I wrote a post the other day about innovating employee benefits practices, and I realized I’d never documented a couple other ways in which we have always tried to innovate People practices. Here’s one of them: the Open Expense Policy, which I wrote about in the second edition of Startup CEO in a new chapter on Authentic Leadership when talking about the problem of the “Say-Do” gap.  Here’s what I wrote:

I’ll give you an example that just drove me nuts early in my career here, though there are others in the book.  I worked for a company that had an expense policy – one of those old school policies that included things like “you can spend up to $10 on a taxi home if you work past 8 pm unless it’s summer when it’s still light out at 8 pm” (or something like that).  Anyway, the policy stipulated a max an employee could spend on a hotel for a business trip, but the CEO  (who was an employee) didn’t follow that policy 100% of the time.  When called out on it, did the CEO apologize and say they would follow the policy just like everyone else? No, the CEO changed the policy in the employee handbook so that it read “blah blah blah, other than the CEO, President, or CFO, who may spend a higher dollar amount at his discretion.”

When we started Return Path, we had a similar policy. It was standard issue. But then over time as our culture became stronger and our People First philosophy and approach became something we evangelized more, we realized that traditional expense was at odds with our deeply held value of trusting employees to make good decisions and giving them the freedom and flexibility they needed to do their best work.

So we blew up the traditional policy and replaced it with a very simple one — “use your best judgment on expenses and try to spend the company’s money like it’s your own.” That policy is still in place today for our team at Bolster. We do have people sign off on expense requests that come in through the Expensify system, mostly because we have to, but unless there is something extremely profligate, no one really says a word.

Similar to what happened when we switched to an Open Vacation policy, we had some concerns from managers about employees abusing the new un-policy, so we had to assure them we’d have their back. But do you know what happened when we implemented the new policy? We got a bunch of emails from team members thanking us for trusting them with the company’s money. And the average amount of expenses per employees went down. That’s right, down. Trusting people to exercise good judgment and spend the company’s money as if it was their own drove people to think critically about expenses as opposed to “spend to the limit.”

I don’t think in 15+ years of operating with an Open Expense policy that any of us have had to call out an employee’s expenses as being too high more than once or twice. That’s what the essence of employee trust is about. Manage exceptions on the back end, don’t attempt to control or micromanage behavior on the front end.

Sometimes the work we do as CEOs, leaders, management teams is glamorous, and sometimes it’s not. But it all matters. One thing we tried to do at Bolster this past year is to really amp up employee benefits. The war for talent is real. The Great Resignation is real. Sometimes startups like ours have natural advantages in terms of attracting and retaining talent such as being made up of letting people in on the ground floor of something, having small teams so individual impact is easy to see, being mission-driven and full of creativity and purpose, and having equity to give that could be very valuable over time. But sometimes startups like ours have natural disadvantages around recruiting like having less certain futures, being relatively unknown to potential employees, being unable to pay huge salaries in the face of the Googles and Facebooks of the world, and having limited career path options since the teams are so small.

My co-founders and I have always been big believers in innovating People Practices. We did an enormous amount of work around this at our prior company, Return Path, which has been pretty well documented and we feel was very successful. Things like our People First philosophy of investing in our team, an extraordinary amount of transparency in the way we ran the company, a sabbatical policy, an open vacation policy, a peer recognition system, 360 reviews (I’ve written about this a lot, but I don’t have a great single post on it – this one is good enough and has some links to others), and an open expense policy.

Most of those things, when we started doing them 20 years ago, were revolutionary. We had our own version of the then-infamous Netflix deck even before we saw the Netflix deck. But today, many of those people practices are more common, not quite table stakes, but not exactly unique either. So this year when we set out to do our annual retrospective and planning process, we decided to try to innovate on a fairly standard topic for people, employee benefits. Although there’s not a lot of room for innovation on this topic, we are doing a few things that new and existing employees alike have told us are noteworthy, so I thought I would share them here.

We started by getting the basics right. We have a good solid health plan, dental plan, vision, transit benefits, etc. And we are paying 100% of the basic plan and allowing employees to pay more for a premium plan. That’s not the innovative part.

