Strategy & Operations » Confessions of a CFO – Steadying the ship during extremes of growth

Confessions of a CFO - Steadying the ship during extremes of growth

Most organisations experience extremes of growth, from slow organic growth to runaway growth. When it comes to navigating this turbulence, it’s often the CFO who’s in the hot seat, steadying the ship and knowing when to pause for breath. Nick Frost, CFO of Prytek, sheds some light on bringing balance to all departments while dealing with the new growth trajectory.

We have experienced extreme growth over the last few years through a cycle of investment and growth, and we now have some big business units in the organisation.

As we contemplate the next avenues to pursue, there’s always the potential for a shift in direction, and that is being pulled by the CEO and the CEOs of the various businesses within the organisation making all their decisions. All of this is supported by the finance function, but with a close eye on control to ensure that we don’t grow too fast, and don’t take on too much risk.

Conflict within the C-suite

The challenge at that C-suite level is that everyone is trying to get you to spend money and you’re trying to scrutinise that. You have CEOs who may have to choose between two different items, operations guys want to be sure they’re getting the right amount of investment in the core operations. It can cause conflict, but it’s all about balancing that expenditure on having efficient operations because if you don’t invest in your underlying technology or your people, they will burn out. 

Backfilling to maintain growth

Runaway growth is a good thing. Making more money adds value to an organisation, and we must do everything we can to get more revenue on board. However, second to that is making sure we don’t break ourselves in the process.

That means ensuring that the platform is in place to support that rapid growth as it happens. You must also look ahead to the end of the current period of growth and work out what’s needed to support the next period of growth, ensuring that IT has what they need, operations have what they need, etc. It’s a bit like the game of Jenga. As you keep growing, how do you get new bricks to the bottom of the Jenga tower?

As your business grows, you are constantly filling in behind.

Risk and accountability

Financial risk is one area where you can often end up at loggerheads with colleagues. That’s where the balance of the CFO role comes in. I’m often presented with a business case, for a new acquisition, for example, that is described as ‘amazing’ or ‘brilliant’.

What I want to know is what happens if the revenue isn’t at the rate they are predicting. They stand by their figures, but I am a big believer in accountability. My response is to say that we will load their figures into their business plan next year, and they will get their bonus for next year will be paid on delivering that number.

That’s a very powerful tool, because if they start pulling back from it, then maybe the business case wasn’t as robust as they thought it was. 

Ballooning borrowing costs

High interest rates have made it more expensive to do a lot of the things you were able to do the previous year. Borrowing costs are also eating into the bottom line, but when it comes to debt finance and capital facilities, other functions don’t always consider interest rates.

As CFO you need to make a very clear point that investment in the current year is costing more than in the previous year. In addition, clients have less money to spend with us. If we’re in resilience and cash preservation mode, you can bet a lot of our customers are too, and that affects your revenue outlook. One quality that CFOs possess is pragmatism.

They are the voice of reason. Numbers don’t lie. 

Taking a tactical pause

Money is a scarce resource and must be deployed in the right place. The CFO has to listen to operations, listen to IT, listen to the growth aspects of the business, and use their insight to help the CEO make the best decisions. Sometimes, those insights involve taking a tactical pause during a challenging period of growth.

A previous company I worked at was going through massive growth. My responsibility was planning and analysis and delivering insight to people in the business. But I was part of an ecosystem where there was never any consistent data or consistent insight across that organisation. Because we had grown through acquisition we had 10 different accounting systems, and all the effort went into getting one number out of them.

We undertook the task of consolidating all these accounting systems into a single system, one source of the truth. It was a tactical pausing point in our rapid growth trajectory, but ultimately it transformed how the organisation functioned and helped us continue our growth trajectory. Had we not taken that tactical pause to drive change through the organisation, the outcome would have been very different.

The human factor

As CFO you cannot steady the ship without a broad range of experience and the leadership skills that enable you to empathise with people and motivate them. The environment last year was tough for our teams to deal with, and that sits in the collective memory.

This year I need to ensure the team sees the upturn and is motivated to grow again. How do we build up from that going forward?

That’s where I come in, with my experience and the pragmatism to recognise the challenges we are facing while having a clear vision of the end state, and the most effective route to that end state.

Nick Frost is CFO of Prytek, the global technology group

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