A step-by-step guide to zero-based budgeting
Learn more ->
In today’s competitive business landscape, knowing how to be more agile and adaptive has never been more important. Given the necessity to grow toward a more tactical business planning approach, key organizational roles are being forced to evolve. One such example is the traditional role of the Chief Financial Officer.
The CFO has typically been in charge of overseeing all of Finance, including cash flow management, financial risk management, strategic finance, treasury functions, and performance reporting, among others. However, given the challenging business climate, the CFO’s responsibilities have expanded to go beyond mere numbers and are now entering a more strategic and forward-thinking role.
Because they are required to be more agile and forward looking, modern CFOs are not only in charge of strategic financial planning but also serve as business partners to support the board of directors in decision-making.
As a result, they must increasingly engage with internal and external stakeholders to understand how each function contributes to the bottom line, make financial predictions based on relevant socio-economic and operational data, and develop actionable plans to grow profitably. Moreover, they must stay up-to-date on all the latest business trends and practices so they can implement the right resources and technology to drive growth.
The chief operating officer (COO) is the second-in-command of an organization. They are responsible for managing and directing all aspects of operations and depending on the organization this can include Finance, Human Resources, Marketing, Sales, Customer Service, etc. In medium-to-large organizations, they would usually report to the CEO and work with other senior executives to make decisions on how the company should be running.
The COO is typically involved in the day-to-day operations of an organization, although its major focus is on ensuring the organization is running smoothly and effectively to meet business objectives. Thus, to provide solid direction and advice to the CEO, they must have extensive industry expertise, a thorough understanding of the business and its strategy, and be able to visualize the overall big picture of the company so they can improve efficiency and support performance.
Aside from the operational perspective, they should have a strategic and analytical mindset that allows them to see beyond the short-term and into the future. While developing and implementing operational strategies, which may entail expanding workforce, introducing cutting-edge technology, or modernizing outdated procedures, a COO must be able to plan months, quarters, or years into the future to ensure the company is on the right path to reach its business goals.
Additionally, excellent communication, problem-solving, and leadership skills are essential since they serve as the C-suite’s point of contact with other company departments.
The main difference between a CFO and a COO is where they place their attention, with the CFO being more focused on financial matters and the COO taking a broad view of the complete operational environment. However, because of a CFO’s unique perspective on operations and finances, it can be an excellent career move to transition into a COO role. As a result, seasoned finance professionals will need to acquire new abilities in order to excel at being the CEO’s right hand.
The following are some core competencies that CFOs moving into a COO role will be expected to master.
A CFO has a clear guiding role within the finance department; however, when it comes to leading a large enterprise, a COO is expected to assume a broader scope of responsibility and influence across multiple functions. Thus, they must possess the ability to understand and work well with different teams and individuals, build consensus, and foster collaboration among stakeholders.
Whereas a CFO can lead a finance team by providing guidance and mentorship, a COO must take on more responsibility and act as a business leader who sets goals, anticipates needs, and makes sound decisions on how a company operates. This requires strong interpersonal skills and the ability to manage people from more diverse backgrounds and areas of competency.
As the Head of operations, a COO is responsible for ensuring that the business operates to the highest standard. Therefore, taking an execution attitude toward development rather than only regulating and identifying constraints is another way that COOs and CFOs differ from one another. In the end, a chief operating officer must not only be able to spot potential issues early on but also, most importantly, make prompt decisions on sustainable growth.
In contrast to finance leaders, who frequently focus more on past events, COOs place greater emphasis on managing opportunities instead of simply mitigating the risks. They must have a strong awareness of the company’s vision, understand their overall position in relation to external variables, anticipate future industry trends, and be innovative to boost operational performance.
While CFOs like to see business growth through the lens of cost control and profit maximization, COOs prioritize gathering insights by looking for opportunities to increase value while using the same resources to support corporate success.
Therefore, COOs approach business development from a more holistic angle, considering both the company’s areas for improvement and ways to raise the value of their offering to bring in revenue.
Being a modern CFO vs COO is comparable to being a midfielder against a coach in soccer. As a key player, you have full access to all information, are aware of what is going on in real-time, and have the authority to decide where to invest resources to manage risk and promote team success. However, as a coach, you must grasp every facet of the organization and think strategically about how each decision affects overall performance.
But why is a Finance Chief the best choice for becoming a COO?
A skilled CFO will tend to also have a strong commercial acumen, making them the member of the management team best suited to understand the organization from the ground up. Moreover, having solid financial awareness can sometimes mean being familiar with the organization’s operations and being able to identify areas of potential growth and revenue drivers. Lastly, due to market volatility, investors are increasingly interested in how the leadership team manages financial matters rather than just learning about the stories behind companies, and will therefore increasingly scrutinize the background of senior executives.
Thus, to stay ahead of the game, if you are a CFO looking to rise to a COO position, your first step should be to shift away from traditional methodologies and adopt a more holistic, forward-thinking approach. Next, establish a solid relationship with internal leadership teams so that you can cooperate on business opportunities. And finally, explore how you can simplify your procedures to increase organizational efficiency.
Not sure where to begin? Request a demo today to learn more about how Abacum can help you streamline your operations through automation and seamless collaboration.
Discover how finance automation drives better decision making