Episode 16: People & Stakeholder Management as a CFO

Madhurima Gupta:
Welcome to the Mid-Market CFO Circle podcast powered by HighRadius. I’m your host, Madhurima Gupta. We hear you mid-market CFOs, and we have got your back. Every Thursday, we bring you the CFO circle podcast with your peers, where we discuss challenges you face and how you can solve them with emerging technology, the experiences of your peers, and more. And today we are going to talk about how in the last few decades, the role of CFO has undergone a profound change and CFOs today need to do more than just manage businesses day to day financial operations. In fact, a successful CFO in today’s world communicates the story behind his or her numbers, builds relationships with leaders, and collaborates with them to ensure that an enterprise or any organization is able to maximize their performance. And today we will understand the people and stakeholder management skills that every successful CFO should possess.
And for that discussion I have with me, Andrew Lear joining me today. Andrew has over 25 years of leadership experience in accounting and finance roles. He’s currently working as CFO at EZ Raider. He’s also the CEO and founder of  Lake Tapps Capital, a technology startup company, which is dedicated to improving freshwater ecosystems. Andrew has consulted for a variety of companies and businesses of all sizes and at all stages of the organizational life cycle on corporate development, mergers and acquisitions, restructuring, outsourcing FP&A services, and more. He’s an exceptional leader with unparalleled expertise in building high-performing cross-cultural global teams that deliver superior results. So for that reason, I think there’s nobody else better than us to understand what a CFO’s people responsibilities are. And I’d like to welcome Andrew to the show on that note. Hi, Andrew, how are you doing?
Andrew Lear:
Hi, Maddie. Thank you, Madhurima, appreciate the introduction. Nice to see you today.
Madhurima Gupta:
Absolutely. I think it’s all my honor, to be able to, you know, hear your thoughts on how, you know, as a people manager, a CFO can be successful. Kicking start this particular discussion, I wanted to understand in your decades-long experience, how much of a change has the role of a CFO undergone and what do you think is expected of a CFO nowadays other than the financial skills?
Andrew Lear:
Well, I think the change that the CFO role has undergone is probably consistent with the change in a lot of executive roles with simply the advent or the advance of technology, specifically communications technology, and basically the flattening of organizations. Previously, you know, when I first started my career, communication through hierarchies was really how things were managed if you will, uh, with executive levels and then middle management, depending on the size of the organization, but communication through the hierarchy was really sort of stressed early on. As communication technology has evolved, as has the culture around how people communicate. It basically flattens the organization where everyone has a voice and it’s critical when you’re an executive or in an executive role where you have actual accountability- legal, and financial. It’s important to understand that dynamic, that it can’t just be top-down, I dictate sort of what’s happening, but what I think has resulted from sort of that advance of communication and sort of flattening of hierarchies is further emphasizing and putting importance on the interpersonal relationship that you have with people, all stakeholders.
So in a startup company, it’s critical that you have good relationships with your investors and with your partners and co-founders. And in, you know, a bit larger organizations, you have to have good working relationships with your, uh, the people that report to you. It’s important that you, you know, you yourself speak with credibility and trust so that, you know, you can get things done for the organization. So a rather long-winded sort of things, the way to say that things have really evolved since I’ve been, you know, working over the last 20, 30 years, that organizations now are much flatter, but the cultural sort of expectation of communication and voice is also very different from when I started.
Madhurima Gupta:
So do you think it has changed for the better?
Andrew Lear:
I think there are trade-offs. I think it has changed for the better, for sure. There’s no question where, you know, the hierarchy I think was really sort of an artificial sort of way in which people felt more important than they are probably otherwise, should have been. You know, things get done in organizations by a coordinated effort. And, when you have political power through the hierarchy that says you do things, that’s one thing. But when that doesn’t really exist, like it used to, then the way things get done have to be built on really collaboration and trust. And you know, where people understand that you collectively have your best interest in mind. So that’s one thing. The other thing that I think the downside is is unless you have a good sort of collaborative work culture, it could spin into chaos where everybody has a voice.
