Upside/Downside - Grow Your Profits and Cash Flow
Poor profits and cash flow got you down?
My name is Matt Cooley and value creation has always been central to my career, from start-ups to multi-billion-dollar product lines. As a finance executive at successful companies, I've noticed a thing or two about what creates versus destroys value. In this podcast, we explore value creation and share a few laughs on the way to higher profits and cash flow.
Check out my website at www.upsidedownsidepodcast.com where you can share your email for my FREE one-pager: "10 places to look for higher profits and cash flow right now!"
I wish you the best on your value creation journey!
Matt Cooley
Upside/Downside - Grow Your Profits and Cash Flow
Ep 32: Track This Indicator for Coming CFO Turnover
Upside/Downside is a podcast about value creation, and how the actions we take affect profits and cash flow. I'm your host, Matt Cooley.
Executive recruiter, coach, and company founder Samuel Dergel returns for a super informative update on the market for CFOs.
Why is the opportunity pipeline about to increase? What functional skills are most important? Are you ready for that Saturday call from the Board?
We cover a lot of ground, plus a corny joke. Time to make the uncomfortable comfortable with this episode of Upside/Downside!
Thank you for listening and please visit Upside/Downside podcast and enter your email for my FREE list: "10 places to look for higher profits and cash flow right now!".
I wish you the best on your value creation journey and if you find yourself stuck or in need of advice, please reach out via the contact form at Upside/Downside podcast today!
Matt
Welcome back, everyone. This is Matt Cooley, host of Upside Downside, where we explore value creation and how the actions we take affect profits and cash flow. And we add some sense of humor to the mix because I like to think anyway, most finance people are actually pretty funny. By day, I'm the head of finance for Ericsson's global network platform API business and a self-professed nerd for value creation and how it impacts companies and everyday people. Back for another visit to Upside Down side is coach, consultant, company founder, and executive recruiter, Samuel Dergel. Welcome, Samuel. Thank you, Matthew. It's great to be back. All right. It's wonderful having you back. Are finance people funny, Samuel? Sure. Okay. I guess that one-word response says it all. I've got a joke for you. How does Santa's accountant value his sleigh? How does
SPEAKER_00:Santa's
SPEAKER_01:accountant value his sleigh? Net present value, of course. Okay. All right. I tried. I tried. It's good. Listen, your previous appearances on Upside Downside have been some of our most popular episodes because it seems everyone wants to know what's going on in the market for CFOs. And I think try and make sense of that market as well. Right. You've watched the CFO role evolve over a long period of time and helped companies adapt to that evolution through your work. What's going on in the market for CFOs right now? And is there a message or signal in there about value creation?
SPEAKER_00:CFOs should always be adding value and creating value in the organizations they're with, because if they're not, they can't earn the salaries that they're asking for, which in many cases can be quite high. So value creation needs to be there, but what does value creation mean? I would say value is in the eye of the beholder. And CFOs understand what their stakeholders want to see from value creation, then they can move towards that. When CFOs fail, it's because they don't really understand what's needed from them or their competing interests in the creation of value.
SPEAKER_01:So is this coming up in conversations in the market now? How does this play out in the market right now?
SPEAKER_00:What's playing out in the market right now is the key driver for new CFOs roles is CEO roles. And over the last nine months, CEO roles, the number of change in CEO positions has been significant. We track it with our weekly CEO moves, and it's a lot. So it goes back to why are CEOs being replaced? Um, And the answer that I've been given for the last couple of years was, is your 2018 CEO is not your 2025 CEO. You know, how much has the business world changed in the last years? Significantly, the business world has changed. Your industry has changed. Your company has changed. Your customers have changed. Everything's changed. So if you're still the same CEO driving the business, have you pivoted? Because if you haven't, you'll be pivoted out. And so all those new CEOs, I will tell any CFO that asks, how long Do they have until they know that they're safe with a new CEO? If they're there 12 months after the CEO's there, I would think that they're safe. But the reality is, is within six months, they're gone. So there's a pent-up CFO change that's really coming down the pipe right now. And we're seeing that. So that's what's going on in the market right now.
SPEAKER_01:Wow, that's fascinating. have them. And that struck me as interesting, sitting here in 2023, how you could be lacking those skills. And I wonder from your perspective, and maybe this is related to the first question we just had here, is where CFOs are right now on a continuum of, I'll call it value preservation versus value creation. Like what's going on with data analytics skills in particular?
