I was at a board meeting once and we were discussing the performance of a newly hired CFO or previous CFO, it really struggled with credibility issue. Our financial statements often contain all sorts of little errors, whether they're adding errors, transposition errors or just typos. The person also wasn't able to answer the questions about the details at the level we wanted. And the board was often surprised by the financial results. So we hired a new CFO, and after a couple of board meetings, the financial statements and the explanations had improved considerably. However, the concern was raised because of the increase that we saw the administrative costs directly relating to the approach that the new CFO was taking, instead of doing the financial statements himself, he had made a conscious decision to hire highly competent people to do some of this work on his behalf.

So the question was then asked if these people are so good at doing this, then what does the CFO do now? this narrow view of the CFO difference so many organizations that we come across. And so in this lesson, we're going to explore why leadership matters and what this individual must do to be successful as a financial leader. Leadership is first and foremost about motivating others. intrinsic motivation is driven by three things, according to Zoeller, and Preston in their book, enhancing your executive edge. First of all, people have to know where they fit.

Secondly, we need to enable them to become competent in what they do. And then thirdly, we need to allow them to be autonomous, at least to some degree, and how they go about doing it. So leadership is about motivating others and these three things. So leaders themselves don't actually do that much operationally, if anything at all, yet profoundly, their contribution is significant. Now, rancher m, who's a harbor groover wrote a book and his book bores to deliver that as much as 60% of corporate performance is based on finding The right CEO to leave the organization. And he's not the only one that studied the impact of executives on the organizational performance.

And another study, this one published by Quigley and Hambrick that I've got on the screen before, you haven't put quite as much emphasis on the executive position as Mr. Sharan, but the so called CEO effect still exemplifies the importance of leadership to overall performance. The CEO effect was empirically researched and designed to determine how much of an organization's performance is attributable to the CEO position. Using financial metrics as the benchmark. The research suggests that 20% of financial performance can be attributed to the CEO position, and that this level of executive importance has actually been increasing over the decades, not diminishing. So there are widespread effects from strong, credible leadership including stronger employee attitude. more motivated employees more committed employees which leads to higher levels of productivity.

There's more creativity, innovation that's encouraged as a result of strong credible leadership. And finally, as a result, higher levels of corporate financial performance are generally observe when you have strong credible leaders in place. Now, the employee experience under strong credible leadership is one where the employees empowered to think for themselves, where they can recognize the value of their contribution as they move towards a unified vision. And they are encouraged to build relationships, not only with them, but across the organizations with peers and leaders alike. The command and control function becomes very much decentralized and given back to employees. Some refer to this level of empowerment as servant leadership, where the organizational chart almost literally gets flipped upside down.

The leaders job becomes one of serving the employees serving in the sense that they enable them with the right resources. They entrust them to use those resources at their discretion. And they give them discretion on how mandates are achieved and work is performed. Now, trust men and they will be true to you treat them greatly and they will show themselves to be great. That's a quote from Ralph Waldo Emerson. But leadership is also bred out of trust.

And I think this video of colin powell really exemplifies this message the best so let's take a listen. My name is Amy Wilkinson. I'm a White House fellow. My question is how you would define the key characteristics of effective leadership that allow you to go and be an advocate for good trust. The longer I have been in public service, and the more people have asked me about leadership over the years, leadership ultimately comes down to creating conditions of trust within an organization Good leaders are people who are trusted by followers. Leaders take organizations past the level that the science of management says as possible.

One of my sergeants back in the Infantry School of Fort Benning, almost 50 years ago, which is where I learned everything I ever got to learn about leadership was at the Infantry School, and he said to me one day said, Lieutenant, you will know you're a good leader. When people follow you, if only out of curiosity. I've never had a better definition. Because Because what he was saying and I and I seen it, I've seen it experienced in my lifetime. what he was saying is to trust you and you have built up that trust. How did you do it clear mission statement, selfless service.

People look to you and they trust you because you're serving selflessly as the leader. Not self serving selflessly. And that you prepare the followers you train them. You give them what they need to get the job done, don't get the job if you're not going to give them the resources, and that you're prepared to take the risks with them. And so they would teach us at the Infantry School. No matter how cold it is, Lieutenant, you must never look cold.

No matter how hungry, you all are, Lieutenant, you must never appear hungry. No matter how terrified you are, Lieutenant, you must never look terrified. Because if you are scared, terrified, hungry and cold, they will be scared, terrified, hungry and cold. I've gotten away with that many, many times in the course of my career by being scared to death cold and want to go to sleep. But now let's go let's keep going. Let's go around this corner, if only out of curiosity, and they'll follow you into the darkest night down the deepest valley of the highest hill if they trust you, so The essence of leadership is about doing all the science of management says you can with resources, but that taking that extra step and giving it that spark, and that spark comes from getting people to trust you so that they will follow you, if only out of curiosity.

What a great message leadership. true leadership is getting people to go beyond what they thought was possible. Here's another quote this one by Jared kins leadership is being the first egg in the omelet. I like that too. for that individual I spoke about at the outset of this lesson to be successful in the long term, they will need to go beyond just building a solid financial team. They will need to build their influence inside the executive, boardroom and the boardroom itself.

They will need to become a strong business partner across the organization if they are to add value and embody the role of the modern Chief Financial Officer