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The qualities of a CFO leader: an interview with Ed Schultz

For a CFO to be an effective leader, they need to be a mentor, a collaborator, and a steward through times of change.

For a CFO to be an effective leader, they need to be a mentor, a collaborator, and a steward through times of change.

With an MBA from Harvard and Fortune 100 experience under his belt, Ed Schultz has supported large multinational companies and mid-sized and small companies with private ownership. Here are some of his many accomplishments:

  • Led as interim CFO of a $1B private equity firm, closing $100M worth of acquisition.
  • Led a $320M debt refinancing for a multinational manufacturing company.

I was fortunate enough to sit down with Ed and ask him about the different qualities a CFO needs to exhibit as well as how the CFO can be an exceptional leader to the rest of the company. 

What follows is the conversation he and I had.

The most important qualities of a CFO 

Ibrahim: So, before anything, I just wanted to thank you for your time with me today.

Ed: No worries whatsoever. It is my pleasure.

Ibrahim: Let me start with a simple question: if a CFO comes in tomorrow, what are the 4 main qualities you feel are critical for effective leadership?

Ed: 1. I feel that collaboration is critical. 2. A CFO should have chemistry with the CEO and the rest of the organization. They should fit in nicely. 3. The CFO should have an authentic desire to succeed in the role. 4. Their ethics are a crucial part of their effectiveness. And I am going to add a 5th component. So, 5. Mentoring and imparting knowledge is of the utmost importance. This mentorship takes one of two types. One is what is called book knowledge or technical knowledge. And the other is the soft skills that I think are necessary.

The importance of mentorship

Ibrahim: Speaking of mentorship, how do you feel that a good CFO can make everybody around them better? 

Ed: One of the things a CFO brings to the table is his expertise: they’ve seen multiple businesses succeed and fail. With that comes a spirit of mentorship, a wanting to teach others and impart knowledge. A big part of that energy comes from wanting to work with everybody at the company, starting with the CEO and the finance people, then going to any and all other functional areas. 

Ibrahim: So the willingness and the excitement to work collaboratively with other department heads and to have a mentorship angle where they've seen several companies, and they're able to bring that lens to the table. What about the CEO himself? How can the CFO add value and mentor them?

Ed: Part of working with a CEO is understanding their background. For instance, some technical leaders have little patience or interest in difficult business conversations. In this case, a CFO might find it tricky to get much-needed one-on-one time with the CEO. 

So, to rectify matters, the CFO needs to start from the CEO’s reference frame and steer the conversation by discussing things the CEO might find interesting. Essentially, you need to find the proper hooks to get the CEO to have the difficult conversations they need to have with you but might be avoiding. 

Once you get the CEO on board, you start building rapport with them. After that, it becomes a matter of managing up. For instance, you never want to make an example of the CEO in front of the rest of the company. Instead, if you are going to correct the CEO, do it one-on-one. And you do it in a way that highlights that you guys are working together and shows how much you value your partnership. 

Ibrahim: And what would be the best way for a CFO to hook the CEO and build rapport with them?

Ed: So, the really great CFOs are comfortable in areas beyond finance. They are excellent managers and business strategists. Accordingly, when they join a new company, they have an interest in the entire business, not just their department.

If the CFO understands general management and can dive into different functional areas, they will be in a much better position to understand a lot of the problems plaguing the CEO, the stuff that might be keeping them up at night. 

You want to hook the CEO? 

Talk to them about how they should be dealing with investors or how to work on different parts of the business. Ask them good questions, request their help when needed, and involve them as much as possible in whatever it is you are doing. 

When the CFO does all of this, a CEO will start growing by osmosis. They will soak in the experience and the business acumen. That, to me, is one of the best ways an experienced CFO can mentor the CEO.

Ibrahim: Have you walked into a company, and as you’re walking out of it, you’ve noticed that the CEO has become more business-savvy thanks to soaking in some of your experience? 

