Emotionally intelligent CFO no longer an oxymoron – they exist

CFOs can increase their effectiveness by astutely blending their emotional intelligence with their prowess

The bottom line is CFOs must move beyond technical left-brain skills to develop competencies in people-oriented right-brain areas. Thankfully, in the world of finance, a paradigm shift is in progress with CFOs metamorphosing from guardians of finance to strategic, empathetic leaders. This new era of financial leadership is symbolised by real-world CFOs, like Kevan Parekh, who are defying traditions, breaking the mould and setting the stage and new standards for what it means to lead with empathy and understanding. An emotionally intelligent CFO is no longer an oxymoron

The recent appointment of Kevan Parekh, a Bachelor of Science in Electrical Engineering from the University of Michigan and a Master in Business Administration from the University of Chicago, as the Chief Financial Officer (CFO) of Apple Inc. confirms my growing belief that the modern CFO need not be a professional accountant or a degree holder in accounting but must be an effective leader, integrator, business partner, enabler and strategist. Immediately prior to being appointed as the CFO of Apple, Parekh who is of Indian origin was the Vice President, Financial Planning and Analysis overseeing financial planning, investor relations and market research.

In his 11 years at Apple, he also served in key positions in worldwide sales, retail and marketing. Before joining Apple, he had held leadership roles at Thomson Reuters and General Motors in finance, treasury and business development. At time of making the announcement, Apple’s Chief Executive Officer (CEO) Tim Cook stated, amongst other things, “For more than a decade, Kevan Parekh has been an indispensable member of Apple’s finance leadership team, and he understands the company inside and out. His sharp intellect, wise judgment, and financial brilliance make him the perfect choice to be Apple’s next CFO.” 

Luca Maestri, Parekh’s predecessor, noted, “I am excited about the next chapter at Apple and have full confidence in Kevan as he steps into the CFO role. His passion for Apple and its mission, coupled with his leadership and values, will serve the company well.” 

Cook’s and Maestri’s comments reveal some of the traits, behaviours, and skills expected of a modern CFO. Today’s CFO must have a leader’s understanding, not necessarily a mastery, of the relevant hard coded technicalities of accounting, treasury, taxation, internal controls et cetera, and how they blend into the overall fabric of corporate governance. However, there is a greater need for him/her to have skills in leadership, people management, strategy formulation, business partnering, stakeholder management, sustainability, business psychology, mergers and acquisitions, negotiations, corporate finance-based project evaluation, performance management and risk management, just to name a few. 

Further, the power of information technology in upgrading the finance and accounting function makes it imperative that a CFO is well versed in it. Artificial Intelligence (AI), Robotic Process Automation (RPA) and blockchain are now common features in finance function transformations. Data and information are valuable commodities in a current business world fraught with volatility, uncertainty, complexity, and ambiguity. Information is money! CFOs are reputed for their rationality, discipline and objectivity and, therefore, it is in that vein that the CFO is believed to be better placed than most in leveraging the timely availability of data and information in value creation. Overall, if the proportion between stewardship and non-stewardship components in a CFO’s deliverable was 70;30 in the early nineties, it is now probably the other way around at 20;80.

Traditionally, the CFO was viewed as the financial gatekeeper of the company. He/she had the primary responsibility for financial planning, record keeping and financial reporting, interpreting financial data, project evaluation, managing financial risks, and safeguarding the company’s assets. He/she was the ultimate authority in the company on financial matters. This has changed dramatically in the past half century with the CFO being now regarded as a trusted professional to all stakeholders, an advisor, strategic partner and ally to the CEO, a business partner to his operating peers and an inspiring leader to his constituents.

Reinventing the CFO

In his book, “Reinventing the CFO”, Jeremy Hope, British author and cofounder of the ‘Beyond Budgeting Round Table’, used metaphors in describing the role of the CFO. He said that CFOs must embrace seven critical roles in transforming a company’s finance and accounting operations, they being, * A Freedom Fighter in liberating managers and employees from stultifying systems, value destructive work, overly detailed planning processes and irrelevant reporting, * Analyst and Adviser in assembling, developing and guiding a high performing finance and accounting team which understands the business and communicates financial knowledge across the organisation, * Architect of Adaptive Management in being the font of information to managers and employees in formulating medium to long-term business plans, annual budgets, rolling forecasts and trend analyses, thereby enabling the organisation to respond swiftly and appropriately to ever changing business realities, * Warrior Against Waste in eliminating processes, procedures and systems which increase bureaucracy, slow decision making and add no measurable value to the business, * Master of Measurement in encouraging managers to limiting the number of performance measures to the few which truly support and improve corporate excellence and facilitate continuous learning, * Regulator of Risks in identifying and highlighting the pressure points which regulate more informed risk taking and in establishing an open and honest approach in dealing with the uncertainty inherent in business, and * Champion of Change in transforming the finance and accounting operation from a controller and measurer to a valued and trusted business partner. CFOs are increasingly being relied upon as the owners of business information and financial data, which support business strategies and tactics.

