A New Model for CDFI Business Development Services
CFO Studio Q12017
1. 1st Quarter 2017
Vol. 6, No. 4
Trust...a CFO!
Alison Cornell
Chief Financial Officer
Pros and Cons
Of a Centralized
Treasury
36
What’s on the Table
As CFOs Refine
Budgets
14
2017 CFO INNOVATION AWARDS: Nominations Close Dec. 15
How
Sweet It IsAlison Cornell set a goal and developed top-notch skills to rise
to the CFO rank at a global public company
3. CONTINUED ON PAGE 2
CONTENTS 1st Quarter 2017, Vol. 6, No. 4
Q1 2017 WWW.CFOSTUDIO.COM 1
6
10 Tackling Systems Head-on
Dan Crumb, CFO of the Kansas City
Chiefs football team, wanted the sports
franchise to benefit from a more efficient
and transparent business planning system
— so he built one
By Julie Barker
14 Budgets: What’s on the Table
CFOssaytheelectionandotherissues
complicateyear-endplanning
By Martin Daks
18 Business & Money
MattersofinteresttotheCFOswe’re
talkingwithdaily
20 Q&A: Finance in the
Tax-Exempt Sector
AchatwithAnnaDeJesus, chief financial
officerfortheFamily&Children’sServiceof
MonmouthCounty
FEATURES
10
TRUST...A CFO! LEARN MORE AT WWW.CFOSTUDIO.COM
6 Cover Story: Best-laid Plans
On a well-designed career path, a Finance executive
makes smart choices to control her future — but
encounters an unexpected twist
By Julie Barker
4. CONTINUED FROM PAGE 1
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Stimulating financial growth in the face of economic unknowns is the key to
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24 All Together Now
The CFO can be the driving force behind company alignment, even when one area
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Cybersecurity continues to be a top concern among CFOs
28 Principles for Growth
The CFO of Johnson & Johnson links ethical decision-making with steady, strong
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CFO 2 CFO
34 ÜBER-Controlling
Why businesses with global concerns need a new dynamic on the executive team
By Georg Annen, Chief Financial Officer, Unger / USA & Europe
36 Financial Risk
Centralized or decentralized treasury: Which works best for your company?
By Walter Cirillo, Treasurer, Novitex Enterprise Solutions, Inc.
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2 WWW.CFOSTUDIO.COM Q1 2017
CONTENTS 1st Quarter 2017, Vol. 6, No. 4
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30 What’s My POB?
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32 No More Fuzzy Numbers
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8. ON A WELL-DESIGNED CAREER PATH, A FINANCE EXECUTIVE MAKES SMART CHOICES TO CONTROL
HER FUTURE — BUT ENCOUNTERS AN UNEXPECTED TWIST
BY JULIE BARKER
Photography by Matt Furman
Best-laid
Plans
T
here’s an irony at the top of
the Finance ladder, as Alison
Cornell learned two years
ago. Up to that time, in an
almost 30-year career, she had been
steadily accumulating the skill set and
accomplishments she would need
to hold a CFO position at a publicly
traded company — a role where
she envisioned herself advising and
guiding the CEO, joining in counsel
with the board and investors, and
being a top — if not the top — valued
member of the corporate decision-
making team. When she reached that
culminating moment, the surprise was
finding that there’s another horizon
beyond.
Starting as an AT&T intern in
1983 and progressing through
roles with increased scope and
responsibility (moving to a different
position approximately every two
years), Cornell ultimately achieved
the title of AT&T’s Financial Vice
President, Forecasting Performance
& Investment Analysis, a leadership
role for a $30 billion business unit.
There, she was actively involved in
helping the AT&T leadership team
realize cumulative savings of over
$3 billion between 1999 and 2003,
by identifying and implementing a
series of recommendations to reduce
operating deficiencies and associated
costs and to streamline processes.
Then, after almost two decades
in Finance at AT&T, Cornell left
to pursue her dream of securing a
position as the CFO of a publicly
traded company.