Everybody tries to get things done and then sort of chaos and disintegration can happen too, which can paralyze organizations as well. So, you know, there’s a trade-off and I think that’s where leadership plays a role where you have to, you know, know your stuff and then work with integrity and value the people that you’re working with genuinely not just sort of in pop culture sort of mean kind of ways, but you generally have to value the people you work with. And then, you know, I think that’s when you can really achieve some pretty remarkable things.
Madhurima Gupta:
And how about, you know, the accounting professionals, people who are growing up the ladder, for them, what other skills do you think that they need to possess, and, you know, probably develop today so that they’re big able to become a good CFO tomorrow?
Andrew Lear:
Yeah, so I think, that’s the traditional model. I am, I mean, quite transparently. I am the atypical CFO. I did not come up through the accounting ranks. What I have learned in my career as I’ve been the CFO and this is a bit ironic and that is just how important the accounting skillset is. The important thing for young upcoming accounting professionals is there’s a tendency in the profession to really become, you know, as is the nature of the discipline itself, which is really focused on debits and credits and the rules and FINRA and, or excuse me, FASB standards and, you know, that kind of thing, which are necessary, but not sufficient for leadership roles in accounting. You absolutely have to understand the context of the numbers, why they are a certain way, why you have to treat things a certain way in the context of the strategy of the firm, the people you’re working with, you know, et cetera.
And you have to understand that bigger picture. If there is a universal criticism among CFOs that come up through the accounting ranks, it’s just that there’s too much focus on the debits and credits and not enough focus on the strategic picture. So as I’ve experienced as a CFO who has not come up through the accounting ranks, um, there’s a tendency for kind of a self-selection kind of mini-me if you will. So if you’ve come up through the accounting ranks, you look at your subordinates, there’s typically sort of the mini-me sort of selection criteria of people that work for you. So I’ve encountered that as I’ve discussed and done consulting work, you know, in the financial level as a non-sort of CPA, non-accounting sort of discipline CFO, people are, you know, there’s a little bit of question about, you know, how that actually works.
So I have to say, and I’ll say, you know, again, that the understanding the accounting discipline, the debits and credits, the FASB standards, um, you know, making sure that you meet all of the compliance requirements, et cetera. So that is a necessary condition, but it’s not sufficient. For future success as the CFO, you have to understand the bigger picture, the strategic context. And also importantly, as we started from the very beginning, you have to understand the people that you’re working with and the motives that drive them which set the strategic context of what you’re working about or working on. So yeah, I mean, pay attention to the bigger picture in the context that you’re working in.
Madhurima Gupta:
And  I totally agree with that. And especially if you get, um, you know, wrong people in certain positions, or if you don’t gauge what your people or your teams are capable of doing it can cost the CFO valuable time and money. So what would be your suggestion for these CFOs to build their dream teams?
Andrew Lear:
Absolutely. Like in my, in my sort of, uh, I speak from obviously my own personal experience, but you would look for people that augment the skills and the, uh, your sort of strengths and weaknesses. So, in my case, since I’m not a CPA and I didn’t come up through the accounting ranks, I would need a strong Lieutenant for lack of a better term, who is that. So if somebody who is coming up through the ranks on the accounting discipline side, and they do make it to the CFO chair, you would absolutely need to augment your strengths and weaknesses with people that are more strategic, uh, that maybe have really strong FP&A skills, uh, help you understand, you know, again I always go back to the strategic context of the numbers that is absolutely critical in understanding why things are the way that they are within an organization or corporation.
So building a team, you absolutely cannot have a mini me sort of, kind of mentality you have to look at. And that’s true of, that’s probably universal truth around team building is you can’t have all of the same. You have to have people with different capabilities, personalities, perspectives that work well together to sort of develop a bigger picture of capability and talent that work well together. So that you can achieve greater things than you otherwise could alone. So that would be my number one advice. If you make it to the CFO chair you have to augment your, everybody comes to the chair with weaknesses and strengths and you have to augment, and, um, you have to, you know, augment your weaknesses with people who have strengths that you don’t have and recognize that that’s just simply part of the deal of leadership.
