Chief revenue officers and chief finance officers: Optimize their relationship for organizational success

The relationship between the chief revenue officer (or other sales or revenue leader) and CFO is among the most critical relationships in any business. Still, little has been written about the dynamics and best practices that characterize a successful one.

Both executives play pivotal roles, but the nature of each leader’s responsibilities means that this relationship can become fraught for both newcomers and established leaders alike; the CFO oversees finances and financial reporting, guiding shareholders and The Street on business numbers and outlook while the chief revenue officer (CRO) leads revenue generation and makes the case for the resources needed to drive sales—which can run up against the CFO’s thinking on budget.

To better understand the challenges inherent in the CRO–CFO relationship and how leaders can optimize it for successful collaboration, we spoke with six executives with many years of experience as CROs, CFOs, or in other senior leadership roles. These leaders helped us understand why the CRO–CFO dynamic can make or break business performance—especially in today’s challenging market environment—best practices for both executives, and pitfalls to watch out for. While most of our interviewees have worked in the technology industry, their thinking extends to businesses in any sector.

A critical time

Given the current business environment, being thoughtful about this top-level relationship between the CRO and CFO has become even more critical. Market factors, including the sharper focus on profitability and recurring revenue—especially in technology, have made the relationship more urgent.

“What used to be about top-line performance is now about top- and bottom-line performance,” said Jonathan Chadwick, former CFO and COO of VMware. “Returns are very important right now, and CFOs need to understand the sales organization by asking questions such as, What’s the average account manager’s level of new sales? Where should they be and how can they get there? What are our overall people costs today?”

“Going from a focus on growth to a focus on profit has been one of the greatest whiplashes of all time,” Christian Smith, chief revenue officer of Splunk, said. “On top of that, how revenue gets realized has become much more complicated than the traditional buyer–seller model. The CRO and CFO must have a relationship focused on continuous value and continuous revenue generation. Sales leaders have to become revenue thinkers, with a deeper relationship between the revenue and finance offices. Now, every revenue officer has to think about gross margin and use cases. Neither the CRO nor CFO can do all this alone.”

The shifting market has also meant a change in scrutiny of top officers. “When it’s about growth, the spotlight is on the CRO,” Tom Reilly, former CEO of Cloudera, said. “Now that it’s more about margin, the focus is on the CFO. But it should be on both, as they need to work closely together. The CFO used to be more willing to throw resources at growth, but now it’s about doing that as efficiently as possible together.”

Ongoing market dynamics could even mean having to find the right combination of leaders to boost or sustain performance. “You may need to switch out financial leadership to make it work,” Splunk’s Smith said. “But it’s about having empathy for how you got where you are as a business rather than blaming people for the past.”

Caution vs. innovation: Building a connection between the two

When it comes to the relationship between the CRO and CFO, all the executives we spoke with emphasized the need to get it right. “Outside of CEO relationships, the CRO–CFO bond is most important in the organization, especially in a growth business,” said VMware’s Chadwick. However, there is a natural tension between the two roles and their associated agendas. “The stereotype is that the sales leaders always want more resources, and the CFO is looking to cut,” said Gerri Elliott, former chief customer & partner officer at Cisco. “But it works best when there’s a truly equal, transparent partnership.”

“It’s especially important for financial planning and analysis,” added Mark Garrett, former CFO and executive vice president at Adobe. “Everything starts with revenue, and you need complete alignment between the CFO and head of sales on this. There’s lots of pressure on the CFO from P&L, and on the CRO from sales. Both can be tireless, stressful jobs.” But failure to make the relationship work carries deep costs. “If there’s no relationship, it’s to the business’s detriment,” Cisco’s Elliott said.

Avoiding the pitfalls

Cloudera’s Reilly, who has overseen the CFO–CRO relationship as CEO at Cloudera, described the nature of the on-the-ground challenge: “Everyone, especially the CFO, wants to see the highest growth and margins with the fewest resources—except the CRO. The CFO wants the number to be attainable and would rather exceed the plan than fall short. In a high-growth company, the most expensive line item is sales and marketing—so all eyes are on making that area efficient. It’s a battle between the CRO and CFO over how many resources are needed to support salespeople and what investment is needed to open new verticals and geographies, along with how much to pay in commissions.”

The first step leaders of an organization can take to build a fruitful, cooperative relationship between the two often conflicting roles is to work to eliminate silos, enabling cross-functional collaboration. Splunk’s Smith underscored that point: “When we organize teams into siloes, it’s hard to look at them holistically and solve macro problems. We think of finance as a ‘count the money’ problem and revenue as just about sales. The CFO is seen as needing to set targets and manage checks and balances for a potentially reckless sales team. But it’s not that simple.” Said Cloudera’s Reilly, “We treat them as two different domains.”

