CFO. VP FINANCE. CONTROLLER. WHAT'S THE DIFFERENCE?
In large companies, especially public companies, the definition of Chief Financial Officer is a bit more “standard” than in smaller, growth, private companies.
In public companies, the CFO leads:
· Accounting – what happened before
· Financial planning and analysis – budgets, forecasts – why, and where are we going?
· Tax
· Treasury – investment, borrowing, other company financing
· Investor relations with significant board of director interface.
As businesses have become more complex, the CFO job in many organizations, both large and small has become a strategic operating business partner as well.
The accounting piece of closing the books and reporting the numbers is managed by the Controller.
Large companies most often have an additional role separate from the Controller’s group titled VP Finance. Think financial reporting, budget/forecast and analysis – more forward thinking.
In the smaller growth company, anything from start-up to even $100m in revenue or more, a lot depends.
Depends on skills of other team members. Don’t look at a roles in a vacuum by itself, but in the context of the whole team.
· Was the CEO a former CFO who has Finance (fund raise, cash flow, forecasting) handled such that more a Controller level (close the books, get basic budgets) is more what’s needed? I’ve even seen tech companies get to double digit millions of revenue with barely a bookkeeper.
· Does the CEO still have bandwidth to manage Legal, HR, and IT or should this sit with the Financial leader?
· Will the company expect significant capital raise needs?
If you had to attribute a number one differentiator between a CFO and a Controller, it’s operating business partnership.
When the top Finance function person in the organization is in fact relied upon as a crucial member of the executive team and maybe even the strong #2 to the CEO, adding to the business more broadly than just providing historical and future prediction for financial information, that role is CFO.
The CEO, especially a founder if I have to say, must be honest with him/herself and ask whether he/she really wants and will embrace this partnership. If not, don’t go the CFO route! It can be true that a newer CEO doesn’t know what he/she doesn’t know – i.e. the value the right Finance partner could bring to strategy. Ultimately the CEO must know he would be excited about the partnership
The smaller, growth company CFO may also have some or all of administrative oversight - Human Resources, Legal and IT. It’s part of wearing many hats that happens in the smaller organization, until size warrants carving these roles out. Would a Controller normal have these functions? Probably not so much, but…it just depends.
I’ve seen small organizations of $10m hire a Director or VP of Human Resources because growth was going to be rapid with significant hiring and people considerations.
VP Finance
One common caveat I see with smaller growth tech companies is titling the top job VP Finance. In this case, this top role does partner across the organization and will have input to strategy, but many times the person in the role is new(er) to the very top leadership role and would not have been key to selling companies or be deeply experienced in capital structuring or fund raising and working capital resourcing once the right capital stack is determined. The VP Finance in this case has the future looking planning and analysis and budgets and accounting would also report to this top role or even be a very hands on part of it.
Another situation I see where the top job is titled VP Finance is when the only C title in the org is CEO and the CEO feels strongly that there shouldn’t be other C titles. (My view: It’s not the best strategy to be “hard line” on title once you find the A-Player you really want to hire in this continuing tight market. It never is, really.)
The great CFO:
· Works effectively across the enterprise, often helping to moderate competing interests
· Challenges in a constructive way
· Offers solutions – not just be a “no” person
· 1+1 = 3
· Brings ideas no one thought of
· Sees changes in the business, brings them to attention, AND recommends actions.
· Evaluates strategic alternatives
· Doesn’t just record the past but guides other functional areas in understanding and managing their results
· Helps hold functional areas accountable for their results,
· Brings ideas for mitigation when results aren’t going to be met, assumptions turn out not to be
· Suggests ways to hold people accountable – awareness of how comp structures are tied to behavior
· Intellectually curious. Critical thinking. DECISIVE.
· Proactively chases down the root cause of something substantive that doesn’t make sense…
because her mind won’t rest until her curiosity is satisfied.
It’s true that a strong Controller or VP Finance that is growing his/career should be contributing to these objectives at some level, just not fully experienced yet.
My advice is to forget about titles at first when thinking about what title to assign a new hire or what titles your current team members hold. Think about
· where the business is headed
· what skills the organization already has in the CEO or others
· what needs to be accomplished in the finance department for success, and
· what the gap is to the current team’s skills
Someone titled CFO in one organization really could have less scope/influence/business partnership than someone called VP Finance or Controller in another org. Figure out if you need your Finance leader to have strategic impact, carry out financing activities or look at acquisitions. Those types of contributions by your Finance leader make the job clearly a CFO.
Leave some wiggle room to work with the candidate you want to hire. Regardless of the title, do a deep dive into the chapters of the candidate’s career, far past the table-of-contents resume to see if the candidate’s can-do’s and want-to-do’s are a match for your organization’s vision for the future.