CFO Chapter 10: Board communication
The story of a brand is told by marketing. The story of a company is told by CFOs. The former has creative freedom, the latter cannot deviate from any detail. When it comes to communicating with others, marketing therefore has an easier task of making the stories they wish to tell engaging. However, when within board meetings – given the importance of their data – CFOs must communicate their message as effectively as any high-budget marketing campaign.
Throughout the CFO Chapters of 2023, there has been an emphasis on the growing strategic responsibility of CFOs, reflecting their increasing influence from within board rooms. In the final chapter of the year, we will therefore detail how CFOs can deliver upon this development by providing precisely what fellow board members expect through clear communication.
Talk about communication
Previously honing the skill of clear communication was not necessarily high up on the list of priorities for financial leaders. However, there is now much talk about the importance of it from everyone within companies.
For example, at the start of this year, roughly 45% of surveyed CFOs indicated that they aimed to improve relationships with internal stakeholders such as those who sit on their boards. Similarly, 40% of executives and managers outside of the finance function believe that their CFOs do not currently have the necessary expertise to be a good communicator.
Evidently, CFOs themselves and their peers are not shying away from the fact that communication of financial professionals was previously overlooked and now needs to improve. With a study by McKinsey revealing that when board effectiveness is increased (a symptom of improved communication at that level), financial performance also increases, it is clear to see why this is a priority for everyone.
What does the board expect from CFOs?
Moving beyond the broad expectation of better communication, what exactly do board members expect CFOs to deliver? Whatever it is, they have high expectations – since the pandemic 87% of non-finance executives and managers view the finance department as being more vital than ever.
With that in mind, let's assess what board members wish to hear from their CFOs:
Directing a company is an intricate business due to numerous factors – big and small – having the ability to cause a gradual or instant change in fortunes. Despite investors therefore wishing for every single detail to be handled with the utmost scrutiny, in reality, this isn’t possible. Being in the position of having access to more intel than anyone else within an organisation, it therefore falls upon CFOs to pragmatically decide which information is the most important to discuss within board meetings.
To ensure that they serve up the right intel to their fellow board members, CFOs have to think holistically. They must consider the priorities of their peers, the priorities of their market, their business’ overall objectives, and their own expertise and priorities as the financial authority within their business. Combining all of these perspectives is not an easy feat. However, as everything is always connected, the best CFOs will be able to find a way to link employee turnover to department performance, churn rates to whether support SLAs are being met, and more, resulting in whatever they choose to present always being relevant to all parties.
It is no secret that the ascent of CFOs into the board room was not because of their innate strategic skills. These have been developed over time. Instead, it has been because they have unparalleled access to data which they can manipulate and interpret like nobody else.
As a result, when CFOs present to the board, it is paramount that they do so with complete transparency. Board members have welcomed CFOs into the room so they can see the unfiltered truth behind their company – no tales can be told, only the story which their raw data presents.
From a high level, assessment of overall business performance and even departmental performance are both relatively easy for internal stakeholders to have a grasp of if they are inclined to take notice. However, knowing trends is not enough to influence them. Instead, the factors which are impacting them are what is important.
Once more, financial leaders are in the best position to provide these insights. However, this is only possible if the feedback they provide is based on undiluted data. Detailed data is a necessity that board members will not be willing to negotiate on – the advice of a CFO is highly sought after because it is to be based on data, not whims or business acumen.
What else is happening
A CFO with their head buried in internal numbers is not a very good CFO. With no business in history ever operating in complete isolation, they must always be mindful of what is going on in other organisations, industries and even nations. After all, growth of 10% means very little if share prices drop as a consequence of competitors growing more.
Financial professionals who seek to lead their business in the right direction must therefore be aware of what is going on around them. Trends, metrics and reports from competitors must all be provided to fellow board members.
How CFOs should communicate to the board
It is vital that communication is executed clearly. Without this, everyone suffers. For example, in a recent study, it was revealed that directors believed that CFOs were spending less time on risk management than they actually were. Evidently, a communication gap exists. This is worrying on multiple levels: misunderstandings with detrimental business effects are likely to arise, and so too is a wedge between CFOs and other senior staff members.
So how can financial leaders bridge the gap between their communication styles with those of their peers when they set foot into the board room?
For someone with no financial experience, the prospect of sheets upon sheets of numerical data is a scary prospect. This is unsurprising considering that outside of the financial sector, people very rarely interact with many numbers. For example, every day people see tens of thousands of words, have an average screen time of nearly 7 hours, yet likely only interact with any numbers when they make purchases. As a result, financial leaders must be mindful of the fact that their financial literacy is an exception rather than the rule. In fact, even in countries such as America, 43% of the population are not financial literate.
