The document discusses the important role of a company's Chief Financial Officer (CFO) and how they can impact an investor's view of the company. It states that a CFO must regularly engage with investors and analysts to build confidence, communicate performance in the context of business environment changes, and help interpret financial numbers. A CFO is also charged with creating economic value through smart performance and ensuring this value is transparent to stakeholders. They must look for opportunities to improve operational productivity and sales to boost stakeholder confidence and company valuations over time.

1. How A Company's CFO Can Make
Or Break Your Investment In It

2. Regular engagement with the market/investors
and with the analysts is crucial in building
investor confidence
In recent years, CFOs have assumed increasingly complex, strategic roles
focused on driving value creation across the business. Growing
shareholder expectations and activism, more intense M&A, mounting
regulatory scrutiny over corporate conduct and evolving expectations
from the finance function have put CFOs in the middle of corporate
decisions. While financial performance is what it is, the CFO’s role in
helping stakeholders interpret the numbers in the context of the business
environment is critical. This article signifies the role that CFO’s have to
play in managing investors, communicating with customers, suppliers
and internal teams, bridging cultures in M&A situations, without
dropping the ball on day-to-day finance functions.
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3. Smart performance + good communications
= Better valuations
In a changing business environment, the CFO is charged with creating
economic value through smart performance. It is also his responsibility to
ensure that the value thus created is visible and an easy to understand
parameter for investors and other stakeholders to gain their confidence
and trust.
Businesses today are rapidly undergoing a metamorphosis in India. From
the traditionally managed family run businesses with traditional/ informal
performance measurement mechanism, traditional modes of raising capital
and a certain lack of permeance of transparency through the organisation
about the future, we are beginning to see increasing number of existing, as
well as new age, companies with a professional outlook living in an
environment which is increasingly inter – connected and inter – dependent.
The one key element that has changed in the way of doing business in this
modern landscape is the flow of information.
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4. The new age CFO, therefore must now realise that he is no longer
expected to linger in the background and surface every time the results are
to be announced. As the one person in the organisation that has intimate
knowledge of both the past performance and the expected future growth it
becomes his responsibilty, not only to steer the company towards a better
future through smart performance but also be able to provide a
transparent, big picture view of the future, to internal stakeholders,
customers and investors.
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5. A CFO today understands that the word ‘performance’ has a broader
meaning than just the underlying numbers. There has been a shift in
focus in measuring performance from profits to profitability, earnings to
economic value and so on. The focus is on creating ‘value’ which comes
from both increased sales, driving better margins, increase efficiencies in
operations amongst others which improves stakeholder confidence and
builds company valuations. Smart performance would, therefore, mean
looking constantly for opportunities to improve economic profits for the
company both inside (operational productivity) and outside (sales).
Smart performing companies and their CFOs are serially identifying,
recording, measuring, comparing and finding ways to improve scores on
the short and long term value and growth metrics. by working on:
What is smart performance?
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6. Processes and Systems
One of the challenges that companies face is for them to constantly
look at improving each of their key processes, be it the sales,
operations, HR etc. The CFO plays an extremely important role in
defining the key metrics and more importantly tracking them on a
consistent bais which not just helps in measuring business performance
but also bring out possible areas where process improvements are
possible. The need to evaluate and implement systems particularly IT
systems that cut across functions and intgrate them is a role that most
CFO’s are involved with. The CFO’s input in the selection, design and
implementation of an integrated system (ERP) which involves massive
amount of change management cannot be emphasized more. In that
sense, the CFO is only next to the CEO in terms of importance within
the organisation.
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7. Vision Alignment and relentless execution
Being a leadership role, it is essential for the CFO to have alignment with
the CEO/Company’s vision. Let me illustrate this with an example - We
recently had an opportunity to work with this company, which was on a
high growth trajectory and was looking to grow its revenues to 2x in the
next 3 years. The CFO and the Finance leadership team needed to be ready
to support this aggressive growth path by providing the CEO decision
making support and putting in place performance management systems.
The company struggled with multiple “versions of the truth” and a lack of
standard performance measures, resulting in management discussions that
were all too often spent on reconciling differences in assumptions.
Sponsored by the CFO, a project was created to focus on transforming the
finance function into a highly valued partner in the business. The CFO set
out to lead a strategic change in the business by establishing and modeling a
high-performance culture in finance and then transferring it to the rest of
the organization with the help of HR. Alignment of thought process and
being able to articulate the company’s vision is paramount for a good CFO.
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8. The CFO also needs to have a strong buy in to the CEO/Company’s
strategy and should also play the role as an implementer of the thought
process/ strategy to the hilt. Increasingly, CFOs are playing a key role in
developing and implementing strategy within their company, partnering
with CEOs to creatively design growth opportunities for the future.
Successful CFO leadership requires a deeper understanding of strategy,
increased leadership skills, and an ability to effectively communicate
financial acumen and knowledge to non-financial colleagues. A CFO
cannot wait for things to happen, having an entrepreneurial bent of mind
to get things done is the key.
Communication
A number of CFOs that we meet today spend a considerable part of their
time in communicating with investors and analysts. The CFO needs to
communicate on an ongoing basis and also provide an assurance on the
direction and pace of growth. It is important for the CFO to be seen as
‘independent’, to be able to provide insights on all aspects of business and
be transparent.
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9. A CFO has got to do the communication himself/herself as far as possible
so that the intent of what is being communicated is not lost or
misinterpreted. Any kind of misinterpretation can have significant
implications on the company concerned. Larger organizations build
investor relations teams who work closely with the CFO and who feed
information or analysis relating to the company or the industry which
could be of importance to analysts who track the company's shares closely.
Regular engagement with the market/investors and with the analysts is
crucial in building investor confidence.
A CFO needs to work closely with multiple stakeholders. A CFO probably
needs to work hard on influencing others, improving his/her diplomatic
and people management skills. It helps a great deal if the CFO is seen as
someone who participates and contributes to strategic discussions, which
helps in building influence particularly with the board of directors and
investors. A CFO needs to be a leader, understand the business dynamics
and be familiar with all the elements of the business as well as the
operating model in order to be able to be the ‘Quasi CEO’ or the ‘next in
command’. In today’s economic scenario, CFO’s are increasingly seen as
natural contenders to the CEO position. And then the magic happens.
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10. CFO’s find themselves assuming greater leadership and responsibility
while also asserting more influence on strategy. Outstanding CFOs with
all of these skills and the right personal chemistry with the CEO have the
ability to become his/her right-hand person. Ultimately, such CFOs
become agents of change, creating smarter work patterns throughout
their organization with insights that drive performance and help achieve
better results. Improvement in company valuations is a result of doing
the right things consistently over a period of time. As they say, Rome
was not built in a day.
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11. Read More On This Blog
http://mycfo.in/resource-center/press-mentions/13-press-mentions/166-
budget-2015-recommendations-from-mycfo-2
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