Ed: Actually, I have. Obviously, it all starts with the CEO’s willingness. They have to want to grow and make things work

That said, I had one situation that is like it and that I remember very clearly. There was this SaaS company, and the CEO wanted to buy out his partner. The issue was that the partner was the business guy, and the CEO was the technical one. The CEO understood the technology beautifully, and any time he presented the product, he could sell the client on the spot. 

But when it came to business, he had a lot to learn.  He didn’t know how to prioritize what to manage, how to run the business, and how to manage something like the HR department. He just understood the IT systems. He wasn’t even clear on what to measure.

All that said, he was a very fast learner, and he had a hunger for improving and growing.

So, with some mentoring and coaching on my end, and with plenty of hard work and trial and error on his, you could see him making excellent and quick progress. He was also really excited every time he noticed the progress he was making. 

And over time, you could really see him evolve into a great CEO. He became very strategic, and before you knew it, he was involved in negotiations with suppliers, ironing out master service agreements with them. 

Again, none of this would have been possible had he not had the hunger to grow and learn.  

Collaboration is key

Ibrahim: That’s beautifully put. I appreciate that mentorship mentality. Where do you feel it comes from?

Ed: I was very fortunate early in my career. Rather than diving headfirst into the business world, I decided to become an officer in the Navy. I went to the Officer Candidate School, which they called Supply Corps School. After that, I joined Submarine School. 

I was 22 or 23 years old at the time, and my captain, an older guy, was around 38 years old. Now, he taught me a lot. For instance, one of the best lessons he gave me was about the importance of collaboration and what was called Theory Y management.  

Ibrahim: Theory Y management?

Ed: So, Theory X Management is what they call authoritative management. It’s the dictatorship style of leadership. Theory Y Management, on the other hand, is all about collaborating with others and finding ways to work cooperatively. It is very similar to what you would call servant leadership.

Collaboration is even central to goal-setting

Ibrahim: It sounds like collaboration is a central tenet of how you run the office of the CFO. How do you use that for setting goals?

Ed: For starters, before setting goals, I need to understand what the company needs and how I can help it achieve its own goals. Without a thorough understanding of the company’s goals, the CFO is operating in a vacuum.

Once you understand these goals, you should start by prioritizing the most important ones and work your way down. But always look at the big picture and solve that first. And no CFO can appreciate the picture without collaborating with other departments and understanding their respective problems. 

Ibrahim: This all sounds good and well, but how can a CFO apply this in real-life? Do you have any illustrative examples?

Ed: At the end of the day, to establish a solid collaborative culture, you need to communicate, communicate, communicate.

A clear case in point would be Buffalo Color Corps, a company that I had helped find their sense of direction.

When I first arrived, I started by investigating the problems ailing the company. For reference, the company was manufacturing a synthetic indigo dye, which is essentially the blue in blue jeans. But, it was having a problem because Chinese companies were flooding the market with cheaper products. 

As a result, a lot of people at the company were jumping ship. And that was the situation I walked into. None of this is to mention how divided the company was.

So, to better understand the problem, I tried to see things from every viewpoint possible. I talked to the executive team, the managers, and the people on the factory floor. I would have one-on-one meetings, meetings with different functional groups, and meetings with unions. 

Then, I set up weekly meetings with the company's leadership and monthly meetings with the sales and marketing guys. And everytime we got together, we had a clear agenda of what the most critical issues facing the company at the time were. Accordingly, we would work together and address these issues as a team. 

Also, I worked hard to have a good relationship with the unions, working closely with the union representatives and shop stewards.

Finally, we used to have town hall meetings with the entire company. I made sure to listen to all of the concerns that were brought up during those town halls and to answer any questions people had.

As a result of all of this, the company started regaining some of its lost sales. 

What to do when communication breaks down

Ibrahim: It sounds like a big part of communication is all about making sure that everybody is on the same page, pushing in the same direction. Now, let's say you've diagnosed the problem, and part of the issue is either the teams are very siloed, which happens in a lot of organizations, or the teams have conflicting objectives or priorities, and they're pulling the resources in different directions. How do you come into that situation and, having diagnosed that issue, resolve that?

