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Beyond Insurance
The world of the CFO
How agents can help CFOs meet a host of challenges
By Scott Addis, CPCU
In your quest to become a Trusted Business Advisor, it is essential that you comprehend the World of the CFO, which has become increasingly complex and challenging. CFOs are doing more with less and juggling priorities as never before in a climate of fierce competition, rising costs and increased customer demands. The CFO’s expanded role includes managing people, systems and technology infrastructure in an era of intense regulatory scrutiny.
CFO stands for chief financial officer—the person in a business who directs the organization’s finances. Related terms include treasurer, finance director and business manager. Historically, CFOs’ roles and responsibilities were narrowly defined. Their focus was limited to financial planning and record keeping as well as financial reporting to higher management. Success was seen in terms of balance sheet protection. Most CFOs came from accounting backgrounds and rose through the ranks within corporate finance departments.
Today’s CFOs are radically different from their predecessors. They are required to be business generalists with an in-depth knowledge of their enterprise. They are custodians of organizational knowledge. Today’s CFO faces pressure to cut costs, grow revenue and institute controls, and is even put at personal risk for the company’s mistakes.
One reason the CFO’s job is so fraught with challenge is that it’s really four jobs in one. The first is that of steward, preserving the organization’s assets by minimizing risk and ensuring that the books are accurately maintained. The second is operator, conducting finance operations efficiently and effectively. Third is strategist, influencing the company’s overall direction. And fourth is catalyst, instilling a financial mindset for execution and risk-taking throughout the organization.
A key objective of the CFO is to enhance the decision-making ability of the organization’s top management—especially the CEO. The CFO accomplishes this by delivering reliable information to the management team and helping these people analyze the data to facilitate the decision-making process. Today’s CFO excels at strategic planning, performance management, infrastructure design, deal making, team development and external communication.
The CEO relies greatly on the CFO. A strong relationship and mix of skill sets allow the CEO and CFO to share the workload of managing the business. As a standard, the CEO expects the CFO to exhibit the following skills and characteristics:
• Strong financial and leadership skills
• Experience with technology and information systems
• Ability to identify and capitalize on revenue growth opportunities
• Understanding of business and market challenges
• Ability to align day-to-day operations with long-term strategic goals
• Mindset to reduce costs without compromising productivity
• Ability to effectively interact with all departments in the organization
• Passion for what they do and the desire to go above and beyond their job description
Situational roles of the CFO
In the current business environment that demands more with less, the CFO is challenged to perform four key situational roles:
Execution Maestro: The CFO focuses on operational excellence by instilling operational discipline to streamline efficiency without sacrificing critical business functions.
Growth Navigator: The CFO works closely with the CEO and other members of the management team to develop aggressive plans to achieve profitable growth both organically and through acquisitions. As Growth Navigator, the CFO is adept at resource management, business planning and performance management.
Business Transformer: Today’s CFO is expected to recognize opportuities for strategic innovation and take advantage of them. Strong leadership and people skills are a must. He or she must be a consensus builder, achieving buy-in on appropriate goals for the business model to deliver on the performance objectives.
Turnaround Surgeon: The most difficult task of any CFO is restoring the financial health of his or her business. As a Turnaround Surgeon, the CFO must have the ability and confidence to make changes where the business is not performing up to standards. For this reason, the CFO must have an in-depth knowledge of the business as well as analytical tools to assess the state of the business, set priorities and allocate resources to implement change.
Insurance and risk management
CFOs are well equipped to manage finance and related areas. However, research indicates that they are not equipped for other key responsibilities, including risk management. A 2006 Los Angeles Times article stated that fewer than 20% of CEOs believed that their CFO was doing a good job of managing risk. That assertion is supported by a September 2008 survey by Addis Intellectual Capital in which 100 CFOs stated that they have limited time and technical expertise to identify the exposures facing their business.
The challenges and time constraints of the CFO create a wealth of opportunities for independent agents and brokers. Today’s multi-tasking CFO is starving for an agent or broker who has the desire to go beyond selling insurance to become the organization’s outsourced risk manager. The middle market CFO:
1. Wants the agent or broker to take the time to understand the organization’s business and industry.
2. Needs help in identifying, prioritizing, measuring and mitigating risks that confront the business.
3. Wants an agent or broker who has the ability to design strategic risk mitigation strategies to improve the company’s bottom line.
4. Detests the traditional insurance bidding process. The middle market CFO is looking for a more strategic and disciplined approach to insurance and risk management. Simply put, the CFO does not want to be sold insurance.
Today’s CFO needs and wants the agent or broker to demonstrate a curiosity about and desire to understand the inner workings of his or her business. The CFO is searching for a new brand of agent: consultative, diagnostic, results-oriented and focused on managing and mitigating risks rather than selling insurance. Today’s CFOs want you to be their Trusted Business Advisor!
The author
Scott Addis is president and CEO of The Addis Group and Addis Intellectual Capital, LLC, a coaching and consulting company whose purpose is to transform the process that insurance agents, brokers and carriers use when working with their clients. Scott is a recognized industry leader who has been awarded the Inc. Magazine Entrepreneur of the Year award as well as being chosen one of the “25 Most Innovative Agents in America.” To learn more about the content of this article, you may contact Scott at saddis@beyondinsurance.com or (610) 945-1019 or go to www.beyondinsurance.com.
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