CFO THOUGHT LEADER

As she approaches her 20th year with BSI Group, Sarah Murphy repeats the word “variety” when asked why she turned a blind eye to other opportunities outside the company known to many as an exemplar of business standards. “There was always something new to move on to,” says Murphy, who, having spent the past decade in the United States as CFO of BSI Americas, is about open yet another career chapter as she returns to the BSI’s headquarters in London. The “variety” that Murphy has long pursued has led her to open different career chapters in Hong Kong, London, and Paris. Prior to arriving in the U.S., she served as a global finance director as well as a finance director of BSI’s Asia Pacific region. Still, there’s little doubt that while BSI has offered Murphy a varied menu of opportunities from which to choose, it’s a passion for driving change across the BSI organization that has routinely opened the door to new opportunities and allowed Murphy to savor greater career satisfaction. “There’s always been a real commitment here and a drive for change,” explains Murphy, who says that finance got to play a central role in helping BSI Americas to “hit the reset button.” After years of flat sales, says Murphy, BSI Americas transformed itself by adopting a new go-to-market strategy and entering the consulting services arena. “Now the question has become ‘How do we maintain the growth?,’” adds Murphy, who doesn’t hesitate to mention BSI’s growing appetite for M&A. -Jack Sweeney

  When a company opts to recruit a finance leader from the “outside world,” it’s not uncommon these days for the future CFO to first serve in a provisional role—one that can provide a wide view of the business while allocating a little extra time for on-the-job learning. So it was for Constance Minc, a veteran investment banker who logged 12 months as head of business operations for IFS before entering the ERP vendor’s CFO office last May. According to Minc, her 12-month stint in operations was as much about building bridges as it was about learning. “I was able to build trust with our key business stakeholders and create a bridge between the business and finance that has enabled us to transform finance,” she explains, while also noting that she used her stint in operations to develop a three-year business plan that now serves as her road map as IFS CFO. “This helped me to understand how our customer strategy needed to evolve and allowed me to build the business model with the business,” says Minc, who also spent time evaluating “the inputs” being used by IFS to formulate its forecasts. “We wanted to make certain that the numbers were driven by very concrete and business-driven inputs,” she adds. Asked about her priorities as a finance leader going forward, Minc emphasized the importance of aligning the organization with a standard set of finance principles, optimizing business process efficiencies, and fostering trust with all business stakeholders.   When a company opts to recruit a finance leader from the “outside world,” it’s not uncommon these days for the future CFO to first serve in a provisional role—one that can provide a wide view of the business while allocating a little extra time for on-the-job learning. So it was for Constance Minc, a veteran investment banker who logged 12 months as head of business operations for IFS before entering the ERP vendor’s CFO office last May. According to Minc, her 12-month stint in operations was as much about building bridges as it was about learning. “I was able to build trust with our key business stakeholders and create a bridge between the business and finance that has enabled us to transform finance,” she explains, while also noting that she used her stint in operations to develop a three-year business plan that now serves as her road map as IFS CFO. “This helped me to understand how our customer strategy needed to evolve and allowed me to build the business model with the business,” says Minc, who also spent time evaluating “the inputs” being used by IFS to formulate its forecasts. “We wanted to make certain that the numbers were driven by very concrete and business-driven inputs,” she adds. Asked about her priorities as a finance leader going forward, Minc emphasized the importance of aligning the organization with a standard set of finance principles, optimizing business process efficiencies, and fostering trust with all business stakeholders. - Jack Sweeney

CFOTL: What comes to mind when we ask for a finance strategic moment? Friedman: MCI itself, during the ’90s, was a great place. I was there for just a little bit more than nine years. The opportunity within that organization to have different roles and different responsibilities that were all progressive, or progressing, was really key for me. When I had my first real corporate finance job at MCI, I literally was a direct report to the CFO. While I wasn’t going to show up on an org chart, it was kind of heavy for somebody who’ was in his late 20s at the time—to be able to have one-on-one conversations and have a real impact on decisions that were made and, toward the end of my tenure there, the direction that the company was taking. I recall a time when I was working with the internal wireless strategy group. We went to Wall Street to talk to analysts about their views on the emerging wireless market. Keep in mind that this was 1997-ish, right? For CDMA, there were still five or six different providers. T-Mobile hadn’t come around yet. Nextel was still a viable player. Everybody had their projections for the adoption of wireless communications in terms of revenue, and all looked like reasonable growth curves—25%, 30% a year for the next X number of years. And then we met one analyst who said, “You know, they’re all wrong. This thing is going to explode. Every kid in the country is going to have one of these things. You’re going to be talking to your grandmother while you’re standing in line at Starbucks.” This one person had a different insight and a different view that proved to be correct. For me, this was the moment when I gained the realization that conventional wisdom can be stood on its head—that just because there’s a herd mentality around what the right answer is, you don’t necessarily have to go with it. That’s something that has stuck with me every day.