Ed: To develop a culture of collaboration, you need to start at the top. Start with the functional heads of the company. And as you have different meetings, the rest of the company will see firsthand how you are all espousing unity and how the entire company, white or blue collar, is together in the same boat. 

You do this enough times, and the disparateness kind of goes away. For instance, the purchasing guy now knows that the manufacturing guy is facing certain challenges, so he’ll work with his suppliers to get things right. On the other hand, the marketing guy will now understand more of why certain production systems are needed in the business and how support can be offered on that.   

Ibrahim: This is all good and well. But what if you have a fundamental disagreement with the CEO or with anyone else on the executive team? How do you overcome this hurdle and get them to collaborate with you?

Ed: So, to overcome a disagreement, a CFO needs to start with the requisite information that they can use to sway the CEO in a one-on-one, confidential meeting. In other words, a CFO can’t start the conversation with “I feel that way about so and so…” Instead, you want to say, “objectively, here is the problem, and here is the data that supports the argument.”

Simply, take the emotions out of the conversation as much as possible, and keep the entire conversation as logical as possible. Accordingly, if you do that in a collegial way, you will create a safe space for the CEO to hear you where there are no relationships or reputations that might get harmed in the process. 

How to build relationships throughout the organization

Ibrahim: It’s clear that a big part of your collaborative philosophy hinges on building relationships throughout the company. Do you feel there is a particular strategy to follow when building those relationships?

Ed: So, as a CFO, you need to build two types of relationships: internal and external. Internally, you start with the CEO, your functional peers (the ones running the different portions of the business), and the finance team. Another group of stakeholders a CFO needs to engage with are the owners, investors, and board of directors.

Externally, you also need to build a relationship with the company’s creditors, including the banks. You also need to establish relations with the company’s advisors and consultants, which could include a CPA firm that helps with tax accounting or attorneys dealing with contracts and occasionally lawsuits. Other external stakeholders are your suppliers and customers.

Ibrahim: I really appreciate how you broke that down. Let’s scrutinize any one of those relationships. For instance, how do you feel the CFO’s relationship with the board fits into their leadership role? 

Ed: Again, any relationship has to be based on communication and understanding, and a CFO’s relationship with the board of directors is no different. So, the CFO needs to start by understanding the board and their needs, which can only happen by asking the right questions and trying to find out what their main concerns regarding the company are.

And this applies to any type of stakeholder, not just the board.

For instance, when a CFO talks to a company’s investors, especially if the company has been funded by a private equity firm, he will find that a recurring pressure comes from the limited partners who are expecting above-average returns. 

Leading the finance team

Ibrahim: You also mentioned the importance of leading the finance team. With that in mind, how do you judge your team and find out what they are capable of, especially when you are new to a company?

Ed: When starting out, I try to get a measure of each team member and ask around about them. I want to get some input rather than rely solely on my first impression. I won’t use what others say to make any personnel decisions, but I want to have a clearer understanding of how the team is functioning and what potential problems may be lurking beneath the surface. 

After that, I just watch each person work and amend my initial impression over time. I want to see their chemistry with the other team members, their ability to get things done, and their tendency to collaborate with others. Most important of all, I want to see whether they are ethical people or not. And while ethics is about being fair and not cheating others, it is also about being accountable and refusing to blame others for mistakes you’ve made. 

Leadership development

Ibrahim:  Okay. That makes a lot of sense. So, to recap, you sort of ask around about them, you see whether they got the work done, you see their chemistry with their team members, and you watch out for their ethics. Now, we have also talked about mentorship, especially as it applies to the relationship between the CFO and the CEO. But how do you feel a CFO should mentor and develop the team members within the finance department? 
Ed: So, developing people is a customized thing: it is never the same thing twice. Everybody has strengths and weaknesses, and they have strong attitudes towards certain things and not others.