Despite such ‘urgings’, most CFOs still find themselves bogged down in the basics of traditional accounting practices such as transaction reporting and compliance with accounting standards and are, therefore, unable to make time for business partnering. Personal liability burdens cast on them by ever increasing laws and regulations make them reluctant to delegate. Preparation of financial statements, financial reporting, budgetary control, internal controls, treasury, tax and the operational aspects of performance and risk management, all of which can be easily performed by subject experts continue to remain under their direct purview. Fear of delegation prevents them from freeing their minds from lower-level tasks to performing higher-level tasks which call for deeper experience and exposure as, usually, possessed by them. 

It is heartening to note, however, that progressive CFOs are addressing this misalignment by structuring their finance and accounting functions under different pillars led by technocrats and subject experts. These being an Accounting pillar configured as a shared service, Centres of Excellence pillars covering Treasury, Taxation, Corporate Finance, Investor Relations, Internal Audit and Group Initiatives, a Planning and Monitoring pillar in driving, and guiding strategy formulation using insights from available data, business trends and anticipated developments in the subject industry, the market place and the macro environment and a Business Partnering pillar which supports the leadership of different business units and functions in continuous performance improvements. 

The CFO of today and tomorrow must be a big-picture thinker rather than a detail-oriented one

Notwithstanding the structure employed, it is plain to see that the CFO of today and tomorrow must be a big-picture thinker rather than a detail-oriented one, be prepared to delegate than micro-manage, be forthright, transparent and outspoken than be reserved and cagey, be a coach, mentor and enabler than an instructor, be a collaborator than a dictator, be a leader than a manager and be a clear, active communicator. Whatever the style adopted, the CFO must know that the buck stops with him/her in all matters which are financial and related. 

The CFO sets the financial agenda, provides governance assurance and timely advice to the board of directors, supports the CEO, ignites robust discussion with peers via an appropriate balance between ‘push’ and ‘pull’, creates psychological safety to his/her team and provides professional comfort to shareholders, regulators, investors, suppliers, society, banks and funding agencies. The ability to inspire and motivate people is paramount and has assumed increased significance particularly in the face of long periods of uncertainty which have plagued the globe in recent times.

It is evident from the above that an effective modern CFO must be very accomplished in soft skills such as listening, empathising, problem solving and communicating than just being an expert in financial and accounting techniques. Traditionally, CFOs’ strengths tend to be defined in terms of their rational, analysis-based approach to decision-making rather than the capabilities of empathetic communication. Adding to that, CFOs, and for that matter accountants, are regarded by the public as not having the capacity to show emotional intelligence, empathy and other soft skills and traits which emanate from it. They are seen as robotic technocrats lacking people management skills.

Novels, movies and songs depict the typical accountant as a bespectacled, bowler-hatted, prim and proper individual in a pinstriped suit, a conservative shirt and a zany necktie, wearing oxford shoes and carrying a utilitarian briefcase and a folded umbrella. Obviously, referring to a male. I have not come across the equivalent of a typical female accountant! His/her superiors, colleagues, associates and subordinates usually see him/her as a no-nonsense, serious, humourless, number cruncher and bean counter who ensures that rules and regulations are followed to a tee. 

My career as a CFO and above began in 1987 after 15 years in roles ranging from an accounts clerk, accountant, management accountant to financial controller in a business environment which was vastly different to what exists today. Based on the popularity of a command/control style of leadership which existed at that time, it was believed that a CFO had to be aloof and had to portray toughness if he/she had to be effective. In fact, in my first performance review as a CFO, I was told that I was too friendly with my colleagues, too soft and not assertive enough. Needless to state, I counter argued and I was able to convince the evaluating panel that notwithstanding my leadership/managerial approach that I achieved all my Key Performance Indicators (KPIs). 

I went to great lengths in describing the advantages of empathetic leadership and convinced the evaluators that my style of leadership did not dilute my authority, but it augmented it. I had to stress that my ‘free’, ‘trusting’ involvement gave authenticity to my communications with the internal and external stakeholders. Over the years, I continued to maintain such a stance and I have been able to demonstrate the power of emotional intelligence and empathy in action. The connectedness and the mutual understanding and respect which were established drove motivation, loyalty, team spirit and productivity. Such style was a stark contrast to the then conventional wisdom where such soft approaches were often sidelined in favour of a more rigid, numbers-driven style.

