Unless they’re lucky enough to be jetting off to a sunny location this winter, it’s unlikely you’ll see most North American CFOs hitting the links for the next few months. And that may leave some organizations breathing a huge sigh of relief.
Fortune magazine recently reported on the results of a U.S. study that looked at the recreational habits of nearly 400 financial leaders over a four-year period. Specifically, the research was trying to find a correlation between the number of times CFOs were playing golf and the way they managed to steer the financial direction of the company which employed them.
The short version? Being the Jordan Spieth of the finance department can be detrimental to the bottom line:
The report found that the more CFOs golf, the more “accrual errors, discretionary accruals, and unexplained audit fees” are found in their work. It also found that earnings conference calls tend to be shorter with lower quality information. In sum, the more a CFO golfs, the worse a firm will likely perform.
This might sound like a joke or something that required those involved to stretch the data to fit their thesis, but it’s not. In fact, it’s worth going well beyond the short article on Fortune and taking a look at the full 46-page report from Miami University of Ohio’s Department of Finance and David Cicero at the University of Alabama’s Culverhouse College. The information gathered in the survey is subjected to the kind of rigorous analysis that you would expect in a more traditional financial reporting process. The authors also go to great lengths in justifying the need for this degree of rigor.
“Our findings suggest that CFO effort is a significant, and perhaps underappreciated, determinant of financial reporting quality,” they write. “It also suggests that not all CFOs are consistently putting in the effort required to generate financial data that is of the highest quality.”
This is an intriguing conclusion, and begs greater discussion. No one would dispute that data quality is integral to sound financial management, but what do (and should) we mean when we talk about a CFO’s “effort?”
Should they need to spend considerable amounts of time making sure information is accurate, or should they be investing in processes and tools that take on and automate those tasks? Should their efforts be such that there’s no time left to go golfing between nine to five, or should financial reporting simply be so streamlined and automated that they can invest more effort in relationship-building with other decision-makers – over a few rounds, for example.
Running a finance department will never get so easy that CFOs spend more time working on their handicap than on their firm’s performance, but surely excellence in this role means more than putting in hours for the sake of it.
Acknowledging as much should be par for the course.
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