I facilitated a TEC mediation recently between my TEC CEO member “Frank” and his controller “Jim” (names changed to protect me!). They were very frustrated with each other.
Jim is a great controller. Frank is an excellent entrepreneur and business person.
Frank complained that while the books were closed like clockwork by the 8th of the month and the audit was always clean, Jim wasn’t giving him what he wanted.
Jim complained that Frank was asking him for information he really didn’t need. So like any good TEC chair/marriage counselor, I called a timeout and asked to meet with each person separately.
I spoke to Jim first. I told him he’s an excellent controller and he provides much of what the company needs – but not everything.
I asked him about his career goals.
“Of course, I want to be the CFO here when we are large enough,” he said.
“Jim, you’re an awesome controller,” I said, “But I don’t think you’ll ever be the CFO.”
Deflated, he asked, “Why not?”
“Because your boss is looking through the windshield and you’re looking through the rear-view mirror,” I said. “And, knowing your personality, I think you will always prefer the rear-view mirror.”
Jim wasn’t too happy with me. We talked a little more about his role at this company. Eventually, he understood and agreed. He can’t look at the future and where the business might go, and he doesn’t want to.
He does not provide insight and analysis of the data. He’s a classic and dedicated “list crosser-offer.” He’d rather have the books closed on the 8th than analyze whether it makes sense to buy a small company in another market or open a branch. He’d rather harass the VP of sales about an excessive dinner tab with a key client, than analyze whether the client’s account is profitable.
Don’t get me wrong, this company needs a controller. It’s a critical role. But the company won’t grow much past $5 million in revenue until it hires an excellent CFO, even if it’s just on a part-time basis.
Later, I talked to Frank. He asked me why I thought the relationship with his controller was rocky. I told him, “It’s because you’re looking through the windshield and Jim’s looking through the rear-view mirror.”
And it’s a sign the company is ready for a CFO.
“While you need to express your appreciation to Jim for being an excellent controller, guarding your treasure, and being willing to say ‘no’ once in awhile, you must also tell him you need to bring in additional financial horsepower to get the company to the next level,” I said.
We agreed that the next step was to find an excellent, part-time CFO.
Thanks to John Jensen, of Jensen Consulting in Milwaukee, for helping me create this continuum of financial expertise for growing businesses.
Levels of financial expertise for growing organizations
I. Level One: Bookkeeper to controller
“Transaction processing and
- Sales invoicing
- Cash receipts
- Cash disbursements
- Manage A/R, A/P
- (End of month typically done by outside CPA firm.)
II. Level Two: Controller to accounting department manager
“Fiduciary responsibilities and risk management” – Performing or managing the above, plus:
- Timely completion of financial statements (10th to the 15th).
- Managing A/R, A/P and purchasing associates and insuring a separation of duties.
- Risk management, in particular cash management.
- Work with outside firm on a review or audit.
III. Level Three: Part-time CFO to full-time CFO
“Consultative Decision Support” –
Managing functions listed above, plus:
- Provide financial analysis and tools for business decision support.
- Should be an Excel Savant.
- Foster a close business relationship between finance and the rest of the organization.
- Create and disseminate innovative, relevant information.
- Work closely with bank or other sources of financing, focusing on the next 12-36 months.
IV. Level Four: Full-time CFO
“Corporate Strategy Development” – All of the above, plus:
- Help the CEO focus on strategy.
- Member of the senior management team.
- Anticipate industry trends.
- Launch new businesses.
- Advise on the purchase or disposition of business units.
- Create and sustain shareholder value.
- Part of a long-term succession plan
One final note: Many people in your organization look through the rear-view mirror and not the windshield. They are important because they will follow rules and be very particular about the quality of their work. But in order to grow your business, you need your leaders looking through the windshield.
A serial entrepreneur, business and community leader since 1983, John Howman has led a variety of businesses, from technology to consumer products companies. He leads two groups for TEC, a professional development group for CEOs, presidents and business owners. He can be reached at email@example.com.