18 top CFOs share their best piece of financial advice

Sep 28, 2015

James Kosur

C-Suite editor, Business Insider

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Financial chiefs at major companies oversee millions, and even billions, of dollars and have a unique vantage point into what it takes to run a successful business.

We reached out to CFOs from a range of industries and asked for their best piece of financial advice.

From leading and communicating with people in the finance function to tips for responsibly managing a budget and making bold moves, their answers are as unique as the companies they oversee.

Anthony Noto, the CFO of Twitter, says great financial leaders dig deep to find the truth.

“Great leaders of organizations run after problems, make their footprint bigger than their foot, and always strive to find the truth — because you have to get to the truth to be excellent.”

Bob Shanks, the CFO of Ford, says you have to be grounded in real-time.

“Operating a global business in a fast-changing world, you have to be grounded real-time in the external environment, have complete transparency, be fact-based and working with a great, collaborative team.”

Pat Yarrington, the CFO of Chevron, says you have to be ready for higher levels of risk and opportunity.

“With an increasingly integrated world economy, be prepared to respond to higher levels of both risk and opportunity. A strong balance sheet is a tremendous asset when managing though periods of volatility.”

John Stephens, the CFO of AT&T, says it’s critical to remember cash generation.

“In this era of ‘free money,’ it’s still critical to remember cash generation — or, rather, consistent and material cash generation. It’s the biggest factor in the long-term success of any business.

“This might sound textbook, but that’s because it’s true. Revenue growth and disciplined expense management will generate the cash a business needs to invest, seize growth opportunities, and return consistent value to owners.”

Carol Tomé, the CFO of Home Depot, says you need to become a master of connecting with your audience.

“During my first presentation to investors as Home Depot’s CFO, an investor on the front row fell asleep. He wasn’t fighting nodding off… he didn’t close his eyes for just a second… he didn’t have a glazed look in his eyes. He fell asleep and fell off his chair.

“After that, I understood immediately that you can know the numbers and the strategies behind them better than anyone, but if you can’t communicate well and tell your company’s story in a way that engages the investor and analyst community, you are toast.

“I vowed from that moment on to become a master of connecting with my audience, and it’s something I push my direct reports to do as well.”

Mike Schlotman, the CFO of Kroger, says you have to be as comfortable with the people as you are with the numbers behind a business.

“From an M&A standpoint, the returns on a spreadsheet are interesting, but it is far more important to be comfortable with the people running the business.”

Howard Ungerleider, the CFO of Dow Chemical, says you need to have strong accountability focus within the organization.

“In this more volatile macroeconomic environment, finance organizations hold a significant leadership role in developing true value-based cultures. It begins with a strong accountability focus within the organization — a clear understanding of value drivers, coupled with scorecards based on common financial metrics.

“In this way, the finance organization elevates from the transactional and becomes a true ‘co-pilot’ in driving business strategy for attractive, sustainable growth.”

Frank Calderoni, CFO of Red Hat, says diversify, diversify, diversify.

“If you are investing for the first time, diversify, diversify, diversify. Putting all your eggs in one basket is never a good thing. Be prepared for market fluctuations with some value stock and some high-risk stock as the payoffs could benefit you in the long run. The other thing I recommend is invest for the long-term, at least 10 years or more, as long-term valuations generally increase with the overall portfolio market value.

“My dad used to say the old adage: A penny saved is a penny earned. For me, it was always about investing in yourself first. Make sure you have a savings account that has at least six months worth of income to subsidize any unexpected event that could happen in your life. Prioritize savings in general such as your children’s college funds, 401Ks, etc., and pay your bills. Then, invest your spending money in long-term stocks or pay off a little more of that mortgage.”

Brad Halverson, CFO of Caterpillar, says resource allocation is incredibly important and you need to get your hands dirty.

“An important responsibility of a CFO is resource allocation — where the company is investing its time and money.

“To do this well, the CFO needs to first get their hands dirty in the field by gaining an understanding of where and how the company is positioned to compete for business by adding value to customers. Second, have a granular understanding of the business — where you create and destroy value — using Operating Profit after Capital Charge (OPACC) as a lens. Finally, drive disciplined execution of the OPACC improvement agenda. Investors aren’t interested in activities; they want results.

“Every leader at Caterpillar has two responsibilities: leave the place better than we found it and in more capable hands, which requires a focus in leadership development.”

Brian Worrell, CFO of GE Oil & Gas, says you have to know as much as possible about how your customers make money.

