It’s fairly rare in a startup or scaleup that you, as a CEO or CXO (Chief [fill in the function] Officer) of any kind, will have significant one-on-one time with other members of the executive suite; instead, you’re most likely to spend time with the team in executive meetings, at offsites, or during all-company events. So, when you do get that one-on-one time it’s important to make sure that it’s not only productive, but that it builds a stronger relationship between you and the other person.
As a CEO I learned that the best way to help people grow and develop, and to further develop a better understanding of each other, is to engage with them in a mix of work and non-work settings. By that I mean, working together on some aspect of their part of the business. Since each role and each person performing that role are different, there aren’t any hard and fast rules, but I thought I would create a series of posts that provide some ideas on things I’ve done to develop a better relationship, better team, and better company for each CXO in a company.
I also have a whole series of posts related to each function on the executive team — CFO, CMO, CTO, etc. So each post is part of two series. This is the inaugural for both, and it’s quite fitting as Q4 is, for most companies, budgeting and planning season. So today’s topic is How I engage with the CFO.
When I get the chance to spend time with my CFO I’ve found that we both get the most value working on several “problems” together. For example, we do Mental Math together where we look at key metrics and test them, improve them, or decide to scrap them. We are always attuned to key metrics and from time to time, we project them forward in our minds. What will happen to a key metric if our business scales 10-fold or if it declines 10-fold, for example.
We are constantly checking to see that our financial and operating results mesh with our mental math. When looking at our cash balance, we’ll look back at the last financial statement’s cash number and mentally work our way to the current statement: operating profits or losses, big swings in AR or AP, CapEx, and other “below the line” items. Do they add up? Can we explain what we’re seeing in plain English to other leaders or directors? The same thing applies to operating metrics — the size of our database, our headcount, our sales commission rate, and so on.
I’ve found that by working on the mental math that we actually come to understand the dynamics of the business far better than merely looking at the numbers or comparing the numbers. The mental math approach forces both you and the CFO to engage with the results, question them, and anticipate how slight changes can impact the company going forward. And once you get to that point, you have the ability to creatively think about how you want to go forward. Here’s a simple example from the early days of Return Path. One day, my long-time business partner and CFO Jack and I were doing mental math around how many clients each of our Customer Success team members was handling. We had an instinct that it wasn’t enough — and we did a quick “how many of those reps would we need if we were doing $100mm in revenue” check and blanched at the number we came up with. That led to a major series of investments in automation and support systems for our CS team.
Another way that the CFO and I work together is in a game called “spotting the number that seems off.” In any spreadsheet or financial analysis there is bound to be something that doesn’t seem quite right and for some uncanny reason, I am really good at finding the off number. I’m sure this has driven CFOs crazy over my career, but for whatever reason I have some kind of weird knack for looking at a wall of numbers and finding the one that’s wrong. It’s some combination of instincts about the business, math skills, and looking at numbers with fresh eyes. It’s not an indictment on the CFO’s results and it’s not a “gotcha” moment but it’s part of the partnership I have with my CFO that improves the quality of our work and quantitative reasoning. My hunch is that looking at something with fresh eyes, as opposed to being the person who produces the numbers in the first place, makes it easier to spot something that’s not quite right. Kind of like an editor working with you on an article or book—they always seem to pick up and point out something that you didn’t see even though you spent hours creating it and hours more reading and re-reading something.
A third way to work with the CFO is to create stories with numbers. The best CFOs are the ones who are also good communicators — but that only partly means they are good at public speaking. Being able to tell a story with numbers and visuals is an incredibly important skill that not all CFOs possess. Whether the communication piece is an email to leaders, a slide at an all-hands meeting, or a Board call, partnering with a CFO on identifying the top three points to be made and coming up with the relevant set of data to back the number up — and then making sure the visual display of that information is also easy to read and intellectually honest, can be the difference between helping others make good decisions or bad ones.
Of course, a CFO could create stories on their own but like much of storytelling (like screenwriters for movies, plays, or sitcoms, for example), the creative storytelling usually happens with a team. In presenting financial data to others so that it makes an impact, so that it motivates them to take an action or change a behavior, a team approach is best and the CEO-CFO team can be much more effective than either one of them alone.
You won’t have a lot of time to spend 1:1 with any given CXO on your team, including the CFO, but you can make the time you spend together work to your favor in developing a stronger relationship between you and the CFO, and help you build a stronger company that can scale quickly. Without a deep understanding and strong relationship with others on your leadership team, your decision-making, speed, and risk-taking can suffer. Make sure every minute you spend with the CFO is productive. That’s why working on things together like mental math, spotting the off number, and storytelling, can be powerful ways to help you build a better company.
(Also posted to the Bolster Blog).