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Financial leadership during_crisis

Jim Cook shares his insights on how to be a Strategic Financial Leader during Crisis Events

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Financial leadership during_crisis

  1. 1. Strategic Financial Leadership During Crisis Events As Presented in Zoom Virtual Sessions to over 100 CFO’s and Executives across several Key Group Networks Thur, April 2ndFri, March 27, 2020 Mon, April 6thMon, March 30, 2020
  2. 2. 3 Goals For Today’s Discussion 1. Situational Context – 3+ Disruptive Cycles 1. “Best Of” Sharing: My perspective 1. Q&A: Sharing with Each Other
  3. 3. Situational Leadership 1. More Questions Than Answers 1. Original Plan and Forecasting is out the Window • Exploring brand new territory few if any have seen before. • We have gone “Off Road” without a 4x4. • A new Game Plan is Required 1. No Clear Playbooks; But There Are “Plays” • The Game is On • Plays Need To Be Called; • Sitting on Sidelines is Not an Option 1. Your Leadership is Required • Everyone Is Looking Around Looking For You – to lead them through • This is Your Time to Shine as a Financial Leader • You Are in Best Position To Lead. 1. Decision Making Frameworks and Scenario Based Contingency Plans • As CFO’s, we do this regularly…it’s called Scenario Planning. You Got This! • This is the CFO Plan. Not a CPO’s New Product, CRO’s New Market or CTO’s New Technology. • It’s about 3 things: People, Money, and Buying Time SUPPORTIVEBEHAVIOR DIRECTIVE BEHAVIORLow High High How Will You Lead? - Which Style? Hint - You need multiple styles at various times.
  4. 4. Investor Psychology: “Crashes Take The Elevator Down and Recoveries Take Stairs Back Up” (Doug Leone - Sequoia) “The Market Can Remain Irrational Longer Than You Can Remain Solvent” “Risk On Happens Slowly…..Risk Off Happens Overnight”. Bill Gurley Benchmark
  5. 5. RELATIONSHIPS CASH FOCUS & RE-ALIGN AGILE OPERATIONS & COMMUNICATIONS RECOVERY 2 AGILE OPERATIONS 1 RECOVERY 4 CASH 3 FOCUS & RE-ALIGN 5 RELATIONSHIPS Start Growing Again MY ATTEMPTED HIERARCHY OF NEEDS: FINANCIAL CRISIS (ode to Maslow) • Take advantage of your new Operating Agility and Cadence • Be just as brave “Recovering” by “Re-Investing” with the same Urgency • Sr Mgt Stand Up Sessions (2-3x / week? • Now is Time to Finally Create Monthly (or even Bi-Weekly Board Update and All Employee Updates • Align All Sr Mgt • Create Even More Focused Metrics and KPI’s – find out what “really matters” • Re-define Cash Needs • Create Scenario Plans • Create Contingency Plans • Contact All Relationships with Plans • Customers • Employees • Investors • Network Time
  6. 6. Your Health and Your Families Health Always Comes First: “Your Health Is Essential Business”
  7. 7. Best of Sharing: “past crisis personal learnings” ON BEING HUMAN 1. Disruptive Events like this are all about investor psychology and managing fear 2. Human Beings don’t operate well with “fear of the unknown” 3. Enabling Humans to make choices (even very hard ones) and to control their destiny (even if it involves pain) is better than not knowing if you are going to survive. RELATIONSHIPS > CASH > TIME 1. Buying Time is the Key Variable When Forecasting Event Timing is Broken 2. Cash Buys Time 3. Relationships Ultimately Provide the Cash FINANCIAL OPERATIONS 1. During Disruptive Events: Financial Leadership is very different • Quick, Decisive action is Required • Following the lemings off the cliff or “herd mentality” is just as bad in crisis times as bubble times 2. Make Sure You Don’t Cut Into Muscle and Certainly Not Bone; • All Disruptive Cycles are Time Bound. It’s your job to Forecast the “Time to Recovery” and “Replan the Route” • You Need To Be Able to Recover and Start Growing / Accelerating Again