Madhurima Gupta:
And now that we’ve, you know, talked about how a CFO can augment the, um, you know, the gaps that he may himself possess and, you know, to build an ideal team. I think the next question that I would want to understand from you is that once you have that ideal team build-up, what should a CFO do to ensure that the employees are engaged and, you know, he’s able to create a positive environment and maybe even have a little bit of healthy competition so that the entire team flourishes?
Andrew Lear:
Like I said, I go back to sort of what I first started with, and that is being genuine in your, uh, care and interest of the people that work with you and work for you. In my mind, the symptoms or the outcome of that approach is you place a premium on truth and transparency and that builds trust. And oftentimes in organizations, we get overwhelmed with positivity, which you, which is critical that you have, but people also need to hear very directly where there are opportunities in their performance, in terms of how they interact with team members, how sort of the whole team dynamic plays out within your group. You know, I’ve had instances where there has been conflict within the team, uh, and it’s critical that you speak truthfully and transparently about the issues that are impacting the team.
And that’s not always positive, but as my mom always used to say, the truth is always positive. So if you speak the truth, then ultimately the positive, the outcome will be positive and the team will understand that and sort of really embrace that. That to me is critical. So being able to understand and speak truthfully and transparently with the team members is important. There is, it is in my mind, okay, to have a healthy rivalry within the team where, you know, there is some bit of internal competition, but you have to really monitor that so that it doesn’t result in chaos because the worst thing that can happen and you have to stuff it out as, you know, stamp it out as, as best you can is that it impedes transparency into sharing of information.
Whenever there’s a rivalry that becomes unhealthy, then it can impede sharing of information that is in my mind, important or critical to the success of the organization. People kind of hold on to that as their own self-interest and, you know, it just sort of impedes things. So you gotta say attuned to that, um, so that,, you know, you build a healthy team that shares that really wants to achieve collective success, and then you reward collective success too, and you monitor it in, you know, sort of, uh, reward the team in monetary and nonmonetary ways. The cheapest best way to offer a reward is to say a genuine, thank you and recognition and acknowledgment among a broader group that goes a long ways.
Madhurima Gupta:
That’s amazing advice. I think that’s applicable even for a person like me being appreciated for whatever I’m doing. Great. So, Andrew, the other thing that I wanted to understand from you is, it’s not always easy to hire the right talent and at such stages often, CFOs, directors of finance, VPs, depending on what kind of company it is, right. There are some companies that are in the earlier stages. They may not have a CFO now in such cases, they often end up outsourcing some of their processes instead of, you know, building a team right up right then. So in your experience, is it the right approach to outsource processes? If yes, then which kind should be, uh, you know, outsourced and which should not be, so that eventually when you transition, you know, your processes back to an internal team, you know, the flow or the movement, the transition is absolutely seamless?
Andrew Lear:
It’s interesting. I don’t know that I could really sort of tag a process that you can say, this one’s good for outsourcing. And this one, you sort of, which one’s ideal? I’ve seen it all like basic FP&A, basic bookkeeping, down to financial reporting gets outsourced, like, um, so I’ve seen it all. And in today’s day and age, as you and I are having communication via, you know, um, video conference here in New York, I’m in the Seattle area. Yeah. Again, the technology has really flattened the sort of the, what used to be sort of these barriers of hierarchy. So I don’t know that I have a really good answer in terms of what processes are really sort of suitable for outsourcing, or which ones are not. I’ve outsourced FP&A and I’ve outsourced financial reporting, which are necessary for, you know, filing on the SCC so on, you know, for SCC guidelines.
