The Smarter Startup

Soft Skills: The Key to Making Good CFOs Great CFOs

Although they're often overlooked in startups, we’re convinced soft skills can make the difference between good CFOs and great CFOs.

Conventional wisdom holds that the person leading a business’s finance function is highly quantitative by nature. By and large, this is true. But after working with hundreds of venture-backed startups across the country, we’ve learned that while the analytical element is necessary, it is not always sufficient. A CFO’s “soft” skills, i.e. the qualitative, subjective traits that form the basis of effective relationships, are equally (if not more) important. In fact, although they’re often overlooked, we’re convinced soft skills can make the difference between a good CFO and a *great* CFO.

The Difference Between Hard and Soft Skills

The difference between hard and soft skills is easy to spot. Hard skills are broadly defined as measurable technical knowledge that can be taught and practiced to standardized competencies, like basic, senior, and expert. They’re easy to quantify and usually exist as tools or experience within a profession. For CFOs, this means proficiency in modeling, financial planning and analysis, accounting, capital raise structuring, and so on.

Hard skills are broadly defined as measurable technical knowledge that can be taught and practiced to standardized competencies, like basic, senior, and expert.

Soft skills, on the other hand, are squishy. Soft skills are the intangible, usually instinctive elements that are almost impossible to quantify, and differ greatly from person to person. They’re learnable but very hard to teach, largely because they’re anchored on personal emotions and attributes. At their core, soft skills enable effective and generally more harmonious interactions with other people – active listening, for instance, or being empathetic to another person’s situation or vantage point. They’re also incredibly valuable, particularly in a technical setting, because they facilitate the human connections on which all good companies thrive.

Soft skills are the intangible, usually instinctive elements that are almost impossible to quantify, and differ greatly from person to person.

We’ve all been there – the CFO is a quantitative genius when it comes to the numbers, but has a hard time interacting and collaborating with the rest of the team. Indeed, your typical venture-backed startup CFO is probably pretty good at the technical, financial side of the job, but may fall flat when it comes to things like empathy and communications. It follows, therefore, that actively improving and enhancing soft skills makes for a far more successful CFO.

Communication and Empathy Are Cornerstones of Great CFOs

Communication and empathy are the cornerstones of these soft skills. Through effective communication, expectations are correctly set, transparency is achieved, constructive conversations happen, and alignment with the rest of the team occurs. More is generally better than less, and being super responsive and over-communicating is almost always a preferable option over the alternative (particularly relative to the usually quiet demeanor of most finance folks). For CFOs, who by nature will calculate more and write less, understanding the nuance of communication is important – replying to a long-winded question from the CEO with a terse “Yes” and a signature line might be technically correct, but may not leave the most collaborative impression. Tremendous financial skills and experience can go by the wayside if not matched with equally strong communication abilities, and this mismatch can have direct consequences on coordination and collaboration with others on the team – and ultimately the company’s performance.

Tremendous financial skills and experience can go by the wayside if not matched with equally strong communication abilities…

The issue is that communication is easy to do poorly and hard to do well. Working on how to adapt elements such as vocabulary, grammar and presentation to your audience, topic, or context can help, but we’ve determined effective listening to be one of the most essential components of effective communication. In fact, it’s a talent we think all CFOs should develop.

…we’ve determined effective listening to be one of the most essential components of effective communication.

Think About How You Listen

Think about how you listen. Do you talk over people, interrupting them or finishing their sentences? Do you multitask while “listening”? Crucially, do you listen to *respond* or listen to *understand*?

We engage in all of the above to some degree, and the pandemic has highlighted some of the worst tendencies when it comes to how well we listen to others. Indeed, the average person can speak around 125 words per minute, while those listening can process up to 3x faster, making it easy to miss subtle cues, become impatient, do something else, tune out, or mentally cut to the chase (especially on a zoom call with the video off). But there is a cost to this tendency – listeners who are more intent on reacting to or anticipating what is said in a conversation will often mis-hear portions of it, leave out key information or jump to false or incomplete conclusions, causing mistakes, extra costs and process inefficiencies along the way. In contrast, effective listeners use the extra processing time to parse the speaker’s words, distinguish key points, and mentally summarize to-do’s and takeaways, resulting in more effective work and higher value-add in a senior position such as the CFO.

Of course, effective listening is easier said than done. It starts with a good attitude – patience, flexibility, adaptability, open-mindedness, a willingness to learn, etc. – that forms the framework with which we approach every conversation. Understanding the psychological deaf spots that might impair your ability to listen to feedback or things counter to your opinions, convictions, experience, etc. is a key step in effectively hearing what others on the team are trying to say. For subject-matter experts like CFOs, it’s especially easy to tune out or shut down others when they start talking about finance, but it is precisely the wrong approach to tackle the kind of strategic decisions often faced by startups.

Great CFOs Develop Empathy

Empathy, meanwhile, is highly related to effective communication and underpins much of a given person’s soft skills. Essentially the ability to view the world through other people’s eyes, empathy helps grasp other perspectives and understand core motives. It allows for broader situational awareness and context, which in a business setting drives alignment and ultimately productivity. We think empathy is a required skill for CFOs, because it informs frames of reference and helps navigate the emotional complexities often found in small teams.

We think empathy is a required skill for CFOs, because it informs frames of reference and helps navigate the emotional complexities often found in small teams.

Being empathetic improves a range of social skills, like influence, conflict management, teamwork, and the ability to inspire others. It helps the CFO, who usually sees the world through black-or-white, just-the-facts filters, find the right way to approach (and thus communicate with) others. For instance, effectively interacting with the CEO is a chief goal of the CFO. Is the CEO a stickler for rules or more an entrepreneurial risk taker? Knowing the answer will go a long way in explaining his or her behavior.

Soft Skills Make Good CFOs Great CFOs

Particularly in startups, the CFO is often called upon to be the voice of reason, the grown-up in the room and a devil’s advocate, all of which are enhanced and informed when accompanied by a degree of empathy. Particularly for startups, who have to make the right decisions at the right time in order to optimize their growth, the CFO needs to be approachable, collaborative and able to communicate effectively. All those traits rely on soft skills, not financial knowledge. The technical aspects of being a CFO — essentially, getting the numbers right — is obviously crucial, but we’d argue it’s almost the minimum necessary to do the job, i.e. table stakes. When we look at candidates to join our team of fractional CFOs, we screen for soft skills as carefully as we do for financial knowledge and background. In our experience, honed over years of working with venture-backed startups, it’s the well-developed soft skills like communication and empathy that will ultimately distinguish a merely competent CFO from the kind of strong, trusted, strategic ally on which the whole team — CEOs, board members, and employees alike — can rely.

The technical aspects of being a CFO — essentially, getting the numbers right — is obviously crucial, but we’d argue it’s almost the minimum necessary to do the job, i.e. table stakes.