CFO THOUGHT LEADER

Steve and Jack discuss how pricing strategy has increasingly become top of mind for finance leaders as businesses become more responsive to customer behaviors, and Steve reflects on the virtues of time travel and how by asking finance leaders to reflect on their past experiences we enjoy a front row seat to view those experiences as they happen. Featuring commentary and FP&A insights from Planning Aces: CFO Mike Milotich of Marqeta, CFO Jeff Shepherd of Advance Auto Parts and CFO Mark George of Norfolk Southern.

Looking back at the early years of his finance career, David Bedell recalls being frustrated when a business unit leader remained leery about the merits of a potential deal. “I had done all of the analysis and was convinced that it would make a lot of money for the company, but I just couldn’t figure out how to convince him,” explains Bedell, who spent the balance of his early career years at software developer Intuit, where he advanced from running the gauntlet of FP&A projects to serving in multiple CFO business unit roles. “Finally, I bet my entire bonus for the year on it—I told the leader that if the deal failed, he could keep it, but if it was a win, I would appreciate my bonus being doubled,” explains Bedell, who notes that his confidence in his own analysis of the deal compelled him to break what he refers to as the “glass wall.” Says Bedell: “If we in finance limit ourselves to only making recommendations and choose to keep that wall between us, it’s just not personal enough.” For Bedell, his hefty investment in 13 Intuit career years appears to have been well spent, as the company achieved a number of strategic milestones, including the acquisition of Mint.com and the sale of Quicken. “I was just there at the right time with my hand raised, always being eager—and for people early in their career, it’s about being there at the right time,” comments Bedell.    As for the business leader whom Bedell once risked his bonus to win over, the end appears to have justified the means. “He just laughed at me and said, ’If you’re that confident, we’re going to do it,’” remarks Bedell, who adds that while his bonus bet may have been a bit “childish,” it got the job done. “Sometimes it’s not personal enough for finance,” he observes. “You have to push that emotion or excitement forward to the point where you’re part of the business and your soul is on the line—that’s what makes a great finance person.” –Jack Sweeney 

When Kabir Ahmed Shakir first arrived inside the CFO office at Tata Communications, the former Microsoft India CFO quickly determined that there was one person above all others who held sway over the company’s maturing transformation plans. “The person who is actually giving pricing to our customers needs to know how much cash we make on Year 1, Year 2, and Year 3,” explains Shakir, whose 2-year CFO tenure has spanned a period in which the company’s free cash flow has grown twentyfold.    “We had to bring our ‘cash thinking’ down to the deal profitability level,” reports Shakir, whose choice of words at first makes it sound as though his finance team had become tasked with running an errand. However, Shakir quickly clarifies the magnitude of what he was looking to achieve: “I wanted there to be an undying focus on cash. It’s not the most profitable companies that survive—it’s the liquid ones.” While this is certainly an organizational mind-set that many CFOs eventually reach, not that many do so within a span of time comparable to that of Shakir’s short ascent. For those who succeed in implementing the emphasis, as he appears to have done, leadership style is often the key contributing factor. Shakir, who spent 23 years climbing the finance career ladder at packaged goods giant Unilever, cites the scathing results of a 360-degree review that he once received as an aspiring future leader as the experience that most helped to shape his leadership skills: “It was the worst feedback of my life. Some of my friends even reported that I was a real pain to work with. They said, ‘When we come to you, you always have to show us how much smarter you are than all of the rest of us.’” In truth, a chastened Shakir tell us, he was indeed “nosy” by nature and would at times second-guess the work of others. Even faced with such cutting feedback, though, and as “extremely difficult” Shakir found it to change, nevertheless, change did come. “I have let go. And I now spend my time thinking, not doing, because that is what I’m paid to do,” observes Shakir, who says that Tata’s undying focus on cash took root with the help of many rather than just one. Adds Shakir: “When I first walked into Tata Communications, I told my team that I knew nothing of telecommunications. I said, ‘Help me learn.’” –Jack Sweeney

