My company is going through a finance department transition period. One of the possible outcomes is that there would be no formal
How unusual is a CFO role without IT and HR responsibilities?
Answers
I have seen this different depending on what the company does. In a technology consulting company, the CIO reported to a NA
I see the CEO encroaching on the point where he/she exceedis their span of authority, compromising his ability to lead the organization properly.
In emergency
More importantly what is the ultimate outcome wanted by the transformation.
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Wayne:
In my experience, the CEO has a complete span of authority whereas, no one else does. Thus, how does a CEO "exceed their span of authority" I might ask?
I've worked at and am aware of, several small to mid-sized companies where IT and/or HR did not report to the CFO. In fact, in my own experience, most HR directors/VPs do everything they can to NOT report to the CFO but to directly report to the CEO.
I know a few HR directors and they adamantly refuse to report to a CFO believing that CFOs just don't have the understanding of their "important" role in the organization. IMHO, it's more a matter of ego: They want to report directly to the CEO for the ego boost and higher level of respect and influence they believe that entails.
Besides, as finance professionals, we are all certainly aware of the constant conflicts of where payroll's responsibilities end and HR's begin, aren't we? This has been a constant dynamic throughout my
That's also one of the reasons I like HR to report to the CFO. It's easier to referee these conflicts and keep them from becoming larger than they should.
thanks for your responses. Do you see downsides of a structure with no CFO if both Finance leaders are senior level high performers? It seems like it could lack a sense of financial leadership and direction of the department as a whole.
Since it's family-owned, almost anything goes, but if I set that aside, my take would be:
Not having a true CFO can be a red flag to stakeholders
Is your CEO hands-on operational? If so, then IT reporting there could work. Otherwise, not.
What is the nature of your HR function? Is it mainly a service thing for existing employees? If so, reporting to finance is appropriate. If it's strategic and has a big impact on culture or if you are in growth mode and hiring a lot then having its own senior leader who reports to the CEO makes sense.
In our company neither HR or IT reports to the CFO. IT used to, but as it had a larger and larger impact on the business the CIO is now reporting directly to the CEO. I don't think there is anything odd and/or unusual in neither of these functions reporting to the CFO. As others have mentioned it depends on the skill-set of the CFO.
I would say though that I don't think it's a good idea to not have a CFO in the case where you have two finance heads side by side. This would only lead to trouble as no matter how you do it roles and responsibilities will be unclear as well as would accountability.
This is not that unusual in a family owned company. The CEO is having HR, IT, Finance, and presumably sales all report directly to him. The breakdown can be a good dynamic, and what I have heard from people in this situation is “everyone had a seat at the table”. They can be SVPHR, CIO, CFO, and SVPS&M. Or they can be Director of HR, Dir of IT, Controller, etc.
However, having one confirmed head of finance is preferable over two. Would the responsibilities differ significantly ? Like one in charge of transactional
Thanks for your thoughts Karoline. In regards to the two finance members, one is in charge of reporting and recording keeping (Controller) and the other
As support functions like HR and IT evolve from being compliance and administrative to becoming consultative and strategic, direct line reporting relationships with the business leader is expected. With this comes an upgrade in the talent that manage these functions who should have competencies in the financial management of their domain expertise.
It is not uncommon for HR to report directly to the CEO. The IT leader, especially if his title was CIO, might also report directly to the CEO. A lot depends on the nature (business sector) and size of the business. The fact that it is a family business is a key factor since the family will surely want to be as close to the purse strings as possible. They probably feel insufficiently qualified to run HR or IT but believe they should manage finance very closely.
And by the way no two companies have exactly the same structure. A lot depends on who you have on board and what their capabilities are, especially in a smaller company environment where the CEO may not want to spend money doing a complete (and risky) re-org - hiring new people to fit the new roles he might like to create.
I doubt that anyone could accurately describe the disadvantages of your new org chart without knowing the professional experience and capabilities of those who are filling the key positions. That said a lot of companies undertake a re-org to solve a problem which has nothing to do with bad organisation. What you describe sounds like more than just a Finance department transition.
It's certainly not standard for HR and I.T. to report to the CFO, although they do in many cases. Where those functions report depends on how much of an opportunity you want to give them to have strategic input at the executive conference table. Another factor can simply be to limit the CEO's number of direct reports in order to free up his/her time for more productive matters. My bet would be that they most often report to the CEO, but when they don't, the next most common option is to have them report to the CFO, as there always needs to be a strong linkage between Finance and HR anyway, and since the CFO typically has a strong understanding of I.T., given the heavy reliance on systems in Finance. When they do report to the CFO, you will often see a role called VP of Finance and Administration instead of CFO. It should be noted that the COO role is somewhat of a dying role, but it often makes sense to have I.T. report into that role, if it exists.
Long story short, there is no particular convention or rule, written or unwritten. Everyone just needs to be somewhat flexible and do what makes sense for the particular company taking into account that company's inventory of top management skills. For example, CEO's often rise up from parts of the company -- like Sales -- where future CEOs can learn little about running the entirety of the business. In such cases, it really is better for everyone if the CEO will delegate responsibility for administrative or operational functions, like HR and I.T., to someone with broader exposure, like a CFO or COO.
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Patrick,
I disagree (unless your in certain medical fields) with your phrase "not standard" that HR & IT don't report to the CFO - ultimately.
By adding layers of administration as you have suggested may make the relationship an arm's length one, but the dotted lines are still there.
I also don't agree with your perception of the COO.
But that's what makes Proformative a great community, a diverse group of professionals with an assortment of view points.
Wayne
I'm with Wayne.
I know a few COOs that would take umbrage at that "dying role" comment.
You're right about flexibility though. But it comes with quite a price. One easily ends up being the Jack of all trades but master of none. Which is fine. Until the buyout or takeover comes. Then, you're shown the door.
I've worked at three smaller startups that grew rapidly to the $50M to $100M annual sales range. Flexibility was expected of all key employees. There was an inherent promise that, the companies were doing well and so will you. But, over the long run, it was costly to both the entity and the key employees. The only winners were the founders who walked away wealthy.
At other places, I've seen key execs effectively refuse to step outside of their specialties and, that not only made their work roles easier, over their career, it paid off handsomely.
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