Next, we decided to max out the HSA contribution. HSAs and FSAs are some of those things that people don’t really think about, or they think “oh that’s great, employees can set aside health care expenses pre-tax.” But employer contribution to them matters, especially because the plans are portable. So we are giving people whatever the legal limit is towards their HSA, something in the neighborhood of $7k/year for a family plan or $3k for an individual plan. This is real money in people’s pockets, and it takes away from fears and concerns about health and wellness.

Next, we decided to begin addressing two things we felt were always weird quirks or inequities in benefit plans. One is the fact that employees who DO take advantage of your benefits program essentially get a huge additional amount of compensation than employees who DON’T because they are on their spouse’s plan. So we decided to give all employees who DON’T use our benefits program a monthly stipend. The amount doesn’t quite equal what we would be paying for their health insurance (which varies widely for employees based on single vs. family plans), but it’s a material number. So those people who aren’t on our plan still receive a healthcare proxy benefit from us.

Another (and the final thing I’ll talk about today) was instituting a 401k match, but doing so with a dollar cap instead of a percentage cap. Percentage caps FEEL fair, but they’re not fair since the company ends up paying more money towards the retirement plan of the people who earn the most money and who presumably need that benefit the least. The IRS tries to help do this leveling with their nondiscrimination testing, but that doesn’t come close to achieving the same outcome because it’s about employee contributions, not employer matches. By instituting a dollar cap, we are making the statement that we value all employees’ retirements equally. Incidentally, this simple change is proving to be very difficult to implement since our systems and benefits providers aren’t set up to do it, but we will persevere and find workarounds and get it right.

Investing in our people is critical to who we are as a business, and if you take your business seriously, it should be in your playbook as well. Benefits sound like a dumb area in which to innovate since they’re very common across all companies other than the percentage of the premium covered…but there’s still room for creativity even in that field.

Post 4 of 4 in the series of Scaling CPO’s- the other posts are, When to Hire your First Chief Privacy Officer, What does Great Look like in a Chief Privacy Officer and Signs your Chief Privacy Officer isn’t Scaling.

There are a few high-quality ways I’ve typically spent the most time or gotten the most value out of Chief Privacy Officers over the years. Part of it may have to do with the business we were in at Return Path (and now, Bolster), but part of it is understanding what the Chief Privacy Officer needs from the business and working with them in that arena.

For example, I found it helpful to work with the Chief Privacy Officer to help them to deeply understand our business.  Part of what I think we got right in this regard at Return Path was that we almost always made this a fractional role that was combined with other responsibilities — Tom Bartel, Dennis Dayman, and Margot Romary almost always did other senior jobs in operations or product as well.  This is what most likely enabled us to play more offense with the function rather than play defense. Even with an operation or product background, the Chief Privacy Officer is typically focused on external threats and issues and I have found that working with them on business issues not only raises their knowledge, but helps them understand potential security risks.

Another thing I did was to role model training and compliance.  If you mention of the word “compliance” to just about anybody in the organization, you’ll see that it doesn’t usually get anyone’s juices flowing. But it’s important for the company to live up to its obligations with customers and with its own internal policies and we found that if we involved a certain amount of employee training every year around compliance, we were able to build skills and stay on top of changing dynamics.  I always try to be the “first done” on an online training course and make sure to follow related policies so that our Chief Privacy Officer has air cover…and so that I can ask others to do the same with a clear conscience.

During a crisis.  I may interact with Privacy infrequently, but oftentimes when I do, it’s because something has gone wrong, or we’re worried about something going wrong.  That’s ok!  As long as you can be there to support your Chief Privacy Officer on an emergency response basis and practice some level of servant leadership in a crisis (“how can I help here…who do you need me to call?”), you’re doing your best work in this department.

It’s important to have a regular cadence and a strong relationship with the Chief Privacy Officer because when a crisis hits you don’t want to miss any steps. While most of the time things run smoothly in the Privacy domain, the few times when things spin out of control those are the exact moments when you need to hit the ground running, trust your Chief Privacy Officer, and help get everything sorted out.

