The New COO-CFO
By: Mark Athitakis
In 2010, Brenda Hargett, CPA, CAE, left her job as VP, Special Programs and CFO of the American Petroleum Institute, where she spent 17 years, to work at the American Academy of Otolaryngology—Head and Neck Surgery. On the surface, this seemed like an unusual move. API is a trade organization that represents the world's major oil companies. AAO-HNS serves a specialty group of doctors and surgeons and has a tenth of API's budget.
But the opportunity to lead is much deeper. And keeping the books is more fun.
"API is a large trade association, but the accounting of it is relatively simple: Six members paid 98 percent of the dues," she says. "The organization I am with now, with both a (c)(3) and a (c)(6) entity, is much more complex, accounting-wise. We own our own building, with municipal bond financing and an interest rate swap, we have endowments."
Hargett has a dual role at AAO-HNS: Though she began the job as COO, she quickly acquired her familiar role of CFO as well. Much of that is a tribute to her talents, where she's proven capable of saving millions of dollars by identifying inefficiencies and correcting them. But she also represents a role that many associations have adopted in recent years and that others might seriously consider. As the business of running an association grows more complex, understanding an organization's operations is inseparable from understanding how its money moves.
Whether the blended CFO-COO role is a trend is hard to say: There's no hard data on the number of associations that have pulled those two top positions together in one executive. But Laura L. Lott, CPA, COO of the American Alliance of Museums (and who also plays the CFO role), says the last recession forced many organizations to streamline operations, making CFO-COO combos a natural fit.
"Increasingly, CFOs aren't just the scorekeepers who tell you the numbers and then walk away," she says. "CFOs have been playing a more operational, strategic role. Even if the title isn't COO-CFO, they're still playing both of those roles."
Where the COOs Are
Percentage of companies in the Fortune 500 and S&P 500 with a COO:
2010: 41 percent
Percentage of associations with a COO:
2010: 37 percent
For her part, Hargett has seen the change at work in a networking group of CFOs she's known for years. "A lot of our titles are CFO-COO, or something that shows that it's a broader role," she says. "Fifteen years ago, we were all just CFOs."
One of the hallmarks of Hargett's tenure at API was efficiency: She streamlined its electronic payments and payroll systems and presided over an outsourcing plan that reduced accounting and facilities management staff by 40 percent. The layoffs were a tough call at what was a large, healthy trade group. But efficiency means clearing budgets to do what you want to do, not just what you've done before. "Sometimes you make cuts because you can't afford what you're doing, but sometimes you make cuts because you want to do more but you can't fit it in because you're inefficient," she says.
Hargett brought that focus to AAO-HNS practically from the moment she walked in the door. She recalls being aghast at an email she received on one of her first days on the job: It scheduled a finance meeting in June, at the end of the association's fiscal year, to discuss January statements. "If we were overspending in January, we couldn't have made a change at that point that would have a positive impact on the end of the year. So what is the purpose of talking about statements that are so old?"
Another red flag for Hargett is invoices, which have a habit of needlessly passing through multiple departments. "If it's touched three times, there's got to be an easier way to do it," she says.
Yet another: Staff keeping "shadow" spreadsheets for departments because the accounting system does not allow them to access the financial information they need. At API, Hargett implemented a system where senior staff could access that data: "Instead of having to call accounting, they can drill down and find [account figures] themselves. They've avoided a phone call, and the accounting folks can be more proactive and do more analysis, providing more real value instead of just being reactive."
Not Just Numbers
For all her skill at rooting out accounting inefficiencies, Hargett points out that an effective CFO-COO needs to keep a certain distance from the numbers.
"I can't spend all my time in the accounting world," she says. "If I'm going to have the title of CFO, [we] have to have a strong leader running that business unit, so I don't have to feel like I need to go and double-check everything."
Susan W. Medick, CPA, CAE, CFO-COO at the Automotive Aftermarket Industry Association, concurs. "I know a lot of very good CFOs who like to be bogged down in the details. A [CFO-COO] can't be bogged down in the details. You always have to be looking at the bigger picture."
Lott stresses that the dual role demands leadership as well as accounting chops. The CFO-COO, she says, "is really a partner with the CEO. You're playing a really strong leadership role in the organization. Being able to understand broader business management and needs and corporate culture and how you lead an organization is really key."
One place where Hargett has brought that focus at AAO-HNS is in education, where she's worked to find partners to produce education programs instead of having the organization handle production duties (and expenses) by itself. "Look for the areas you can build on, and you can bring your core competency to it and they can bring theirs," she says.
Hargett says she thinks today's CFO needs an operations mindset, even if that person isn't in a formal dual role.
"An aspiring CFO today really needs to know more than just accounting," she says. "They need to have a good understanding of whatever business type they work for. In associations, it is critical that CFOs understand the value of membership and how value is added. Not just the debits and credits."
Mark Athitakis is a senior editor at Associations Now. Email: firstname.lastname@example.org
Read More Online
- "So You Want to Be a Great Association CFO?" by Susan W. Medick, CPA, CAE, Dollars & Cents, November 1, 2012
- "CFOs Share Outlook for 2011," by Lisa Junker, Associations Now, February 2011
- "What's Next in Association Finance," roundtable facilitated by Andrew S. Lang, Associations Now Guide to Insurance and Financial Services, March 2010
- "Association Finance Trends and Advice," roundtable facilitated by Andrew S. Lang, Associations Now, January 2010
Three Questions With Brenda Hargett, CPA, CAE
What are the benefits to your organization of your dual role as a CFO and COO? Would you encourage other associations to create the role?
Given our size and my previous background, having me serve in the dual role of CFO and COO makes sense. There is no need to have two people in the "C" role when one person is capable of handling both areas. But the dual role isn't possible if there aren't qualified senior staff reporting to the COO-CFO.
What would make strategic plans more effective?
I actually believe it is important to do strategic planning without the constraints of finances. Once strategic planning is done, I think the financial aspects should be added. If a strategic plan is put together focusing on the financial aspects of activities, I feel the organization is not able to achieve as much as it otherwise would be able to.
Does the increasing complexity of tax law make it harder to be an association CFO today?
The world moves faster today than it did back when I first became a CFO. The tax area can be really complex for nonprofits these days, especially if your organization is involved in fundraising from members or others outside your registered state of business. Luckily, though, there are so many opportunities to readily obtain information. But you have to be willing to take the time to find what is important for your organization.
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