Over the years, the roles of a chief financial officer (CFO) have evolved significantly. CEOs expect them to deliver optimal financial results and partner with them in developing the company’s strategy. In general, different CEOs expect different results from their CFOs. According to Gary McGaghey, there are four basic orientations for CFOs that include the responder, the transformer, the architect, and the challenger.
Private Equity specialist Gary McGaghey believes that to succeed as an effective strategist, a CFO has to think innovatively, choose a strategic orientation that best suits his company, and hire an effective finance team. While some companies hire CFOs to serve directly as CEOs’ strategy partners, in others, you have to earn your position at the strategy table.
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Having a strong finance team helps the CFO create time to attend to strategic matters and provide support capabilities and the quantitative analysis necessary for developing an efficient strategy. For CFOs to develop valuable strategy ideas, they should ask important questions about the risks, uncertainties, dominant growth constraints, and scale assumptions that affect the company.
Different companies and individuals choose varying strategy orientation that suits their needs. Gary McGaghey hopes that with the understanding of different orientations, CEOs, CFOs, and business unit leaders can have a clear expectation for how CFO can effectively participate in the strategy process. In addition, CFOs will always choose an orientation depending on their scope of work and their involvement in the strategy process.
McGaghey adds that CFOs should not be static in one orientation but should reorient with the company’s changing performance and contexts. After formulating a strategy, the CFO should ensure its execution by setting up a delivery milestone dashboard that tracks the strategy.
Gary McGaghey is a private equity specialist based in London. He works at Williams Lea Tag, a marketing and business service group owned by Advent International. In his capacity, he is responsible for the company’s acquisitions, cost restructuring, divestitures, balance sheet refinancing, and others.