CFO THOUGHT LEADER

CFOTL: When we ask for a finance strategic moment what comes to mind?

Yenaropulos: Maybe we can look at one of my experiences when I was living in Chile and I was the CFO of a company whose main business was to provide services to trade and eliminate industrial and hazardous waste. The revenue recognition process began with the reception of the waste the bulk form. The next step was to identify the type of waste and then finally to define and apply the chemical process required in order to convert it into nonhazardous waste. All of these processes were very manual, which as a result had a huge impact on the finances and working capital. Imagine if a company was not able to invoice for services to the client until it had finished the identification of the waste and its subsequent treatment. Additionally, another problem was that the company was held responsible for any environmental damage that may have occurred from the hazardous waste that it had already received and that was waiting for its final treatment.

What we did was to create a team from the operations people, the commercial people, and the technology department of the company. We proposed and successfully implemented a plan that reduced the days of accounts receivable from over 200 days to just 90 days in only one year. This was achieved due to changes in the processes from the client’s side and from the operations side and by adding new software capabilities to the process. Of course, we don’t want to forget about the importance of training all of the employees involved in the process—that is very important to also highlight. So, finally, after a year of working with a new team, With a clear plan, and milestones well defined we were able to consistently track our progress by changing commercial and production processes, and achieve extremely positive financial impacts for the firm. By implementing a sizable reduction in days of accounts receivable, we’ve been able to generate an impressive positive cash flow for the company.

Among all of what is remarkable about Andreas Schulmeyer’s finance career, the timing with which he enters and exits different career chapters is most worthy of some added attention.

For instance, consider his timing at Pepsico, where in the late 1990s he arrived inside Pepsi’s corporate strategy group—the beverage behemoth’s performance-minded brain trust headed by none other than Pepsi up-and-comer Indra Nooyi. It’s just this type of timing that makes you doubt that Schulmeyer ever has had to cross-examine himself by deploying a few “If onlys … .”

To prove our point, we thought that we might speculate on what such a self-inquiry by Schulmeyer might sound like, so here goes:

“If only … I had been part of Nooyi’s group when it helped to hatch Pepsi’s historic acquisition of Quaker Oats.” But wait: I was part of that very group.

“Well, if only … I had agreed to join Pepsi China Beverages as CFO when Hong Kong’s sovereignty was transferred to the People’s Republic of China.” But wait: I was CFO of Pepsi China Beverages when Hong Kong was handed over to China.

“Well, then, if only … I had agreed to join Walmart’s e-commerce business as CFO, today I would be a seasoned C-level e-commerce executive with a wealth of experience.” But wait: I was CFO of Walmart’s e-commerce business.

Finally, one “if only” of our own. “If only we told you how truly remarkable Schulmeyer’s career has been.” But wait: We just did. – Jack Sweeney

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Ballbach:  We found something really interesting on the go-to-market side that I believe will have a major impact on our top-line growth, and it came through the analysis that the finance team conducted. We looked at our sales model and at the number of customers that we have around the country. We looked at the run rate and the renewals and the retention of these customers. In partnership with our new head of sales, we then did a deeper dive into what kind of time was spent by our sales force—that is, primarily our outside salesforce. We noticed that the sales enablement infrastructure was not set up so that our sales folks could go out and win big deals—win big deals that could make a step change difference in our business. Instead, they were spending a lot of their time on working with the existing customer base. So we are actively now reinventing our go-to-market by investing in tech enablement for our sales folks so that they are freed up to truly do what they do best, which is to sell and to go obtain new logos with more strategic and kind of longer-term sales cycles. The second thing that came out of this was a desire to invest in digital marketing. There's never been any testing of what kind of ROI we can get from investing marketing dollars in these new areas. Given the long list of customers that we have and the disparate array of long-sale customers that do relatively small deals, we suspect that we can invest in digital marketing that will that will return a very high ROI on the investment as opposed to what we get with the kind of legacy sales model.

CFOTL: Help us to understand what sets Sage and its offerings apart?

Iguchi: In eight years we’ve developed a company that’s at about nine and a half billion dollars in market cap. We are really well positioned from a cash perspective, and we’ve grown to over 650 people strong. Let me tell you a little bit about the history here. We are focused on developing innovative medicines for brain disorders. When we started the company eight years ago, there was a total innovation void. Companies had had many, many failures, and they were shedding their CNS pipelines. Everyone was saying that brain disorders were too tough to tackle, and we said that they were way too important not to. So we were going to take some risks, and we knew that we were going to have to shift the paradigm. That was what we focused on.

How do we learn from those mistakes? From the science side, I think that a couple of things that we did really differently was that we always followed the science. We didn’t go after an indication because it looked good or it felt good or it was a big market. We followed what the science and the molecules told us. That was one key feature. I think that the second key feature was that as we moved into development, we used a differentiated approach, a development strategy where we started with what I would call “methodology studies.” These were smaller studies that had very quick end points, and they were very clear, very unambiguous. What was great about this was that it not only gave us a look at activity very quickly so that we could determine whether to move forward but also enabled us to design the next trial. We could do that more efficiently, right? We know something from that earlier, smaller trial, so now let’s make whatever changes we need to design the next trial. So, we have used this approach over and over again at Sage, and I think that this has really been a core component of why we have such a vast pipeline.

I think that the key here is that what Sage is all about is seeing the brain differently so that we can make all the difference. I think that’s been the core of how we’ve been able to set ourselves up as leaders and differentiated in the field.

When Ben Luety first arrived inside the CFO office at the Seattle Indian Health Board, he would frequently rely on his smartphone’s roaming service to search the Web rather than depend on the organization’s Internet connection.

“The Internet for the entire organization had less bandwidth than I did,” explains Luety, who describes the IT infrastructure serving the organization’s 200 staff members as being minted in the pre-Internet days of the early 1990s. 

