CFO THOUGHT LEADER

In the late 1980s, when Gordon Stuart exited a 4-year stint as an auditor with Price Waterhouse, he bid accounting farewell—or at least he did until he stepped into a CFO role roughly a dozen years later.

Ever since, he has occupied multiple CFO roles, helping to remove any doubt about his finance and accounting orientation.

Still, Stuart’s appetite for broader business experiences during the early part of his career set him apart from many of his finance leader peers. During the 1990s, as a senior engagement manager for strategy consulting firm McKinsey & Company, he found job satisfaction across a variety of industries.

Asked what originally led him to join McKinsey rather than take on a more traditional corporate finance role, Stuart says that “the opportunity that I saw would allow somebody who’s naturally curious about business to build a better set of capabilities, frameworks, experiences, and connections to further their career.”

Looking back, Stuart says that his biggest take-away from his 6 years with McKinsey involved the approach that McKinsey uses while serving clients.

“It taught me an awful lot about how to work with teams and rapidly assimilate and understand businesses and business models, as well as how to communicate with others. In fact, I think that this was probably one of the key learnings,” says Stuart, who would leave the strategy house in 1998 to become director of strategy for Dell Europe, where he would ultimately set up and lead the technology company’s Web hosting business for Europe.

“Our timing was unfortunate because the dotcom collapse of 2000 kind of reset priorities within Dell, and that’s when my CFO career began,” explains Stuart, who left Dell after the CEO of a UK software company (and former McKinsey colleague) convinced him to accept the software firm’s finance leadership role.

“I never set out with an ambition to be a CFO, but as time passed, I kind of realized that if you pick the right business and it lines up with your interests, CFOs influence a lot of what happens in a business. And having an impact is very satisfying,” he explains. –Jack Sweeney

When John Bonney joined San Francisco–based Harness a little more than a year ago, he became not only the company’s first CFO but also its first finance hire.

“For me, this was the first time that I came into a role with a blank slate—it was at Ground Zero,” explains Bonney, who says that the software start-up specializing in the automation of software applications delivery had theretofore been outsourcing its finance, legal and IT functions.

Initially, he recalls, he was somewhat doubtful that he was good match for such an early-stage firm—and especially one with such meager internal operations.

However, he became intrigued by the challenge that Harness CEO Jyoti Bansal put before him.

Looking back, Bonney says that he knew that “we could become really big, and here was a chance to set the foundation right.”

Within 5 months, Bonney relates, he had fielded a team of roughly eight people, including a controller, an FP&A leader, and department heads for legal and IT.

“Generally, when companies are really small, it doesn’t always make financial sense to have people in-house, but as you grow to 100 people and beyond, what you quickly begin to experience are bottlenecks impacting responsiveness to IT needs or legal bills that are beginning to balloon,” explains Bonney, who adds that positions outside the finance realm were filled first, with the FP&A hire a more recent addition to the team.

Says Bonney: “When a company has raised capital and the question becomes ‘Where do you put that capital?,’ the CFO and FP&A team have to impact this and monitor it.”

Meanwhile, as Harness scales, the company has prioritized the use of new applications and technologies to perform work traditionally completed by back office hires. For example, Bonney says, Harness did not hesitate to adopt applications vendor Airbase of San Francisco to manage its companywide credit card spending and expense management.

Asked to reflect on his first year as CFO of Harness and his Ground Zero “to do” list. Bonney quips: “12 months gone by in a blink of an eye.” –Jack Sweeney

Mair: It was  probably in the first week of March, we had to close our Seattle office and have people work remotely. And it was about the second week in March that we did the same for our Portland office. We have the good fortune of having had a lot of experience working remotely as an agency. A lot of people have flexible schedules, a lot of the work we do is digital. But (COVID) is impacting us. It's still unclear as to what the second quarter's revenue is going to look like, but we're projecting it it'll be down probably by 25% at least. We know from a couple of large events that our clients we're sponsoring have been canceled, so that has a direct impact on some of the projects we were doing. But we also see there are some opportunities for us to use our services, to help in this sort of environment and get the messaging out in paid and social media, in ways that don't require a physical conference or event.

