In recent years, CFOs have assumed increasingly complex, strategic roles focused on driving value creation across the business. Growing shareholder expectations and activism, more intense M&A, mounting regulatory scrutiny over corporate conduct and evolving expectations from the finance function have put CFOs in the middle of corporate decisions.

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Smart Performance,
Communication Skills
Yield Better Results for
CFOs

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In recent years, CFOs have assumed increasingly
complex, strategic roles focused on driving value creation
across the business. Growing shareholder expectations
and activism, more intense M&A, mounting regulatory
scrutiny over corporate conduct and evolving expectations
from the finance function have put CFOs in the middle of
corporate decisions.

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While financial performance is what it is, the CFO’s
role in helping stakeholders interpret the numbers in the
context of the business environment is critical. This article
explains the significance of the role that CFOs have to
play in managing investors, communicating with
customers, suppliers and internal teams, bridging cultures
in M&A situations, without dropping the ball on day-to-day
finance functions.
In a changing business environment, the CFO is
tasked with creating economic value through smart
performance. It is also his responsibility to ensure that the
value thus created is visible and an easy to understand
parameter for investors and other stakeholders to gain
their confidence and trust.
Businesses today are rapidly undergoing a
metamorphosis in India. From the traditionally managed
family-run businesses with traditional/informal

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performance measurement mechanism, traditional modes
of raising capital and a certain lack of permeance of
transparency through the organisation about the future, we
are beginning to see an increasing number of existing, as
well as new-age, companies with a professional outlook
living in an environment which is increasingly inter-
connected and inter-dependent. The one key element that
has changed in the way of doing business in this modern
landscape is the flow of information.
The new age CFO , therefore, must now realise that
he is no longer expected to linger in the background and
surface every time the results are to be announced. As the
one person in the organisation that has intimate
knowledge of both the past performance and the expected
future growth it becomes his responsibility, not only to
steer the company towards a better future through smart
performance but also be able to provide a transparent, big

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picture view of the future, to internal stakeholders,
customers and investors.
What is Smart Performance?
A CFO today understands that the word ‘performance’
has a broader meaning than just the underlying numbers.
There has been a shift in focus in measuring performance
from profits to profitability, earnings to economic value and
so on. The focus is on creating ‘value’ which comes from
both increased sales, driving better margins, increase
efficiencies in operations amongst others which improves
stakeholder confidence and builds company valuations.
Smart performance would, therefore, mean looking
constantly for opportunities to improve economic profits for
the company both inside (operational productivity) and
outside (sales). Smart performing companies and their
CFOs are serially identifying, recording, measuring,

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comparing and finding ways to improve scores on the
short and long term value and growth metrics. by working
on:
Processes and Systems
One of the challenges that companies face is for them
to constantly look at improving each of their key
processes, be it the sales, operations, HR etc. The CFO
plays an extremely important role in defining the key
metrics and more importantly tracking them on a
consistent bias which not just helps in measuring business
performance but also bring out possible areas where
process improvements are possible. The need to evaluate
and implement systems particularly IT systems that cut
across functions and integrate them is a role that most
CFOs are involved with. The CFO’s input in the selection,
design and implementation of an integrated system (ERP)

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which involves massive amount of change management
cannot be emphasized more. In that sense, the CFO is
only next to the CEO in terms of importance within the
organisation.
Vision Alignment and Relentless Execution
Being a leadership role, it is essential for the CFO to
have alignment with the CEO/Company’s vision. Let me
illustrate this with an example – We recently had an
opportunity to work with this company, which was on a
high growth trajectory and was looking to grow its
revenues to 2x in the next 3 years. The CFO and the
Finance leadership team needed to be ready to support
this aggressive growth path by providing the CEO decision
making support and putting in place performance
management systems. The company struggled with
multiple “versions of the truth” and a lack of standard

