The role of a CFO has evolved considerably in recent years, and nowhere is this more true than in startups. With a changing role comes changing requirements, and today ‘soft skills’ are more important than ever.
This article discusses why emotional intelligence, the ability to build strong relationships with key stakeholders, and embracing an entrepreneurial mindset are fundamental to the success of a CFO and their startup.
Establishing yourself as partner to the CEO
The relationship of a CFO to CEO is perhaps the most pivotal in a startup. The responsibility of making this the high-calibre collaboration it needs to be rests with the CFO. Emotional intelligence, defined as the ability to perceive and manage one’s own emotions and that of others, is vital here.
By corporate tradition, the CEO is more likely to possess high emotional intelligence, whereas the CFO is a monochromatic thinker. But in founder-led tech firms this dynamic is often inverted. The CEO is a creative, disruptive personality whose primary talent lies in their deep product understanding and innovative technical talent - but does not necessarily have strong communication or corporate leadership skills.
So there is an increased requirement for emotional intelligence in the CFO - developing rapport and managing upwards is critical. You may well need to adapt to the gaps in their skillset - being able to accurately assess where their strengths lie is crucial to your effectiveness.
You need to make sure you fully understand the CEO’s expectations and vision for the company’s future. But arguably more important is establish yourself as a trusted sounding board and advisor. In many cases, you will need to act as a mentor to the CEO, to help them develop the required corporate leadership skills and knowledge they may not have. Developing a strong personal relationship will smooth this process and help you influence their decision.
It is no guarantee that the CEO will fully understand how much financials like leverage and cash positions can inform business strategy. Indeed, before the arrival of a CFO in a startup the finance function is frequently limited to an external accountant and monthly checks of the PnL by the CEO or another member of senior management. So it is your responsibility to make sure the CEO knows the extent of the insight provided by finance data when making decisions on business strategy.
Understanding what the board are looking for
Developing a relationship with the board of directors is another key objective for a successful startup CFO. As the one responsible for presenting key metrics, it is important to get an understanding of the board’s focus, expectations and measurements of success.
Building rapport with individual board members is also important. Each one may want to see different metrics in monthly or quarterly dashboards, so you should make sure you’re fully aware where the focus of each stakeholder lies.
Developing relationships with management to optimise your impact
Even more so than a traditional corporate CFO, a startup CFO is a key stakeholder in the overall strategic direction of the business. It is important to avoid financial tunnel vision, and to ensure that your skillset is being utilised across the company.
This means having a comprehensive understanding of all functions so that you can offer effective business partnering to each. Key to this is building relationships across the business - as with the board, you should be looking to understand where the priorities of each individual lies and what you can offer them.
Collaborating so that they fully understand their cost structures, leverage points and points of growth does not just benefit the company at the individual function level, it also allows you to give more informed input on resource allocation and business strategy during C-suite decision-making.
Embracing the entrepreneurial mindset
Undeniably, one of the CFO’s primary responsibilities is ensuring that the company does not overspend or take wild risks. Nevertheless, in a startup that is growing rapidly, risk is an inherent part of the business model.
The CFO’s traditional role as risk manager must be balanced with the entrepreneurial, optimistic mindset it takes for startups to achieve the rapid growth that constitutes success. So while you are likely to have to put your foot down at some points to avoid what you perceive as an unacceptable amount of risk, you also need to accept a certain level of it. Pick your battles wisely.
This is another reason why your relationship with the CEO is so important - the ability to communicate your own viewpoint effectively and influence decision-making is vital.
A balanced approach means that in the cases where you do need to push back you will have more credibility. If you are not perceived simply as a policeman, but rather as someone who understands and embodies the entrepreneurial approach, your voice will carry more weight.
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