It was the type of assignment that Mike Milotich had been awaiting for most of his career. An innovative product team at American Express had just launched a promising new offering, and Milotich had been assigned to the group to help “optimize its day-to-day decision making”. “I arrived when it had been live for only maybe 4 to 6 weeks, and all of the traditional metrics indicated that it was a runaway success,” explains Milotich, who adds that the early consensus among team members and even the company at large was, “Wow! It looks like we may really have something here” As it turned out, the assignment provided Milotich with a singular perch from which to study the high-flying opportunity. “My job was to determine what was driving this success and what we were seeing with regard to the behaviors of customers that could be fueling this,” comments Milotich, who notes that such insight could have potentially uncorked a new secret sauce for the company as a whole.   However, there would be no recipe for significant new revenue.   Observes Milotich: “As we started to dig deeper, we began to understand that we had a problem.” The nagging question that began to haunt the product team was whether its new product was cannibalizing sales from existing customers.   “We set up a weekly meeting with the leader who ran the business, at which for an hour each week I would come in with analysis and say, 'Here’s what’s happening,'” recalls Milotich, who points out that at the time, the indications of cannibalization remained somewhat murky because behaviors of early adopters sometimes vary from those of broader customer segments.   As time moved forward, the leader and the greater team began to accept the idea that the product was flawed and changes were required. “Then the discussion shifted to ‘How do we maintain many of the new innovative attributes of the product but make certain that it’s both almost as attractive to the customer and at the same time not something that’s going to damage us financially?,’” reports Milotich, who in the weeks ahead would begin working closely with the team’s marketing and sales executives to help them to reposition the product to mitigate the risk of cannibalization. Says Milotich: “In something like a 6- to 9-month time period, we went from a kind of a euphoria to ‘Uh-oh!’ to then designing a solution that could hold on to the best parts of the product.” –Jack Sweeney

Last winter, when China ordered tens of millions of people back into a pandemic lockdown, executives inside the $170 billion automotive aftermarket parts industry took a deep breath. Jeff Shepherd, CFO of aftermarket giant Advance Auto Parts, says that the possibility of another China shutdown had just not been part of Advance’s procurement calculus. Still, parts “in stock” at Advance stores during 2022 have dropped only a few percentage points from their usual inventory level in the “mid-90th” percentile, according to Shepherd, who credits the anticipation of yet another China-related event as further evidence of Advance’s astute procurement practices.   “The last time China hosted the Olympics, they shut the power down and they shut the factories down. So, during the Games, you can’t get product out and it’s not being manufactured,” explains Shepherd, who notes that Advance’s procurement team anticipated a China shutdown in February due to the Beijing Olympic Games.  “We started doing a lot of buying late last year and very early this year,” comments Shepherd, who reports that not unlike those of its competitors, Advance’s 2021 supply chain troubleshooting efforts were related mostly to bottlenecks at U.S. ports and a confounding shortage of truck drivers.   “We’re not out of the woods now—I will tell you that it’s not perfect,” remarks Shepherd, regarding the existing supply chain challenges inside the U.S. However, if Advance’s “in stock” levels stay in line, the company may have a read on future developments in China. Says Shepherd: “I can’t take credit for knowing those things, but we were indeed able to get out in front of the China shutdown, and our ‘in stock’ percentages are now nearly back to their pre-pandemic levels.” –Jack Sweeney

It was nightly business conversations at his parents’ dinner table that first led Prashanth Mahendra-Rajah to consider alternatives to business when it came to building a career. “As most small business owners do, my parents worked all the time—and as with most small businesses, things could at times be financially challenging,” explains Mahendra-Rajah, who vividly recalls business rent increases, outstanding receivables, and the dynamics behind supply and demand that pervaded his parents’ dinner conversations. Nevertheless, it was this same scrutiny of supply-and-demand dynamics that Mahendra-Rajah credits with helping him to “come full circle” and ultimately led him to business school. At the time, Mahendra-Rajah was working full-time as a senior process engineer for chemical giant FMC Corp., a career-building stint that afforded him the real-world insights required to enrich a master’s thesis that he needed in order to complete a chemical engineering degree from Johns Hopkins. “It was my first job out of college, and the plant manager’s M.O. was to always beat me up and demand more cost reductions and better process yields,” recalls Mahendra-Rajah, who notes that his immersion into the business side of manufacturing quickly escalated when FMC received a large order for a synthetic that the company no longer manufactured. “I was given the task of refurbishing an old factory and getting it up and running in a matter of weeks,” remembers Mahendra-Rajah, who adds that the production of the once-discontinued synthetic led the plant manager’s mind-set to suddenly pivot. “He was pushing me to spend as fast as I could. I was told not to negotiate with suppliers, and if I needed overtime for the maintenance workers, to ‘go for it’—schedule was paramount, cost was secondary,” explains the career finance leader, who credits the experience with helping him to open a door that he had once shut. Says Mahendra-Rajah: “It kind of brought me back to the table with Mom and Dad and made me realize how so much of our world is really driven by supply and demand and how finance is the oil in the gears." –Jack Sweeney

