7 Strategic Questions Top CEOs Should Ask Their CFO

??This blog outlines seven strategic questions that CEOs should ask their CFOs to assess and enhance their capabilities in financial and strategic leadership.

? These questions explore areas critical to corporate success, including operational efficiency, risk management, and strategic growth planning.

? By utilizing these questions, CEOs can better align with their CFOs, ensuring a unified approach to navigating the company's challenges and opportunities.

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It is my fundamental belief that a thriving organisation begins with a thriving CFO.

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A world-class CFO doesn't just act as a financial steward within an organisation. When they step up and into the role of your right-hand executive, they can take some of the enormous burden off the CEO, freeing up the CEO to dedicate greater attention to fostering innovation and cultivating a strong corporate culture - essential components for creating a lasting corporate legacy.

The answers to the 7 questions I've outlined in this blog won't just provide you with insights that can act as thoughtful triggers for your own thinking. They will deepen your understanding of your CFO's strengths, uncover any gaps in their approach, and help you build a plan between where your CFO is now and where you need them to be.

This blog is essential reading for any CEO committed to achieving a competitive edge.

1. How do you plan to foster a culture of belonging and efficiency within our finance team to enhance overall productivity?

Understanding that high-performing finance teams are built not only on robust systems but also on strong team dynamics, this question probes the CFO's capability to nurture an inclusive and efficient workplace.

It assesses their leadership style and strategic approach to people management, crucial for aligning team efforts with the organization's broader goals.

Why ask this question? A CFO adept at fostering a positive culture can significantly boost productivity by enhancing morale, reducing turnover, and fostering an environment ripe for innovative thinking and effective problem-solving.

Conversely, a CFO's inability to articulate a clear strategy for team culture might highlight leadership weaknesses or a misunderstanding of team dynamics, signaling areas needing support or development.

What to expect from a good response: A high-performing CFO should be able to outline clear strategies for promoting inclusivity, communication, and collaboration within the team. Look for examples of initiatives they've implemented or plan to implement to boost morale, reduce turnover, and encourage innovative thinking.

Indicators of potential development areas: Beware of vague or generic answers that lack specificity or actionable plans. If the CFO struggles to articulate a clear strategy for building a positive team culture or fails to address the importance of inclusivity and communication, it may suggest a development area in their leadership and people management skills.

2. What are our biggest inefficiencies, and how can we improve our cost structure?

This question challenges the CFO to display their operational acumen by identifying not just cost centers but also hidden inefficiencies that could be draining resources.

It compels them to provide a strategic plan for optimizing resource allocation and reducing waste. Their response will reveal their proficiency in conducting a thorough analysis of business operations and diagnosing financial health beyond the monthly accounts. This includes pinpointing redundancies, cutting unnecessary expenses, and identifying underperforming investments.

Why ask this question? For CEOs, this question is pivotal as it uncovers potential operational blind spots that, once addressed, could lead to substantial financial benefits and a stronger competitive edge.

What to expect from a good response: Look for specific examples of inefficiencies they've identified and proposed solutions for optimizing costs and resource allocation. A good response should also include plans for monitoring and measuring the effectiveness of these improvements over time.

Indicators of potential development areas: Be cautious if the CFO proposes solutions without supporting data or analysis. If their response lacks depth or fails to address the root causes of inefficiencies, it may indicate a need for stronger analytical skills or a deeper understanding of the company's operations.

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3. What commercial value do you believe your strategic financial leadership can add to our company in the upcoming fiscal periods?

This question demands that the CFO outline how their strategic initiatives will not just maintain cost efficiency but actively generate additional value for the company.

This could involve creating new revenue streams, leveraging financial data for strategic decisions, or optimizing existing operations to enhance value.

An effective CFOs response would demonstrate an in-depth understanding of the company's business model and competitive landscape, highlighting their ability to think strategically about entering new markets, developing new products, or using technology to secure a competitive advantage.

Why ask this question? It underscores the CFO's role as a strategic partner capable of aligning financial strategies with corporate goals to maximize shareholder value.

What to expect from a good response: Look for insights into how they plan to drive revenue growth, enhance profitability, or create value through strategic financial initiatives. A good response should align with the company's overall business goals and market opportunities, demonstrating the CFO's understanding of the broader competitive landscape.

Indicators of potential development areas: Beware of responses that focus solely on maintaining financial stability and cash flow without considering opportunities for growth and innovation. A CFO who struggles to articulate a clear vision for how their financial leadership will contribute to the company's commercial success, it may suggest a lack of strategic thinking.

4. How do you propose we optimize our capital structure to support both immediate and long-term growth initiatives?

This question taps into the CFO's expertise in financial structuring and strategic growth planning.

It asks the CFO to articulate their approach to balancing the mix of debt and equity to support the company's growth ambitions without compromising financial stability.

