Talking shop

“For f*cks sake, don’t you get it?”

“I do get it! You just aren’t listening…”

The CEO (Roger) and I stood arguing in his office. We’d just returned from a meeting with the sales leadership team. They’d proposed terms to land a new customer.

The margins were terrible, the payment terms worse, and it would bring unwelcome complexity to our business. Naturally, I thought it was a bad idea, but Roger was keen.

This was the third time in a couple of weeks we’d had a ‘conversation’ like this. We’d argued about a big capex project two weeks before (I won), and a few days ago disagreed over next year's bonus structure (he won).

Three in two weeks was a bad stretch, but we’d have 15 or 20 conversations a year like this.

To anyone else, this sounds dysfunctional. The end of a relationship…

But it was quite the opposite. By now, we’d been working together for many years, and had come to learn this was how we got to the right answer.

95% of the time, we agreed on important decisions. We were cut from the same cloth. Logical thinkers, never too proud to admit we were wrong and happy to change our minds if necessary. This normally led us to one answer rather than the other.

That’s what made it so interesting when we disagreed. And to resolve those moments, we developed this ritual. We would talk it through in private, often in Roger’s office, getting gradually louder and more animated until one or the other admitted defeat.

When I first started working with Roger and experienced this a few times, I just assumed it wasn’t going to work, and I’d leave before long.

But as time went on, I noticed the decisions we reached out of this process were often proven right by hindsight. Whichever one of us had caved would end up later admitting that they ‘were glad you talked me round’ or that we’d ‘dodged a bullet.’

In short, our heated arguments had a fantastic track record.

Whichever one of us was most stubborn at that moment would likely win the debate. And that stubbornness was driven by how passionately we felt one way or another. 

Roger could have just overruled me on most things, of course. But he chose not to nearly every time. He liked me challenging his thinking, and this was his way of extracting the best out of himself. He wanted to be sure he was right and wasn’t afraid to admit when he wasn’t.

And the private disagreements were always just that. Private. We had an unwritten rule. The minute we’d agreed on a way forward, however painful it was, it was done. We moved on immediately. No scars. Often straight into another meeting on a different topic.

It turned into the best CEO/CFO relationship I ever had. Unconventional yes… but who cares if it works?

Partners in crime

I’ve seen otherwise good CFOs never hit the heights they deserve because they lacked one thing: they didn’t have the savvy to navigate the C-suite political jungle.

Let’s make sure that doesn’t happen to you. In this month’s series, we’ll talk C-Suite politics. 

As you get more senior, a small number of high-stakes relationships become ever more important. Precise management of these is important. So, I’m going to share the tips, tricks, and dark arts I’ve learned over the years.

20 years ago, I remember proudly telling my boss at the time that ‘I don’t do corporate politics.’ She was a rational, reserved woman, who I thought would respect that sort of maturity from a young buck.

Instead, she gave me some of the best advice I’ve ever had…

“Sorry, but that is the dumbest sh*t I’ve ever heard.” She couldn’t stop laughing as she said it. I’d never seen her swear or laugh before…

I just sat confused and mouth agape.

“Of course you do politics. EVERYTHING is politics. You were doing politics right then when you said that. You wanted me to think a certain thing about you, right?”

I nodded (mouth still open).

“Well… that’s politics. You are defining politics wrong. Like it's just this bad thing to stay away from. But that’s the wrong framing. What you are talking about isn’t politics, it’s influencing. There is influence for good purposes, bad purposes, selfish purposes, etc. And it’s complex. But it's all influencing. You can’t just take a chunk of it, call it politics, and say you don’t do it. You’ll get scorched alive when you get exposed at a more senior level. Because what you are calling ‘politics’ doesn’t show up wearing a name badge, it’ll come dressed as something else and hit you in the face.”

It was a hell of a wake-up call. I actually met that former boss recently and reminded her of this conversation. We had a good laugh about it. She didn’t remember any of it, but it stuck with me.

Because she is totally right. As a leader, you need range. You need to have the skills and sophistication to successfully influence others regardless of the situation. That’s a real skill.

So, in this series we’ll focus on influencing inside the C-Suite:

• Part I (today): Working with the CEO

• Part II: How to handle C-Suite politics

• Part III: Using the CFO seat to forge a better C-Suite

I don’t profess mastery in this stuff. And there is certainly no ‘one-size fits all.’

