I created this article series for companies running (or seriously contemplating running) EOS® Traction, Gino Wickman’s Entrepreneurial Operating System® for small-business owners. I run my company on it and found that, while EOS® is extremely effective for management and scaling, the core EOS® materials don’t provide the depth of guidance for the financial component so critical to small-business growth.
These posts are for entrepreneurs who want to polish and improve the implementation of EOS® in their companies by enhancing that financial lens. It can also help accounting and finance professionals be impactful leaders within their EOS® company.
Articles in this series can be found here.
The CFO’s role in the Vision component of EOS® — the part that touches on your company’s long-term plan or vision — is an interesting one because the Visionary (typically the owner, co-owner or founder) is a vital part of the accountability chart.
It might seem that the Vision is something that the Visionary has responsibility for. The CFO, the “numbers guy,” might not want accountability for that or may believe they have no role to play, but there is a critical role in Vision for the CFO.
The CFO’s Role in Vision
The primary tool in “Traction” for establishing Vision is called the Vision/Traction Organizer (V/TO)™. Within this organizer, the Visionary and leadership team create a conceptual perspective of what the one-, three- and 10-year plans look, smell, and feel like. The CFO’s role is to make the V/TO™ measurable, credible and attainable.
The CFO must ask many critical questions:
- What does our vision say about how we are to serve our customers?
- What does our vision say about how we are to serve our employees?
- What investments are required?
- How many new employees will we need to hire?
- How many customers will we need?
- And how do we afford to execute on the vision?
Quantifying the Vision
A Visionary (in EOS® vernacular) may ask, “Can we execute this vision? Does it make sense? Does it add up?” For example, based on the vision of growth and market dominance, how many customers will the company need to acquire, how many employees will it need to hire? What kind of infrastructure and investments will be required? And how will we have the cash to get there? The CFO helps build, fortify, communicate and quantify the vision.
And the CFO ensures that the measurable, quantitative stepping stones are aligned because you can only achieve the 10-year vision if you achieve the five-year plan. And you can only achieve the five-year plan if you execute on the three-year plan. And to achieve the three-year plan, you’ve got to be on track for it in the first year.
Breaking the Vision Down
One of my old mentors discussed with her son, who was then a sophomore in high school, his plan to become a doctor. She said that was great but then asked him when he planned to be a doctor, and how do you become one?
He responded that he had to graduate from medical school. She told him to back up. “How do you get into medical school?” she asked.
He answered that he would need to get into the right college. “And what classes are you going to take?” she pressed.
He figured he should major in biology, biochemistry or something in the sciences. Good so far, but which colleges are good at these majors? He mentioned a few.
“What do you need to get into those schools?” she asked
He did some research and reported back the likely test scores and GPA requirements. She looked at him and asked how he was currently doing as a sophomore. “Holy crap,” he responded, “I better get moving.”
That mom helped her son break a vision down to the now…to the execution! This is not a skill the Visionary necessarily has. The core skill for most Visionaries is seeing how the big picture fits together, how they can interact with the market and in a competitive landscape.
A CFO can help them break it down and build out that journey map. They can create financial credibility around the vision, and this credibility can be vital to selling the vision to the team, partners, stakeholders, investors and employees.
The CFO’s Role in Data
The CFO’s role in data, one of the six key EOS elements, is probably the one we think about as the most when we think about the role of the CFO. There are four critical aspects for the CFO and their data role:
- Source of truth – Only one accepted data set for the company
- Reliability – Accurate information, every time and on-time
- Structure – Building a data repository that can effectively grow with the company’s needs
- Speed and velocity – Producing data at the speed that the business needs
Source of Truth
You’ve probably been in a team meeting when the big boss asks a simple question like, “How many new customers did we win last month?” and different departments have different answers (e.g., sales counts a new booked deal as a new customer whereas accounting does not. Marketing defines “new customer” as one who has bought from the company, not just in the last year. And accounting counts a new customer when revenue is earned.)
Another example is when leaders in a company provide information that is not “in the system” as fact.
Discussions about definition are an unnecessary distraction. The CFO plays a key role in creating a Source of Truth for the company by defining and setting standards for goals and measurables.
In the EOS® Level 10 (L10) meeting, when people are showing up and seeing their scorecard number, that number means something, and sometimes it’s tied to compensation. Driving that source of truth is essential, and it often prevents the degradation of an L10 meeting.
When decision-makers can’t trust the data, they will often delay a decision. It might be a crucial decision. They may acknowledge that they need to figure it out, but it’s put on hold because the data isn’t reliable.
Then what happens? We lose time, and because we lose time, we lose velocity in the organization.
Reliability plays a considerable part in EOS® because you want to get into these power-packed L10 meetings, make decisions and propel the company forward. The CFO plays a massive role in ensuring that decision-makers have a strong sense of reliability in their data.
There is a plethora of data available to small- and medium-sized businesses. It can be a very nuanced subject. For example, marketing might request specific data. But the company may not be able to afford to supply it or does not currently have the systems in place to provide it.
Scale is important here. If you build a thousand data points around six customers, you can’t be sure if those are even the right data points. It may make more sense to learn a little bit more and build the data out as the company grows.
The CFO determines and structures that data path. They then identify how the company can access more data as it expands. A company may be getting everything they currently need from QuickBooks, but may eventually want to migrate to an ERP system such as NetSuite.
The CFO guides this process. They keep the data on pace with the organization but also ensure its efficiency. A startup may have to aggregate data manually because, for example, it is dealing with information spread across several disparate systems. This works fine in the early stages, but eventually, this might hamper growth. As the demand changes, the CFO helps the company adapt by migrating to better and more data. Then, they establish a clear path for expanding data access as the company grows.
Speed and Velocity
Accountants often use the key metric of ‘how many days to close the books.’ It’s the classic speed metric of accounting.
With EOS®, there is a weekly scorecard. Many companies who implement EOS® lack this weekly data and have nothing to discuss in their meetings. But they may have monthly revenue numbers instead. The CFO can migrate the data to become weekly, and the company can then develop a weekly scorecard that is profoundly meaningful and based on a specific KPI.
If you have data that are available frequently, you can solve issues and keep the organization moving. Consequently, the L10 meeting allows you to resolve issues and create accountability around the scorecard. The speed and velocity of available data will also have a direct impact on keeping the organization on pace for its goals and targets.
The CFO plays a critical role in ensuring weekly scorecards contain meaningful metrics and that your L10 meetings continue to move your company forward.