  8. 8. The Common Questions You May Be Hearing 1. Time (months) to Cash Out? 2. Revenue impact due to Disruption Event? 3. What does your Pipeline Look Like 4. When Should I Start Cutting Expenses 5. Should I raise money now and/or take down round earlier than planned 6. What About Debt? Should I Tap Our Existing Credit/Venture Debt Line? 7. How Long Will This Disruption Last? 8. Long Term Economic Impacts? 9. Is it Different This Time? 10. CARES Act? PPP? 11. Insert Your Question or Your Board’s Question Here >> Yes, the Questions Go to “11”
  9. 9. Some Answers…..and Required Framing 1.Notice the Question Pattern: • Mostly About Cash. And Access to it. • It’s time to Re-Forecast • Throw Your Current Annual Plan out the Window. 2. One Size Does Not Fit All; Define Your Positioning In the Crisis Situation • Series A with <10 people and just got funded?: “Pack the Car - New Roadtrip” • Series B-C with <12 Months Runway before the Crisis? “Stop To Refuel” • Series D with 100’s and large Op Ex Structure to Support 50+% Revenue Growth? “Detour Ahead; Replan Your Route” • YOU MUST FIRST DEFINE YOUR CURRENT STATE - 1 Scenario Does Not Fit All • DEFINE SHORT TERM SCENARIO’S” and CORRESPONDING CONTINGENCY PLANS 1. The Objects In Mirror Are Closer Than They Appear. It’s Time to Act. • How Fast Should You Act? • If You Are in Travel, Cruise Line, Corp Conference Industries • If you are an Enterprise SaaS Platform Company – • If you are Zoom or Telehealth or Slack, • Do you have rare ability to Play Offense right now? You Need 2 Teams to Win • Your Action Plan depends on What You See In the Mirror.
  10. 10. What If’s, When, and How Define Future Crisis Milestones (Scenarios) When Will You Break the Glass What Will You Do When You Break It? Define Triggers Progressive Corrective Action: • The “IF” RIF – If this Scenario, Then… • Store Closures/Office Closures? • 10% Base Salary Cut Across Board? • No Merit/Annual Increases This year? • Rent Furloughs? • A/P Payment Plans? • Zero-Base Budget Entire Business • Take Opportunity to Re-Align Everything? • No Ideas Are Too Extreme when you Need to Break the Glass
  11. 11. In Case of Emergency: You are now being asked to create a “Financial Crisis Response Plan” • What To Do • When To Do It; • Notice the Sequence Pattern…. • Oxygen first (Cash) • Flotation device second • Brace for Impact • Know the Exit Route • Specific Instructions On HOW to Perform the Tasks
  12. 12. In Case of Emergency:KEY ACTIONS: Call These Plays 1. Align Sr Mgt Team With Wake Up Call – this is Top Priority 1. Align Sr Mgt Team with Crisis Severity Assumptions • Worst Case; Best Case; Base Case • Build Action Blueprints Together 2. Everything revolves around Cash Conservation and Liquidity is #1 DO NOT Wait. You don’t need all the answers You DO NEED Sr Mgt Team Engagement
  13. 13. COMMUNICATION IS CRITICAL 1. Sr Mgt Team “Stand Up Sessions” • Agile / “War Room” Leadership • Zoom sessions: Ok. Sit Down Virtual Sessions 1. Create a Bi-Weekly Board / Investor Update Template. • Communication is Key • Define Direction/Path • Precise Steps Not Required • You Will Be Course Correcting 1. Transparency is Critical; Accuracy is Not; • More ?’s than Answers • Create Team/Board/Investor Feedback Loops • The Best Ideas Win In Case of Emergency:
  14. 14. Notice the ”Framing” here is 1) Time (X-Axis) 2) Severity of Impact 3) Cash Runway (Color) Note how Sequoia thinks with their color coding Your investors will signal their desires to you as well. It’s time to Listen. Be Yellow and preferably Green. Don’t be Red. Behind the Scenes I: Sequoia Capital