So, um, it’s difficult to say if there’s one ideal or not ideal because cloud-based accounting systems, like you can access all around the world. You have video conference, you can com communicate instantaneously, you know, work hours of people that work, you know, in other parts of the world, generally, you can find times that align with what’s happening, you know, here where you’re the focus of, you know, sort of the work and management is. So, technology has really enabled the flattening of that. As far as, what makes sense to outsource and what doesn’t, others may have strong opinions about that, but I’ve experienced the full array. And, you know, again, it always will go back to, you know, the strategic context and then also your ability to work with the people that you work with. And, uh, if you have, you know, trust issues, then that’s an issue, right?
So, um, you gotta have good partners and you gotta have good, you know, good contractual obligation, it’s gotta be bound by good contractual sort of agreements. So that your services are delivered in a way and the time and the costs that are expected. So then as far as transitioning in and out, um, like if you outsource a process and then you want to bring it inhouse again, the systems allow us to do that pretty seamlessly. The key thing that you have to watch out for is the loss of institutional knowledge. So if you have somebody that’s been an outsource service provider for a number of years, they understand the business, the history, the context, and all that. So if you transition away from that service provider and bring it in-house, you’ve gotta have, you know, an onboarding for lack of a better term transition, where there you, you pass on as much institutional knowledge as possible.
So, don’t really have a good answer for that. I think where things are, you can have, companies and service providers that specialize in a very, sort of fine set of skills, and you can have ongoing relationships with them for quite a while, honestly, as far as you know, how the services are provided for the firm. I know that’s an interesting one. Again, I think where we are in the world today, uh, that I think is gonna, you’re gonna see more and more of that rather than functions being brought inhouse, as has been the historical traditional model, especially on the FP&A side, in the accounting side, too.
Madhurima Gupta:
So if I asked you what your choice is, let’s say for, um, you know, um, accounts receivable, process management. So what would you wanna do? Would you wanna bring it in-house or outsource it?
Andrew Lear:
Oh boy, that depends. Like I say, it depends. If you have a good trustworthy supplier that can build relationships with your customers that, you know, when you reach out to get payment or whatever, the case may be on the AR on the account’s receivable, um, you know, I would prefer that over somebody internal that really, you know, upsets your customers when they try and reach out to get payment, like. So, I can’t have a solid answer other than it depends. And it depends on the quality of the person that you guys have, if, and again, you think of the access of customer relationship and how critical it is if face to face is important and you have relationships face to face. Then it might make sense to have somebody closer, same time zone, you know, similar sort of culture that might make sense to have it, you know, internal, but, you know, there’s a wide variety. I think it really depends on any one of a number of factors, but, um, and that particular case, you know, I feel comfortable either way. Again, the key thing is, is you have, if somebody’s chasing AR and working with your accounts receivable and dealing with customers and getting payments and all that, it’s critical that you have the interpersonal relationship to enable collection or enable whatever it is you’re working on while maintaining a really healthy customer relationship.
Madhurima Gupta:
So I think with that, we come to the end of this podcast. And, you know, I wanna understand if you have some parting thoughts or tips for CFOs that are looking to emerge as leaders.
Andrew Lear:
Well, I guess, Madhurima, it goes back to the beginning, right? Which is, what is leadership in today’s day and age? And I, and my own personal experience, it is valuing the human condition that has to be at the forefront of everything you do. And people will sense that immediately when they are in your presence or in the presence of a leader, they’ll know immediately just how, you know, how you would interact with them and how you act as a leader to work in their best interest. You know, collective success is necessary for a highly functioned team and that is based on human interaction and interpersonal interaction. So the leader will set the tone and enable team, inter-team communication, effective, you know, inter-team communication. That’s critical. So really genuinely value the people that you work with and collectively you’ll reach success financially, and culturally than you would otherwise. So that would be my parting thoughts.
Madhurima Gupta:
I think those were really nice advice for our listeners out there. So thank you so much for taking the time and being on the CFO Circle podcast. And for our listeners out there, stay tuned. We’ll be back with more.