As a CFO, you need to customize accordingly. For instance, if part of your development plan is to give a person more responsibilities or a new title, you need to ask yourself whether they can do the job, and you need to be honest with the answer. You also need to make sure that they have the right degree of desire and that they are hungry for that growth. Otherwise, you are just setting them up for failure. 

Then, test them, and if they live up to their potential,  you can move them up. And there are times when the wisest course of action is to work around a person’s weaknesses and promote them because of their strengths. You can even customize and tailor an individual’s next job to suit their particular capabilities. 

And so long as the passion is there, you should strive to help them climb up the proverbial ladder. Just make sure they are willing to put in the effort.

Recruiting new team members

Ibrahim: That makes a lot of sense. And while I love the amount of effort and investment you are willing to put in your team members, I guess the natural next question is how do you recruit them in the first place?

Ed: Well, the way I look at that is hire for aptitude but also hire for attitude. I think they both go together, and you can’t have one without the other. 

I also want to know whether they are a good fit or not, which can be difficult if you have never met them before. One way to solve this problem is meeting with them and talking with them. You could give them examples of the sort of things that are happening at work and see how they handle those. 

There are other ways you might try to get to know someone. For instance, if I can find a common connection I have with them through LinkedIn, especially if they have worked with that connection before, I might ask those people for their opinion on my candidate. 

Don’t get me wrong, references are good and all, but references will always be good. After all, the candidate wouldn’t offer them if they had something bad to say. 

There are other things you also want to look at: their credentials and their past experiences. I will usually try to see where they have worked before, what the reputation of these companies is like, how long they stayed there, why they left, and that sort of thing. 

And the more important the position is, the more you want to get other people involved. You want to see the type of chemistry the candidate has with your other team members. Ask your team members how they feel about this person joining your team. 

The ability to respond to change

Ibrahim: So, it seems clear that leading and growing the finance team is about getting the right people who have what it takes to do the job but can also integrate well with the existing team. But how do you keep the team overall nimble and able to respond to change?

Ed: Ah, the ability to respond to change is very important for any CFO and their team. And again, it all starts with collaboration and team learning. 

The idea is that the CFO needs to instill in their team the spirit of looking for change. They should all be looking for new changes, be it a disruptive technology that will change how they work or a simple upgrade that could mean more efficiency. The most important thing is for the entire team to understand why that change is essential and how it is likely to affect their work. 

And when the entire team is always on the lookout for change, they will always be prepared as a group and ready to adapt to whatever gets thrown their way. They will also develop a communal mindset that change is inevitable, so it is better to be proactive about it and to always strive to be ahead of the curve. 

The best analogy I can think of here is that of sailing a ship. If the CFO and their team are all steering a ship together and realize that the wind is about to change, then the entire team needs to work together to change their sales accordingly. Otherwise, if the team isn’t as proactive as they need to be, the boat won’t go where it is supposed to go. It will just end up going the wrong way because the team failed to adapt as necessary. Worst still, the boat might tip over if the winds change too much without anyone adapting to that. 

Ibrahim: Wow, I really appreciate that analogy. It’s succinct yet draws a clear picture. And with that said, I want to thank you so much for your time today. I truly appreciate it.

Ed: No worries whatsoever. It was my pleasure. Take care.

Putting it all together…

From my conversation with Ed, here are some of the most important takeaways I walked away with:

  • While every leader might approach their role differently, a spirit of mentorship and collaboration can go a long way.
  • Business is all about the relationships you build, and the office of the CFO is no different. 
  • To lead the finance team, a CFO needs to be aware of each member’s current capabilities as well as their potential to grow. Additionally, each individual’s hunger for growth and displayed passion can play a key role in the trajectory of their career. 
  • Finally, change is inevitable. All you can do is either adapt to it or get swept by it.

If you want to learn more about what to expect from your CFO or if you are a CFO who wants to be a better leader for your company, do not hesitate to reach out. Our objective is to support the office of the CFO in any way we can, and we will always be delighted to be a part of your journey. 

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