What Do CFOs Wish Compensation Professionals Knew?

Last week I provided some insight into what your CEO is thinking when you talk to them about compensation. While it was admittedly not comprehensive, I think the post struck a chord with many professionals who have been trying to find a better way to communicate and move forward with the executive team.

It is expected that most companies will spend between 10% and 30% of all revenue on employee compensation (sometimes even more.) Revenues are money. Money is your CFOs specialty. What do they really wish you knew?

There are several recent “Top 10 lists” that discuss concerns of CFOs. Nearly every list includes most, or all, of the following: dealing with the US economic recovery; identifying the best growth strategies, avoiding execution errors, improving staff without going over budget, identifying and growing talent, retention and motivation of top talent, and improving their departments ability to be a business partner.

Stop and reread that list. It looks a lot like the lists that Directors of Human Resources and Compensation have been putting together for years. So, if we are on the same page, what can we do to make it easier for Finance to provide support for us while helping them achieve their own goals?

A Cheat Sheet from the CFO:

1. Please remember that I am a numbers person. Don’t give me vague estimates or guesses. I can probably do the math in my head, so give me real numbers.
2. Don’t oversell me on huge gains. We have a specific projected growth rate to achieve. If your ideas are in line with that, then you will have my attention.
3. When presenting, show me charts and graphs that make sense (use our proxy and other financial reports) as guides. Pretty is less important than informative.
4. If you give me charts and summaries, back it up with full data sets. I may never look at them, but they make me feel more comfortable.
5. Understand the impact of your ideas and recommendations on the finances of the company. If you don’t know, or are unsure, ask me to explain before you try and sell your latest solution.
6. When you model the expense for awards and payouts, (especially performance-based and equity-based), please use assumptions that are applicable to our company. Again, if you’re not sure, please ask before you go hog-wild with your projections.
7. We have the same goals. I know it sometimes seems like I am not hearing you, but I will support any idea that makes more money than it costs. Communication projects? No problem, show me the ROI. Pay for Performance? Sounds great, but you’ll need to prove that it will work in alignment with our budgets and business strategy. In today’s uncertain market, please be ready to discuss risk -- both upside and downside. More headcount? I’m on-board if you can help figure out where the money will come from.

Remember, many of CFO’s goals are exactly the same as yours.  Take a look at some of the Top 10 lists provided in the links below to learn more about where goals differ. Most importantly, take the time to understand your CFO’s specific concerns. You may be surprised by what you learn.

CFOs are often asked to negotiate deals. A smart finance guy once taught me two important lessons about negotiations and should be considered when working with a CFO. 1) Always argue your point from the other guy’s side of the table. This requires truly understanding where they come from. And, 2) In a great negotiation everyone leaves just a bit unhappy. A perfect negotiation requires compromise from all involved parties. Compromise means giving up something you want, or taking on something you don’t. Understanding these two rules will make conversations with your CFO far less frustrating.

I have found that CFOs are often the easiest people to work with on compensation projects. They understand numbers (like us.) They talk about money every day (like us.) They must directly link every budget decision to the growth and success of the company (like we should.) Heck, they even enjoy being compensated (like most of us!) Approach your needs and issues from their perspective and you will find a like-minded business partner eager to help you succeed.

Top 10 List Sources

http://deloitte.wsj.com/cfo/2012/06/07/top-10-concerns-keeping-cfos-up-at-night/

http://www.proformative.com/articles/top-three-issues-facing-todays-cfos

http://www.cfoglobalhq.com/what-are-the-three-biggest-issues-currently-facing-cfos-around-the-world/

http://www.masslive.com/business-news/index.ssf/2013/01/cfos_hopeful_about_their_companies_growt.html

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation”, “If I’d Only Know That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.

Comments

[Mercedes McBride-Walker]

This is fantastic, Ann. And one I'd tack on to No.6 is: remember Finance has to consider all of the tax burden. So we may project $8,000,000 in bonuses off of calculations from base salary & bonus opportunity. They hear this number and think this is all-in. Wrong! So knowing the burden rate the organization uses (by country, province, etc.) so you can give a full forecast is greatly appreciated by our Finance friends, or be completely transparent as to what is included and what is excluded. Finance can be wonderful business partners and Compensation advocates.

[Mercedes McBride-Walker]

I apologize - I should have addressed my note to Dan.

[Dan Walter]

Mercedes,

Thanks for the great addition! You are so right. It can even go farther than that. I once did a project with a company where the HR dept. held an account of more than $1M to deal with an annual tax/fx issue. Finance had no insight to this money and no one was managing it. Correcting this one issue freed up enough money to pay for several other enhancements to compensation processes.