  15. 15. Behind the Scenes II: Lightspeed Ventures: Lightspeed Ventures Cash Planning Checklist
  16. 16. Less than 12 Months Cash? This Is Your Financial Model For Next 3-6 Months…THIS is Your Financial Model March 31, 2020 June 30, 2020 Beginning Cash Balance + A/R Collections Must communicate way more with your customers and get 1st in line - A/P Disbursed Get this to fixed – predictable – payment plans as fast as you can + Add’l Cash Sources (Financings?) Contemplate Adding last round now; definitely raising planned future round earlier than planned. Valuation is not a concern….getting cash is Ending Cash Balance Set a Target; Figure out how to get there
  17. 17. RELATIONSHIPS CASH FOCUS & RE-ALIGN AGILE OPERATIONS & COMMUNICATIONS RECOVERY 2 AGILE OPERATIONS 1 RECOVERY 4 CASH 3 FOCUS & RE-ALIGN 5 RELATIONSHIPS Start Growing Again IN SUMMARY: Relationships - Cash - Time • Take advantage of your new Operating Agility and Cadence • Be just as brave “Recovering” by “Re-Investing” with the same Urgency • Sr Mgt Stand Up Sessions (2-3x / week? • Now is Time to Finally Create Monthly (or even Bi-Weekly Board Update and All Employee Updates • Align All Sr Mgt • Create Even More Focused Metrics and KPI’s – find out what “really matters” • Re-define Cash Needs • Create Scenario Plans • Create Contingency Plans • Contact All Relationships with Plans • Customers • Employees • Investors • Network Time
  18. 18. A Final Word on Operating Values – Trust - Transparency - “Safety” 1. People need ”Safety” during Crisis…both physical and mental 1. Transparency builds Trust. Trust creates Safety 2. True Character Show Up In Times of Crisis. People Don’t Forget. Your Reputation is Cemented During Crisis. 1. Listen intently; Don’t be Tone Deaf. People First. 1. When you have to take the Hard Decisions, Make Them With Dignity 1. Be as Generous as you can given the Constraints “How you lead right now is likely to be a career defining moment/opportunity for many of you. Lean into the uncertainty and fear and provide leadership”. (Jim Cook – 2001 and 2008 and now 2020)
  19. 19. Key Takeaways 1. Create Decision Making Framework For Your Mgt Team and Your Board • Narrow the Field of Vision (Time and Severity are Key Variables) • Scenario Plan; Together With Your Extended Leadership Team • Contingency Plan; Specific Actions You Will Take 1. It’s Your Time To Lead: Leadership Gaps are always quickly filled; Lead-Follow-Get Out of Way • Communicate, Communicate, Communicate • Be Agile and Transparent. Communicate What You Know and Especially What You Don’t Know • Create a Culture of Safety • Create a Culture of “We Will Get Through This Together” 3. A Strategic Financial Leader is Required (note on Strategy; I try to always end on Strategy) • Strategy is a clear set of planned choices • Strategy always starts with Situational Analysis + Your Position in that Situation • Strategy means knowing the End State (Your Goal) • Define the Path to get there • Keep Score, Learn, and by all means Course Correct...Often
  20. 20. 3 Goals of Today’s Discussion 1. Situational Context – 3+ Cycle Perspective 1. “Best Of” Sharing 1. Q&A: Sharing with Each Other (next 20-30 minutes)
  21. 21. Keep Engaging: Let’s Keep Conversation Going Jim Cook Founder, Managing Partner BenchBoard CFO, Orbital Insight jcook@benchboard.com Steve Abbott Managing Director Sapphire Ventures Elizabeth Patterson Vice President, Talent Network Sapphire Ventures BenchBoard Sapphire Ventures: LinkedIn CFO Group Operators Guild: OG_Live (Q&A)

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