Construction Industry Alert: How a CFO Creates Value in a Private Construction Company

Business owners and CFOs tend to voice similar concerns in today’s competitive employment marketplace. Owners often ask themselves whether they are getting added value from their CFO, and whether he/she is helping to drive the business forward. CFOs often feel they are adding value to the business, and therefore deserve more compensation.

In some cases, the owner and CFO are on the same page. They are partners in the business and their expectations are each being met. In other situations, the CFO believes he/she is adding incremental value beyond reporting the numbers, but the owner does not agree. These situations can lead to a high degree of conflict and possibly even separation of employment.

For this reason, it is critical for an owner to understand what to expect from their CFO. And, a CFO needs to assess the value he/she can bring to the business. Detailing expectations on both sides from the start is vital.

If you are an owner: Is your CFO playing a valuable role in your company’s success?

While the goal in construction is to get work and then perform the work, accounting for that work is just as important. Construction businesses can fail if the accounting function is not given the status and significance it should have. Some CFOs are isolated from other areas of the business or considered a necessary but unimportant function of the business.

However, CFOs are usually the first to foresee serious business issues. And, a construction company CFO often plays multiple roles including steward of the company’s assets and strategist in the use of funds and credit. To ensure success, the CFO must be on the organization’s executive committee and be included in senior management meetings.

Consider the following when determining whether your CFO is truly adding value (and whether you are putting that person in a position to do so):

  • How is your finance role viewed internally and externally? Does your CFO possess only financial skills, or does he/she have a wide range of skills? Is your CFO viewed solely as a financial scorekeeper who produces reports, or is he/she able to recommend and make decisions based on those reports?
  • Is your CFO a true partner in the business, engaging with peers and working hard to manage internal tensions with operations and sales?
  • Is your CFO engaged in the value chain of the business? Does he/she work closely with all divisions, geographies, and functional areas to drive the company’s vision, direction, and strategy? A strong CFO interacts with all areas and understands how all of the company’s elements fit together.
  • Do other function leaders include the CFO when they make business decisions?
  • Is your CFO involved in the bid process and does he/she work directly with operations? Does your CFO help manage inventory and evaluate each project thoroughly for efficiency? The best CFOs in construction companies participate in the operational bidding processes. He/she needs to account for the work, and therefore must understand intricate details of construction operations.
  • Does your CFO positively represent the company to the outside? The best CFOs are easily able to lead the relationships with the banking community, the audit team, insurance providers, and legal counsel.

If you are a CFO: What value are you providing to your organization beyond the financials?

A true value-adding CFO is one who not only possesses strong technical skills, but who can use these skills to clearly communicate highly evolved financial data and concepts to non-financial employees. He/she is also able to translate data into decisions and recommend solutions that will drive revenue for the business.

A strong CFO must also be a jack of all trades: a gatekeeper of financial matters, a cheerleader for the finance team, a good communicator both inside and outside the company, and a strategic visionary. He/she is a leader who can help move the company forward and position it for long-term success.

Finally, a truly remarkable CFO will continuously look for ways to be challenged and to challenge others in order to benefit the business and promote growth.

What’s the next step?

If you’re an owner, now is the time to evaluate the value your CFO can add. First, develop a list of expectations for the CFO role at your company. Then, identify whether your current CFO has the skills and personality to match your expectations. Discuss these expectations with your CFO and ask for feedback. At this point, it will become obvious to both of you whether you have the right CFO for your company, you need to find a replacement, or perhaps, you need to help your current CFO develop new skills.

If you’re a CFO, develop a list of your skills and the contributions you make to the company. Discuss this list with the owner to understand his/her highest priority needs from the CFO role. If your list falls short of the owner’s expectations, discuss ways you can improve to meet the owner’s needs. If your list matches the owner’s expectations, you can feel reassured that you have found the right position and deserve compensation that matches your added value.

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Contact the authors:

Tyler A. Ridgeway, Director-in-Charge, Human Capital Resources at Email

Cindy Warkow, Executive Recruiter, Human Capital Resources at Email

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.