If you are running a small or medium sized business, you may have grown to where you are considering adding an extra manager to help you handle all of the work. But do you add a financial manager (potentially a CFO) or an operations manager (potentially a COO)? Do you need help managing your finances or operations first?
What if you could have both roles in one person? That’s the idea behind the CFOO, or chief financial and operating officer, a combined or hybrid role that is gaining popularity in certain sectors and industries.
A CFOO is an executive who can handle both the financial reporting and compliance duties of a CFO and the operational responsibilities (such as IT, HR, sales, marketing, and more) of a COO. A CFOO can also serve as a strategic partner to the CEO, providing the operational framework to support the company vision and goals.
In this post, we will explore the role of the CFOO, when and why a business would combine the CFO and COO roles in one person, and how they may go about adding a CFOO to the team early rather than waiting until they are larger.
When and Why to Combine the CFO and COO Roles
The CFO and COO roles are traditionally separate in larger organizations, where each executive has a distinct set of responsibilities and expertise. However, in smaller or growing businesses, it may not be feasible or necessary to have two separate executives for these roles. In fact, having one person who can oversee both the financial and operational aspects of the business can have several benefits, such as:
Hiring one executive instead of two can save on salary, benefits, and overhead costs. Research has also shown that the net benefit to a business (growth in size and profitability) of adding an experienced executive often significantly compensates for the cost of the one person when compared to a company that waited to appoint.
Having one person who can make decisions on both financial and operational matters can reduce bureaucracy and streamline processes. The one person can also have a more comprehensive view of the business and be in a position to make decisions that truly optimize benefit for the company. There will be situations where one individual executive would have made a different decision without the benefit of the combined operations and financial perspective.
Having one person who can align the financial and operational goals and strategies of the business can ensure consistency and coherence across the organization. Because the one person knows both sides of the business, they will be aware when there is a change in process that may appear to streamline an area of operations but will detrimentally impact finance (and vice versa), or when a financial process could perhaps benefit significantly if a simple change was made in operations.
Having one person who can “instantly” adapt to changing market conditions and customer needs can help the business respond quickly and effectively to opportunities and challenges. When the knowledge lies with one combined operations-finance person there is no missed message so the entire business can immediately “turn” without creating challenges in communication, processes, or anything else.
Of course, combining the CFO and COO roles is not without its challenges. It requires finding an individual who has the skills, experience, and personality to handle both sets of responsibilities effectively. It also requires ensuring that the CFOO has enough time, resources, and support to perform both roles well. And it requires balancing the potential conflicts of interest that may arise from having one person in charge of both financial reporting and operational performance.
What Are the Value Advantages of Appointing a CFOO?
If you are considering appointing a CFOO for your business, you may be wondering what kind of advantages you can expect from this role. Here are some of the ways that a CFOO can add value to business performance:
CFOOs can improve marketing performance:
With the increased emphasis on online presence and social media marketing, a CFOO can help manage the sales funnel by improving marketing performance. Specifically, a CFOO can assist with the development and leveraging of content marketing, blog posts, videos, and more, knowing whether they are bringing changes in metrics and financial returns. A CFOO can also help measure and optimize the return on investment (ROI) of marketing campaigns by using data analytics and financial metrics to demonstrate any direct correlations and trend impact.
CFOOs can enhance customer relations:
By ensuring that the products or services delivered meet or exceed customer expectations, and then translate into efficient payment of invoices CFOOs can help improve retention while creating profitability for the business. A CFOO can find solutions that are fair and beneficial for both parties when resolving customer complaints, without also creating more recording challenges for either company or solutions that then create other problems further down the line.
CFOOs can foster innovation:
A CFOO can help foster a culture of profitable innovation by encouraging creativity and experimentation among employees. When they evaluate and implement new ideas or technologies that can improve the quality or efficiency of the business processes or products, they automatically consider cost implications that may accompany the change. They may also naturally incorporate the extension of innovation project evaluations into considering the need or ability to secure funding. The CFOO is also most likely to consider the project’s potential impact on business value, the overall impact and its tax deductibility.
