The Crucial Role of CFOs in Mid-Sized Businesses and Startups
“…from a CEO’s perspective, if there’s someone within the organization who can provide a 360 degree view into all the business functions, it’s the CFO.”
We all largely have the same perception about scale or size, at least till some point in our lives - that bigger is better. A student always feels that a bigger school or college will be better for him. An entrepreneur always aims to grow his business into a large empire. A job seeker always aspires to join a bigger corporate to hone his skills and attach a coveted tag to his resume to boost his career growth.
Finance professionals are not exempted from this thinking either. Most of us, especially young finance graduates, also always aim at being part of a large business conglomerate which will give us the much-required exposure to prepare ourselves to reach the ultimate ambition of becoming a CFO. I had also set a similar career growth path for myself and things moved according to plan until I came across the opportunity to work for a mid-sized corporate entity – also fondly known as a ‘Startup’! From my experience, I can confidently say that the opportunity for a finance professional to manage business affairs of a mid-sized entity is sure to change his approach towards business, management, resource planning and life as well.
Large corporate entities have the luxury of all the resources at their disposal in the wake of achieving their plans and objectives. By nature, the essential 4 M’s – Men, Machine, Materials and most importantly, Money – are variable resources for these entities and they are at relative ease to create more of all of these when required in course of accomplishing business goals. As against this, mid-sized entities generally will have a rationalised supply of one or more of these and hence, the management at mid-sized entities have the onerous task of designing the organization in a way where resource budgeting is a critical aspect for attaining organizational goals.
This is where a CFO has to play a very vital role. The CFO has to be at the helm of the business plan and deeply involved in formulating a sustainable business model with a clear vision of the cash flows and path to profitability. He or she has to also make sure that the goals of the business are well-objectified and planned to be tracked at every regular intervals. Any deviation in resource consumption needs an immediate analysis more than an explanation. It is this financial discipline which a CFO needs to drive and ingrain across the entire organizational hierarchy. CFOs need to be more like business partners than just gate keepers of finance. It’s imperative that they have a sound understanding of the overall ecosystem which can be leveraged to build a robust business model. They need to control the exuberance of the business teams by being diligent, but not kill their excitement and passion by being too rigid.
It’s important to delve upon and understand a key point here – all business affairs and projects need evaluation on a financial yardstick. The assessment of strengths, weaknesses, opportunities, threats, success, failure of a business or any of its functional domain is deficient without a thesis woven with numbers. Given CFO’s involvement from resource planning and budgeting stage in all business domains, he/ she has a more balanced, neutral, analytical and action-oriented view on the business developments. Hence from a CEO’s perspective, if there’s someone within the organization who can provide a 360 degree view into all the business functions, it’s the CFO.
All the other business functions – be it Operations, Business Development, Marketing, Production, Sales, Technology, HR – have all equal responsibility towards the success of the organization and play a pivotal role as the leadership team, it is, however, the CFO’s version of the business plan and performance which is sought and relied upon by the CEO, the Board and even the external stakeholders such as the Investors – especially for a mid-sized entity where a lot of functions are combined into common centralised functions.
As already substantiated, a CFO’s role in a mid-sized entity spreads its wings much beyond only financial controlling and compliance. In today’s day and age, how often do we see CFOs overseeing multiple other domains such as strategic corporate planning, mergers and acquisitions, information technology initiatives, corporate affairs management, asset planning and management, and risk management? It is with this all-round approach and understanding of the various facets of the business, that we witness many CFOs now staking claim to be the successor to CEOs in many mid-sized enterprises. CFOs’ eye for detailing and strong acumen in financial and risk management makes them strong contenders for the corner office.
A mid-sized entity definitely provides a perfect platform for a CFO to groom himself across all fundamental business functions and provide him with a more intuitive vision of the business. In my opinion there’s no better stepping stone than this for the next big leap.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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