Shed the veneers of our stereotyped personalities

As CFOs, we must, through our own behaviour dispel the notion that we are dull, boring and uncreative individuals. We must shed the veneers of our stereotyped personalities in introducing ourselves as CFOs who are accessible and approachable and are just like any other Tom, Dick or Harry. It is paradoxical though that I still come across many Chairpersons, CEOs and equivalent people who frown upon CFOs who take those extra ‘friendly’ steps in making their constituents and followers comfortable. There are many CFOs and accountants who are jolly, loud and extroverted and have a great sense of humour. Yet they all do a serious job. They have not allowed their easy-going persona to negatively impact decision making.

The bottom line is CFOs must move beyond technical left-brain skills to develop competencies in people-oriented right-brain areas. Thankfully, in the world of finance, a paradigm shift is in progress with CFOs metamorphosing from guardians of finance to strategic, empathetic leaders. This new era of financial leadership is symbolised by real-world CFOs, like Kevan Parekh, who are defying traditions, breaking the mould and setting the stage and new standards for what it means to lead with empathy and understanding. An emotionally intelligent CFO is no longer an oxymoron!

CFOs can reverse stereotypes and portray a more humane and positive image by, * Being available, being involved, and being seen with colleagues and own team at all important events, particularly in situations of crises, * Proactively engaging with the CEO and other C-Suite colleagues as a trusted business partner in bad times and in good times, * Being a change agent by dismantling silos, encouraging collaboration, and demonstrating leadership by leading people from different functions towards a common goal, * Explaining complex business issues in easy-to-understand language without the use of technical jargon. Using ‘easy on the brain’, charts and graphs in conveying trends and projections and in selling value creation, * Being a good storyteller. Spice up anecdotes, * Showing conversance with current and emerging information technology. Being abreast with new technology and new thinking is the “in thing” and a good way of showing that they are “up with the Joneses”. * Being a regular participant in ‘out-of-office’ social events, * Using non-financial disciplines such as economics, statistics, sustainability and sports psychology in explaining financial issues, * Being active in sports and recreation committees, * Smiling. Is that difficult? 

Although financial acumen, technical proficiency, eye for detail and unwavering discipline have been the bedrock of CFO deliverables in the past, the power inherent in the vital attribute of emotional intelligence has not been adequately exploited. In this VUCA world of business, recognising, understanding and managing emotions are proving to be crucial in effective financial leadership. When head and heart are in sync, the outcomes are incredible. There is a strong positive relationship between effective leadership and emotional intelligence.

Emotional Intelligence is the ability to be aware of and manage one’s own emotions and understand the emotions of people around you, through self-awareness, self-regulation, motivation, empathy, and social skills. Whilst it is difficult to “manage” the emotions of other people, psychological studies indicate that one can influence others’ behaviour through his/her own behaviour i.e. ‘role modelling’. When you have a good understanding of the likes and dislikes of the other person, it is much easier to press the right buttons and choose the best method of interaction in achieving the desired result. 

Emotional intelligence is known to benefit CFOs in, * Equipping them to navigate the currents of human dynamics. Interactions with investors, boards, analysts, regulators, peers, subordinates et cetera require both technical savviness and empathy, * Leading effectively. Recognising and managing one’s own emotions and the emotions of others in applying the appropriate approach in motivating and guiding finance teams, * Conveying complex financial insights to stakeholders, particularly non-financial stakeholders in simple terms, * Resolving conflicts. An astute application of emotional intelligence can lower misunderstanding, lower tension, find common ground and steer discussions towards win-win solutions, * Emotional intelligence and integrity/ethical behaviour are positively corelated. Ethical standards are founded on transparency and honesty and a commitment to principles, *Sensing upfront how others would react to policies, pronouncements and edicts. Emotional intelligence is the barometer which predicts the likely impact of decisions on reputation, trust and credibility.

There are a few simple steps CFOs could take in improving their emotional intelligence, these being, * Being more self-aware, * Being more aware of how others feel, * Practicing active listening, * Giving regular and honest feedback. Receiving feedback. Accepting such feedback for what it is. Not showing irritation on receiving negative feedback, * Staying calm under pressure, * Keeping an open mind. Not jumping to conclusions too quickly, * Staying positive, * Showing empathy, * Communicating transparently, clearly and without ambiguity.

CFOs can increase their effectiveness by astutely blending their emotional intelligence with their prowess.

(The writer is currently a Leadership Coach, Mentor and Consultant and boasts over 50+ years of experience in very senior positions in the corporate world – local and overseas. www.ronniepeiris.com.)