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performance measures, resulting in management
discussions that were all too often spent on reconciling
differences in assumptions. Sponsored by the CFO, a
project was created to focus on transforming the finance
function into a highly valued partner in the business. The
CFO set out to lead a strategic change in the business by
establishing and modeling a high-performance culture in
finance and then transferring it to the rest of the
organization with the help of HR. Alignment of thought
process and being able to articulate the company’s vision
is paramount for a good CFO. The CFO also needs to
have a strong buy in to the CEO/Company’s strategy and
should also play the role as an implementer of the thought
process/ strategy to the hilt. Increasingly, CFOs are
playing a key role in developing and implementing strategy
within their company, partnering with CEOs to creatively
design growth opportunities for the future. Successful CFO
leadership requires a deeper understanding of strategy,

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increased leadership skills, and an ability to effectively
communicate financial acumen and knowledge to non-
financial colleagues. A CFO cannot wait for things to
happen, having an entrepreneurial bent of mind to get
things done is the key.
Communication
A number of CFOs that we meet today spend a
considerable part of their time in communicating with
investors and analysts. The CFO needs to communicate
on an ongoing basis and also provide an assurance on the
direction and pace of growth. It is important for the CFO
to be seen as ‘independent’, to be able to provide insights
on all aspects of business and be transparent. A CFO has
got to do the communication himself/herself as far as
possible so that the intent of what is being communicated
is not lost or misinterpreted. Any kind of misinterpretation

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can have significant implications on the company
concerned. Larger organizations build investor relations
teams who work closely with the CFO and who feed
information or analysis relating to the company or the
industry which could be of importance to analysts who
track the company’s shares closely. Regular engagement
with the market/investors and with the analysts is crucial in
building investor confidence.
A CFO needs to work closely with multiple
stakeholders. A CFO probably needs to work hard on
influencing others, improving his/her diplomatic and
people management skills. It helps a great deal if the CFO
is seen as someone who participates and contributes to
strategic discussions, which helps in building influence
particularly with the board of directors and investors. A
CFO needs to be a leader, understand the business
dynamics and be familiar with all the elements of the

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business as well as the operating model in order to be
able to be the ‘Quasi CEO’ or the ‘next in command’. In
today’s economic scenario, CFO’s are increasingly seen
as natural contenders to the CEO position. And then the
magic happens.
CFO’s find themselves assuming greater leadership
and responsibility while also asserting more influence on
strategy. Outstanding CFOs with all of these skills and the
right personal chemistry with the CEO have the ability to
become his/her right-hand person. Ultimately, such CFOs
become agents of change, creating smarter work patterns
throughout their organization with insights that drive
performance and help achieve better results. Improvement
in company valuations is a result of doing the right things
consistently over a period of time. As they say, Rome was
not built in a day.

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Case Study -1
The Company
RealBuild is a Promoter owned and managed, and
privately funded mid-sized real estate company
headquartered in Mumbai. RealBuild had developed
approximately 10L sqft of residential and commercial
space in and around Mumbai immediately before
MyCFO’s involvement with the Company and developed
around 5Lsqft of commercial real estate during the time of
our involvement. Senior Management was and conitnues
to be exclusively run by close friends and relatives of
Promoter. Initial work has been done to induct a
professional CEO at RealBuild.
The problem MyCFO had to solve

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MyCFO was involved with RealBuild in two phases.
In t he first phase, the mandate was to study the business
processes of the company, make recommendations for
improvement and to recommend a suitable ERP package
for implementation. This phase also required us to study
the financing structure of RealBuild and recommend
strategies to move away from a personal relationship drive
approach to fund raising to a more professional basis to
raise funds from formal, institutional sources. In Phase II,
MyCFO was required to establish financial and operational
controls, streamline MIS delivery, help develop models for
pricing decisions and study fund raising alternatives,
including private equity and lease rent discounting.
MyCFO Approach
In Phase I, MyCFO’s role was one of change
management, working closely with department heads, who

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had never before been exposed to working with
professionals. Our deliverables included a comprehensive
SOP document that covered land acquisition, broker
appointment, project evaluation, contracting and sub-
contracting, financing and accounting and reporting
controls and processes. MyCFO’s approach was to ‘first
seek to understand’, evaluate the technical and execution
capability of HODs and come up with a set of practical
solutions that provided some easy wins, but yet were a
step up from what the company was already doing. The
SOPs formed the basis for the ERP implementation
partner to configure Microsoft Dynamix at RealBuild. On
the fund raising side, MyCFO introduced banking partners
to RealBuild and was actively involved in the negotiations
for fund and non-fund based limits, which helped
RealBuild reduce dependence on private and expensive
sources of lending.

