How CFOs Can Use Empathy to Drive Peak Performance

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10 Ways Chief Finance Officers Can Use Empathy To Drive Performance

A Chief Finance Officer (CFO) is a C-level executive that is basically responsible for managing the organization’s finances. Often third in the line of leadership after the Chief Executive Officer (CEO) and the Chief Operating Officer (COO), the CFO ensures that the financial risks, planning and reporting are in order. Being a person overseeing the flow of money in an organization means you are supervising not just an important touchpoint but a very sensitive one.

That’s where empathy comes in. Driving high performance isn’t always directly proportional to a heavy financial chest, it’s really about using what you have to achieve your goals with proper people management. This is because finances isn’t always the problem but a symptom of the problem – you can throw money at a problem and you will end up with an expensive problem until you address the underlying issues.

A CFO knows that finance is to an organization as blood is to the human body.  Finances gives life to the organization. The CFO must grasp the critical importance of managing the material resource alongside the human resource that requires it to function. Having a high intelligence quotient will definitely get you the job as a CFO but empathy enables you to make decisions that are in the overall best interest of the organization. CFOs should do the following.

  1. Maintaining Best Book Keeping Practices

Organizational awareness is the very first element of emotional intelligence that CFOs should do in driving performance; they must ensure that every financial transaction is documented. Also the assets and liabilities of the organization should be readily available and made accessible to all the stakeholders. This is a trust-building approach because the CFO is showing all and sundry that there is nothing to hide and the financial records can be interrogated.

From the boardroom to the lower cadres of the organization, the message of accountability boosts confidence. When people realize that their financial interests within the organization is well-handled, they allow themselves focus more on their own part of the bargain – doubling down on their deliverables. Effective book keeping enhances transparency which is key to establishing this desired ecosystem and it’s something CFOs must have at the back of their minds.

  1. Adopting The Best-Suited Financial Model

Achievement orientation informs the CFO on what financial model is most appropriate for the organization. There are many examples of financial models: The Three Statement Model, The Discount Cash Flow Model, The Merger Model, The Initial Public Offering Model, Leveraged Buyout Model, Sum of the Parts Model, Consolidation Model, Budget Model, Forecasting Model, Option Pricing Model etc. All these models have their distinct nuances and it is the job of the CFO to advise the organization on which to adopt.

This is very important because a financial model should reflect the consensus within the organization. It should also align with the overarching objectives of the organization. For example, the Merger Model focuses on pro forma accretion/dilution of a merger or acquisition, the Consolidation Model is best suited for conglomerates while the Initial Public Offering Model is used when the organization is positioning for investors in the stock market.

  1. Encouraging Synergy With Departmental Heads

Every CFO should work directly with the heads of department to ensure that they are in line with the strategic objectives of the organization. CFOs scrutinize every request for funds by department, determine the viability of intended procurement and how best to optimize the income generated by the departments. By effectively acting as a nexus between the boardroom and the departments, CFOs use teamwork as an emotionally intelligent tool to diffuse tension and effectively manage those intra-organizational relationships.

  1. Managing Consensus Amongst External Stakeholders

CFOs don’t just manage relationships within the organization but also importantly, without it. Some of the tasks CFOs must constantly undertake is selling the viability of the organization to potential investors, ensuring compliance with regulatory authorities, negotiating profitable third-party deals on behalf of the organization. In addition to this, Chief Finance Officers also ensures that the pricing model of the organization’s products corroborates with economic realities and that the pricing is competitive given the industry it operates in and its financial goals are factored into every transactions etc.

These interactions come with a differing interests but a CFO with emotional intelligence knows just how to deploy empathy in managing the varying interests and managing conflicts to steady the ship. This external players are very important because they do affect the internal environment of the organization and consequently the performance levels. For example, when the share price of an organization continuously declines, it might be forced to downsize, cut salaries and all these negatively affect performance.

  1. Promoting Competitive Compensation

CFOs work with human resource managers to set competitive emolument for the staff members. Taking into account many factors such as the financial buoyancy of the organization, skill level of the worker, industry rates, over time fees, allowances like housing, health, holiday etc. The CFO must ensure that the financial compensation is adequate to motivate staff members to do their jobs well. When employees feel as though they are earning slave-wages, they tend to do the bare minimum.