It took about one year and
75 interviews to find the right
opportunity. During that time (2003–
4), Cornell achieved her Certified
Treasury Professional designation, a
Six Sigma Green Belt, and helped her
cocker spaniel puppy become a show
dog. (No slouch himself, Cornell’s
cocker spaniel went on to attain his
Championship and then receive
an Award of Merit at Westminster
the following year.) Then, while
interviewing for the job of VP,
Finance – Late Stage Development
Services at drug-development services
organization Covance, Cornell told
that company’s CFO that her goal was
to have his job someday — which she
secured eight years later, in 2012. (“As
COVER STORY
6 WWW.CFOSTUDIO.COM Q1 2017
9. Alison Cornell
told the chief financial officer in an interview that she
wanted his job someday — and she got it
Q1 2017 WWW.CFOSTUDIO.COM 7
10. Advice for CFOs Looking
for a Global Perch
8 WWW.CFOSTUDIO.COM Q1 2017
I
had wanted to be the CFO of a publicly traded
company since I was about 25 years old,” says
Alison Cornell. Following a methodical career
plan, she attained her goal in 2012 at a mid-cap
company, Covance.
She says she achieved her career objective by
working hard, being persistent, making personal
sacrifices, making the most of each opportunity
given, being fearless, building strong teams,
being a good teammate, maintaining faith and
humbleness, and by helping people along the
way. She also credits her husband, Dave, who
supported her career aspirations and to whom
she has been married for 25 years.
Astutely, Cornell studied an AT&T colleague
who was good at advancing his career (she
worked there from 1984–2003). She questioned
other associates about how they got where they
were and what skill sets she would need; then
she took jobs that would provide those skills. She
even met one-on-one with the CFO at AT&T while
she was a Division Manager and asked, “If you
had one piece of advice, what would it be?” He
answered, “Have a good tax person.”
Now, she understands the value of that advice.
Her pointers for others include: Get a system-
wide understanding of all parts of the business,
especially operations. Take time to develop and
enhance your team, so you “have the best players
on the field.” Also: “Develop the skill of asking
questions from all angles in a disarming and
thought-provoking way.” And, “Find balance and
be present with family and friends, because they
need your best, too.”
it happened, they were looking for a potential
succession candidate for that role,” she says. “It
was somewhat serendipitous.”)
But barely two years after she’d achieved that
career goal, as she was in the midst of considering
the merits of executing an acquisition — the
target having been chosen — or doing a share
buyback, a suitor from North Carolina, LabCorp,
approached, and made an offer for the Princeton,
NJ–based Covance.
It fell to Cornell, the Corporate Senior Vice
President and CFO, in a tense roughly month-
long period in the fourth quarter of 2014, to
give the LabCorp team a thorough enough
understanding of Covance financials so LabCorp
could do its own financial modeling. What she
needed at her fingertips was not just the current
and forecasted numbers for eight business units,
but “what’s going on in each of the different
markets.”
On November 2, LabCorp entered into a
definitive agreement to acquire Covance, and
in February 2015, in a $5.7 billion transaction,
completed that acquisition.
“What really became pronounced were the
principles of duty of loyalty and duty of care
that the Board takes in making all decisions
in their capacities as Corporate fiduciaries,”
Cornell says. “It was up to me to present the best
set of information possible, a comprehensive
set of analytics, so that the Board could weigh
everything possible to make the right choice. My
job became informative.”
She knew, of course, that there was a likelihood
that the acquiring company wouldn’t keep
her as CFO, and yet she immersed herself in
gathering research and information to facilitate
the decision. And so in her last weeks as Covance
CFO, “The role pivoted,” Cornell says. “It became
more about helping [the board members] do
their best job.”
Reputation as a Go-to Person
Cornell has always used her positions to make
a meaningful impact. When she was at AT&T,
as CFO of the Business Network Services unit,
she delved into the sales figures, so the company
could understand its customer-level profitability,
then introduced a sales-contribution model, and
linked that to the business plan. “It changed the
way we ran the sales force,” she says.
Inthelate1980swhenAT&T soldcomputers,
shewasforecastmanagerforthemarketingand
salesoperationsintheDataSystemsgroup. She
noticedthatinaccuratedemandforecasts, basedon
salesprojections,werehurtingprofitability, because
theywereusedformanufacturing. Shedevelopeda
forecastingprocessaftergaininganunderstanding
ofwhattherightdriverswere, and“weincreasedour
forecastaccuracyto 99percent.”
At Covance, she spearheaded a project to
significantly improve profitability and Days
Sales Outstanding (DSOs) for the Late Stage
Development unit.
