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Brace for Impact

I must have f*cked up, even if I didn’t know how.

David wasn’t easy to upset.

He was the sort of dude that everyone liked and never lost his temper. He was an impressive guy, who’d had a good career in many different commercial leadership roles. He was now a VP of procurement.

I was his finance business partner, and we’d always got on well.

I was only a couple of years out of college, and he was someone I looked up to. That’s what made this so hard to take.

I’d upset someone on his team (Sam), without realizing it. She’d felt I’d talked down to her. And belittled her.

I felt like an a**hole. It only made it worse that I hadn’t even known I was doing it. It meant that it was part of my style.

“Look … you are a bright kid. And you are going to have a bright future. But it won’t be your brain that decides how bright. It will be how you control the impact you have on people that decides. Today, you did that badly.”

He big dogged me, in the most comprehensive way possible. And he was totally right to do so.

He’d stood up for his team member in front of the arrogant young finance kid. And he’d taught that kid a life lesson. One that would be burned so deeply into my brain, that I’d confess it to more than 30,000 people 20 years later!

After that, I thought about ‘impact.’ A lot. That the actions I would take in a work setting would have an impact on how others felt about themselves, and the work they did.

I’m ashamed to say despite being 3 years into my career, I’d just never thought of things that way before.

I’d always just focused on looking as smart as possible. The only impact I was interested in was leaving people thinking, “Oh, isn’t he clever.”

I started thinking about how I wanted people to feel when they worked with me.

I noticed that people went out of their way to help David because they liked him. They wanted him to win. I wanted that.

I realized the person I was at work, wasn’t the same person I was at home. In trying to impress people and demonstrate my value, I came across a little arrogant and condescending. Once I noticed this and started to be myself, people warmed to me more.

I soon noticed how much easier my job became when people wanted to help me.

David’s feedback is one of the greatest gifts anyone has ever given me.

Ask Me Anything

Have a question for me? If you’d like me to answer your question as part of the Office Hours series, submit it here.

This is part 3 of a 4-part series diving into the skill stack a top CFO needs.

10 Must-Have Skills for Modern CFOs

In week one of this series, we introduced the T-shaped skill stack.

Last week we detailed the functional skills you need to be a top CFO.

This week we will look at the horizontal part of the T. The generalist skills you need to lead a business.

But first… two gripes:

Gripe 1: These skills are often called soft skills. They are not soft, they are hard. Numbers are perfect. People are not.

Gripe 2: These skills often get discussed in finance circles as some black box that you either have or you don't. That is wrong. There is a rich tapestry of different skills. And you can learn them, just like technical skills.

With my rant over, let's dive into the details of the skills…

We will work from the outside of the T towards the inside. There is some significance to the relative positioning of the individual disciplines.

Naturally, there is overlap between the horizontal skills and the vertical. Nothing is 100% functional, nor is anything 100% generalist.

The closer disciplines are to the center of the T, the more overlap between the specialist and generalist skills.

A reminder: Today we are not sharing how to develop these skills. Just sharing what skills you need to develop.

Let’s get into it.

1. Leadership

Starting with the big one. It's impossible to do this topic justice in a few words. Barnes & Noble has whole displays dedicated to leadership books. Many of them are brilliant.

There are some very specific leadership skills you will need to develop as you become a CFO.

You will need to act as the visionary for the finance function. You will need to be a role model and repeat your mantra. Every single day.

Like it or not, you are a figurehead for the business. My first Group CFO job was in a business with over 10,000 people. At first, I found it uncomfortable that so many people knew who I was, without being able to reciprocate. You are always on show.

Most businesses are on some kind of cultural journey. You have to be living that culture 24/7. This is exhausting.

Leadership is so much broader than these examples. But this is a flavor of some of the things you’ll need to get comfortable with.

2. Communication

Communication is the act of transferring information from one brain to another. It doesn't matter how you do it, what matters is that it works. There is nothing more destructive in a business than poor communication from the top.

You need to find an effective style that works for you. That will include being comfortable with speaking and presenting. You will frequently find yourself in the hot seat. Often in high-stakes situations (investors, board, etc). You will also need to be comfortable speaking and engaging with large groups. Like company conferences, earnings calls, etc.

You also need to get good at business writing. You are going to write a lot of board memos. One of the reasons I started this newsletter, was to improve my writing.

3. Self Management

Plato said "The first and best victory is to conquer self."

Senior exec jobs can be grueling. Managing your energy is vital. Making sure you are in the physical and mental condition to perform at your best is important. It's not for me to say how to do this because:

a) I haven't worked it out myself

b) It's different for everyone

c) A pivot into self-help would be a dumb move on my part

But it is important. The energy you transmit will infect your team and beyond. Choose it wisely.

You also need to learn extreme ownership. Remember, it's all your fault, even if it isn't.

4. Team Management

Good news: everything on this T is easier if you have the skill of finding and keeping rockstar finance pros.

Bad news: this is one of the hardest skills to learn. 

Getting the right raw material is only one piece. You have to be able to build the jigsaw puzzle. Building a cohesive team is hard. We’ll do a whole series on this soon.