(You can find this post on the Bolster Blog here)

(Post 1 of 4 in the series on Scaling CROs)

In most startups, the founder is the first salesperson and while it may be difficult to let that go you’ll eventually scale, add sales reps, or maybe some form of a Sales Manager once there are more than a couple of reps.  In Startup CXO our Return Path CRO, Anita Absey, wrote about the journey of startup sales, from “selling on whiteboard” to “selling with PowerPoint” to “selling with PDF.” I encourage you to read that section if you’re wondering about hiring a CRO, but all of the hiring of sales reps and (possibly) a sales manager happens during what Anita calls the “White Board” stage as you’re beginning to transition to “Selling with PowerPoint.” 

Selling from a White Board means that you are essentially working with an interested potential customer on a custom and conceptual sale; selling from PowerPoint means that you are selling tailored solutions—you’re no longer at the discovery stage. Selling from either the White Board or Powerpoint stage is fine for an early-stage company, but eventually you’ll want to scale and hire your first CRO. Here are some of the telltale signs that will help you figure out if you should bring in a CRO.

First, you’ll know it’s time to hire a CRO when you’re nervous about HOW you’re going to make this quarter’s number — not just that WHETHER or not you’ll make it (since you should know that as much as anyone). Another sign that it’s time to hire a CRO is when you aren’t clear what the levers are, or what the pipeline/forecast details are, to hit those quarterly numbers. 

If you are spending too much of your own time managing individual deals and pricing, or teaching individual reps how to get jobs done, that’s a clear indicator that a CRO is needed. If your board asks you if you’re ready to step on the gas and scale your revenue engine (e.g., move from Powerpoint to PDF), and you don’t have a great answer and aren’t sure how to get to one then you need to hire a CRO.

A fractional CRO can add a lot of value, especially at a small volume where a full-time CRO would be overkill. Or, if your sale is very complex or to a very senior buyer, and a more junior sales team needs a fair amount of deal support from above, a fractional CRO makes a lot of sense. Sometimes a fractional CRO can help you enter a new adjacent segment (e.g., mid-market going to enterprise), and then you’ll need a seasoned professional to help translate sales processes from one segment to the other while keeping the initial segment running smoothly. 

If you’re not sure what kind of sales leader you’ll need long-term and full time because you’re not at enough scale yet, a fractional CRO can help you “try before you buy.” You can try out a specific type of revenue leader to see if that type works, for example, sales only, sales + customer success, manager of hunters, or builder of a high velocity sales engine, to name a few different options.

Hiring a CRO will definitely free up time for founders and allow them to work on other things that drive the business, without worrying about sales.

(You can find this post on the Bolster blog here)

This is the second post in the series…. the first one When to hire your first Chief People Officer is here).

While all CXOs are important to a company, the Chief People Officer is the one role you don’t want to get wrong because People Ops impacts every facet of a company. If you hire the wrong people—even one wrong person—you’ll regret it, and so will everyone else in your company. If you short-change the onboarding process you’ll create tons of work for others in the company to answer questions, teach people the systems, and help them get up to speed quickly—not to mention the frustration of the new hire. And of course, if you or your employees do anything illegal, discriminatory, or harassing, you’ll end up in legal trouble and you’ll lose—big time. So, it’s not enough, if you’re expanding rapidly, to “just get a Chief People Officer,” you need to hire a great Chief People Officer and I have found that great Chief People Officers do three things particularly well:

The most important characteristic or attribute of a great Chief People Officer is that they believe their function is strategic. In Startup CXO Chief People Officer Cathy Hawtrey wrote about the ways in which HR/People can be a strategic function and not just a tactical corporate function.  It’s true of most functions, but for whatever reason, (likely past experience), HR leaders frequently don’t view themselves or their functions as strategic, which is not only a huge missed opportunity but maybe says something more important about the confidence level of the Chief People Officer.  If that’s their frame of reference, then they will likely be tactical managers, they’ll keep the trains running on time, but you won’t be able to anticipate the changing talent landscape, much less be strategic about it.  If they believe they can move the needle on the business by improving engagement and productivity and efficiency, if they believe they can make the executive team more effective by helping you with team facilitation and coaching…they can do anything.

A second important characteristic of the Chief People Officer is courage—they have the courage to call you (you, the CEO) out on things directly and firmly when they see you doing or saying anything that is a bit off. It could be around language, inclusion, values, authenticity, or anything else, but they don’t let it slide or ignore it. The CPO, along with you, are the principal stewards of the company’s values and culture.  Even the best CEOs benefit from having a watchdog from time to time.

