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Challenges CEOs face in Finance and Accounting
Challenges CEOs face in Finance and Accounting
CEOs of all industries and company sizes face challenges in finance and accounting. After decades of experience as a senior leaders in several organizations, and as a consultant offering change management and process improvement to C-level executives, I’ve outlined some of my observations below. One thing to remember is that each CEO is different (there are several types), and all leaders have varying strengths and weaknesses. You may see the items below not as challenges, but opportunities for growth.
Challenge 1: The organization does not have good operational and financial data upon which to make strategic decisions.
Leaders with long tenures may default to gut feelings and past experiences. The gap becomes obvious when a new CEO arrives expecting more robust data and metrics.
Root causes include:
Old Enterprise Resource Management (ERP) or Management Resource Planning (MRP) systems built and implemented based on past business models that are ‘too hard’ or ‘too expensive’ to modernize. Changing financial regulations can trigger restatements and revisions of historical data, which is often a daunting task. At the same time, disconnected systems, such as ERP, MRP, CRM, and inventory platforms create problems when they fail to communicate with each other. On top of that, conflicting “sources of truth” emerge as different groups insist their data is the most accurate.
Remedies include:
- A thorough review of the current state of ERP and MRP solutions in the market today that could possibly support the business. Typically, an objective third party involvement to help navigate business needs and push back on the organizational friction related to new implementations is beneficial.
- Deep dives into data sources and business processes that can highlight fix areas, providing a good return on investment.
- Determining and declaring the ‘source of truth’ that will be used to drive strategic decision making.
Challenge 2: Organizational friction and cultural norms do not align with creating/improving company value.
Root causes include:
An aged work force that has grown up in the company and only knows one or a few ways of doing things. It could also be a lack of employee understanding on how their work contributes to the overall success of the business in terms of finances. Alternatively, it can simply be the natural human tendency to not want to upset the status quo methods by which they do their jobs.
Remedies include:
- Using a trusted third party to perform a quick and non-obtrusive diagnostic of the organization to identify areas of friction, offer solid recommendations for improvements, and then assist with implementing the recommendations. In some cases, just sharing leading practices from other similarly situated companies can help educate those that are ‘in the trenches.’
- Aligning people to the appropriate roles and responsibilities can go a long way to achieving change.
- Documenting and sharing success stories that highlight improvements made by various departments and people.
Challenge 3: Leadership does not have a solid grasp on financial mechanics (profit and loss, balance sheet, cash flows).
Root causes include:
Leaders educated and raised in the operational or sales side of the business. Anyone can develop financial muscles of course, but this is another level of education just like an Engineering or Sales/Marketing degree. Another more likely root cause is weak financial leadership that does not understand the business and the key information needed by executives to make effective and timely decisions.
Remedies include:
- Hiring the appropriate type of business-minded Chief Financial Officer who recognizes the CEO’s strengths and weaknesses and can complement them while being sensitive to the optics.
- Understanding the end customer value chains and how the company supports this.
- Developing key metrics that the leadership team agrees on and uses to hold itself accountable periodically.
Conclusion
These examples represent just a few of the common challenges our clients encounter. We have highlighted those that arise most frequently in our work and conversations. The underlying causes and solutions are often unique to each organization. Importantly, every challenge can be overcome with the right focus and prioritization, even amid the many other demands businesses face.
In our experience, CEOs value a partner who can provide thoughtful, constructive feedback and is genuinely invested in the success of their business. We refer to this as a “push-back partner.” Clients appreciate collaborative support that strengthens their teams throughout our engagements, contrasting with larger consulting firms that often rely on standardized approaches delivered by professionals with limited practical experience. This information is also based on a recent client survey we conducted with a 95% confidence level.
If you need some ‘pushback’ and straight talk, give us a call. We guarantee results.