In 2015 Cornell received the prestigious CFO
Innovation award from CFO Studio, having been
selected by an independent panel of judges. Her
noteworthy achievement was introducing a “cash
neutral” approach that convinced Covance’s drug
development customers to provide advances, a
practice that was not the customary standard for
the clinical trials the company managed for them.
The cash neutral plan was radical, and might
not have occurred to an industry insider.
“Sometimes it’s helpful not to be from the
industry, as you have a fresh perspective and
don’t take things as a given,” says Cornell, who
sold the idea to customers on the merits of
its fairness. “If you have a conversation with a
businessperson that essentially says we should
get paid for the work when we do it, it’s very hard
[for them] to argue, especially someone who’s
your customer and wants you to be successful
[in delivering services to them],” she says. “[The
plan] essentially laid out the math and showed
them that absent the advance, we would have
been “in the hole” for the trial cash-wise. With the
advance, we were just neutral.” Industry practice
changed as a result, she says.
“For me, it’s all about making a difference
wherever you are. And every day,” says Cornell.
When she wasn’t driving the Finance agenda,
she was the Executive Sponsor to a maternal and
infant health program sponsored by the Covance
Charitable Foundation and operated by CARE
Nepal, which established 15 birthing centers and
COVER STORY
11. Q1 2017 WWW.CFOSTUDIO.COM 9
It’s All About
Visibility
C
oming up from a business unit to
Corporate Finance, Alison Cornell,
who was named CFO of Princeton-based
Covance in 2012, knew that having
only short-term information available,
managers tended to make short-term
decisions. The 18-month rolling forecast
she instituted gave management a longer-
term perspective.
“When I was in the business unit, it
was very frustrating,” she says. But with
the rolling forecast, people had greater
visibility into what lay ahead.
At the same time, she introduced
a business unit operations review,
attended by the top five or so leaders
of each business unit. This consisted
of a 90-minute meeting held once a
month that looked at each business unit
holistically. “We talked about financials,
people, process issues, technology
issues, customers. We looked at the
business from every angle,” she says.
With eight business units in the portfolio,
“if you knew what was going on in what
time frame, you could make trade-offs.”
The two initiatives resulted in “many
fewer fire drills,” Cornell says. Not just
the leadership benefited from the shift
away from reactive. Everyone had a
better sense of business needs and
challenges.
five school bathrooms within the poorest regions
of Nepal.
With verve and solid accomplishments,
she has navigated a career path through three
diverse industries, her most recent CFO post
being at a multinational firm in the chemical/
consumer products industry. She leveraged her
past experience and expertise, taking up several
initiatives including obtaining 500 million Euro
Bond financing at a substantially lower rate, and
identifying opportunities to build upon her Finance
organization’s strengths.
“Each industry and company has a culture of its
own,” she says. “You need to be adaptable while
maintaining your authenticity.”
Lifelong Learner
Raised in Sayreville, NJ, the daughter of an Army
major and a stay-at-home mom, Cornell amassed
extra-credit points and predominately straight A’s
all through school — receiving her undergraduate
Psychology and MBA degrees at Rutgers University
— both with honors. Approaching college
graduation, she had an internship at AT&T’s Center
for Education and Training, but the company had a
hiring freeze. She got into Finance by pure chance:
When the freeze was lifted, the first job to open up
was Financial Systems Analyst. Cornell applied and
was hired.
She did not realize until after she left AT&T that
during her time there she “developed skills that
could be used anywhere: leadership, multitasking,
process design, execution, project management,
influencing, problem solving — all applicable to be
successful as a Finance leader,” Cornell says.
Still, it takes a particular type of individual to
build a career on the opportunities presented.
Cornell needed to leverage her hard work and every
bit of networking; furthermore, she had to develop
teams to help her “get the right things done,” as Peter
Drucker put it, describing the archetypal effective
executive.
One of her longtime practices is to discuss with
each team member individual career plans in her
first meeting with him or her. She told CFO Studio
magazine in 2015, “Each person needs to own their
career and have an individual development plan in
place that you need to help enable. An individual
development plan should be a living document, not
just ‘check the box,’ but very thought-out and well
planned.”
When she moved into her Corporate VP –
Global Financial Planning & Analysis role at
Covance, “it just so happened I had 365 people
in my group. That was the inspiration for [taking
365 days and] meeting literally everybody [live
or by phone]. In my prior jobs, I always made it
a point to talk to a lot of people. The 365 went
above and beyond. It helped me understand them
as individuals, what their challenges were, what I
could do to help.”