According to the leaders we interviewed, mistrust is the most hazardous issue. One interviewee recalled a situation in which the CFO, cautious by nature, had the legal function reporting into them, which made it challenging for the risk-seeking CRO to pursue the big deals they were targeting. “Legal and the CFO wanted to negotiate every aspect of the deals,” the interviewee said. “It got to the point where they all couldn’t even work on the next year’s operating plan together due to low trust. That left the CEO trying to clean up the broken glass. It’s bad for the whole organization.”

Splunk’s Smith explained that “low trust and transparency often [leads to] a multiple-plan approach: board plan, CFO plan, sales plan. But you don’t need seven layers. You need trust and alignment.”

In other circumstances, the CRO may want too many resources to work toward their targets or seek to set overly conservative targets to enable achievement, and the CFO may push back. “The worst scenario is for the CRO and CFO to be misaligned going into an executive staff discussion, with each thinking the other doesn’t understand them,” Adobe’s Garrett said. But a close CFO–CRO relationship can enable an understanding of key trade-offs and how they affect resource allocation. “In the revenue office, we’re trying to determine how much resource to put toward flat-dollar renewals versus incremental growth,” Splunk’s Smith said. “The CFO partnership is critical to understand that trade-off and what’s best for shareholders, not just customers.”

Former Cisco executive Elliott agreed: “Sometimes it’s a tough company situation, like when large cuts are needed, and finance has the power to make those cuts in sales without talking to sales. That’s like using a hatchet instead of a scalpel, and the patient can die on the table. But it’s bad if the sides disagree and the CEO has to step in. It should be about leading together rather than ‘taking it to mom and dad.’”

Making the relationship work: Best practices for leaders

Given the high, growing stakes for the CRO–CFO relationship, we offer three best practices based on our years of experience and these interviews.

Make it mutual

Multiple executives highlighted the need for a truly mutual, high-respect, and multi-dimensional relationship. That may mean asking for valuable input upfront, explained Cisco’s Elliot: “As a new sales leader, I said to the CFO and their team, ‘I need your help understanding what the company’s objectives are and what will maximize value on The Street. Explain it to me like I’m a kindergartner.’” Cisco’s Elliot also asked finance leaders to advise on what “real productivity” would look like in the sales organization in order to determine best practices to drive efficient returns.

“Make the CFO part of your team,” Cisco’s Elliott advised CROs. “Put them in front of your customers and link them to customer CFOs. That CFO-to-CFO mapping makes for the strongest relationship and helps get deals done.” Splunk’s Smith echoed that idea: “Show the highest respect for your business partners, including the CFO,” he said. “Bring them to your strategy meetings and offsites. Award them slots in your Club or Prize trips [such as luxury trips for the highest-performing salespeople]. It will help you represent the business better to the finance organization as well as communicate how customers think.”

Adobe’s Garrett also supported that approach: “I literally sat next to the head of sales. We talked to each other daily about the plan for revenue, with lots of give and take around that number: What’s the stretch number? How realistic? Does sales have the resources needed? The math has to work,” he concluded, “and both parties have to say, ‘We won’t always agree, but we’ll do what’s best for the business and compromise.’ Once the CFO and CRO are aligned, everything becomes much easier—understanding and agreeing on the growth model and how quickly you can get there.”

Mutual respect helped Adobe’s Garrett and the sales head connect and collaborate at Adobe despite their different styles: “[The CRO] was more of a dynamic salesperson, and I’m a low-key, more conservative CFO. He was big on golf, and I wasn’t. We recognized each other’s differences and got to know each other as people, [sharing stories] about our families. That’s how we built the relationship.”

Nothing facilitates trust better than spending time together. “You don’t know how well things will work until you travel together,” Adobe’s Garrett said. “Dealing with late flights, lost suitcases, stress.” In his capacity as the CFO, he routinely traveled with the sales head to see customers and do quarterly business reviews out of state and overseas. “You can’t understand everything while just sitting in an office somewhere,” he explained.

In the end, it’s about developing a strong sense of mutual trust. “Trust reinforces a shared perspective,” VMware’s Chadwick said. “CFOs are there to trust but verify, and CROs are supposed to meet quotas. The key is to not get paralyzed by numbers that reflect the past, and that requires dialogue and negotiation, putting yourself in the other’s shoes to understand their goals.” And Paul Smith, chief commercial officer of ServiceNow, highlighted the need for speed: “Build trust fast. It enables you to be prepared to align commercial and prudent financial instincts and stand by big bets together.”

Communicate, communicate, communicate

Regular communication is the key to a healthy, trusting CRO–CFO relationship, as multiple interviewees noted. “The CFO invited me to every town hall meeting to talk about objectives and accountability with her team,” Cisco’s Elliott said. “Her team clapped when I told them I needed their help understanding account profitability. I put [my CFO] in front of all my meetings, too, so [my team] would understand where the revenue was coming from.”