To overcome the novelty of financial data for their peers, visualisation is a brilliant method. By transforming raw data into graphics such as charts, financial leaders have a tool by their side to maximise the impact of the board level presentations. For example, the human brain processes visuals 60,000 times faster than text; people’s perception of accuracy grows from 68% to 97% when information is transformed from numbers and words into graphs; and data visualisations can shorten meetings by 24%. Ultimately, data visualisation is conducive to improving efficiency, increasing understanding and helping board members get the most out of the insights which CFOs are wishing to share.
Information overload is a common experience for the finance department which others are more than happy for them to experience alone. No matter how tempting it might be to introduce others to the tribulations of data management, board meetings are not the time to do so.
Instead, CFOs should find a way to make data appear effortless on the surface. Unsurprisingly though, it appears that this is easier said than done, with only 35% of CFOs enjoying the prospect of telling a company’s story through financial data. To overcome this issue, finance leaders should aim to communicate key data takeaways rather than report upon every single bit of data. This way, vital messages are conveyed without lengthy explanations whilst still being built upon high levels of detail.
With the past, present and future in mind
Regular board meetings are rightly scheduled for important stakeholders to take stock of the current position of a company; however, failure to prepare for the future and a refusal to learn from the past means that even the most detailed evaluation of the present is worthless in isolation.
When discussing any topic, prudent financial leaders will therefore support existing data with that from the past which relates to a similar scenario. This will present the board with more than just a current snapshot but insight which is built upon the depth of time. Ultimately, the more sources of knowledge available, the better position people are in to make decisions for the future.
How CFOs can prepare for board meetings
Arguably, board meetings are the most important gatherings of any company. Plus, out of those attending, CFOs will be in possession of the data which is of most interest. As a result, financial leaders will want to consider the following to ensure that they are best positioned to deliver what is expected of them come the date of their next board meeting:
With figures perpetually changing from minute to minute, CFOs need to present to their board the most up-to-date statistics that they have available. To get as close as possible to information which is current, finance teams cannot be spending hours or even days or weeks clarifying data. If this was the case, CFOs and businesses would constantly be working with out-of-date intel.
Unfortunately, due to the masses of data which finance teams must work with, this is often the case. Fortunately, there is a way to neutralise this problem – automation. By automating tasks such as reconciliation, finance teams are guaranteed that they will have available to them, figures that are accurate within minutes. This tiny timeframe means that when CFOs enter a board room, the insights they are sharing are as up-to-date as possible, ensuring that decisions which will direct the future of a company are well informed.
CFOs might have a lot to share within board meetings, but before they do so, many two-way conversations are required. What is shared in these conversations should either be discussions about data, or data itself.
For example, given the fact that financial teams have access to infinite amounts of intel, firstly they should ask board members what they wish to hear. Doing so is not a sign of inexperience, it is a proactive way to demonstrate that as a CFO you are determined to best support your company with what really matters. It also establishes a great foundation for future open communication.
Once conversations have been had over what information is of most importance, it is then down to CFOs to ensure that it is sourced. Whilst financial departments might have access to most data, they don’t necessarily have all of it. As a result, they must be prepared to open and lead discussions with other departments too. This will ensure that a flow of departmental data can find its way to finance teams who will be able to get it into the best shape possible for the scrutiny of the board.
Get your team on board
CFOs might be the sole financial representative who regularly enter board room meetings but the intel they share is the product of their entire team. Accurate data to visual insights are all a team effort.
As is so often the case in the world of finance, CFOs will therefore want to work backwards from the date of upcoming board meetings. This way they will be able to strategically set out timelines which will ensure that upon the date of board meetings, they are well prepared. Importantly, doing so will not only benefit CFOs but also others in their department. By giving finance employees clear schedules in advance, less is likely to go wrong, and preparation for board meetings can be absorbed into existing workloads with minimal disruption.
Another way which financial leaders can encourage their team to work diligently towards board meetings is by explaining why it is important from their perspective. For example, two significant reasons are:
- A financial presence in the board room gives an opportunity for their department to demonstrate their value to the wider business
- Providing insights to those who make decisions is one of the most effective ways to influence optimisation which in turn will improve the financial performance of a company.
The world might be extremely volatile at the moment but money unsurprisingly continues to be one of the most valuable assets to any company. Without it, there would be no employees, materials couldn’t be sourced, and purchases couldn’t even be made. As a result, everything which impacts the funds of the company must be communicated clearly to those who can make a difference to the fortunes of a business from within the board room.