SPEAKER_00:So let's put data analytics aside. Value creation is really key. Data analytics is a subset of value creation. Now, Depending on the company, size of company, where they are in their market space and how much revenue they're at and whether they're public or not, I would say on one side, you have your large company CFOs who never open Excel. because they have a team to be able to do all of that. The CFO at that end of the spectrum is solely relationship-oriented. really very much focusing on relationships inside and outside the business. Sure, they're doing some analysis, but yes, they have to understand what's going on. But to go into the data analytics and figure it out themselves, I doubt it. The mid-sized CFO is certainly going to be way more hands-on. But data analytics for them would really be having access to the data and playing with it from time to time to try to understand things by themselves. But again, and I've said this for years since my book came out almost 10 years ago, Guide to CFO Success, A CFO can only be successful if they have a team that's strong enough to support them that allows them to add value to the organization they're with, and that's still the case. They need to understand data analytics, but should they be in the weeds with it?
SPEAKER_01:Maybe
SPEAKER_00:not.
SPEAKER_01:Right. That's a good point. It's where you are and what kind of CFO you are. But what other kinds of functional experiences are helping position the next generation of CFOs?
SPEAKER_00:You know, it's... public company CFOs, if they're larger, they're not really, you know, they would have a chief accounting officer or similar. So, you know, those CFOs would not necessarily have to come from the accounting side. There's, you know, there's a triangle. There's three sides of where CFOs can come from. Accounting side, the analytic, the, you know, FP&A side of the business, more operational, or the fundraising side. How many IR people or buy-side, sell-side analysts end up as CFOs? Quite a few. And why is that? Because the key to success of the business that that CFO is in is financing because that's where the time needs to be spent. The mechanics of the accounting or budgeting, those are mechanics and will be done by mechanics. CFOs are paid way too much to be mechanics. Okay.
SPEAKER_01:No, that all makes sense. And I think you're laying out almost a roadmap for listeners that are thinking about their careers and the types of skills that they need to build over time. Okay. What are some of the big differences, and you've hit on a few of them already, between public versus private company CFOs? And what are boards asking for in particular right now, as well as these CEOs?
SPEAKER_00:You know, boards are fickle. You know, we can use the word boards like... They're a monolith thinker, as in the one person. Most boards, if you remember the multi-headed monster on Sesame Street, they're kind of like that. Saying one thing, saying another thing. There are different interests at the board level. Look, What a board member wants most is increasing the value of the business because they have some tie-in to it. They want to make sure that the business is running well because they have that responsibility to the shareholders and to make sure there's nothing funny going on. That's what's driving them. And depending on how they got to the table, they have different interests related to that. But what does the board want? Board wants all those things. And the CFO... CEO is the driver of the business. CFO is the interpreter of what's actually going on in the business. And a trustworthy CFO or the board helps them sleep better at night.
SPEAKER_01:So we started this off talking about the pent-up changes in... CEO and CFO roles that's coming, and it's really being driven by the change with the CEO role. What are they looking for right now in a CFO, given that context? Thinking like, hey, I may not be around in a year or two. My CFO might have to step up and run this thing, for example. What's going on in their mind in terms of what kind of CFO they want right now?
SPEAKER_00:I'm going to switch that around a little bit. Please. In conversations that I've had with CFOs who are open and candid and saying, well, you know, I don't know how much longer my CEO is going to be around because of word conversations, because of reading the tea leaves. The CFOs that I coach, I asked them, I said, do you want to become CEO? They go, well, maybe. I said, well, do you have... your plan. What do you mean? Do you have the plan if they call you on a Saturday and say the CEO's gone and they want you to be CEO? Do you have a plan? Do you have your deck that says, this is my vision, this is my plan, this is how we're going to get there, and boom, boom, boom. Because if you want it, you know the business. It's not like somebody's coming in from the outside and has to figure it out. Nobody knows the business more intimately than the CFO, even the CEO. They're very intimately know the business. So what would you do? And if you want to be CEO, you need to have that hidden on your personal file. This is what I'm going to do. If I'm in charge, this is what I'm going to do. And the board's going to go, well, why didn't you tell us earlier? Because I couldn't tell you earlier. But if you're asked a question, you have to be ready to answer it, not think about it. You have to be able to say yes, I want it, and this is what I'm going to do. I'm going to say, no, thank you. Don't say, hmm, I don't know. Let me think about it. You're not going to last very long in that company if you say that.