Their response should reflect a nuanced understanding of market conditions, investor expectations, and regulatory constraints, crucial for making informed decisions about capital allocation.

Why ask this question? This insight is critical for CEOs to evaluate the CFO's ability to drive expansion while managing financial risks, ensuring that the company's financial strategy supports its overall strategic objectives.

What to expect from a good response: A strong response to this question would demonstrate the CFO's expertise in financial structuring and strategic planning. Look for a detailed explanation of how they plan to balance debt and equity to support the company's growth ambitions while maintaining financial stability. A good response should consider market conditions, investor expectations, and regulatory constraints, showcasing the CFO's ability to make informed decisions about capital allocation.

Indicators of potential development areas: Beware of simplistic answers that fail to address the complexities of capital structure optimization. If the CFO lacks awareness of the realities of the capital environment, it may suggest a need for a broader understanding of the financial environment beyond the monthly reports.

5. What are the key financial risks our company currently faces, and how do you plan to mitigate them?

Focusing on the CFO's risk management capabilities, this question is essential for understanding how they identify and address potential financial threats and market forces that could impact the company's strategic goals.

A comprehensive response from the CFO would detail both internal and external risks, such as liquidity issues or macroeconomic uncertainties, and their strategies for mitigating these risks through diversifying revenue streams, bolstering liquidity reserves, or enhancing compliance measures.

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Why ask this question? It demonstrates the CFO's proactive approach to safeguarding the company's financial health and aligning risk management with business objectives, essential for maintaining stakeholder confidence.

What to expect from a good response: Look for a comprehensive assessment of both internal and external risks, along with strategies for mitigating these risks effectively. A good response should include specific measures for diversifying revenue streams, bolstering liquidity reserves, and enhancing compliance measures to safeguard the company's financial health.

Indicators of potential development areas: If your CFO's response lacks specificity or fails to address emerging threats, it may indicate a need for stronger risk assessment skills or a more robust risk management framework.

Want a more in-depth understanding of your CFOs strengths and weaknesses and the skills that they need to develop to become world class? Request that the take my CFO of the Future Index Report and share with you their unique CFO sequence of success.

6. How can we enhance our reporting and transparency to strengthen trust with our investors and meet the board's expectations for financial stewardship?

This question addresses the critical role of financial communication in investor relations and corporate governance.

It challenges the CFO to review and potentially revamp the company's financial reporting and transparency practices.

An effective strategy might include implementing more detailed financial disclosures, adopting real-time financial data sharing technologies, or improving the granularity of financial reports.

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Why ask this question? These steps are crucial for cultivating trust among investors and satisfying board requirements, ultimately supporting the company's reputation and strategic initiatives.

What to expect from a good response: A strong response to this question would showcase the CFO's commitment to transparency and accountability. Look for specific initiatives aimed at improving the quality and granularity of financial reporting, such as implementing real-time data sharing technologies or enhancing disclosure practices. A good response should demonstrate an understanding of investor expectations and regulatory requirements, highlighting the CFO's ability to communicate effectively with stakeholders.

Indicators of potential development areas: Beware of vague or evasive answers that sidestep the importance of transparency in financial reporting. If the CFO fails to address concerns about data accuracy, integrity, or timeliness, it may suggest a lack of commitment to governance best practices or a disregard for investor trust.

7. Can you outline the innovative financial technologies or practices that we can leverage to enhance our operational efficiency?

Here, the question assesses the CFO's readiness to adopt innovative technologies and practices that can transform business operations.

The CFO should detail specific tools such as automation software, AI-enhanced analytics, blockchain for secure and transparent transactions, or advanced cloud-based financial systems.

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Why ask this question? These technologies can streamline processes, minimize errors, and boost analytical capabilities.

What to expect from a good response: An effective response to this question should demonstrate the CFO's awareness of emerging trends and technologies in finance. Look for specific examples of innovative tools or practices, such as automation software, AI-enhanced analytics, or blockchain technology, that can streamline processes and improve decision-making efficiency. A good response should also include a discussion of how these innovations align with the company's strategic objectives and can create tangible value.

Indicators of potential development areas: Be cautious if the CFO struggles to identify or articulate innovative financial technologies or practices. If their response lacks depth or fails to consider the potential impact on operational efficiency, it may indicate a need for greater awareness of industry trends or a reluctance to embrace change.

Summary

The relationship between a CEO and CFO is critical to a company's success. The seven strategic questions outlined in this blog serve as a powerful tool to deepen this crucial partnership. By engaging your CFO with these targeted inquiries, you not only gain a deeper understanding of their strategic mindset and operational capabilities but also set the stage for more aligned and robust leadership.

As you implement these questions in your interactions, expect to see a clearer picture of your CFO's ability to drive change, manage risks, and leverage opportunities. This process will not only strengthen your financial strategy but also enhance your company's overall resilience and agility. Need support in helping your CFO reach their full potential?

Book a discovery call with me today.