So it's going to be interesting. We were... I got to say this in the nicest way, we strive to not have to close the business or seriously cut back staff. We had a relatively small riff of about 5% of the population last month and we imposed a salary reduction, sort of a tiered salary deduction, depending on how much your annual salary was, to avoid a more broad riff, if you will. And we have recently applied for relief through one of the Cares Act programs, the payroll protection program to be specific. But it's going to be largely based on how much revenue we continue to generate while we're in this sort of remote environment.

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Years from now, when Hilla Sferruzza recalls her initial actions to buffer the impact of COVID-19 on home builder Meritage Homes Corp. (NYSE: MTH) of Scottsdale, Arizona, she will likely not forget the seemingly endless calls that she placed to land sellers across the country.

“It’s not like I’m calling a manufacturer and telling them to bring less raw material to my factory. I’m calling land sellers in every one of our markets to start the renegotiation process,” says Sferruzza, who, as finance chief for the seventh-largest public home builder in the U.S., is no doubt accustomed to having her calls returned.

“They’re reading the same newspapers that we are and they know what’s going on, so they’re fairly understanding,” observes Sferruzza, who has been using her phone time to push back on seller payment terms and defer or delay home building projects in nine different states.

Meanwhile, Karri Callahan, CFO of RE/MAX Holdings (NYSE: RMAX), the global franchisor of real estate brokerages, has been formulating her own mode of outreach to RE/MAX’s franchisees, who understandably have been signaling some pushback of their own.

Factors such as social distancing and governmental stay-at-home orders are slowing the amount of home buying and forcing real estate brokers to tighten their belts. Suddenly, the franchise fees that real estate brokers pay to RE/MAX and other franchisors are looming large on broker P&Ls, leading franchisors to take action and pull back fees.

“Our franchisees can now defer their fees and pay them back later in the year as real estate transactions occur, or they can pay now, but at a reduced rate of 50% of what they would have normally paid,” explains Callahan.

Still, it’s the variances of COVID-19’s impact from state to state that is summoning real estate CFOs like Sferruzza and Callahan to be more accessible and visible to their firm’s extended network of partners and stakeholders across different geographies.

“Clearly, some of the challenges have to do with how different governments—whether at the state, county, or city level—have classified real estate and whether it’s classified as ‘essential.’ But transactions are still occurring, albeit at a reduced velocity,” says Callahan, who credits the size and breadth of RE/MAX’s franchise network with helping to minimize the impact of those jurisdictions that have classified real estate transactions as being “nonessential.”

To better assess Meritage’s sales pipeline and extend her lines of sight deeper into the business, Sferruzza has been keeping a close eye on sales appointment numbers. “I’m also looking at cancellations because as important as it is for us to get sales, I need to make sure that the backlog’s not eroding at a magnitude that’s overcoming sales,” she notes.

Still, when it comes to protecting the health of the business, Meritage’s CFO makes it clear that her primary focus remains on cash flow and preserving whatever she can of it to help Meritage weather what lies ahead. Hence her recent outreach to land sellers.

“It’s a pretty long cycle, and there is a substantial cash outlay at the start of the life of a community versus at the tail end, which is really when it is cash flow positive,” reports Sferuzza, who estimates that the cash outlays for most of Meritage’s communities run two to three years before becoming cash flow positive.

“We have to buy the land, which is expensive, and we have to develop the land, which is expensive. We have to build the models and then we have to build the homes,” adds Sferruzza, whose top-of-mind cash flow priorities are not unlike those of other finance leaders whose businesses were pursuing steep growth trajectories. Meritage, for example, told industry analysts last November that they should expect the home builder to grow by 25 percent in 2020.

Meanwhile, more regular communication with the analyst and investor communities has swiftly become a priority for both Callahan and Sferruzza as they seek to tamp down fears across the board.

“In terms of the employees, I split my responsibility with the rest of management—my main focus remains on our investors, in terms of where I take primary ownership,” explains Callahan, who since mid-March has participated along with RE/MAX senior management in two companywide “town hall meetings” for all 500 RE/MAX employees.

Says Sferruzza: “I think that the real fear in the marketplace right now is one that I think we’ll be able to overcome, and it’s simply whether people will still feel confident about making a home purchase.”

As for Meritage’s balance sheet, Sferruzza explains that “it’s actually not as stressful a scenario for us as it might appear to be. We become extremely cash accretive during a downturn because we stop spending money on new land, and everything on our balance sheet converts to cash.”