“A CFO role was something that I had not yet really envisioned for myself,” explains CFO Erik Ostrowski when asked about the investment banking chapter of his early finance career. Still, Ostrowski says that he always found the challenges facing smaller or high-growth firms more interesting than those encountered by large enterprises. “I had a choice as to whether I wanted to work for a larger bank that worked with larger, established companies or for a boutique working with smaller firms, and I found that I was pulled to emerging-growth companies,” he explains. Today, as CFO of biotech company AVROBIO, Ostrowski says that he likes to remind himself that while there are many aspects of business that can be controlled, many cannot be. In terms of which variables are beyond a CFO’s grasp, Ostrowski lists the economy, followed by the performance of capital markets. As far as what CFOs can control goes, AVROBIO’s CFO makes it clear that a highly engaged CFO is often the determining factor when it comes to achieving effective investor relations. Says Ostrowski: “Make certain that you are presenting the company’s business proposition in a clear and concise way. And be ready to answer anticipated investor questions effectively.”  –Jack Sweeney    Ostrowski: There are many things in business that you can control and many that you can't. In terms of variables that you can't control, a good example might be how the economy is doing or how the capital markets are performing. What you can indeed help to control would be, for example, things on the IR side: making sure that you're presenting the company's business proposition in a clear and concise way and being ready to answer anticipated investor questions. Another thing is having the team of bankers and lawyers that helps you with the fund-raising process ready. These are things that you can control. By having these pieces in place, when business developments and capital market conditions align, you're ready to take advantage of the opportunity and, in this example, to conduct a successful fund-raise. So, it was nice to see that play out recently at AVROBIO. Just a few weeks ago, we were able to raise $138 million for the company on the heels of positive interim data from our Fabry gene therapy program. I think that it was proper preparation along with favorable market conditions that helped to make that capital raise a great success for us. Over the next 12 months, my priority is to continue to help effectively manage the growth of the company as we continue to progress our activities not only in Fabry disease, which is our lead program, but also in developing treatments for patients with Gaucher cystinosis and Pompe disease, as we look to build out what we think is really one of the leading pipelines in gene therapy.

The recent opening of a Chicago office of ANGI Homeservices is one that the firm would like to replicate, but not in terms of size (the site has a capacity for roughly 100 sales representatives) or even necessarily geographic location. Instead, the home services player plans to duplicate the approach that it used to determine whether a Chicago location was worthy of investment, according to ANGI Home Services CFO Jamie Cohen, who says that signing a 10-year lease for tens of thousands of square feet is often just too big a gamble when so many questions remain unanswered. “Can we recruit in this market? Can we sell in this market? And can we build upon this foundation?,” rhetorically asks Cohen, who adds that the approach involves “a pop-up sales center” concept that permits ANGI to test out new markets in a “low commitment manner.” In the case of Chicago, ANGI deployed a small team of about 20 people into a Chicago-area WeWork location, where they soon found answers to Cohen’s questions that allowed her and ANGI’s operational team to green-light a larger, more permanent home for the team. Meanwhile, Cohen’s finance function is now home to ANGI’s real estate team, which oversees about 1 million square feet of property. Besides being one of ANGI’s heftiest expenses, real estate is part of a more collaborative financial model that operates in lockstep with the company’s capacity for hiring sales personnel—the same people that ANGI uses to determine future office space commitments. – Jack Sweeney

For most of us, the act of “throwing the book” at someone is just an expression meant to conjure up the image of a judge throwing a book of laws at a criminal as punishment. However, the visual that CFO John Orton summons in the opening minutes of our talk is the act of having a physical book thrown at him by a manager during the early days of his career. It’s clear that Orton found the experience unsettling, and from that day forward, he explains, he became committed to the idea that treating others with respect must always be a key tenet of his CFO leadership. We should mention here how very often finance leadership is summoned to help address bad behavior in the workplace (even at those times when CEOs have behaved poorly). Conventional CFO wisdom tells us that incivility not only is a nuisance, but also is a threat to a company’s bottom line. Still, by identifying the experience as one of a select few that shaped his CFO leadership, Orton does something that most of his CFO peers dare not when he extracts a leadership lesson not from an esteemed mentor, but from a troubled manager. –Jack Sweeney

CFOTL: What comes to mind when we ask for a finance strategic moment?  Parikh: I think that I'd have to go back to the great financial crisis for a finance moment, the week after Lehman Brothers failed, when I actually pulled all of the top-line numbers for the hotel. For the first time in my life, I said to myself, "Well, something is just drastically wrong with our accounting system because these numbers just don't make sense. We've never seen a drop this precipitously this quickly." That was the time of one of the hardest decisions, because we had never cut our dividend up to that point. From 1999 to 2009, we had been a very consistent dividend payer. Not one of the highest dividend payers in the lodging REIT world, but I think that's when you look at forward bookings, you look at what's happening, and you have to make a very difficult decision. We probably cut our dividend at that time by 70% because we looked at it, I looked at it, and I said, "It's more important to batten down the hatches to make sure that we don't violate any of our debt covenants, to make sure that this company's on sound footing for the long term." Of course, the shareholders aren't going to like their dividends being cut by 70%, but it was the right move. You know, you can't let Wall Street and your investors' sentiment on any single day drive your decision-making. There are times when you have to call it the way you see it. I'm happy that we did because it would have been very challenging to continue to pay that type of dividend—and I'm sure that we would have violated some type of cash flow debt covenant.

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 Subscribe to CFO THOUGHT LEADER

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