FEI Daily spoke with Jeff Thomson, President and CEO of the Institute of Management Accountants (IMA), about how CFOs can excel during periods of disruption, positioning themselves to fill the CEO role.
FEI Daily: How are CFOs and other senior-level financial executives stepping up for their CEOs and boards in today’s financially and politically volatile environment?
Jeff Thomson: Having been a CFO and now a CEO, and as a CEO who relies very, very heavily on my CFO, I can speak to my experience. Whether it's in the midst of coronavirus, or trade wars, or geopolitical tensions, all the complexities of business, the CFO is in a great position to either be an emergency back fill like we're seeing in some cases or long-term candidate for the CEO job.
Their job from yesteryear, the ‘table stakes job,’ was to always manage the balance sheet, manage cashflow, manage working capital, work with banks for financing, and depending upon whether you're a small or a larger business.
We're only going to come out of this stronger if we have businesses to go back to, if we have enough cash on hand, if we have alternative sources of funding, if we have a diversified portfolio, and if we commit to being a learning organization. Because, we're learning an awful lot. Do we have a work from home policy? Do we have crisis management plans? Do we have business continuity plans, disaster recovery plans documented and occasionally reviewed with the team?
Whether it's a large company or a smaller company, CFOs increasingly have expanded from finance and accounting operations and the CLO role to technology to strategy, and even HR. When you look at small businesses like ours, which still account for 60 to 80% of net new jobs, our CFO Doreen Remmen also has HR. So, she then becomes the point person for how, as a small business which qualifies under the act, do we make employees aware of their right to have paid sick leave and FMLA if they qualify?
How do we figure out the loan provisions that are available to organizations like IMA, FEI, and other small companies? I'm not talking about the accounting part. I'm talking about the financial viability and what's available to you. More and more, over the years in the US, the notion of the CFO as trusted business advisor, strategic business partner has been at least 20 years, probably even more like 30 years of an evolution.
So, whether it's an emergency fill-in during the coronavirus or long-term candidate for the CEO job, I think the CFO, generally speaking, is in a really, really good position.
FEI Daily: As boards discuss candidates to assume the CEO role, what are some of the specific characteristics that they're looking for in a CFO, beyond the ‘table stakes,’ (risk management, and the financial expertise)?
Thomson: If you're going to walk in somebody's shoes temporarily, or permanently, or be a candidate to walk in their shoes, you've got to demonstrate that competency or have the short term potential.
It’s the intangibles of leadership: building followership, executive will and resolve, the ability to inspire, the discipline to listen first and speak last, and the courage to listen to your followers, in addition to leading your followers. It's resilience. It's adaptability. It's global mindset. I'm not a big fan of the term servant leadership, so I try not to use it. I try to describe the attributes, but very little of what I just rattled off has anything to do with FASB standards, or SASB standards, or Rev Rec, or CECL, or anything like what FEI’s CCR talks about. Really, it's those intangibles of leadership, courage with grace.
We had a workshop at IMA where we talked a lot about courage with grace. We talked about fierce conversations and crucial conversations, because if you are in this role of, whether it's CEO in waiting or just a business partner to the CEO, and the rest of the C suite, and the board, you're going to be influencing and being influenced by multiple people every day. So, having that interpersonal flexibility, being aware of unconscious biases, the list just goes on, and on, and on. These jobs that span multiple disciplines and cultures, you want to be a good listener, but you also want to be a decision maker. People expect leaders to ultimately lead. I'm not even a big fan of the term soft skills, but it's those kinds of skills that I think are those that would make for a good CEO. It really is sometimes hard for people to go from specialist to generalist. I'll tell you, it was a little hard for me, having been trained as a mathematician-, statistician-type of CFO, very specialized domain knowledge.
Then, as you evolve and you're asked to take on more and more, that's a little bit out of your comfort zone, and talking to investors, talking to customers, talking to potential deal partners. With reasonable intellect, and reasonable experience, and a broad knowledge of even HR, you can be an effective specialist or generalist. But, it's a little uncomfortable because the way most corporate controllers and CFOs got to where they are is because they had very, very specific domain knowledge of accounting standards, and rulings, and everything else. Now, they're being asked to rely a bit more on their judgment and their experience and make immediate best decisions for the company.
FEI Daily: What are some of the things that CFOs can do to ready themselves for a step up, specifically to the CEO role?
Thomson: One way to do it is to embrace more cross-functional responsibility and hire and trust really good people. Because, if you're going to embrace a broadened responsibility that might come your way, then you can't do it all. There's a tendency to think ‘what got me here will get me there.’ What got me here is by having really specific expertise in a domain, but that's not what's going to get me to be successful as CEO. I've got to hire really good people, build competency, develop them, embrace talent development.
I was CFO for our sales force, so I really got to understand the sales mindset. Now, when I'm in a CFO-type role or negotiating targets and budgets with the sales force, they're not bad guys or bad ladies. They're people with a mindset, different incentives. So, it really does help if you've been able to directly experience as much cross-functional responsibilities that the CEO has. I mean, the CEO is responsible for everything, so I think the more of that, the better.