Asked whether additional cash preservation techniques may be required, Sferruzza is quick to add: “If the shelter-in-place extends beyond May, June, July, different decisions will need to be made.”

- Jack Sweeney

When Amir Jafari looks back and reflects on his path to the CFO office, he includes two character traits that have arguably long distinguished finance leaders from other functional leaders. 

“We in finance have high levels of accountability and integrity, and these are the things that we’re able to then transpose in terms of what we do and how we are able to lead as CFOs,” explains Jafari, who says that it was his ability to “transpose” these traits during a recent career chapter at ServiceNow that allowed him to ultimately gain the leadership experience required to step into a CFO role at Reputation.com.  

“I landed at ServiceNow as their corporate controller, but the biggest twist in my entire life—and one that I think ultimately helped me to prepare for a CFO role—is that I had a chance to be the general manager of a business unit,” explains Jafari, who notes that his GM tour of duty was rooted in the creation of two applications that ultimately evolved into a business unit.

“Being able to lead a product management team, an engineering team, a design and go-to-market team is very different from my past assignments and has really helped to round out the core elements of what we do in traditional finance,” comments Jafari.

While there’s little doubt that Jafari’s ascent into leadership roles was aided by more than accountability and integrity, he credits his finance career track for helping to preserve and nourish these traits along the way, allowing him to more confidently assume leadership roles when opportunities arrived. –Jack Sweeney

At the age of 31, David Woodworth was offered CFO positions at two different firms. The first offer came from his then current employer, where as vice president of finance he was keenly aware of urgent challenges that the company’s next CFO would need to address. The second offer came unsolicited from a smaller company in the same field, where he could expect to ease into the role and set the pace for his first 100 days.

“It was a hard decision, and one where you wish there was a silver bullet,” says Woodworth, who opted to stay where he was, which was at a highly leveraged firm that had recently been taken private by a group of investors.

Woodworth’s early chapter flies in the face of the widely expressed conundrum that to become a CFO, you have to be a CFO. However, in Woodworth’s case, the price of entry to the CFO office was a cool head and an even keel—or at least being someone capable of working alongside a group of edgy investors.

“I had to embrace the role pretty quickly and operate in some unique environments,” he adds.

Thinking back on his first CFO tour of duty, Woodworth concludes by saying, “The advice that I would like to give to someone stepping into a CFO role would be about how to prioritize and how to say ‘no.’” – Jack Sweeney

Earlier this year, when the FDIC approved fintech start-up Varo Money’s application to become a national bank, Thibault Fulconis’s latest CFO career chapter suddenly appeared to make perfect sense.   

Still, it was only two years ago that Fulconis’s entry into the land of fintech start-ups no doubt raised a few eyebrows among his former colleagues at BancWest Corp., where he most recently served as vice chairman and COO.

“I was coming from a position where I had about 3,000 direct reports when I was COO to an entity where I had three people reporting to me,” says Fulconis, whose banking resume, rich with senior leadership roles, spans nearly 30 years with roots inside BancWest’s parent company, BNP Paribas. 

While certainly not the first banker to find a door-of-entry into the realm of fintech start-ups, Fulconis, in light of the FDIC’s recent approval, became the first CFO of a fintech start-up that is able to hold customer deposits—much the same as in the world he left behind.

Until recently, fintech firms have partnered with community banks to actually hold customers’ money, while start-ups like Varo have traditionally handled only the consumer interface and mobile app technology portion.

Who better than a seasoned banking leader to help architect a finance function capable of responding to the breadth of consumer activities on a national scale? “When I arrived at Varo, we were at version 76 of our financial model. Now, a year and a half later, we are at version 180,” says Fulconis, who routinely expresses his fondness for Varo’s nimbleness. –Jack Sweeney

Last February, following his arrival on a flight to Israel, Tomer Pinchas recalls receiving a startling text from the Israeli government. Having recently visited Italy, the text explained, passenger Pinchas must now agree to enter self-quarantine for a period two weeks. As CFO of Kryon—a Tel Aviv start-up specializing in Robotic Process Automation (RPA)—Pinchas, like most business travelers, was well aware of the recent spread of COVID-19. Still, the order to self-quarantine seemed aggressive to Pinchas, who at the time could not have imagined that in a few short weeks he would be sheltering in place with the rest of Israel.