“Spend less time with spreadsheets and more time with customers. It will be more uncomfortable but more insightful. Successful CFOs know as much about how their customers make money as they do their own business.”

Dave Benson, CFO of Fannie Mae, says a business should be easily understood in just a few succinct sentences before it’s worth a closer look.

“I have found that a business that can be easily understood within a few succinct sentences is worth a look. Who does the business serve, what are the two or three key financial drivers, and what is the distinct competitive advantage? If it can’t be described that simply, perhaps this isn’t the right opportunity for you.”

Beth Bombara, CFO of The Hartford, says you have to follow the money and know everyone’s role in the company.

“The way to navigate any investment, business proposition, or financing opportunity is to follow the money. In my days as an auditor, understanding complicated transactions always started with an analysis of the cash flows. Regardless of how elaborate a deal or business might be, the underlying economics tell the real story about who is paid, for what, and when.

“Know the objectives of the parties involved and their role in a company’s financial success. Get a full grasp of how a business turns profits on paper into money in the bank.”

Barb Niland, CFO of Huntington Ingalls Industries, says you have to rely on continuous communication with the right team.

“My best financial advice is to surround yourself with the right team and ensure continuous communication with each other. You must provide leadership, but you also have to give your team authority and accountability. It takes the entire team to be successful.”

Neil Williams, CFO of Intuit, says you need to offer as much information as possible to your team.

“When you are planning a big company change, don’t underestimate the amount of communication you need to do. You can get so close to a situation you just assume your choice is right, but your board of advisers may not have the same context.

“It’s easy to underestimate how hard it will be for others to grasp why you are making change when you have been dealing with the ins-and-outs. And, remember, analysts have a hard job. They don’t have the context we have, and yet they are expected to have a point of view about our performance.

“You need to offer as much information as you possibly can to help them evaluate the company’s performance.”

Gilles Bogaert, CFO of Pernod Ricard, says you need to fully understand the path you have taken to reach your decision.

“Whenever I make a decision, I like to do what I call a ‘constructive challenge;’ that is, understanding how we got to the recommended option as opposed to the other possible routes.

“I always try to balance short and long term, being mindful of the famous short-term quarterly pressure. There is a need to be very responsive but also consistent in time, especially in a brand-building business.

“The key questions I ask myself whenever we are assessing an investment are: Is it a strategic priority for the business? What is the balance between opportunity and risk? How can it be financed, including through reallocation of resources? What are the opportunities for return and value creation (short, mid and long term)?

“Then, I can make a clear (and quick) decision, and I make sure I say a clear ‘yes’ often enough to help create favorable conditions for risk-taking and entrepreneurial initiatives in the group.”

Rich Veldran, CFO of Dun & Bradstreet, says you need to be multi-dimensional and serve many roles.

“The primary mandate of the CFO is to be the guardian of shareholder value for the company. Traditionally, this was about managing risk, but today CFOs are expected to balance risk and opportunity. It’s become quite a quite multi-dimensional role.

“In making decisions, there are really three important roles that CFOs perform.

“Firstly, we need to make the right investment decisions to drive growth. Second, ensuring that we turn that revenue into strong earnings and cash flow through smart resource utilization and cost management. Finally, we need to optimize our capital structure and make smart, strategic use of the cash that we generate.

“Underpinning this all is the need to maintain a rock-solid control environment and to build and develop a top notch, highly energized and committed team.”

Olivier Bisserier, CFO of Booking.com, says you need to have a maniacal focus on ROI.

“As an organization, we have a maniacal focus on ROI. We built our organization globally by keeping this at the center of every investment and decision and now it’s just part of our DNA.

“My best piece of advice is look at what your organization needs and don’t be afraid to take chances, but balance risk with success, only increasing the former when the latter goals are being met.”

Robbie Sprechman, CFO of Retro Fitness, says you need to make yourself replaceable.

“This might sound off to many, but I think the key to success is to make yourself replaceable.

“Taking the time to train a second in command in everything you do, including budgeting for your company, allows you to be ‘replaceable.’ At Retro Fitness, we budget two to three years in advance in order to keep finances stable.

“By training a second in command in these practices, I’m able to delegate anything that might cross my plate, allowing me to concentrate on projects necessary for company growth.”

This article is published in collaboration with Business Insider. Publication does not imply endorsement of views by the World Economic Forum.

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Author: James Kosur is the C-suite editor at Business Insider.

Image: A businessman walks through the Tokyo International Forum in a banking district in central Tokyo. REUTERS/Thomas Peter.

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