Failure in the senior leadership team can primarily be attributed to a lack of focus on strategy, according to a poll taken at last week’s CFO Retreat. This was followed by a fear of not being able to challenge one another, and then a weakness around overall communication.
In-fact, the dominant theme to emerge from the Retreat’s two days of panel discussions, interviews and discussion groups, was that a high-performing CFO ought to possess the winning combination of strong technical know-how and excellent people skills.
They also need the self-discipline to have a heads-up approach to the business, rather than getting sucked into day-to-day tasks. As one attendee put it: “If you are down in the ‘pit’, who is doing the thinking?”
Here are a selection of take-outs from Day 1 of the CFO Retreat, held in association with IBM, Ashurst and BIE Executive.
Develop an Appetite for Innovation
Innovation requires taking risks, which doesn’t always sit well within the corporate machine. Matthew Blagg, CEO of Criticaleye, noted that, “a company that doesn’t take risks is probably one that you want to get out of”.
However, a poorly thought-out approach to innovation can result in huge sums being invested with little return. It’s up to the CFO to ensure that new ideas are supported and encouraged, but in a way that is structured and has oversight.
Ralph Hewins, CFO of Elementis, said: “It is right to encourage risk, but it needs to be well-judged. Focus your energy on a few big projects and create a strong stage process so only the best ideas are pursued.
“You shouldn’t fund innovation blindly, but you should have a tolerance for failure. Organisations that don’t have the capacity to fund a lot of innovation need to be very focused.”
Ruth Cairnie, who is a Non-executive Director of Associated British Foods (ABF) and Rolls-Royce plc, as well as a Board Mentor for Criticaleye, advocates separating such projects from the core business: “Innovation is very important. When it is likely to be killed by an organisation, it can help to create a separate entity to pursue it.
“This ringfenced area will be able to put small bets on innovative projects to build knowledge and learning.”
Leadership Teams Benefit from a Good HRD
The CEO and CFO cannot function at the level they need to without alignment and trust, and this holds true for the rest of the senior leadership team.
Ralph of Elementis commented: “The executive leadership team, in particular the CEO and the CFO, have to work together to create a mood that encourages challenge. Extended offsite sessions, with no normal business agendas, may help to improve team dynamics and interpersonal relationships, especially when you need to have difficult conversations around the executive table.”
According to Ralph, “the dynamic between CEO, CFO and HRD is a really important triangle when it comes to building a strong leadership team”. He explained: “The CEO and CFO together may not have as much emotional intelligence as you might need. The HRD can act as a coach and a candid adviser to the CEO.
“This is a really subtle role, as a lot of the other leaders on the team will have line responsibility and will often be giving the CEO the story of how well they are doing.”
The goal must be to create an environment where leaders aren’t afraid to discuss problems. Ruth commented: “The natural state of things is to be misaligned, so you have to really work at it. Challenge can help to build alignment, allowing you to work though disagreements in the boardroom rather than pretend that they are not there.
“There has to be alignment in terms of strategy and direction, and in terms of teamwork. The whole must be more than the sum of the parts.”
CFOs Must Drive Business Performance
In a poll taken at Criticaleye’s Non-executive Director Retreat last month, attendees identified people skills and communication as the main area where CFOs need to improve, followed by building alignment in the senior leadership team and strategic thinking.
This was mirrored by what was discussed at the CFO Retreat. “Finance people may be very smart, but smartness is trumped by wisdom and judgement,” commented Ralph. “The culture of the modern finance function should be to act to support the business, making it more successful through excellent communication and strategic thinking.”
Paul Lester, Chairman of Essentra, said: “I like the operating model where the CFO is seen as the number two in the business. There should be a bond between the CEO and the CFO, whereby they know how one another thinks and they can work together as a team. The CFO should also have the full support of the CEO in order to drive KPIs through the organisation.”
There was also agreement that the speed at which markets are changing requires greater agility from the CEO and CFO. Matthew of Criticaleye said: “We are seeing two words used more frequently: one is simplicity and the other is fluidity.
“Leadership teams need the ability to make things simpler, but also develop a strategy that is fluid.”
Marc Barber, Managing Editor, Criticaleye
Next Week’s Community Update will be on the workforce of the future session from the CFO Retreat 2017