And then she shifts to a more personal tone,
speaking about helping fulfill the aspirations of
people who have worked on her team. “I think
people tend to pigeonhole other people,” she says.
“They think, ‘Oh, you’re in Finance, you don’t care
about people things.’ ” But she does; she was a
psych major, after all. She says she has spent “a ton
of time with people talking about what their career
aspirations were, about how do you even think
about a career plan. I created my own template on
how to do that and walked people through it.”
In her own career, she says, she was fortunate to
have “great internal teachers who were willing to
answer my million questions.” But learning answers
to questions isn’t enough. She had to prove herself
again and again as she moved through the career
path she had envisioned.
And she’s still learning. “I do a kind of self-
assessment every day.” C
“Each industry and company has a culture of its own.
You need to be adaptable while maintaining your
authenticity.”
12. 10 WWW.CFOSTUDIO.COM Q1 2017
FEATURED CFO
T
he most exciting part about being a chief
financial officer, says Dan Crumb, the
Kansas City Chiefs CFO, is the ability to
play a strategic role in the organization.
“We touch every department,” he says. “We’re
involved in the overall business, from budgeting to
business planning.”
For him, the years 2015 and 2016 have provided
exhilaration, not so much because of the way the
team performed (and the Chiefs did have a great
2015 season, turning in 10 consecutive wins and
landing a wild-card berth in the playoffs), but
because Crumb pushed for and oversaw the design
of a business planning system that is now used by
the entire Chiefs organization. Its capabilities and
dashboard give him what a football scout might
DAN CRUMB, CFO OF THE KANSAS CITY CHIEFS FOOTBALL TEAM, WANTED THE SPORTS
FRANCHISE TO BENEFIT FROM A MORE EFFICIENT AND TRANSPARENT
BUSINESS PLANNING SYSTEM — SO HE BUILT ONE
BY JULIE BARKER
Tackling Systems
Head-on
13. call “arm talent” — in the finance world,
it’s an ability to be strategic.
Up until the 2016 fiscal year, Crumb
received business plans from the 20
departments (IT, retail, marketing,
security, corporate partnerships, and ticket
sales & services, among them) that support
the team, each plan in a separate three-ring
binder. The plans used no uniform software
program — Microsoft Word and Excel and
Adobe Acrobat were all employed — in
describing the departments’ objectives for
the year, how they planned to accomplish
the objectives, the capital and operating
budgets, and other resources that every
department would need.
Each department head would then
have three binders assembled: one for
Crumb; one for the ball club’s president,
Mark Donovan; and one to keep. It was an
ungainly process.
Crumb wanted the mission statement
and long-term goals to be top-of-mind
during the entire planning operation. He
believed the best way to do this was to
ask that the department’s objectives link
directly to the strategic goals that support
the mission statement. An automatic
prompt should ask, “ ‘What goal does this
objective support?’ ” says Crumb.
So he set out his objectives: Make the
business planning process more uniform,
make it more strategic, make it more
visible, make it more efficient.
No off-the-shelf product gave Crumb
all he needed. “We’re sort of a specialized
business,” he says. “There are only 122
professional sports franchises in America.”
So, he looked at the Chiefs’ internal
resources.
The SharePoint Solution
The company uses Microsoft’s SharePoint
in most departments for content sharing
and collaboration. Crumb, who oversees
IT, knew he had a couple of good
programmers on staff, so he gave one of
them the vision and the assignment. He
also okayed hiring an outside consultant
who, like the programmer, had experience
with the Microsoft application.
“We’ve got the resources, and [the
software application] gives us a really good
platform, so I felt we could do this,” says
Crumb.
The programmer created a prototype.
Crumb asked department heads to provide
feedback. And the final prototype debuted
for all to review and critique at the annual
planning colloquium. The entire process
took around four months.
“We knew exactly what we wanted
this to do ... and I think having the other
department heads weigh in and help out in
the process was critical,” he says.
Besides eliminating the stacks of
binders, one of the things Crumb is most
excited about is the “accountability layer”
via a dashboard that gives Crumb and the
Chiefs considerable visibility into where
department heads are at any particular
stage in the planning cycle, and insight into
how well they are doing in accomplishing
their objectives.
In December 2015, the new system
launched. It was used throughout the
process of creating and approving FY2016
business plans (the sports franchise’s fiscal
year began April 1). Crumb has checked
the dashboards quarterly to see how
departments’ plans have met reality.
