Risk appetite of a cfo…

Jim has generally been clear about being at the center of a position he has to take. Eg. If it’s a tax optimization strategy, the questions are clear:

1) are we within the bounds of tax code

2) is this something that most companies do - are there precedents

3) what’s the gain from this, a likelihood of litigation and  impact if it is litigated. 

If we are in the center (or close to), wherein the rewards are commensurate with the probability of risk materializing, and we are within the law, it’s a reasonable risk (even if litigated). The answer is not always clear, but general philosophy is to try and seek clarity. 

On numbers for the board, investors and internal…

While planning and projections are critical, what gets communicated depends on the stakeholder. 

For a board plan, you want to show numbers that are a stretch, but attainable. Numbers that show that the leadership is ambitious. Of course they need to be attainable with good execution. Not flawless execution, but really good execution. Boards don’t want to see conservative numbers at all times - else while you hit your numbers and earn their trust, they can also suspect that you are not being ambitious enough. But at the same time, boards don’t want you to miss numbers all the time. It’s a fine balance.

Investors are a different beast. They don’t like stretches. They like predictability. To investors you show a projection that you can hit. That has meaningful risk baked in. 

Internally, transparency is good. So execution leaders know what’s at stake. That they can be part of a winning team, and have good compensation effects if they execute well. And flip side, what they lose if they don’t. 

On importance of planning…

Planning is an important exercise in any company. It is important because it helps align all teams. Aligns teams to unified goals, spending envelopes, and catches disconnects before they become drivers of failure. But for that planning exercise has to be well managed. It should push sales to drive numbers that are a stretch, but reachable; and it should force product teams to deliver. A disconnected planned exercise will fail in alignment exercise and fail in getting confidence of people involved. 

On reading…

As a finance leader, you should look for breadth in your knowledge absorption. These will allow you to build high level understanding of a wide range of topics and have educated conversations with your stakeholders. Jim prefers to read articles and summaries that “net it out” for him, than reading a book where the point is made after 100 pages. A CFO should also try to spread that knowledge by forwarding key articles to relevant team members so they can also educate their work, conduct and conversations. 

Time is a scarce commodity and consuming: relevant topics, at right level of depth, and from right sources are key factors.  

Jim reads sales side analyst reports - to help understand how companies are positioning themselves, the way they manage their narrative and how investors are perceiving results. He reads insights from Korn Ferry and editorials from WSJ. Lastly, his other source of understanding is meeting professionals outside of work - bankers, attending cfo roundtables, investors. 

on introducing disruption in the team...

When you are looking to make changes in your team, you have to be mindful about how much disruption you are introducing deliberately.  Sometimes you don't have a choice - external factors introduce.  But when you do have a choice, you have to be careful about the areas getting disrupted, how much, and when.  It is also important to consider the ability of the team under the leaders.  You should also assess how your direct leaders are in collaborating with other parts of the organization.  As a CFO, it isn't just the ability of your leaders to do their functional jobs, it's also about their ability to do their organizational roles - extensions of the CFO.

on getting ready for IPO...

A lot of companies focus so much on governance and controls when they consider filing for an IPO.  But the reality is, that is one aspect of the whole proposition.  One of the trickier things is to have a rigor in the business, and the ability of FP&A to predict the business.  Whether you have the processes, the people, and the overall ability to forecast the business, tell your investors what you are going to do, and then come within an acceptable range of that forecast.  Once you have that, you also need a narrative.  A narrative that is compelling, exciting, and believable.  While private investors look for it, wall street also wants something that is more real and near term.  Something that the company can actually execute to.  It is important to have a narrative that marries possibilities with the ability of the company to execute, and then show the execution.

Once you have done this, you can think about the controls, governance, tax structures, legal compliances, etc. 

On being an 'swim lanes' type of CFO....

Someone once described Jim as a 'swim lanes' type of CFO.  That he will press functional leaders to do their jobs, but wouldn't get into their kitchens.  He will challenge, validate and verify.  But eventually, he will trust them to do their jobs.  That also allows him to remain independent and not get overly close to the business.

I asked Jim for his reaction to this characterization.  His response...

I have always been an operational CFO.  I am heavily engaged in the business and with a very balanced approach.  I try to be as rational as I can be.  And with an accountability orientation.  So in this regard, I am trying to understand what an operating leader is trying to do, kicking the tires on operational feasibility, and looking for end-to-end alignment with key stakeholders.  I am not trying to do their jobs.