The construction industry has not been immune to the overall talent shortage of workers in the marketplace. The U.S. unemployment rate continues to hold steady at 4.0% as of May 2024, with more job openings available than qualified workers to fill them. This has created additional stressors on many organizations at all levels, and particularly those in the C-suite. One consideration to help mitigate these stressors is to have a best-in-class CFO who can position the organization for success well into the future.
Many years ago, a CEO asked a simple question: “What is the difference between a controller and a CFO?” In answering the question, they simply stated: “Headlights versus taillights.” Said another way, the controller (or similar) position, while highly valued, focuses more on what has already happened. Their work centers on correctly capturing historical information and verifying that controls and processes are followed. Conversely, the CFO is more analogous to headlights on a car, in that they are (or should be) future-focused in their role and discerning what lies ahead.
Best-in-Class CFO Traits
Forward-Looking
Solid financial reporting is the cornerstone of any organization. However, this only captures what has already happened. Often, the most valuable information is what is yet to happen, and how leaders in the organization can impact those outcomes. Specifically, CFOs are uniquely positioned to not only understand the financial aspects of the organization, but best-in-class CFOs are also looking ahead to where the organization needs to be and how they get there. We explore a few forward-looking areas below.
- Technology: The pace of change will never be slower than it is today.1 Therefore, what investments in technology are needed to propel the business into the future? This includes back office and field technologies and can vary drastically from one contractor to another. Artificial intelligence (AI) appears to be more than just a fad. Thus, considering how to implement AI into an organization can make a big difference for its future state.
- Growth plans: Growth is needed to fund future opportunities for owners and employees alike, along with funding investments to be made into the business to stay competitive. Margins continue to get squeezed with stiff competition and tight labor markets. How will this growth be achieved? Entering new markets? Working with new owners? Expanding into other industries? What type of relationships need to be built or fostered? What new talent will need to be acquired? The CFO should consider all of these questions when looking at the long-term outlook of the organization.
- Capital: Cash is king. Is the organization’s capital being put to work in the right way? What is the overall risk tolerance of the organization? Has this evolved over time, and is a more formal investment/treasury management policy needed? Do owner distributions need to be adjusted to further support future growth? Conversely, should excess capital be taken out of the company in the event of possible litigation, i.e., why put that money at risk? The CFO needs to understand the big picture to make informed decisions on managing the organization’s capital.
Make the CEO’s Job Easier
For many contractors, the owner and CEO are one and the same. Or there may be several “owners” with a more structured CEO at the helm of the organization. Regardless of how the organization is structured, one of the CFO’s responsibilities is to make the CEO’s job easier, i.e., providing them with the necessary information to make the best decisions possible. Beyond the financial reporting, there are many key performance indicators (KPIs) that are used to help drive the business forward. Ensuring the accuracy and timeliness of these KPIs is critical. The CFO should consider finding ways to automate the collection of this data to help alleviate undue strain on other departments or themselves.
It would be unreasonable to expect the CFO is knowledgeable in all areas, such as tax, accounting, financial reporting, IT, HR, insurance, KPIs, legal, etc. Leaning on your trusted advisors can result in better outcomes and create opportunities to strengthen those relationships. For example, when there are concerns about tax exposure by performing a job in a new state or jurisdiction, reach out to your CPA to better understand the issue and how that professional can help. Similarly, when working with a new owner who wants to modify the standard contract terms, engaging external legal counsel can not only help minimize risk to the company, but it can also give the CFO peace of mind when executing the contract or negotiating further. Could joining a captive insurance program be a better resource for your organization? Ask your broker, peer, or other experienced professional to find out more. When viewing these service providers as an extension of the team, the CFO can cover more ground on a daily basis and focus on other issues that cannot be delegated.
Understand the Organization
Being curious and constantly thinking of ways to improve the organization are often unsaid responsibilities of a CFO that should not be overlooked. The CFO must operate beyond the walls of the accounting and finance department, and they need to understand the culture of the organization. The CFO can then identify if there are gaps in responsibilities or possible duplication of efforts. For example, are there personnel performing tasks that could be automated or enhanced with technology? Or, are there duplicative systems in place that are simply creating more work?
Knowing what sets you apart from the competition in your markets is paramount. The organization’s reputation within the business community is important with respect to business development. What do your customers think about working with you? Do you solicit their feedback on completed projects? If not, consider trying to capture this information and set goals to increase customer satisfaction. The CFO is often well connected within the community, whether through nonprofit boards, service providers, or prior work experience. Leveraging these networks can help support business development.
How We Can Help
As a CFO, are you exhibiting these attributes? Are you stronger in some qualities, while lacking in other areas? As an owner, have you positioned the CFO to thrive in their role, or are you hovering over them and not giving them the autonomy they need? Our construction team at Forvis Mazars has access to many industry professionals through our vast networks that can help your organization. Please reach out to a professional at Forvis Mazars to learn more.
- 1“Essential Skills For The Technology-Powered Future Of Work,” forbes.com, June 20, 2019.