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By Saleem Sufi

STRATEGIC PARTNER

How to become a

to the CEO

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Saleem Sufi CFO leadership coach and strategy expert

Saleem Sufi is a CFO Leadership Coach and Strategy Expert with more than 20 years CFO level experience working for top world class Fortune 500 and Private Equity owned companies in Asia Pacific, Middle East, Europe and United States. He is the Founder and President of MECA CFO Alliance where he leads the CFO Academy with an entire focus on leadership development and career growth among the senior Finance community. He can be reached at SaleemSufi@CFOAcademy.org

Most finance professionals confuse it with RONA, ROE, EVA or other profit earning related measures. It is actually much broader. Amazon that hardly makes any profit is valued at $264 Billion compared to its meagre book value of $13 Billion; a reflection of significant value creation.

No doubt, modern business models are getting overly complicated. It’s no more about capital, reserves, plant & equipment or product inventories. The critical assets of a successful company today are its people, brand, culture and customers that play a significant role in value creation. Unfortunately, in accounting systems we generally do not recognize them as assets.

In a modern, high performance business model the value creation cycle is complicated and takes much longer. Top management focuses to create a culture and environment of high performance by putting in a combination of talented people, robust systems and efficient processes. Together these forces create customer value.

Customer value is not profit earned through customer as commonly believed. It is customer happiness that leads to customer loyalty and retention ultimately resulting in buying decisions.

Today’s customers are super smart and equipped with abundant information. Their buying temptations are not triggered by one way advertising. They do their own research and intelligence before they can get engaged. It takes time for them

to move from the level of awareness to pulling their wallets out of their pockets.

Businesses work extremely hard to transform customers from prospects to committed buyers. All these efforts create customer value even before a sales takes place. This value is real, though it’s difficult to attach a verifiable dollar value.

Traditional accounting systems are limited in their scope due to the conservative principles of objectivity, tangibility, materiality, and historical cost. They cannot measure most of the value created by today’s modern businesses that usually takes place prior to any revenue recognition.

Due to the prominence of intangibles, the gap between the real value created by today’s successful businesses and what is reported on financial statements is only widening. From a strategic viewpoint, the financial information is becoming less relevant. At the same time CFOs and senior finance professionals are expected to play a wider role in the strategic management of their companies.

The limitations in traditional accounting system should not limit the ability of the CFO to support their businesses at strategic level. To serve as strategic partner to CEO or business head, the CFO needs to elevate beyond the level of financial information and become a navigator for the business or in other words, a GPS.

To effectively utilize a GPS while driving, two conditions have to be

fulfilled; (a) that it’s a trusted brand, and (b) it has updated maps.

Now think of the CEO in the driving seat and consider yourself (the CFO) as the GPS. Do you have a personal brand that can be trusted? And do you have updated knowledge of markets (updated maps) and fully understand the value creation cycle of your business?

If the answer to above two questions is not a resounding ‘yes’, don’t blame your CEO for not involving you into the strategy process of your business. To play the role of a navigator or strategic partner, the burden is on the CFO to prove him as a trusted partner and share his updated knowledge of the value creation process.

The role of CFO and Finance is continuously evolving. The advanced ERP systems of today have taken over most of the traditional accounting work and relieved senior finance professionals to provide high quality, high value support to their businesses.

This requires a deep learning about the business you support. If you have ambition to successfully play the role of a strategic partner to the CEO, ask these two questions yourself:

1. Do I have a personal brand that is trusted by my non finance business partners?

2. Do I fully understand the value creation cycle of the business I work for?

An honest answer will tell you how far you have to learn and develop to transition into the role of a Strategic CFO.

What is value creation? If you ask this question to 5 different experts, I bet you will get 5 different answers. Despite the fact that value creation is the main focus of today’s successful businesses, it has not been consistency defined.