“A good CFO talks to leaders in the field,” said VMware’s Chadwick. Such regular conversations maximize alignment and help the CRO and CFO and their teams present a united front to other executives, the board, and shareholders, as related to revenue, recent and upcoming deals, earnings, and other topics.

The CFO, moreover, can and should be part of the sales cycle. “For big deals, the CFO must be more than a rubber stamp,” ServiceNow’s Smith said. “They can help articulate the deal to executive sponsors and the CFO on the other side.” CROs, meanwhile, can provide insights into how the CFO can present the business’s financial performance to The Street.

Close communication will also enable the executives to support one another through potential ambiguity, ServiceNow’s Smith suggested: “The CFO may see low sales productivity and avoid devoting resources there based on the data alone. But the CRO places the bet and may know more is there—the return is far out, but they know the market and benchmarks that may warrant investment.”

He put the need for communication bluntly: “It’s insane for the CFO and CRO not to be joined at the hip. There needs to be constant dialogue and overcommunication.”

Don’t forget the soft skills

The “soft stuff” of interpersonal relationships is often the hardest part. Here, it’s about using high EQ and mutual understanding to forge a strong relationship.

“Leading with empathy is key,” Splunk’s Smith advised CROs. “CFOs have pressures, and you want to understand what they have to explain to the board and investors. You can supply them with customer stories and make their job easier versus causing friction or ignoring their requests.”

“Ego and politics can get in the way,” Adobe’s Garrett added. “It’s hard if both executives want the CEO job. But it has to be about figuring out what’s best for the company, not the individual.”

As serious as the work of CROs and CFOs is, it’s essential to bring a sense of humanness to the relationship. “Don’t always make it about the numbers,” Cisco’s Elliott advised. “My team loved the CFO more than me because she appreciated them and spent quality time with them and knew nothing gets sold by itself.” Cloudera’s Reilly agreed: “You want to get to the point where people from finance and sales are having dinner together and enjoying each other’s company.”

Advice for new (and not-so-new) CROs 

We asked interviewees for advice for new CROs, though such advice can apply to revenue leaders of any experience level. A large part of success, they explained, is being clear on sales-related objectives from the start. “The CRO has to understand sales-efficiency targets—as a percent of revenue—for the short and long term, especially for public companies,” Cloudera’s Reilly said. “Make sure you work with the CFO to clarify that and work together to understand what the journey will be, with a clear roadmap.”

Splunk’s Smith also made that point: “You must understand the financial drivers of the business and the financial measures that matter. The CFO and their team think in terms of compound annual growth rate (CAGR), internal rate of return (IRR), and other terms that may be unfamiliar. Get to know those by reading books and going online. Translate those metrics into your world. Learn how to read a P&L statement. Ask what matters to the board if you’re not in those meetings. Look for someone who can mentor you on this.”

He also pointed to the importance of partnering with the CFO: “Lean in fast to build a relationship with the CFO. Ask for feedback on strategies. Discuss areas of concern. Aim for informal calls at least twice a week and a formal meeting once a month. Storytelling may be more natural for the CFO, but build this skill beyond being good at talking and selling.”

It’s also about going in with a healthy sense of confidence and efficacy. “Establish yourself as a leader and strategic partner,” Cisco’s Elliott said. “If you see yourself as a junior leadership team member, it won’t go well. You’re the voice of the customer, so bring that outside-in perspective to establish your credibility.” She also noted the need to make tough but intelligent calls: “If the budget drops 2%, don’t fall into the trap of ‘peanut-buttering’ and cutting 2% across the board [such as sales commissions]. Instead, give your most deserving people more resources. It will establish you as a true partner to the CFO.”

Indeed, CFOs need that partnership for their own success. “Some CFOs don’t think about strategy much beyond capital use,” ServiceNow’s Smith said. “The good ones want to know how customers buy and how to deploy resources to optimize that, how to deliver quality more efficiently. You can help them understand that.”

A healthy CRO–CFO relationship has never been more important. To best position these leaders and their organization to thrive, leaders should prioritize a fruitful, cooperative relationship between the two often conflicting roles by eliminating silos, enabling cross-functional collaboration, and ensuring a genuinely mutual, high-respect dynamic.

The authors wish to thank the following executives for sharing their insights: Jonathan Chadwick, former COO & CFO, VMware, and current director on several boards; Gerri Elliott, former chief customer & partner officer, Cisco, and current senior advisor, Boston Consulting Group; Mark Garrett, former CFO and executive vice president, Adobe, and current senior advisor, Permira; Tom Reilly, former CEO, Cloudera, and current director on several boards; Christian Smith, chief revenue officer, Splunk; and Paul Smith, chief commercial officer, ServiceNow. Their views are personal and do not necessarily represent those of the companies they are affiliated with.