But I can share the tips and tricks that have worked for me, in the hope they are of some use to you. 

So to kick things off, here are 5 tips for building a healthy CEO-CFO relationship:

Tip 1: Pick your CEO carefully

The CEO chooses their CFO.

But it’s also true that a CFO chooses their CEO.

And as CFO, your choice of CEO is much more of a one-way door than the choice the CEO has.

If the CEO doesn’t like you and decides they made a mistake, they can replace you. It’s inconvenient, but happens all the time.

But if you join a business and the CEO relationship isn’t working your only choices are to leave or see it through.

So when you take a job, you MUST do your diligence on who you will be working with. Ask to speak to the CEO’s former CFOs at different companies - that is the best way to get the lowdown.

The best CEO-CFO relationships are symbiotic, and this takes time. So the questions you need to ask yourself are, is this person someone who you:

• Can perform at your best around?

• Like being with (you are going to spend more time with this person than your spouse for the next few years)?

• Respect & trust?

• Share personal values with?

You can never know for sure until you start working with them, but if there are any red flags upfront, you need to tread very carefully.

Nearly every CEO-CFO relationship I’ve seen that didn’t work, was doomed to fail before it started.

But when they work well… it’s great to have someone to share those ups and downs with… just like Jarred and Richard did:

Tip 2: Check in every day

The longer you and your CEO don’t speak, the more opportunity there is for you to row on different courses.

Great leaders are prepared to change their minds or shift their direction when they need to. And business gives surprises every day. And with it comes new reasons to change course.

You and your CEO need to be speaking regularly to keep aligned. You need to know what they are thinking. If you can’t immediately reel off the top 3 things your CEO is thinking about right now, you aren’t close enough.

It’s likely your calendars will bring you together in some way most days, and you will have formalized one-on-ones etc. But if more than 24 hours go by, find an excuse to give them a quick call. It can be as short as five minutes or much longer.

Pick a time outside of regular hours, either first thing in the morning or after the day's meetings have finished. Know their calendars and pick moments you know they have downtime, or won’t be distracted with other things.

It is in these moments they will be more reflective and share more generously with you. And the more you learn about what’s important to them, the better you can serve, and influence, them…

Tip 3: Be unmanageable

OK… don’t literally be unmanageable.

I mean, be so good you don’t really need managing.

The more your CEO feels they have to manage you like a subordinate, the harder it will be to get close to them.

As CFO, you own the finance function. You should know what needs dealing with (and when) better than they do. Make sure it happens.

The more they are having to ‘manage’ you on routine finance affairs, the less they will value you as a business partner.

Keep them informed so they know everything is in hand, and you are there to support them. There is a lot of work upstream to make this happen. #1 is having the right team.

You should know what they need before they ask for it. Before they even realize themselves.

The more you speak to them, the easier this gets (see tip #2).

A good test here is everytime they ask you to do something, ask yourself this: ‘why didn’t I know this would be needed already?’ 

Of course, you aren’t going to foresee everything. There will always be random leftfield requests. New news. But the more you challenge yourself, the better you’ll get.

Tip 4: Agree on boundaries

You need to have your own point of view. And it might be different to your CEOs.

You should try and reconcile your views with your CEOs to the extent you can. It will force better decisions for the business. But inevitably you won’t always be able to do that. And you need a way of resolving that deadlock.

Most of the time, ultimately, it will be a CEO decision. They have the power and right to overrule you. You need to respect this. When it happens, you can make clear you disagree, but still commit.

But there are a few exceptions to this, when you can’t accept being over-ruled. Some examples:

• Accounting issues

• Any decision that is not inside the CEOs authority delegated by the board

• Anything that affects personal reputation

With every CEO I’ve worked with, I’ve made clear that I am the ultimate decision maker on accounting and reporting issues. If the CEO thinks the inventory reserve should be X and I think it should Y, we can talk about it. And hopefully we can agree. But, if we can’t, then the decision is mine, not theirs.

In return, I promise transparency, and being reasonable (i.e. balanced but not unnecessarily over-prudent).

I make this a condition of taking on a CFO role.

There are other ways of handling this. Most CFOs I know just lean on the audit committee/board when disagreements arise, to influence the CEO through the back channel.

But I prefer to tackle it head on. Have the conversation with your CEO up front about these ways of working, and agree on those boundaries for making decisions.

