The CFO is a company’s “connector in chief.” No one else in the organization is more important for ensuring that strategy, financial controls, stakeholder management, technology, and personal development link together for value creation. Marjorie Lao, who served as the CFO of the LEGO Group—and before that, as CFO of the Norway-based public company Tandberg (now part of Cisco Systems)—managed these connections for more than a decade and is now a director on multiple company boards. In a conversation with McKinsey’s Christian Grube, Lao shares her unique insights about the CFO role. An edited version of the conversation follows.
McKinsey: One of the themes we’ve been following is the expanding CFO mandate. What do you think is the CFO’s biggest priority?
Marjorie Lao: A CFO is responsible for running the full finance function, including capital markets if
it’s a public company, accounting, tax, treasury, and increasingly, technology—not just as a matter of business efficiency, but in terms of how it can affect business dynamics. That means a CFO needs to have business understanding, finance skills, and leadership and people management skills, including across stakeholder groups. Ultimately, the most important role for the CFO is to drive operating linkages end to end across the whole business. Usually, only the CEO and the CFO have that visibility that cuts across functional or divisional lines. The challenge for a CFO is to build a business organization, not just a finance organization, and definitely not just an accounting organization.
Ultimately, the most important role for the CFO is to drive operating linkages end to end across the whole business. Usually, only the CEO and the CFO have that visibility that cuts across functional or divisional lines.
McKinsey: Did you always have a strategy-first perspective?
Marjorie Lao: I’m a CPA by training. But my first two jobs after university—Procter & Gamble and McKinsey—were good training grounds for strategy and business. I had joined Tandberg as head of strategy and business development, and when the company needed a new CFO, we were in the middle of an acquisition—an acquisition that was going to give us a competitive advantage. The company needed someone who understood the business, could work with the sales and other business leaders, understand the momentum case, and tie
it to the forecast.
With my McKinsey training, I was prepared to be the CFO from a strategy perspective. I was less prepared for the rigors of accounting. But I realized that I could delegate more technical responsibilities to team members who were much stronger in accounting than I am. However, I also took it as a learning opportunity—given the pace of change in our industry and company, I also needed to make sure that I understood the accounting so that we wouldn’t get caught by surprise. I rolled up my sleeves and sat through several quarter ends with the chief controller to get an understanding of what we are doing and how we are doing it, while ensuring that different groups within finance—from accounting to financial planning and analysis—are also in sync.
McKinsey: How did you transition to the CFO role at the LEGO Group?
Marjorie Lao: I was initially hired by the LEGO Group as SVP of finance, reporting to the CFO. I remember one of my early projects was to drive what we called “pinnacle KPI” thinking, which is to say that each department or function may have their own objectives or metrics—but ultimately, these have to tie into the overall goals of the company. For instance, in supply chain, one of the objectives may be to maximize inventory turns, while in sales it may be to maximize on-shelf availability. How do we then look at this as a company from an end-to-end perspective—and this was a conversation that our finance team led with more than 100 business and functional leaders.
This early experience in getting the end-to-end perspective was quite foundational and helpful when I was promoted to the CFO role two years later.
McKinsey: Was it hard to embed finance throughout the organization right away?
Marjorie Lao: When I first started, as part of my onboarding, I had the benefit of talking to and learning from the senior vice presidents leading the different functions and units in the company. One of our discussion points was, to what extent does finance have a “seat at the table” when it comes to decision making in the function and BU [business unit] management teams? As I reflected on these discussions, I realized that one of our most important priorities was to establish our credibility as a finance organization, that is, “How do we, in finance, create value so that we are invited to the table?”
As a finance organization, we had to establish credibility so that people don’t see us and think, “OK, it’s the numbers persons again. We’ll talk to them when we need approval.” It’s our responsibility to show the business leaders that we understand the business, we ask the right questions, we enable the right decisions, and help drive value creation.
One of the things that my team and I aligned on
is that our role in decision making is not necessarily the person always saying “no”—sometimes, that’s what the perception of finance is—the ones who say, “We cannot do that, because we don’t have the money,” or “We don’t have the approval,” or “There’s too much risk.” Our role instead should be to consider saying, “Yes—as long as we do this,” or “Yes—under these conditions.” This required a change in mindset: finance as an enabler of business, beyond just being a guardian of controls.
McKinsey: What are some “nontraditional” ways you’ve enabled your companies’ businesses?
Marjorie Lao: Early in my CFO role at the LEGO Group, I was lucky to have had a broader-than-traditional responsibility—covering ESG, legal, and government and public affairs. There’s a parallel there to how we think of the finance function in the organization: how we can contribute value and establish credibility.
As an example, instead of viewing these functions as just focused on compliance and risk avoidance, how do we take a more strategic approach and make our work a more integral part of the business? This included being proactive in our approach to being a good corporate citizen, such as launching initiatives in our local communities to educate children on the importance of the environment, and working with our business leaders and channel partners on the same.
McKinsey: Are there lessons you would impart to your younger self to make things easier?
Marjorie Lao: I would probably tell my younger self to quickly assess what capabilities and skills my direct team and I have versus what are needed for us to be successful, and quickly supplement or complement our team with the right people and the right capabilities. And I emphasize quickly. Often in the past, I had the mindset of, “I can try to make this work.” I held on to this thinking too long, and it took me quite some time to build the right team, including changing out people as needed. In hindsight, this pace of building the right team is what I would have redone.
At the same time, I take pride in the finance organization being a net exporter of talent. And this I would advise my younger self to continue doing. I think of my team as business leaders and future CFOs. They have a role that they’re working on right now—how can I help them understand their potential and continue to build that potential in their existing roles as well as possible next roles? That includes exposure to areas that they normally may not have access to, including attending audit and other board committee meetings, for instance.
When I think of learning opportunities for the team, it goes beyond my direct reports. For instance, shortly after key meetings, I would debrief our finance team on what is on the management team and board agenda, what were the key questions that were discussed, and what that means in terms of feedback on what we as a finance team could be doing better/differently. On one hand, this helps ensure that we as a finance team are in sync. At the same time, this also provides a learning opportunity for the broader team. As CFO, I can’t have my hands on everything. But one of the most impactful things I can do is to have mini-CFOs all over the organization who share a business-enabling vision.
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