Combining the CFO and COO role: Benefits and success factors
An increasing number of organizations, small and large, are combining the CFO and COO role into a single executive role. Samuel Kumar and Charlie Waterkeyn from Q5 outline the benefits of creating a more holistic view of financial performance, risk, operations, and business performance.
Some of the possible organizational benefits of a dual role include stronger strategic alignment, holistic and coordinated decision-making, and cost savings at board level. An overview of benefits:
Holistic and coordinated decision making
A wider view of the organisation connects operational decision making with financial context.
Strong strategic alignment
One person overseeing both finance and operations enables a company to align strategies to achieve goals more efficiently.
Cost savings at board level
Combining roles saves money on executive salaries and benefits, freeing up funds for other purposes.
Financial reporting quality
Studies have found improvements to reporting accuracy through a more connected view of the organization.
Improved risk management and compliance
Oversight of operational and financial areas can improve risk identification and management.
The potential benefits from switching to a combined CFO-COO model can only be achieved when being aware of the challenges from broadening the scope of this role. These include:
Overload of responsibility
Combining roles could decrease efficiency and effectiveness through having too broad a scope.
Bottleneck for escalation
Escalation issues may arise as teams below the joint role will have a wide scope and one point of escalation.
Potential conflicts of interest
The legal and regulatory landscape may prohibit this role being combined.
Potential creation of additional reporting layer
Sizing of reporting teams below the joint role must avoid introducing an unnecessary additional layer in the organization.
When does combining the role make sense?
There are a number of scenarios where we see this combined role working effectively, improving how executive teams and organizations react to both adversity and opportunity. This role may work for a company if it is…
Small and mid-sized
Streamline management structure and reduce costs while maintaining effective oversight.
Undergoing turnaround or transformation
Holistic oversight aligns decision making and keeps the organization moving in a cohesive direction.
Undergoing unit/department reorganization
A dual role can steady an organization through significant exec-level turnover.
Experiencing rapid growth
Makes the organization more nimble during growth while monitoring long-term financial sustainability.
Process-heavy
This role can be most effective when process effectiveness is closely linked to cost base, such as manufacturing industries.
In need of a wide, executive team
Some organizational contexts require a wide executive team. This model shortens the span of control of the CEO, improving decision making capability.
Asset-heavy
Increased oversight is particularly effective where inventory management or capital allocation is connected to operating profit and cashflow.
Key success factors for the CFO + COO role
For organizations who are considering transitioning to this dual role, there are a number of traits and strategic structures that will help seamlessly integrate the role and ensure that the full benefits are reaped.
Empowered reporting team
The new reporting team must be empowered to make decisions to avoid the joint role becoming a bottleneck.
Mature data and tech capabilities
Mature ERP systems and developed insights facilitate simple and effective operational reporting.
Clear accountability and decision making
Given the increased breadth of scope, it is crucial to have formalised accountabilities and clear decision-making frameworks.
Embedded continuous improvement
The combined model requires a significant focus on continuous improvement of financial and operational processes.
Collaborative culture
Operational and financial leadership teams must develop collaborative ways of working to avoid the creation of silos or tribalism.
Leadership skills
The new executive must have excellent leadership skills to unite a team covering a wider scope and ensure the team is moving in one direction.
CFO background
This role should be filled by candidates with a CFO background due to the requirements for specialist financial knowledge.