A Personal Connection
Dan Crumb watched Super Bowl IV on
television back when he was just shy of
six years old. He has a sharp recollection
of that event because it was the first
football game he can recall watching,
Q1 2017 WWW.CFOSTUDIO.COM 11
“Having the other department heads weigh in
and help out in the process was critical.”
— Dan Crumb, Chief Financial Officer of the Kansas City Chiefs
Asset to Two
Communities
“You walk around the parking lot on a game
day, and you smell all the great barbecue,
and you see people just having a great time,
getting excited about going into the stadium for
the kickoff,” says Kansas City Chiefs CFO Dan
Crumb. That’s what it’s like to be the CFO of a
professional football team (at least the one in
Kansas City, MO).
Before he took a job in professional sports,
Crumb was CFO for New Orleans–based Abita
Springs Water Company, which had its bottling
plant destroyed by Hurricane Katrina. He
considers the time surrounding that episode,
and the results that were born from chaos, as
the biggest success of his career, as well as the
biggest challenge.
Crumb and the company’s leaders transformed
their business plan, changing from that of
a bottler to a distributor of other sources’
water, a solution “we had to invent on the fly.”
Meanwhile, the company’s leadership “had to
be the glue” to hold the tenuous bits of normal
life together and to help employees get back on
their feet, says Crumb. The company survived,
and ultimately the owners decided they wanted
to sell. Subsequently, he worked for three
years for the New Orleans Hornets and in 2010
became CFO for the Chiefs.
“This is arguably the richest history/tradition–
oriented organization that I’ve worked for,” he
says. “To be part of what I view as a community
asset — that’s very exciting and that’s what
separates it from just a regular corporate
business…. It makes it really gratifying.”
14. 12 WWW.CFOSTUDIO.COM Q1 2017
and it was being played at Tulane Stadium in his
hometown of New Orleans. He remembers the
team that won: the American Football League’s
Kansas City Chiefs, by a lopsided score (23–7)
over the National Football League’s Vikings. It was
1970, the last year the two leagues held a playoff
game; they merged a few months later under the
NFL organization.
Forty years on, Crumb was CFO of the National
Basketball Association franchise, the New Orleans
Hornets, when the Chiefs came calling, looking for
a chief financial officer. The team “ultimately made
me an offer, and it was an offer I could not turn
down,” he says. In no small part, he was excited to
be working for the Hunt family and to work for an
organization that “has such a rich tradition, such
a rich history as the Kansas City Chiefs.” The late
Lamar Hunt founded the AFL and the Chiefs, as well
as Major League Soccer, and coined the name “Super
Bowl,” among other accomplishments.
Crumb, who earned a Bachelor’s degree in Finance
from the University of New Orleans and an MBA
from Tulane, initially worked for KPMG, and has
since had six successive CFO positions, prior to
joining the Chiefs. He says the most challenging part
of the CFO’s job is that with technology constantly
advancing, it is difficult to identify “where to put your
technology investment.” Both from a financial and
a personnel perspective, the CFO has to determine
which technology will best support the organization
in achieving its objectives as both the technology and
the organization evolve. It’s a tough call.
At the Chiefs, he has made significant investments
to upgrade connectivity at Arrowhead Stadium,
which was built in 1972 and is leased by the Chiefs.
“We put in a complete Wi-Fi system, and we put in a
DAS — a distributed antenna system — for cellular
coverage,” he says, adding, “People want to be able
to post photos, they want others to know they’re at
Arrowhead Stadium watching a Chiefs football game,
so we had to deliver that.”
A husband, father of two, and a community
volunteer, Crumb is also an avid historian, a
horseman, and an amateur welder. He gets a kick
out of working in operational jobs, and it’s more fun
when no one knows his true identity. He once went
“undercover,” making balloon animals and tossing
T-shirts to the fans during a Hornets game; he has
also wielded his welding torch incognito in the
repair shop of another company where he was CFO.
Recently, he sold tickets in the Chiefs’ 50/50 raffle.
“It’s a good way for me to understand the business,” he
says, adding that taking on such initiatives can be very
helpful in getting to know some of the people in the
organization.
While in his CFO role Crumb gets a charge out of
throwing himself into “looking at ways to improve.”
