Depending on a company’s size and strategy, the Chief Financial Officer (CFO) or finance director role can take many different forms, from accounting to strategy to acquisitions. One extremely important but often overlooked responsibility of the CFO is internal communication.
At a recent CFO Leadership Council event, a panel of CFOs discussed various strategies for better communication between the finance function and the rest of the organization. Two specific characteristics emerged as crucial to being effective in the role.
CFOs spend much of their time focused on financial planning and analysis, and typically report their findings directly to the senior leadership and management teams. Just as important to their role, however, is making sure every member of the organization understands the business’s long-term financial goals and communicating about plans to achieve those goals.
“Transparency breaks the knowledge silos,” says Neal Modi, Vice President of Finance and Business Operations at brand advertising platform Kargo. While it’s often hard to draw the line between adequately communicating business performance and giving too much information, Modi says it’s important to share more concrete initiatives and objectives than simply “growing sales and increasing profitability.”
“Finance is in the best position to guide the company towards its financial goal. They are the ones leading the roadmap to profitability. It really goes beyond accounting,” says Ken Rugg, CFO of baby products manufacturer Rashti & Rashti. To him, being transparent is important whether the company is doing well financially or not. “As a family-owned, privately-held business, we share very little financial information. But we have to find other ways to be transparent about how the business is performing no matter what.”
The finance function can gain a great deal of trust and credibility across the workplace when they communicate openly. If you’re creating or revisiting your organization’s financial communication plan, consider how the message will be best conveyed — through presentations, infographics, videos, and other formats.
Studies have also shown that a regular cadence of communication from the finance function helps in better retaining and engaging employees. “There’s huge value in being consistent in the way you communicate to the company, and it builds a lot of credibility,” says Modi. When deploying a communication plan, be sure to think critically about the frequency of communications coming from the finance function.
For example, CFOs may want to present the key findings from financial statements at a regular cadence – but should consider whether or not the details are pertinent to the organization’s goals. CFOs must also consider the channel through which these messages are communicated. Addressing financial performance in front of the entire company may help quiet murmurs around the water cooler, but other updates may be better delivered in small group settings.
“If you’re in a mid-sized or small company, CFOs are the defacto COO,” says Rugg, so the CFO should be able to weave financial performance and operations together. Consistently tying financial outcomes to employee inputs helps keep employees focused on the end goal.