Knowing how to oversee that team is an asset too. This is the zoom-in/zoom-out concept we talked about two weeks ago.

5. Influence

Influence means changing people’s minds and behaviors. If you can’t change people’s behavior, you don’t belong in the CFO chair.

That starts with the CEO. If you cannot influence the CEO you work for, you are not effective enough. Sometimes this is about skill, sometimes this is about chemistry. I would not work for a CEO who I felt I couldn't influence.

People give a lot of thought to influencing up and influencing down. But the hardest of all is influencing sideways. For the CFO, that means your C Suite peer group. Few people help you with how to do this, and this is a very real skill you need.

Building relationships that you can ‘cash in’ on is an important skill too. Anyone can make friends with people. But the real test of a relationship is when you need something, can you get it?

6. Making Things Happen

You need to have the skills to create urgency around the important things. Being able to identify what is important is one skill. Being able to manhandle the business to point its laser eyes at the correct problem is another.

The inertia effect in big businesses is real. Being able to overpower that is vital. Without it, the direction of the tide will determine your destination.

7. Strategy

Setting strategy, and connecting the finance function to that strategy is not easy. Strategy is the responsibility of the CEO. But the CFO needs to be a powerful voice in that discussion.

There is an iterative loop between what the business wants to do, what it can afford, and what is a good use of capital. Finding the middle of that Venn diagram requires a great process and good debate.

It is the CFOs job to plug the strategy into the FP&A cycle via the Long Range Plan.

Another part of being strategic is seeing the unseeable. Accountants use the rearview mirror. FP&A teams use the windshield.

And CFOs need to see around corners. The CFOs that were on the ball were preparing for inflation in mid-2020 as soon as they saw the size of the stimulus checks.

8. Better Thinking

Most problems that reach the CFO have some level of complexity. If they didn't the team would solve them. Some are hard to solve. You will face problems where every option is terrible (think back to the pandemic again). Your job is to select the least terrible.

Having a disciplined frame for solving complex problems is vital. I shared mine here.

Some use mental models. I like reasoning from first principles and second/third-order effects. I use them all the time. Some in tech/twitter have gone too far down the mental model rabbit hole. You don't need 30 mental models. But having a couple you can rely on is great. 

You should also practice what I call 'radical independence'. The ability to form independent judgment. Separating fact from opinion. This is much harder than it sounds.

The business I currently work in can be guilty of a loose grasp of facts. I spend a lot of time peeling back layers of conjecture and opinion to expose only what we know to be true.

9. Commerciality

Putting an income statement together and driving the numbers are not the same.

That requires commerciality. The best CEOs I have worked with had the unit economics of the business in their blood. And a good CFO is right there with them. Bringing nuance and detail to the discussion.

When I was a business unit CFO, I worked for a Group CFO whose answer to everything was to raise prices. Behind budget? Raise prices. Short of cash? Raise prices.

The BU CEO I worked for fought with him over it. We were in a cost leadership business, where volume and full utilization were critical. Raising prices would have put the core unit economics at risk. Good business decisions are about trade-offs.

Good CFOs will understand those trade-offs and how they influence financials. They can understand between muscle and fat in the cost base. They know how important it is to reinvest in the business.

P&Ls are multi-dimensional. Too few finance pros actually understand how they work.

If you want to be a top CFO, you need to be one of the few.

10. Industry Intelligence

If you've worked in one industry ... you've worked in one industry.

Every business looks easy from the outside. I heard a great quote from the wonderful Prof G this week:

“Whenever you look in from the outside of a business and think you know what needs to be done. Most of the time you are not as smart as you think, and they weren't as dumb as you hoped.”

This is my experience too. When a good company is doing something that seems dumb from the outside, more often than not, there will be something the board knows you don't.

That tribal knowledge of an industry and company is invaluable. It's a great reason why you shouldn't hop around companies or industries too often. The compound knowledge, skills and contacts you have built are priceless.

Industry knowledge is underrated.

Under each of these 10 disciplines are 2-4 individual skills you need to master. That means there are 30 or so non-technical skills you need!

So much for those ‘soft skills.’

Next week we'll bring it all together, and share a way you can find out where you rank on the T.

Neel from NYC asked:

From a junior perspective (associate/senior associate), how do you recommend going about developing a broader network? Do you go to industry events/networking events?

The problem with most networking events is that oftentimes, the people attending them are also looking for a network. Meaning that they can just be a bunch of unconnected people getting together.

At the other end of the scale, if you can get into the right room, it is career rocket fuel. Good networking events tend to be invite-only, though. So breaking in is hard.

My advice, early in your career, would be:

1. Focus on your internal network to start with. And expand it out over time. This will build your confidence, provide senior exposure, and give you the best chance of getting into the right conversations.

2. Take up a niche interest where successful people hang out. Whether that’s a specific industry group, sport, wine club, whatever. Become “Neel, the guy who …”

3. Be positive, likable, and charismatic. These are qualities that make you easy to invite.

Best of luck, Neel. Puff your chest out, and go make some new friends!

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And Finally

Next week we'll bring it all together, and share a way you can find out where you rank on the T.

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Stay crispy,

The Secret CFO

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.