“May we live in interesting times,” my father used to say. Well, if he were still alive today, he would not be disappointed! The current global pandemic is testing the mettle, grit and resiliency of all of us, and exposing the weaknesses and vulnerabilities of every company across all sectors and lines of business. Equally, this environment also exposes the uncompromising importance of effective leadership — in particular, the CFO.
In any crisis, CFOs are on the frontline helping their companies navigate often choppy or uncharted waters with a steady hand on the tiller. I recently interviewed the CFOs of five tech companies to get their perspectives on what it’s like to guide a company through, what many consider to be, the largest and most unpredictable global crisis since the Great Depression.
Interviewee Profiles:
- Interviewee #1: CFO at a publicly traded Enterprise Security company with a $17B market cap
- Interviewee #2: CFO at a publicly traded SaaS company with a market cap of $3B
- Interviewee #3: CFO at a B round VC-backed SaaS company in the Healthtech space
- Interviewee #4: CFO at a late-stage VC-backed SaaS company with $200M in revenue
- Interviewee #5: CFO at a PE-backed SaaS company with $50MM in revenue
What’s the most challenging crisis you’ve ever dealt with as CFO and why?
- Interviewee #1: This crisis, for both me and my company, is the most challenging we’ve ever experienced due to the speed at which it hit, how widespread it is, and because there’s no credible timeline for when it will end. When I compare it to the post 9/11 downturn and the housing/credit crisis, there are so many more unknowns at present. It’s incredibly difficult to plan for the future when the duration, extent of damage, and overall impact of the pandemic are largely still unknown. However, managing these vast uncertainties and making tough decisions is what we do.
- Interviewee #4: This pandemic is a wild and wooly beast and we have to accept that there will be future pandemics, all of which will change human behavior and interactions permanently. This crisis is global in scale, touching all markets and industries, and unlike the dot-com implosion and the housing/credit crisis, it’s much harder to plan for and predict what the lasting effects will be on businesses and on the emergence of new norms — such as working remotely, interacting with customers, and hiring people. Good companies will need to be even better, and marginal companies will get crushed. It’s during times like these that we CFOs earn our keep!
What changes in operating style are you deploying to help your company navigate through this crisis?
- Interviewee #2: We cut our burn early — in the first week of March when it seemed like the pandemic was not only “real” but global and spreading fast. We started analyzing our sales pipeline in a very detailed and dispassionate way, balancing existing revenue protection with targeted new customer outreach, time investment correlated to CAC (customer acquisition cost), and development, particularly in our customer segments that were being hurt by the pandemic. We are very deliberately spending time with the highest value new targets, showing a lot of love to all of our existing customers, and deploying as much empathy to our vendors and service providers as we possibly can. We’re offering flexible deal terms, while balancing exposure. It’s a dance for sure.
- Interviewee #3: We had a 10% RIF the second week of March, cut salaries across the company, and tore apart our pipeline to sniff out the low hanging fruit. We’re managing the business to cash. I’m glad we don’t need to raise money right now, because our competitors that do are in a tight spot. We recently closed a significant debt round, and as the debt markets are robust, we cut a very good deal, but like many companies that are burning cash, we now have debt stacking up in front of the preferred shareholders and that affects common shareholders too. Our focus is squarely on cash, our pipeline and our people.
- Interviewee #5: Fortunately, we were a very healthy business coming into the pandemic meltdown, so we have not had to make any significant changes, except for a small RIF and 25% salary cut for VP level and above. However, because we’re not burning cash, not highly leveraged, not tripping any covenants, and have a lot of cash on our balance sheet, we are in a good position to weather the storm. The hard part is not knowing when the storm will end and the impact it will have on the customer segments we sell into (FiServ, CPG, ECommerce, Education, Healthcare).
Managing a workforce through periods of crisis is a tremendous responsibility — any best practices you can share with us?
- Interviewee #1: I am not the type of CFO that sits in his office and waits for people to come to me. I love to walk the floor, visit people and take teams out for lunch, so this WFH “thing” really sucks for a lot of us. We’re also used to working in an open floor plan — many of us miss this “communal” and collaborative environment. Therefore, I’ve found that staying connected to my team, other teams, and other leaders in the company is more important now than ever. Not only to keep my finger on the pulse of morale, but to make sure that the mental health of our people is intact, because happiness is directly correlated to productivity. I am on Zoom calls all day long with folks up and down the organization, making a concerted effort to over-communicate.
- Interviewee #2: A few observations: the sense of employee entitlement has evaporated overnight, and the realization that we’re all in this together is palpable. Running a company is a team sport, and crises highlight that fundamental truth. We are a young company — average age around 30 — so for many of our people this is the first crisis they have ever dealt with (aside from finding a place to live in San Francisco!). With that in mind, the leadership team has discovered that frequent, candid communication is critical. This pandemic has humanized all of us and the learnings we take away from this will inform the way we manage and lead for many decades to come.
- Interviewee #3: This is a time for transparency, candor, empathy and tough-decisions. We all have a pent-up desire to share our common experiences, so there are even more opportunities to connect with folks, direct reports and the CEO. I have daily Zoom calls with my team and my peers, and during these conversations, I am being totally honest and transparent about the challenges we face as a company. Information is empowering, even if the news isn’t always good.
Effective executive leadership and the steady hand of a seasoned CFO has never been more critical to the health, and perhaps survival, of an organization during this and future crises. How companies and their leaders respond to what feels like endless uncertainty will determine which organizations can adapt and survive, versus those that will ultimately become obsolete. So while these “interesting times” present extraordinary challenges, they also offer opportunity. In fact, there hasn’t been a better time in the course of my career to access and acquire exceptional (otherwise hard-to-get) talent. So if your company is in a position to invest in this critical area, it may just make the difference between ‘managing through’ versus emerging a winner.
If you’re interested in learning more about SPMB or our CFO practice, please contact us at spmb.com or contact the author, Steve Popper, directly.
