On the Operational CFO

On the Operational CFO

By Michael B. Tannenbaum, Chief Financial Officer, Brex

Michael B. Tannenbaum, Chief Financial Officer, Brex

The “strategic CFO” that spearheads the latest “digital transformation,” are meaningless buzzwords detached from the day to day lives of CFOs working at startups and their specific needs. More and more companies are basing their hiring decisions on a CFO’s proven track record of “strategic direction.” As a recent KPMG report found, 40 percent of CFOs had a background in “strategy,” while 36 percent had an operational environment.

But, both startups and fintechs are relying on CFOs that are more of a hybrid role: the operational CFO not only champions organizational change but drives its implementation. In this piece, I’ll look at trends for CFOs within startups in Silicon Valley, why overstacking your back-office functions can be a nightmare for any company, and what being an operational CFO at a leading fintech has taught me about the future role of CFOs.

"The strategic CFO was a starting point for a position that’s evolved"

How Startups and Fintechs Are Reengineering the Role of the Operational CFO

What shapes the day to day lives of CFOs working at startups and high-growth companies? According to the data, more and more companies are basing their hiring decisions on a CFO’s track record of “strategic direction.” As a recent KPMG report found, 40 percent of CFOs had a background in “strategy,” while 36 percent had an operational environment.

But if you look beneath the surface, you’ll find that very few people can tell you what it means to be a “strategic CFO” spearheading the latest “digital transformation” — it’s just empty jargon. After all, is a purely strategic CFO relevant to what you’re the company is doing and where you’re headed?

Over the last two decades, there has been a shift in the role of CFO. Beginning after the Enron-related accounting scandals, CFOs are held to a higher standard regarding financial reporting and accountability. The Sabanes-Oxley reforms not only put an increased level of scrutiny on the back office, but these reforms also put the CFO in the spotlight. Today, CFOs are evaluated not only for the accuracy and quality of the financial reporting they oversee, but also for the operational checks, balances, policies and procedures that their company facilitates.

As a result, startups and fintechs are relying on CFOs that are more of a hybrid role: the Operational CFO. Consultancies like McKinsey and publications from Forbes to the Wall Street Journal have all pointed to how the conf luence of regulatory, business process and technology changes resulted in the “Operational CFO.” This role not only champions organizational change but drives its implementation. The strategic CFO was a starting point for a position that’s evolved. Since then, when you analyze the leading startups and fintechs, you’ll find that the most successful CFOs need to balance investor pitch meetings while also running the back office, accounting, and the books smoothly.

Fintech CFOs at companies like SoFi and Stripe are the living embodiment of startups leading the way and transforming the traditional role of strategic CFO into the Operational CFO. For example, Stripe’s CFO, Will Gaybrik, recently transitioned to Chief Product Officer. This was a logical next step since there is a lot of crossover in fundraising, managing liquidity, running operations, and in helping shape product-market fit, and in Stripe’s case, product development. Meanwhile, Michelle Gil’s fourteen years of experience at Goldman Sachs & Co. provided her with knowhow regarding banking partnerships, and with a strong background in capital markets to help define SoFi’s future offerings.

In my case, working as a CFO at a high-growth startup in Silicon Valley has taught me a lot about the future role of CFOs. At any startup, but especially at a fintech company, having a strong command on your finances is critical, especially as your liquidity is part of your product offering. So to set up my company for success, I have to play an active role in fundraising and setting up projection plans, while overseeing budgeting and accounting, managing our liquidity and making sure our operations are intact. At times during our company’s evolution, I handled customer service, sales and even marketing. While there is some element of startup scrappiness to these various roles, it’s also indicative of the changing role of the CFO within modern organizations. It’s a role that requires a lot of agility, but it’s also a role that hopefully is mirroring your company itself: developing and dynamically responding to the market’s needs.

Silicon Valley is the home to startups and companies thinking about the ways they will disrupt existing models and redefine the next decade of business. Isn’t it time Silicon Valley took this line of thinking one step further and instead of focusing only on building disruptive brands, start focusing on disrupting traditional roles?

The role of CFO today requires wearing many hats to reflect your company’s needs. CFOs aren’t contained to the back office, nor are CFOs only strategic. Instead, the Operational CFO picks up on where the CEO, CTO, and others have left off, complementing the company’s vision while driving the operation. The Operational CFO’s role evolves and grows with the companies of the future.

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