For Luety, it was apparent that the SIHB was the type of organization that cloud technologies often serve best by allowing them to leapfrog certain technologies and approaches that haven’t passed the test of time. What’s more, Luety was in lockstep with his CEO, Esther Lucero, whose vision for the organization could be realized only through greater transparency and visibility into its numbers.

“We needed a system that would allow us to quickly and easily produce reports, and it all came down to our ability to manage data and produce a workflow that allows everyone to make certain that the data is getting into the right bucket and that we’re reporting out to the organization—so that people across the organization can make data-driven decisions,” he explains. –Jack Sweeney jb

When Judy Bjornaas first arrived at ManTech International eight years ago, the company relied on a variety of processes and policies that were widely accepted across its various parts—not because they were efficient or cost-effective, but because they were widely accepted.

Not unlike many companies that have enjoyed a steady diet of success, ManTech had, over its decades (the firm celebrated 50 years in 2018), adopted the old mantra “If it ain’t broke, don’t fix it” as part of its list of cultural dictums. However, shortly after her arrival, Bjornaas began advancing her own watchwords: “Always question everything—and don’t assume that we have to do something the same way that we’ve done it in the past.” 

This new mantra was no doubt a neck-snapper for executives who found comfort in the status quo, and it simultaneously solidified Bjornaas’s credentials as not just a finance leader but also a change agent.

“I realized that I could add a lot of value to the company by sort of pushing things along,” says Bjornaas, who characterized her blunt approach as being almost like that of an inquisitive five-year-old. “I’d ask, ‘But why do we do it this way?,’ and I’d receive an answer to which I would then reply ‘But why?’”  

There are finance leaders that boast of having always been entrepreneurs in their hearts, who can quickly serve up a story or two about a startup they at one time became involved with, and then there’s CFO Marty Meyer.

Of the ten startups where Meyer has served as CFO six of the companies achieved positive exits – an enviable number according to startup pundits. Interestingly, Meyer tell us that the label “operational CFO” is perhaps just as fitting as entrepreneurial CFO when one considers his frequent day-to-day activities as a finance leader.

Asked to reveal the types of decisions finance leaders often face in startups Meyer asks us to consider the choice between investing in an innovative new software function or investing in a customer onboarding process that could potentially cut implementation times in half.  “The implementation process is really the first interaction we are having with the customer – we want to start that relationship off with a lot of trust and success,” he explains.

Meyer launched his finance career after graduating from Babson College, an institution known for populating industry with entrepreneurial founders and more than a few operational CFOs. – Jack Sweeney

CFOTL: Tell us about Your top of mind Metrics? Meyer: I've sat down with the VPs on our professional services teams to help them think through defining financial metrics to use to run their part of the business. Creating a P&L for them is a little bit more difficult in the services space, in the SaaS world, because GAAP accounting basically spreads those revenues out over the life of the contract. So you have to kind of take a little bit of a non-GAAP approach to this. But figuring out the billable utilization of the staff hours applies to each of the projects that you're going to do and what you've completed. Figuring out some burden of costs per hour and looking at all of that against the implementation fees that you're charging and collecting and building out those custom P&Ls really empowers the services team leaders to understand their business. When's the right time to request to add additional resources to potentially ramp up in front of new customers? To request changes from the development teams to make implementation more efficient because it's taking too long to do these projects and we're actually losing money? Or to tighten up the scope of SOW as we do with customers and use more of a change-order process if the scope creeps? They need to make these changes here versus a lot of places not even thinking about those and really losing efficiency, money, and customers by not thinking about each unit as its own little business. We've really been able to empower these leaders to take control of their own element, to have something to measure against, and to really think through how they're scaling their business. So for me, those kinds of things--that ability to kind of transform the way that teams think about their success--that to me is the game-changer of what a good finance leader can bring to the table.

Marc Schegerin’s arrival inside the CFO office at ArQule is either a fortunate accident or a feat of singular career building precision. For there is little question that ArQule has entered a unique place in time along the arc of its existence and it’s this place in time that Schegerin has been seeking to reach for more than two decades.

It’s a place where opportunities are quickly realized or lost depending on management’s ability to correctly answer some daunting questions.

“We have to kind of tease out how much money may be required. When do we spend it? What is the end game where we can we have the biggest impact for the most patients?” says Schegerin, while exposing the coordinates of the intersection of medicine and finance.

Suddenly, Schegerin’s arduous career-building path makes perfect sense. ArQule is the destination where his breadth of experience (From Harvard to Goldman Sachs to Biogen) appears uniquely suited to answer those questions and perhaps many more. – Jack Sweeney

Up until about three years ago Kevin Lind would likely have been identified as yet another gifted private equity executive – capable of issuing business remedies from the tip of his tongue.

At least in the minds of his CFO peers, who are accustomed to listening to PE pundits routinely hand down such remedies for ailing businesses. For Lind the CFO office at Arena Pharmaceuticals is a game changer, where he no longer hands down remedies but serves as a finance leader – an individual tasked with summoning others forward and building trust across an organization even as he or she sometimes completes necessary layoffs.

“Good drugs can succeed in spite of bad management and bad management can fail despite good drugs,” explains Lind, who says the frequent mismatch led him to want to get “one step closer” to management decision making.  Lind would take that one step after receiving a call from Amit Munshi, CEO of Arena Pharmaceuticals.

At first, Lind was less than interested. Arena’s past struggles were not unknown to him – but Munshi encouraged Lind to take a close look at the company’s pipeline.  “From an investment point of view the pipeline was really interesting and there was a turnaround opportunity if we got the right management team together,” recalls Lind, who said knowing Arena was a turnaround – and not a standard CFO tour of duty – made it far more appealing.  – Jack Sweeney