Light some sparks to ignite some fires...

CFOs should nurture ideas that will fuel future growth - lesson I learned at Novell (From another brilliant CFO, Dana Russell). But this became more pronounced a few years ago at Akamai. Once I was having a debate with Jim on investments that seemed silly and egregious (from my perspective) in the light of austerity measures elsewhere in the company. 

He coached, sometimes we have to light some sparks to ignite some fires. Not all pursuits will drive growth, but if we don’t experiment at all, the next wave of growth can become hard. The trick though is to decide when and where to cut losses.

It’s a fine balance, more of an art, and each cfo discovers their own approach... but either way, an important aspect of the job.

On where you stand... depends on where you sit

Jim has always been very measured in his choice of words while coaching.  A trait that everyone needs to develop, but especially important for CFOs.  Once he said "where you stand on issues, depends on where you sit".

Episode: During operating planning season one year, I was complaining about how product development folks don't understand challenges of Sales teams who are on the front lines.  I went on a rant about this, and after listening to me for a couple of minutes, Jim said the above line.

The crux was: While it is understandable that I had the view I did, it is largely driven by the fact that that's the view I understand and am exposed to.  If places were reversed (Another Jim-ism: don't judge others till you walk a mile in their moccasins), I probably would have a different view.  As a CFO, it is important to have a rational perspective on situations, without bias - driven by balanced facts and views.  This is a hard thing to do, but a critical requirement. 

On aligning investor view to management view...

While it may seem common sense to align management view to investor view, it holds more true for public companies than private.  Probably a function of the fact that GAAP requires segment reporting to align - how you manage the business is how you report it externally.  But Jim gave a practical perspective as well...

While you could lean on GAAP requirements to drive the alignment, it is also good practice to align the views.  This enables leaders to answer investor questions with more authority and not have to create a map between the internal management view, and external investor view.  And even if there is some misalignment, because there might have to be, it is sound practice to have very limited disparity.  

In a company where a common friend worked, there was misalignment between internal management view and external investor view, and it resulted in only the accountants (and some leaders) caring for the investor view.  During earnings calls or investor day meetings when business leaders met investors, answering specific questions became extremely hard - a situation you want to avoid as a CFO.

On decisions end up sticking...

As CFO, you have to realize that decisions have to be thought through.  Once you decide, it has to stick, or it will need to stick for a while before you decide to course correct.  Especially when it comes to seemingly mundane things like accounting/reporting.  

Jim had a perspective...

I was explaining to him that recently I started working to address classification of expenses so our financials can be benchmarked against peers.  It involves identifying the right peers, understanding their accounting policies for expense classification, etc.  His explained... this might seem a little bit of a mundane exercise, maybe weedy (read: into the weeds), but is a critical exercise.  Probably inconsequential right now, but it will start to become important as you grow.  In [where he and I worked together], we didn't do a great job of classifying some expenses.  While we could explain it every time, that is not a discussion you probably want to have.  We didn't fix it, and it became a challenge when the activist investor entered our stock - because they wanted to optimize that line item.  

Outside of this though, there are other implications.  If you make a decision to treat some item in a particular way, and you decide to change it later, it is likely to attract scrutiny.  Why did you misclassify earlier, and what changed that you want to classify now. Was it in error.  In public companies, sometimes SEC issues comment letters.  (Sidebar:  SEC usually reviews 10Ks every 2-3 years once you are over $2B, and more frequently once you are bigger). 

As CFO you have to be careful of your decisions - even for the seemingly mundane ones - because as you grow bigger, these can:

1) not only be painful to clean/reverse

2) result in scrutiny and compliance questions

3) have strategic implications

On Majoring in the Majors...

Jim has a rare ability to zoom in and zoom out of specific topics really quickly.  He explained it as "majoring in the majors". 

Episode 1: After going through the GSSM-to-Divisions transition, Jim knew I was getting somewhat overwhelmed with the task at hand.  The need to pivot the business, bringing along leaders who were just stepping up, and blending finance and operations into a single cohesive unit.  He explained that I need to develop the skill of focusing on things critical to the business, and spend lesser time on minor elements.  Addressing cultural differences between finance+ops, and being the adult in the room of leaders that are just stepping up - were more key than pivoting reports.

Episode 2: More recently, in my current role, one aspect I am working to address classification of expenses so our financials can be benchmarked against peers.  It involves identifying the right peers, understanding their accounting policies for expense classification, etc.  His comment was - this might seem a little bit of a mundane exercise, maybe weedy (read: into the weeds), but is a critical exercise.  Probably inconsequential right now, but it will start to become important as you grow.  In our common place of work, we didn't do a great job of classifying some expenses.  While we could explain it every time, that is not a discussion you probably want to have.  We didn't fix it, and it became a challenge when the activist investor entered our stock - because they wanted to optimize that line item. 

In simple terms, there are going to be things that will seem critical, impactful (sometimes mundane).  These can become time sucks, but as a finance leader, it becomes key to figuring out where you spend time, how much time, and how much detail you get into.  If you know your tendencies, you need to catch yourself and course correct - focus on the majors.