity. But an external appointment can bring new ideas, new ways of doing things, new solutions to problems, and new ways of running the finance department. The new CFO needs to:
Get on top of the lingo
Every organisation appears to have its own lingo and there are different terms used in different industries. The honeymoon period for learning these is relatively short. Ask colleagues for help, but the Board will expect you to have a full grasp of the lingo that is being used in board meetings.
Personally, I am against acronyms. Many executives use them in board meetings to demonstrate their knowledge of a business, but I will bet anything, that if one goes around a board table and asks Directors what the acronym stands for, very few will know.
In an incredibly direct memo to his Space X staff, Musk raged on the acronym.
“Excessive use of made-up acronyms is a significant impediment to conversation”, he scolded. “No one can actually remember them, and people don’t want to seem dumb in a meeting, so they just sit there in ignorance. This is particularly tough on new employees.”
So, try and avoid them. Like the lingo, the new CFO needs to get on top of acronyms and my advice is to try and stop people using them. Most people will appreciate this.
What is sacred and what is not?
The new CFO arrives brimming with ideas of how he/she is going to change the place, introduce new systems, change the team, streamline the accounting process and so on. But there are certain things that are within the CFO remit and some changes which would just annoy and make people upset.
Some examples of this would be, not to invite finance colleagues to board meetings if they are used to being included and presenting to the board etc…
There is nothing worse for morale than ‘uninviting’ a colleague to board meetings
The CFO may want to make software changes or staff changes and bring his team across from his previous organisation. The Board on the other hand may want to know what the other alternatives are, and may not want a completely new finance department, which can also be decimated if the CFO leaves.
How to communicate with the Board and the framework for interacting
The Board sits across the whole management team. They are really just ordinary people, some smarter than others and some richer than others, but all should be approachable. Don’t be intimidated by anyone on the Board. The Board cannot survive without management.
The CFO should be able to pick up the phone to the Chair of Audit any time they feel it necessary and needs to establish that relationship very early after the appointment. This will build up a trust relationship between the CFO and Chair of Audit which is vital for good workings of a Board.
How often should the CFO communicate with the Board and chair of Audit outside of board meetings?
Board meetings and interactions can be tightly controlled by the Chair, giving limited time to each executive to present, including the CFO.
If necessary, the CFO should ask the company secretary to schedule more time for their presentation, especially if there are a number of points which need to be communicated.
The CFO should communicate regularly with Chair of Audit on any matters that they deem relevant including sharing audit and other issues quickly. A good Chair of Audit will know the matters that can be addressed outside of the Board, matters that need to go through the auditors, and matters that need to be discussed with the Chair and the rest of the Board.
Bad news needs to be communicated to the CEO, so you can both decide how to present this to the Board.
Communicating clearly – Leading a board to the water doesn’t necessarily make them drink.
If the company is not going to meet its forecasts, or there are other issues that need a board resolution, let the board unambiguously know and the steps if any to try and mitigate the issues and any other steps that need to be taken (i.e. notifying the market).
A new CFO needs build trust with the Board and good communication is the key to doing this.
Assuming what the Board knows or what the Board doesn’t know
Good Boards know a lot and have discussions behind the scenes, but sometimes they actually don’t know anything.
Boards operate at a different cadence to management. There may be politics amongst management. To the CFO it may appear that challenges in the leadership team can be fixed by a stroke of the pen. Boards may have a longer-term view, which may be frustrating to management.
Apple fired Steve Jobs, so theoretically the board has the power but in practice it may be harder to yield.
Management doesn’t show the Board everything and the Board doesn’t share everything with management. Management needs to be united when they sit in front of a Board, but that doesn’t mean they can’t have different opinions and share these different opinions with the Board.
Solving every issue
Boards can’t solve every issue, neither can management. The management and the board need to work coherently to solve issues but at the end of the day, the company is run by management and they need to come up with the solutions.
Understanding Board dynamics
Each Director may have a different background and may be on the Board for different reasons. There are going to be those Directors who want a full understanding of everything, and for these Directors try to figure out what questions will be asked and how to respond. Be prepared!
Finally, a good CFO is an important person in any organisation. Hopefully the Board will accept that you need time to get up to speed on everything and that you will be a valuable executive; after all they have just hired you!
About the Author: Jon Brett
Jon Brett is Non-Executive Director of Corporate Travel (CTM) and Chair of the Audit & Risk Committee
Jon is the author of the very successful podcast series “The Taking of Vocus” which chronicles the extraordinary rise of Vocus, what went wrong with the M2 merger and concludes with the privatisation of Vocus. The podcast can be found on the above LinkedIn link