CFOOs can support growth:
There is potential to support a comprehensive cost benefit analysis, that incorporates both operational and financial aspects, when a CFOO identifies and pursues new markets or opportunities. A CFOO will help manage the risks and challenges associated with growth, such as cash flow management, regulatory compliance, talent acquisition, etc. A combined finance and operations approach to considering and executing mergers or acquisitions can enhance the ease of integrating the new businesses, hence deliver the competitive advantage or market share intended for the business.
Is Appointing a Fractional CFOO the Most Effective First Step?
If a business could benefit from more senior help, but the owners don’t believe they have the need, or budget, for a full-time executive at first does it make sense to appointing a fractional CFOO as the first step? Perhaps combining the operations and finance in one senior resource would be helpful, and the business can thereafter progress to any combination of fulltime CFOO, or fractional both CFO and COO separately, or one of those roles fulltime and the other fractional.
A fractional CFOO is an experienced professional who can provide part-time or project-based services to the business as needed and can offer several benefits over a full-time hire, such as:
Fractional is less costly than fulltime because you pay only for the services you need, when you need them. It also brings the ability to obtain a highly experienced executive at lower cost, and not have to accept a less experienced person in order to manage the budget.
Hiring a fractional CFOO offers flexibility to adjust the scope or duration of the services as the business needs change. A company can even access a variety of skills and expertise from different fractional CFOOs as required.
Hiring a fractional CFOO can ensure that you get high-quality services from a seasoned professional who has knowledge and experience in both the financial and operational roles. You can also benefit from the best practices and insights that they can bring from working with other businesses.
Appointing a Fractional CFOO for Your Business
If you are interested in finding a fractional CFOO for your business, you may be wondering where to start. Here are some tips to help you find the right person for your needs:
Define your goals and expectations:
Before you start looking for a fractional CFOO, you should have a very clear idea of what you want to achieve and what you expect from the role. Document your vision of exactly:
- How the new person will complement the business,
- What they will do (and by implication what the CEO will no longer do),
- The prior experience the person should have accumulated,
- How the CEO and CFOO will work together and communicate, and
- What needs to have happened in the company by a year later for the CFOO addition to be considered to have been a success (this sets the goal for the CFOO role).
You should also have a realistic budget and timeline for the services you need.
Do your research:
You can find fractional CFOOs through sources such as online platforms, referrals, or professional networks. You should review the background, qualifications, and reputation of the potential candidates, and check their references.
Interview the candidates:
Interview candidates to assess their fit for your business. Remember that when adding a senior executive only 20% of the decision is based on the qualifications and experience of the person, 80% depends on how well you and your team will work with that person. You want the addition to give your business a boost; it must not be a drain in energy or business performance. Ask questions about their skills, experience, and approach to both the financial and operational aspects of your business; do you like their answers? Can you hold an effective conversation with the person, do you respect their experience and advice, and do you see yourself working well with them (including when you do not exactly agree on something!)? Be sure to discuss the candidate’s availability, fees, and contract terms.
Select and onboard the fractional CFOO:
Once you have chosen the best candidate for your business, you should finalize the contract and onboard the fractional CFOO. A high-quality onboarding will get the person integrated and adding value to your business faster. Communicate your goals and expectations clearly as part of the onboarding and establish regular communication channels and feedback mechanisms. Be sure to monitor and consider whether adding the fractional CFOO does achieve your desired objectives and make changes if necessary.
A CFOO is a combined or hybrid role that can handle both the financial reporting and compliance duties of a CFO and the operational responsibilities of a COO. A CFOO can offer several advantages for small and medium businesses, including cost savings, efficiency, alignment, flexibility, marketing performance, customer relations, innovation, and growth. A fractional CFOO, as an experienced professional to provide part-time or project-based services as needed, may be a cost-effective option to consider as a “first-stage” executive add in a company. To find a fractional CFOO for your business, define your goals and expectations and do your research before interviewing and comprehensively onboarding your right-fit executive.
If you are interested in learning more about how a fractional CFOO can help your business succeed, please contact us today. We would love to hear from you and answer any questions you may have.