Tip 5: Stay onside

There is one thing that will dissolve your CEOs trust in you faster than anything else: if you say something in a board meeting they are not expecting that undermines their point of view.

There is nothing wrong with disagreeing with your CEO in front of the board of directors. In fact, a good board will respect you more for it. A quiet, compliant CFO in the boardroom will be seen as a CEO patsy.

But it does need to be occasional. Too frequently, and you and your CEO are just not rowing in the same direction.

And if you say something in front of the board that undermines the CEO, that you hadn’t said to them in private first, they will take that as a major breach of trust. DO NOT surprise them in the meeting.

Speak to them in private: “I just don’t support the proposal for that capex investment for the following reasons... I’m not doing my job if I don’t make that clear to the board.”

If your CEO has a problem with that dialogue, then you aren’t a CFO (regardless of what your title may say), you are just the finance patsy for the CEO.

You are also exposing yourself. Because if in 18 months that investment/acquisition/project turns out to be a disaster the board will surely turn to you and say ‘why didn’t you tell us?’

There is also the chance the CEO moves on at some point, in which case that crappy project just became your crappy project in the eye of the board…

A great CEO-CFO relationship will survive even the most difficult times.

Even Karl missed Logan after he was gone…

A unified C-suite is one of the most powerful forces in a business. And a dysfunctional one will spread like wildfire.

Next week, we will be talking about how to navigate the viper’s nest of C-Suite politics.

Jessica from Indonesia asked:

I have been a CPA for many years, specializing in consolidation for 10 years. While I can learn different aspects of accounting and finance from books/courses, I find it impossible to experience everything first hand. I also find financial close process to be repetitive and doesn't hone my critical thinking skill. How can I prepare myself to gain the skillset to be a CFO one day? What roadmap would you recommend?

Hi Jessica - thanks for the interesting question.

Your sense is spot on. You need to move roles. 10 years is a long shift in financial close/consolidation if you want to become a CFO.

Some accounting and reporting experience is useful for a CFO. It’s been invaluable for me. But in those roles, most of your stakeholders are in finance too… you all speak the love language of ‘Accounting.’ But a CFO needs to be multi-lingual.

You need to learn to speak ‘business bullsh*t’ too!

It’s different. Full of shades of gray. Unfortunately they don’t teach it on Duolingo, so the only way to learn it is to get hands on.

You need to get into a role where you can see a more forward-looking parts of the finance function, and develop those skills. FP&A cycle, modeling, communicating with non-finance stakeholders, etc.

It is going to be difficult to move externally into such a role. People will focus on low risk hires, which means prioritizing people with directly relevant experience for these roles, which you won’t have.

So your best shot is an internal move. That means using the credibility earned through capability in your existing role to build credits with your boss, their boss, and the wider business.

Then at some point cashing those credits in to take a role more more towards FP&. It would be a learning curve, so you would need to be in a business that would see it as an investment in your potential.

You need to have that conversation within your current business to understand whether it’s possible where you are.

If not, you should move elsewhere into a business that is capable of sponsoring that sort of move. If you do move externally, you may want try and move slightly away from strict corporate closing, and towards the direction you need. There are plenty of good management accounting/financial reporting hybrid roles out there. Which is a nice stepping stone to an FP&A role.

Your experience could be a great asset to a management accounting function that is lacking a bit of process and control. So think about how you bring your specialism to a an adjacent field, but moving in the direction you want.

You should also take a deep understanding of the business you are in and how it works. How it really works; i.e. what are the unit economics? And what needs to be true in the business for the unit economics to hold. That is vital in an FP&A role.

You might need to make a sidewards step to secure the move you want, but the work will be new, so it won’t feel like one.

I hope that gives you some food for thought, Jessica. Best of luck.

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Footnotes

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• In case you missed it, you got an extra slice of crispy throughout September. We ran a special interview series on AI for CFOs:

  • Ramp CEO, Eric Glyman

  • Anduril CFO, Babak Siavoshy

  • Quora CFO, Courtland Showerman

  • Shopify CFO, Jeff Hoffmeister

And Finally

Next week we’re onto navigating C-Suite politics.

Stay crispy,

The Secret CFO

Disclaimer: I am not your accountant, investment advisor, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. And certainly is not investment advice. Running the finances for a company is serious business, and you should take the proper advice you need.