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In Phase II, MyCFO’s work was focused on helping
RealBuild take decisions on hold/ sell decisions relating to
ready stock and timing and pricing decisions of the sale.
Rent discounting options were evaluated and implemented
with banking partners, helping RealBuild reduce the
overall cost of funding. Timely generation of MIS relating
to size and quality of sales inquiry pipeline, competitor
pricing and inquiry to sales conversion, helped
management take timely decisions on the sales side.
Financial MIS was focused on Budgetary controls to
ensure that costs were within approved limits at all times
and that time and cost overruns were flagged in advance.
How the client benefited?
In Phase I, MyCFO’s involvement helped RealBuild
reduce dependence on private funding from 100% to 63%,
on a larger funded base. We estimated reduction in ERP

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implementation time, by a minimum of 8 weeks on a
conservative basis, with a smooth M+8 days first month
closing on ERP, apart from ‘Go live’ at about 65% of
features available in the system. MyCFO’s involvement
helped improve margins by about 2% through better
controls over procurement processes. Our involvement
also helped reducing time taken to finalise commercial
evaluation of new land bank acquisition process from
about 42 days to 23 days.
In Phase II, MyCFO’s lease rent discounting solution
reduced weighted cost of funding from about 17.5% to
about 13.8%. Sales Pipeline reports were moved from
Week end + 5 days to daily basis. MyCFO estimates
improvement of sales realisation by about 1.5% on
account of improved quality and benchmarking of sales
pipeline reports. Flagging of cost and time over runs

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enabled project completion within 104% of Budget; of the
4% overrun, 85% was passed on to end customers.
Case Study -2
Our client
Pharmax is a family owned and managed company
with turnover close to INR 700Crores. Pharmax is a
leading name in the Active Pharmaceutical Ingredient
(API) and Finished Drug Formulation (FDF) segments
which is sold in both the regulated and the generic
markets in India and over 50 countries worldwide. The
company has state of the art manufacturing facilities
approved by US FDA and has 17 Abbreviated New Drug
Application (ANDA) filed and 12 in the pipeline.
Challenges for MyCFO

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Budgeting at Pharmax was a simple ‘spread sheeting’
exercise restricted only to collation of data inputs received
from various departments. The variance between budgets
and actuals for instance in financial year 13-14 was more
than 80%. The variances were reported every month to
the HOD’s and the management on a month on month
basis for their review and comments.
MyCFO Approach
MyCFO’s mandate here was to play the role of an
ongoing CFO for Pharmax. MyCFO’s approach was to
identify the principal reason behind the budgeting
exercise, which in this case was to help the management
get a clear idea on the cash flow requirement and in
helping them stabilize the FDF business. This was
followed by a communication from the management team
on the need for the departments to participate in the

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budgeting exercise. A 6 member budgets team was
constituted which was lead by MyCFO. This was followed
by one on one meetings with the department heads where
targets were discussed and agreed. Some of the meetings
which involved key decision making were attended by the
promoters. The targets were discussed and debated
amongst teams on parameters such as stock (max order
quantity, credit period, lead time, logistics, distribution),
debtors, creditors, zero based budgeting for PDF
business, competency of personnel involved in the
process, inter departmental dependencies, product
strategy, capacity utilization, investment in fixed assets
and ANDA, making each SBU within the company
profitable, EBITDA improvement, misses and issues
based on last year’s achievements amongst others. The
budget exercise was finally completed in 8 weeks with 3
revisions. The exercise also served to set individual KPI’s

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for department heads and were eventually linked to
incentives.
How the client benefitted
The budget exercise allowed standardization of MIS
reports across the company, helped the company to
institute and track performance for the Senior Managers,
formation of the budget committee helped the departments
to resolve potential issues which may come in the way of
achievement of targets. The process also allowed a formal
mechanism to review actual progress and it also set the
ball rolling in terms of weekly monitoring reports on sales,
cash flow, stock movement to the management.

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