A brief summary of this episode

Even after serving in multiple CFO roles and spending 10 years on Wall Street, Manish Sarin still marvels at the plus-size experience that he acquired in the mid-1990s when he worked for Price Waterhouse as a financial advisor in its Nairobi office in Kenya, East Africa. At the time, Sarin recalls, an abundance of available funding from the World Bank and IMF was enticing growing numbers of state-owned business in the region to privatize their operations as a prelude to jump-starting their capital market strategies. “These were businesses like steel mills, aluminum plants, car dealerships, and commercial banks—for me, it was just an amazing introduction to how businesses work, what makes them successful or not successful, and how to actually evaluate businesses from a capitalistic perspective,” explains Sarin, who reports that he was the most junior member of the East African privatization practice, a team of 10 people within PW’s 100-employee Nairobi office. Says Sarin: “Our clients were really the World Bank and IMF—we would go and work at state-owned businesses at their request and then prepare and present our analysis to both the World Bank and the national government.”     Twenty years later, as Sarin prepared to open his first CFO chapter, some of those presentations undoubtedly came to mind as he began to formulate his own vision for the role and the broader business contexts that Wall Street now expects 21st-century finance leaders to deliver. Along the way, Sarin tells us, he has learned that a broader perspective is being demanded not only by outside stakeholders. “A few years ago, a head of sales told me, ‘You have great ideas, Manish, but you need to provide greater context and better explain why you are doing the things that you are doing,’” remarks Sarin, who says that he took the advice to heart and has found that adding more context has accelerated his relationship-building with different parts of the organization. “If a CFO approaches the role from the perspective of occupying a finance swim lane, I think that this is a very narrow view of the role—it has to be much broader, and you have to be thinking, ‘the entire company and what is happening in every department are part of my concern,’” explains Sarin.  - Jack Sweeney

When Mark George first joined Otis Elevator’s accounting team back in the late 1980s, he found fixed asset accounting to be different from what he expected. Says George: ”We had to run around the company and put barcodes on any new piece of furniture that the company had purchased.” What’s more, George tells us, he roamed the corridors as a deputy in the accounts payable department, “punching A/P vouchers” and acquiring any necessary signatures. “I was always thinking, ‘How do I get away from doing this?,’” comments George, who notes that as a 20-something-year-old he sometimes felt like a “fish out of water” at Otis, which back then—as it is now—was part of the larger conglomerate patchwork that is United Technologies Corp. “I understood accounting to a certain degree, but I was definitely not an accountant,” recalls George. Less than enamored with the Otis accounting career ladder and potentially facing years of manual work, George began to speak up as he roamed the office and suggest changes to certain policies and processes that could eliminate the work that he personally disliked. He also began championing the adoption of new technologies that could automate manual tasks, despite the fact that such automation would more than likely put at risk his own position “with puncher in hand.” “If at some point if they fired me, I was young enough and naïve enough to think that I would just go and get another job, as if that would be just that easy,” explains George, who adds that over time, his suggestions found wider support—and as more tasks became automated, he found himself in greater demand, not less.      “I would solve a problem, and they would give me more problems to solve,” remembers George, who observes that he began to view his early years at Otis in a new light after returning to the United States from a stint as CFO of Otis’s South Asia operations. “I had moved around the company quite a bit by then, and I considered why I had already reached a certain level while others who had joined Otis at the same time had languished,” notes George, who credits his aversion to manual work with having opened the door to more opportunities in process improvement, beginning with a job in Otis’s treasury department and then leading to stints in financial planning and corporate development. “Eventually, due to some M&A work and my treasury background, I got some exposure to some international M&A roles overseas, and our regional headquarters then asked me to take a permanent role,” says George, whose stint as Otis’s South Asia’s finance chief became the first of several CFO tenures within UT—including a term as CFO of Otis itself. –Jack Sweeney

Looking back on her career as a corporate finance executive, Angela Pierce says that the call of leadership arrived at a moment of unvarnished frustration. Sixteen years ago, when the management of Level 3 Communications was expressing a keen interest in acquiring Pierce’s then-company, Broadwing Corporation, it was not the first time that Pierce found herself sitting across from Level 3 corporate development executives.    In fact, as Broadwing’s vice president of finance, Pierce had been involved in two earlier engagements when Level 3 executives had expressed similar sentiments—only to have nothing come out of the exercises in M&A due diligence. For Pierce, the third engagement necessitated a more direct approach—one that signaled to Level 3 that Broadwing management was confident that further negotiation was not necessary. “At some point, you have acquired the required competence from your past experiences, so I said to the executive, ‘Look, I don’t want to do this again, so here’s the deal,’” recalls Pierce, who adds that she shortly received a term sheet for a $1.4 billion deal that would be signed only a few days later. While Pierce says that she was just expressing a sentiment shared by Broadwing’s wider management, her grasp of the deal’s fundamentals and confidence in her own ability to deliver the message abruptly quelled any angst concerning her future leadership roles.    “At that moment,” she observes, “I realized that I wanted to be the one to make the call.” –Jack Sweeney