“The actions taken by Israel were quite drastic and came pretty much a few weeks before the rest of the world, but what we learned during the process was that we can work anyplace—and sometimes we can be even more organized,” says Pinchas, who believes that a new business environment is beginning to come into view.

So far, the remote workforce is perhaps the new environment’s most pronounced characteristic. However, some of the more interpersonal attributes of doing business may be compromised.

“Due to the fact that we work with enterprise customers and many things that we use to install are on-premise, we would often meet the customer face-to-face, so this will be kind of challenging in the new environment)” explains Pinchas, who says that while face-to-face selling will likely be curtailed, Kryon’s RPA offerings will find new traction among companies seeking new tools to help automate repetitive tasks and help them to better engage and respond to customer demands.

Fortunately, the RPA start-up closed on its latest round of financing within weeks of Israel sheltering in place.

“I really believe that you need to raise money when you can and not necessarily when you need it,” remarks Pinchas, who believes that as long as a company has a strategy that it’s prepared to execute—and not just an appetite for cash—the timing of a capital raise should not matter.

Says Pinchas: “Don’t wait for the right time, because the majority of the time, there’s no such thing.” –Jack Sweeney

When John Theler stepped into the CFO office at SaaS developer Avetta last summer, among his list of priorities was the daunting task of better articulating supply chain hazards to management teams and industry at large.  

Nine months later, Theler has no doubt added a number of items to his list of finance leader priorities, but his articulation task has become far less daunting. Not surprisingly, it seems that his thoughtful comments on the perils of poorly managed supply chains have paled in comparison to the high-wattage exposure that COVID-19 has suddenly brought to supply chains—an illuminating spotlight that Avetta and other suppliers of supply chain risk management services are now eager to put to work.

“There clearly are some supply chain challenges and weaknesses that have already been uncovered through this crisis that we’re in right now, and one of the long-term effects of this is going to be a higher scrutiny of supply chains going forward,” explains Theler, who says that while many company boards have made supply chain risk management a bona fide component of their environmental sustainability and governance (ESG) efforts, COVID-19 is suddenly causing some firms to take a closer look at what’s under the ESG hood.  

“Our biggest competitors, frankly, are supply chains belonging to firms that just want to do it in their homegrown solution,” says Theler, who quickly mentions the advantages of using Avetta’s technology to address supply chain risk versus relying on typical in-house supply chain risk solutions.

There’s little doubt that COVID-19 and its impact on industry at large will play a defining role in the careers of many finance leaders. For Theler and other CFOs, the pandemic is a house filled with obstacles and innovation where for every door that closes there’s another that swings open. –Jack Sweeney

It was supposed to be the type of introduction that would help to break the ice between a new business leader and her direct reports. However, the words spoken by the managing director (MD) became frozen in time.

Or at least this was the case for Virpy Richter, who at the age of 27 had only recently relocated from Germany after having accepted a promotion to oversee the finances of her company’s Dutch operating unit.

“This is the German girl from our central unit. Be nice to her. She is just visiting us,” Richter recalls the MD saying, as her 25 direct reports curiously stared back at her.  

In retrospect, the MD might even be commended for having had language skills sufficient to so thoroughly and completely undermine a colleague in the space of a few short sentences, which was no small feat considering that he was able to reference Richter’s youth, gender, and nationality while at the same time even summoning doubts about the permanence of her position.

While these words remain frozen in time for Richter, the lesson that she would carry forth from this role involved more their aftermath.  

“This was my first leadership role, so my response was much more intuitive because at that age I had not taken any leadership seminars and didn’t have any past experiences on which to draw,” explains Richter, who says that her intuition told her to be a good listener.

“Listen to the people—listen to their expectations and let them help you to understand,” she explains.

Fast-forward a number of years, and Richter is once more crossing borders—this time into Russia, where she is working as a senior finance professional for myToys, a large German e-commerce retailer.

Says Richter: “I had three months to set up the Russian entity, recruit the people, and make the goods available because we wanted to be operating by Christmas.”

Today, Richter resides in Germany, where as CFO of Awin Global she applies her cross-border lessons to Awin’s quickly expanding operations. –Jack Sweeney