Both the CFO and the human resource management must be emotionally intelligent enough to know self-preservation is one of the strongest instincts of human beings and that empathy puts the decision on emoluments in perspective. Once there is a seeming fear of income not being enough to cater for primary needs, by default most people divide their attention between their principal assignment in the workplace and other activities that they believe will augment such incomes.

  1. Using Boardroom Advisory and Advocacy For Improved Efficiency

As a C-level executive, a CFO should be realise everything rises and falls on leadership. By providing aspirational leadership in the area of their core competence, CFOs contribute their quota to the bottom-line. The boardroom represents the highest level of leadership in any organization and decisions that are taken in there can either make or mar the fortunes of the organization. It therefore their core responsibility to be the voice of reason in the room where there is a tendency to be a plethora of inflated egos. Most ideas may appear wonderful on paper but in practice they are not consistent with the vision of the organization, are not viable or the organization simply doesn’t have the war chest to fund it.

Many great organizations have been ruined by white elephant projects that were not quickly reined in. The CFO’s job description shouldn’t include being a praise singer or rubber stamp to the Chief Executive Officer or other leaders – he or she should be able to enforce the agreed internal financial controls. Where emotional intelligence comes in is the realization that trickle-down economics can negatively affect the lower cadres of the organization, hence a low performing workforce.

  1. Dismantling Financial Bureaucracy

One of the things that stifle high performance in organizations is the lack of timely flow or disbursement of finances. There is a popular Nigerian saying, “time na money”. That colloquial expression suggests if time is not well managed or things are not done as and when due, it could have financial consequences. CFOs should have a fiscal agenda, where the revenue and expenditure is used to further the interests of the organization they serve. Most importantly, they should apply emotional intelligence to determine the optimum distribution of fiscal influence within the organization. No one person or department should accrue an inordinate amount of power at the expense of the smooth running of the organization.

When financial requests are made, so long as such requests follow the appropriate channels and are within the ambits of the policy of the organization, the CFO should ensure that funds are disbursed promptly. A typical example is when a CFO is not agile with computing monthly compensation for workers and getting approval on time, it may result in late payment of salaries and cause avoidable disenchantment within the workforce. Digitization is a sure strategy to achieving this.

  1. Decentralizing Financial Controls

This is similar to dismantling financial bureaucracy but it is quite different. Dismantling financial bureaucracy speaks to an organization-wide approach to fiscal control i.e. dealing with the bottlenecks that mitigate proper allocation and distribution of financial resources. Decentralization of financial controls is about the CFO devolving certain powers of his or her office to say heads of departments to make certain financial decisions. 

For example, a CFO can allow heads of department sign off on expenses that are less than $1,000 while those above that amount must be approved directly by him or her. It’s almost akin to allowing them have a petty cash book for miscellaneous expenses. CFOs should exercise a healthy amount of self-control so that there are not overbearing or extravagant with financial resources at their disposal.

  1. Collaborating With COO To Optimize Production Process

To achieve high performance in organizations, CFOs must work pari passu with the Chief Operating Officers (COOs) in particular to understudy and possibly rejig the entire production process. This is because at one extreme, a production process can be financial-intensive and at the other extreme, it can be labour-intensive. The CFO should work with the COO to ascertain a most appropriate mid-point that can move the performance needle as well as the profitability needle. Low performance isn’t always a function of incompetent staff members but a dysfunctional production process. Again, tech will play a great part in achieving this and the ability to adapt to new ideas is a signature of emotionally intelligent CFOs.

  1. Applying Global Best Practices

CFOs should always have a positive outlook for better ways of discharging their duties from beyond the organizations they serve. Especially with using data-driven decision models, risk management, information management, people management, product management, stakeholder management etc. CFOs must ensure that their approach is malleable and that the organization is not sabotaged by its own financial policies. All these have a direct bearing on productive and performance because financial strategies should be centred on internal stakeholders and once they outlive their usefulness – it behoves of the CFO to do the needful.

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