A third critical trait of a great Chief People Officer is that they think about investment in People in terms of ROI.  It’s one thing to run a killer recruiting function and fill seats efficiently, with high quality, as asked.  It’s an entirely different thing to start the recruiting process by asking if the role is needed, at that level and compensation band, or whether there are other people, fractional people, contractors, or shifts in lower value activities that could be put to work instead.  Only heads of People with deep understandings of the business can transform the function from a gatekeeper/”no” role into a business accelerator.

A great Chief People Officer is all of these things—strategic, courageous, and financially astute. Above all, great Chief people Officers know that they are the role model within a company and that their behavior, their language, their inclusiveness is setting the tone and providing a template for others to follow. 

(You can find this post on the Bolster Blog here)

I haven’t taken a poll to figure out the overlap between people who read this blog and people that bought the first edition of Startup CEO, but I’m guessing there’s a high degree of it. If you are familiar with the book, I don’t want to bore you with a recap of what I wrote, but I thought I would devote the next several blogs to new ideas in the second edition. First, the new cover art from the publisher is kind of cool:

The first question you might have is, “Why a second edition? Didn’t you say everything you needed to say the first time?” The answer to that is, yes, I did say everything I had to say at the time, and the first edition is pretty comprehensive as a field guide. But that was about a dozen years into what turned out to be a 20-year journey, and after we sold Return Path in 2019, I had time to reflect on all that happened. I learned a lot of new lessons between the first and second editions, we had a lot of first-time experiences, we scaled the company significantly, and we sold it. None of those things are, in and of themselves, worthy of a second edition, but collectively they help tell the story of startup to exit and tell it from a perspective of creating a sustainable business over nearly two decades. 

But there are other reasons, too, besides new lessons learned. Eight years is a lifetime in terms of changes to micro-trends, language, business in general, and the world around us. I wanted to update the book to make it contemporary so that it can speak to a new generation of CEOs. The second edition is more than a new cover and obvious updates on the number of employees or revenues. I added topics that reflect heightened responsibilities of CEOs around moral and ethical leadership in an increasingly transparent and socially conscious world. How do you navigate a politically charged and divisive society? For example, the State of Indiana passed a law intended to not force people to do things that contravened their religious beliefs but it had the side effect of legal descrimination against LGBT citizens. It was contentious, with rallying cries in business and society for one side or the other, and those same sentiments were found within our employee population. 

How should CEOs handle a situation that conflicts with their core values? There are no easy answers, but avoiding them doesn’t make the problem go away. 

Whether it’s the #metoo movement, high-profile failures of leadership like airline employees dragging customers off of planes, or something as simple as unconscious bias in the workplace, the best CEOs now need to approach their jobs differently. I didn’t write about that in the first edition, but the second edition has an entire chapter devoted to “Authentic Leadership” and provides guidelines and advice to help CEOs. The book went to press early in the COVID-19 pandemic and prior to all the protests around racial injustice surrounding the George Floyd killing, so nothing in it specifically addresses any of those issues.  In some ways, though, that may be better at the moment since the book is more about frameworks and principles than about specific responses to current events.

I also added a new section with several chapters on the ins and outs of selling a business. Startup exits are the important culmination of the startup experience and something that the first edition only briefly touched on. Obviously, I was still CEO of a growing company and although we had an opportunity or two to sell within those first years, we never pulled the trigger. The first edition talks about that process at a surface level, but the second edition has far more content and detail since we had completed a sale transaction. 

The first edition of the book has sold close to 40,000 copies as of the writing of the second edition, which blew me away when I tallied it all up. I’ve received many notes of thanks from readers all over the world for the book, and I’m glad that the content has proved useful to so many people, noting from some of the more critical reviews on Amazon that it certainly doesn’t scratch everyone’s itch. I hope the changes in the new edition add even more value to the lives of entrepreneurs and startup management teams. That’s really who the book is written for.

Here are some places to go to pre-order the book:

• Directly from the publisher, Wiley
• From Amazon
• From Books-a-Million
• From Indie Bound 
• From BN.com

I have a limited number of free copies of the book that I can send out, and oddly, they are only print copies since the book publishing ecosystem hasn’t figured out an efficient way for authors to distribute free Kindle copies of books yet.  As a bonus incentive for reading all the way to the end of this post, I will be happy to send a free copy to the first 5 people who comment on this post on the blog and ask for one.

