5 reasons CFOs get fired

Although CFOs lose their job for myriad reasons, five reasons predominate industrywide and perhaps

1. Failure to Warn

CFOs are expected to be the bellwethers-the individuals wearing the bell upfront in the executive group that is leading the flock-to sound the warning about the direction of a trend or indicator. A downward direction is particularly "warning worthy." CFOs are expected to forecast or anticipate where the numbers will go, monitor or track the trends, and sound the warning when things aren't going as expected.

As mentioned in my July 2004, column in hfm, surprises that involve bad news are not welcome by anyone. Surprises catch people unprepared and often ill-equipped to deal with a current reality. The failure of a CFO to anticipate trends is often the result of lack of experience or a big-picture view of the organization. This may or may not be rectifiable. However, the failure to warn is 100 percent avoidable through two strategies:

Put information that could result in bad news on the appropriate agenda and ensure that it is known in advance. This means that information must be communicated promptly and thoroughly to the CEO, management team, and often the finance committee or entire board of directors.

Tell it straight. Don't use euphemistic words to sugarcoat bad news. Give colleagues a feel for the range of possible outcomes.

2. A "Bust in the Numbers"

Everyone agrees that healthcare payment is exceedingly complex. CFOs are assumed to be expert in forecasting contractual allowances provided to insurers or other group health providers. CFOs estimate what the organization will be paid, and hopefully, this estimate is fairly accurate. Sometimes, however, it is not; in fact, sometimes it's wildly off. The organization then has to take a big accrual for something that wasn't expected.

A major bust in the numbers shakes the confidence of the management team and board of directors. Repeated busts, a cause for termination, can be prevented through two strategies:

Ensure reliable financial reporting systems. CFOs must insist that their organizations use up-to-date, accurate, and integrated financial systems that provide real-time information. Then, CFOs and their finance team must monitor and closely track that information.

Don't let the information be a surprise. Related to the first reason described earlier, CFOs need to notify the management team when the numbers are not as expected, especially when the numbers are going downhill.

3. Taking the Blame

Some organizations still hold CFOs, rather than the whole management team, solely responsible for the organization's financial performance even though CFOs may have little control over the actions that lead to negative (or positive) financial consequences. Some CFOs seem willing to work under the demands of this assumption, and a few CFOs even foster the notion of their total control. If organizations experience red ink, the CFO must be to blame and he or she becomes the scapegoat and is fired. To avoid this pitfall, GFOs should do the following:

Clarify and define the CFO's role. Don't accept or retain a CFO position with an organization that holds the CFO solely responsible for the bottom line. The whole management team must be accountable for financial performance. Ensure that the CFO's role is defined as one centered on accurate and timely financial reporting. Hold department heads accountable for their budgets and staffing.

4. Failure to Communicate Effectively

Although communication skills are critical for CFOs, a common stereotype is that financial executives are woefully deficient in this area. Communication in management forums is vital, but so is day-to-day communication with staff and the management team. Withholding information and the inability to communicate simply and clearly are problematic behaviors that can lead to termination. To prevent this, CFOs can do the following:

Avoid using technical jargon. Remember your audience. Spouting financial jargon to those unable to understand it is a defensive strategy to be avoided.

Listen to and communicate with staff. A successful CFO builds a strong finance department by listening to, learning from, and communicating with staff.

Seek resources to improve your communication skills. Many healthcare management and general management organizations offer worthwhile courses, books, and audiotapes. If you even suspect a deficiency, make the time to improve your skills.

Disseminate financial information. Educate department heads on accounting, finance, ratios, and benchmarks and make sure they have the financial reports necessary to do the job and be accountable.

5. Personal Failures and Conflicts of Interest

Abuse of alcohol (and less frequently, drugs), conflicts of interest, and illegal activity, such as embezzlement, are reasons cited for CFO termination. Because CFOs are the final authority on financial statements-upon which all decisions are based-they must be held to the highest moral and ethical standards, and must be above suspicion or reproach.

Remain "purer than Caesar's wife."a Avoid even the hint of conflict or personal failure. This means following the organization's conflict-of-interest disclosure policy to the "nth degree." Keep your personal expense reports and transactions above reproach.

Avoid "doing the books differently" to "make the numbers look better." Some small number of boards, management teams, or external constituencies may press CFOs to bend their standards about the accurate presentation of financial information. CFOs should abide by HFMA's Code of Ethics, which calls for members to promote the highest standards of professional conduct by "striving for the objective and fair presentation of financial information." In some instances, getting fired may be the most ethical thing a GFO can "do."

Closing Comments

Contemporary healthcare organizations need CFOs with a breadth and depth of vision unsurpassed in previous eras. CFOs need to be able to capture and analyze countless data, but they also should be able to rise above the data to see and contribute on a big-picture, strategic level. CFOs who can do so not only will avoid getting fired, but also will be more likely to avoid the increasingly common scenario of getting "merged" out of a job.