SPEAKER_01:I love it. I can just see all folks starting to prepare their pitches now. If you haven't already, actually. That's great.
SPEAKER_00:Some do, but they have it in their head. Take a weekend and just put it in. I think you'll... I think you'll find that it would be really helpful if you get the call, especially if you have that spidey sense that says, hey,
SPEAKER_01:I wouldn't be surprised if. Something's going to change. Yeah, that's great. Wow. It's great advice. Okay. Switching gears a little bit and back sort of to the more functional here. So much conversation going on right now about artificial intelligence, particularly generative AI. I imagine this conversation is just part and parcel to lots of conversations with CFOs right now. How is AI going to alter the value prop for finance over the next few years, particularly generative AI. Are you seeing finance as a leader in this area? And I certainly have my opinions, but I want to hear yours. And why do you feel that way?
SPEAKER_00:Am I seeing them as leaders? Not necessarily. Should they be leaders? Can they be leaders? I'll go across the board. If you're a business leader in your business and you're not playing with AI to see how you can get the best out of it and understand it and know what it means and how it can improve your processes, how it can improve your cost structure, how it can improve your deliverables. I mean, if you just think about what generative AI can do at all the points of the finance function. I mean, for the last years, we've heard about RPA, robotic process automation, and so on. This is just the next level. In theory, you should be able to do more with less, or at least do better with the same. So that's the finance function part of it. But also it's, you know, everybody looks to CFO to say, okay, how are we going to be more productive? CFO has to be a leader within the organization that says, you know, what's your AI plan? And how's that going to help your business? And how's that going to help us, you know, not have to increase our budget and allow us to improve our margins? What are you going to do about it? You and you and you and you and you and you and you.
UNKNOWN:Thank you.
SPEAKER_01:Right, right. Yeah, I think given there are so many new emerging tools and conversations and all of that stuff, I think it behooves CFOs to really understand what problems they want to solve. And whether or not these tools can do it right now or not, that's sort of different. But what's your stack rank list of problems that you need to solve? And how could AI, particularly janitor of AI, sort of slide into doing that over the next few years is something we all have to be doing. All
SPEAKER_00:right. Where CFO has a strong relationship with the CIO, they can accomplish a lot. You know, finance would be back to pen and paper and those old ledger books if it wasn't for IT. And so it really is the ability to be able to say, okay, well, we have this fantastic system that we're working with, whether it's SAP or Oracle, whatever the case may be. Well, what can we do to be more productive? What can we do to cut our time to close? What can we do to, you know, all that time we're putting together the proxy statement to go, why, you know, how can AI help us? I mean, just think about notes to financial statements. I mean, please. There's so much that can be done. And I'm not in the role myself, right? So, but, you know, you got to be able to tinker a little bit. And if your CIO is a little bit of a tinkerer and likes to try new things, and, you know, and your ERP provider as well, I mean, they're really looking at this. Have you talked to them about what they're trying to do with it and how it can make a difference to you?
SPEAKER_01:Yeah, exactly. I was just sitting here thinking, chat GPT, write my annual report. That would be great. Yeah. All right. Well, listen, Samuel, I'm very grateful that you took the time today to share your insights with us here on Upside Downside. This is a great update.
SPEAKER_00:Always a pleasure, Matthew. How many times have we done this so far?
SPEAKER_01:This is our third time, sir.
SPEAKER_00:Okay. Well, it feels like a lot longer. I think that's a good thing. Look, I appreciate everything you've tried to do with Upside Downside. Thank you very much for the opportunity to speak my mind on a few things. And if you had me going for another 20, 30 minutes, I probably could fill up that space very easily.
SPEAKER_01:I don't doubt it. And it would all be fascinating. So I appreciate that. To our listeners, thank you for joining. And I want to mention, as some of you know already, I occasionally accept short consulting assignments and donate the revenues to charities. So if that's of interest, see the link in the episode notes for more information. And remember, there's a ton of value out there waiting to be created. So fire up those spreadsheets and we'll see you soon. Have a great day.