(Post 4 of 4 in the series on Scaling CMOs – other posts are, When to Hire your First Chief Marketing Officer, What Does Great Look like in a Chief Marketing Officer and Signs your Chief Marketing Officer isn’t Scaling)

Similar to interactions with all CXOs, you’ll have to capitalize on your moments but there are a few ways I’ve typically spent the most time or gotten the most value out of CMOs over the years.

 One of the key ways to engage with the CMO is to include them in meetings with the rest of the go-to-market (GTM) executives as a group, not in a silo.  While of course I have always had 1:1 meetings with my CMO, I find that the most valuable conversations are the ones with the GTM group as a group, talking about shared objectives and the underlying drivers and coordination points to get there. You might say, “Well, Matt, that’s true of all the GTM executives,” but I disagree. It’s even more important to have the CMO in the same room as the other GTM roles like Sales, Account Management, and Partnerships because marketing needs to be on the leading edge of GTM, not just a function working in a silo at the direction of the other GTM leaders. A lot of what happens in the GTM meetings is nuanced and since Marketing has to somehow make everything tangible, the earlier they hear about it and can start thinking about it the better off the whole company is.

On the other end of the spectrum, I find it very useful to create a thinking session with the CMO, where we take time away from the day-to-day to do deep dives on strategic topics like the company’s positioning, voice, or brand.  Sometimes I like to do these in the context of reading a relevant marketing book or business journal article, or after reading something I ran across on the internet, or something I learned at a conference—something that piqued my interest. Sometimes I don’t have a perspective or an idea, but the thinking session is valuable either way.  I find that the most creative thinking and ideas happen in some of these longer form, unstructured conversations. These sessions are not limited to ideas, positioning, or branding because even the quantitative part of marketing involves a lot of creativity. So, the thinking session can be wide open in terms of agenda, but it needs to be scheduled and done, otherwise all these ideas just ramble around and we don’t make as much progress.

Finally, a lot of my engagement with the CMO is actually a continuation of a longer relationship, before they become the CMO.  Let me explain what I mean. For years, we went through CMOs at Return Path at the same clip as other companies: every 1-2 years we’d make a change and bring in the new flavor-of-the-month CMO and we had a pattern of hiring them from the outside.  Over time, though, we realized that we would be much better served by having more continuity in marketing by investing in our own people and promoting them from within.  The last few CMOs we had at Return Path were all promoted into the role — so I got to know them pretty extensively ahead of time. I was not only thrilled to give them a shot at the top job, but I was in a great place to understand their strengths and weaknesses coming into the role so I could most effectively mentor them.  Of course, you can say the same thing for the other functional departments, but marketing is more acute based on the average tenure of CMOs.

(You can find this post on the Bolster blog here).

Post 4 of 4 in the series of Scaling CMO’s- the other posts are, When to Hire your First Chief Customer Officer, What does Great Look like in a Chief Customer Officer and Signs your Chief Customer Officer isn’t Scaling.

You can engage with each person on the executive team one-on-one to understand what their issues and challenges are, but I’ve found that engaging with the CCO offsite with customers is far more productive and leads to a better understanding of the service organization than any other meeting time. I have typically spent the most time with or gotten the most value out of CCOs over the years doing the following.

In person at “Canary in the Coal Mine” customers. They don’t use canaries any more in coal mines, but the principle applies to companies: What are the early warning signs that you’ve got big problems looming? The earlier you discover those problems the better, and the CCO is usually the first person to figure out that something isn’t right with your product or service. I always find that the largest clients, the most demanding ones, the ones who push you around, the ones who are highly critical or you, are the ones who make your company a better company.  At Return Path, we had those types of clients over the years, from eBay, to DoubleClick, to Microsoft, to Groupon, to Facebook, to Bank of America—and that’s just the short list off the top of my mind.  The demanding customer is the one who breaks things and forces you to own up to your lack of scalability.  They also either take you to task or threaten to pull their business if you don’t clean up your act.  As painful as some of those meetings are, they are also ones I always wanted to attend in person with my CCO, both so I could eat whatever form of crow needed to be eaten as the Chief Crow Eater (which sends a very powerful message to the customer), and also because the CCO and I could experience the chirping of the canary in the coal mine and learn from the experience together.

