Make better use of the CFO.

• Author: Riley, Michael J.
• Position: Chief financial officer - Column

Activist boards increasingly are turning to CFOs for more than just the latest numbers.

When I was CFO at Lee Enterprises, a publishing and broadcasting company, Lloyd Schermer, then CEO, used to say: "Tell me exactly what you think, even if it costs you your job." Then he would chuckle.

But he was serious. My job was to tell him the truth. It was one of his many ways of gathering information and creating positive change.

With boards increasingly focusing on protecting and maximizing shareholder interests, the role of CFOs is changing at many companies. The CFO has always been regarded as the Boy Scout of an organization - an honest executive telling the CEO and the board the accurate picture about the numbers. Because of this honest role, activist boards are using CFOs more and more and in a variety of ways.

Savvy board members are using CFOs to gauge the big picture about how their corporation or organization is faring, what the best long-term strategy for the business is, and as an independent financial check against sales and marketing initiatives.

The CFO still has to help the board understand finances. Some of the numbers may not make sense to the average director whose background isn't finance. The CFO must translate numbers into words that are easily understood by directors.

When a business makes a strategic decision to approve a new marketing thrust, to significantly increase capital, or to permanently cut costs, finance people usually see the connection to debt, short-term earnings, and current cash flow. Board members rarely see this, and it is the duty of the CFO to translate decisions into numbers and then the numbers back into concepts. The CEO usually understands this instinctively, but often needs the CFO to help explain the information to the board and ultimately to stockholders and customers.

Mainly directors want to know whether things are getting better or worse. They want to know whether a company's situation is improving or declining and what the key drivers are. Directors want to know what two or three strategies can affect the company, such as price increases, changes in the product mix, or adding value to products. They want answers from the CEO and, increasingly, independent confirmatiom from the CFO. Such information is not necessarily in the numbers, and good CFOs can be of great help to directors.

The CFO also can help directors understand how to balance the competing goals of the organization, to show how...