While it’s important to engage with the CCO in the critical meetings with demanding customers, it’s also important to understand the base.  There’s an old saying from the hardware world that goes, “God was able to create the world in only 7 days because God didn’t have an installed base.”  The new world of Internet technologies, SaaS, and agile development is one where your installed base of customers is your biggest asset, not a millstone around your neck.  Some of the most meaningful experiences I had over the years with our CCOs was to be in market, spending time with all kinds of customers together in small groups and large, deeply understanding their needs and use of our product.

The CCO role is one that is easy to ignore or put on the back burner if things are going smoothly at your company, but as CEO I feel that it is best to stay close to the market and engaging with the CCO with demanding customers and with the base is a good way to understand your company and CCO better.

(You can find this post on the Bolster Blog here)

(Post 4 of 4 in the series on Scaling CBDO’s- other posts are, When to hire your first Chief Business Development Officer, What does Great look like in a Chief Business Development Officer and Signs your Chief Business Development Officer isn’t Scaling)

Other than the weekly executive meeting, your day as a CEO rarely has an entry of “meet the CBDO.” Because of the infrequency of deals it’s critical to engage with the CBDO with a regular cadence so that when something does come up you’re not getting to know each other again. Anyway, a few ways I’ve typically spent the most time or gotten the most value out of CBDOs over the years are:

One way to engage with the CBDO is to make ecosystem maps together. It’s important for you and the CBDO to understand exactly what ocean you’re swimming in, which other fish are swimming nearby, and which ones are sharks you need to watch out for. This understanding is what can make or break the CBDO role and it is vital that you, as CEO, engage with and help shape that understanding since you’ll have specialized knowledge of some of the other players, their CEOs, and their strategies. The ecosystem map is actually a fun thing to create and not only does it lead to better clarity about where you’re at and where you could go, it also aligns you and the CBDO on a deeper, strategic level.

While you can plan out the ecosystem mapping activity, a lot of the engagement I have with the CBDO is sporadic, unplanned, and spontaneous.  The deal world is intense and unpredictable.  When you’re working on a deal you may be talking to your CBDO 20 hours a day.  When it’s business as usual, you may go weeks without deep interaction. So unlike the other executives, the time you engage with your CBDO will be compressed into highly intense time frames.

A third way I engage with the CBDO is in-market and in-transit.  As with the CRO, I spend time extensively with the CBDO since we are likely going to the same place at the same time a few times a year.  Since the essence of the job as a CBDO is to be a trusted ambassador on all fronts, as Ken identified correctly in his section of Startup CXO, the CEO has to constantly be engaging the ambassador on the organization’s most current thinking, positioning, forward-looking strategy.  Over the life of Return Path (and currently at Bolster), there’s no question that I spent the majority of my “planes, trains, and automobiles work time” with Ken.

(You can find this post on the Bolster Blog here).

Blogiversary, Part VII

Today marks the seventh anniversary of OnlyOnce.  I haven’t marked the date with a post in three years, but here was my last such post (with links to prior posts in it).  In sum up until now, my reasons for blogging have been written up as:

• “Thinking” (writing short posts helps me crystallize my thinking)
• “Employees” (one of our senior people once called reading OnlyOnce “getting a peek inside Matt’s head)
• My book reviews help me crystallize my takeaways from books and serve as a bit of a personal reference library
• I like writing and don’t get to do it often

After seven years, though, I’m going to add another important point of value for me for writing OnlyOnce:  now, at 672 posts (including 27 that are scheduled but not yet posted – easy a record for me), this blog now serves as a repository for me of my own lessons learned, best practices, anecdotes, and aphorisms.  Thanks to Lijit, it’s easy for me and others to search.  Thanks to the new WordPress format and design by my friends at Slice of Lime, the categories and tagging make it much easier to navigate.

I probably get one question a week from a fellow CEO or prospective entrepreneur or employee that, instead of typing out an answer or setting up a meeting, I can actually just send a link as a starting point.  Sometimes there are follow-up questions, sometimes there aren’t.  But the blog is proving to be a very efficient form of documentation.

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).