Rethinking the business planning system, he says, was
very appealing because it involved “how to improve
processes and be more efficient. Those are things that
I’m passionate about.” C
Dan Crumb (center) at the Souper
Bowl of Caring, packing food for
Harvesters — the Community
Food Network
Crumb, who serves on the Board of Trustees of the National WWI Museum &
Memorial, presents a check representing the nonprofit’s share of one game’s
50/50 Raffle receipts to Dr. Matthew Naylor, the museum’s President & CEO
Every quarter, the CFO Breakfast Learning Series, with CPE credits. Reserve your seat at www.cfostudio.com
+
FEATURED CFO
17. I
n late Q3 2016, as CFOs worked
on their capital budgets for the
upcoming year, they faced a trifecta
of uncertainties: a so-so economy,
lingering concerns about possible interest
rate hikes, and an election that presented
a choice between two starkly different
candidates. Of course, that was on top of
the usual concerns about competition,
regulation, and other issues that keep
CFOs on their toes. To see how financial
executives are dealing with these multiple
issues, CFO Studio spoke with chief
financial officers from businesses that
represent three significant industries:
technology, health care, and consulting.
From taxes to strategy, they shared their
thoughts about 2017.
“Fortunately, the state of the economy
has not affected our capital planning,”
says Dave Pearson, CFO of Holmdel,
NJ–based Vonage, a leading provider
of cloud communications services
for consumers and businesses. “We’re
continuing to commit capital into our
unified communications cloud segment.
We’re basically putting in as much capital
as we can effectively deploy.”
Vonage’s expanded focus from Internet-
based telephone services to cloud
communications services for both the
consumer and business markets gives the
company new capital needs. Pearson notes
that Vonage’s consumer network doesn’t
consume much cost, “Since it’s already in
place and we can basically maintain it,”
so the cash it generates frees up funds to
invest on the business side. “Currently, the
cloud unified communications market has
less than 20 percent penetration, so there’s
a lot of room for growth,” he adds.
Health Care, Borrowing
But Pearson’s budget-planning plate is filled
with a variety of other issues, including
rising health care costs, which continue to
be a big issue for many businesses. He says
Vonage is trying to rein them in with the
company’s first-ever self-insurance plan. “We
implemented it in 2016 — with a backstop
insurance plan that kicks in after a certain
level — and so far it seems to be the right
way for us to go. We plan on continuing the
self-insured health plan in 2017.”
BUDGETS:
WHAT’S ON THE TABLE
Q1 2017 WWW.CFOSTUDIO.COM 15
CFOs SAY ELECTION,
OTHER ISSUES COMPLICATE
YEAR-END PLANNING
BY MARTIN DAKS
18. 16 WWW.CFOSTUDIO.COM Q1 2017
He’s also tracking interest rates, noting
the likelihood of at least a slight increase in
the benchmark prime rate in 2017.
“We’re prepared for that to happen,”
Pearson says. “We have not hedged, but
we are borrowing at LIBOR [a benchmark
interest rate index] plus 3 percent, so we
feel good about floating right now. We do
expect further rate hikes and have built that
scenario into our capital plans.”
He doesn’t believe that the outcome of
the presidential race will change Vonage’s
day-to-day operations, either. “I don’t think
that the difference between a Democrat or
Republican as president will be too dramatic
for businesses,” Pearson explains. “I do hope,
though, that Congress and the next president
can work together on general business issues,
particularly on a plan that would reduce the
tax rate on repatriated foreign earnings [which
are currently taxed at about 35 percent].”
Challenging Times Globally
When Bill Baldwin, CFO of the Princeton-
based multinational management consulting
firm Kepner-Tregoe, worked with his team
on the 2017 capital budget, they took a
global view.
“As CFO I work with the CEO, and with
five regional worldwide managing directors,
each of whom works with five worldwide
controllers,” he explains. “We also work with
service focus leaders who oversee services,
operations, and general training. We get input
from key functional leaders in information
technology, marketing, and product
development. So there’s a comprehensive
feed of information, which is important.”
Kepner-Tregoe’s initial 2017 budget plans
were distributed to key executives in mid-
September 2016. They have been reviewed
and refined — and will continue to be worked
on until mid-December, when the final
proposals will be presented to the Board of
Directors for their consideration.
During that review period, Baldwin and
CEO Chris Geraghty visited the company’s
remote offices to review and polish the firm’s
three-year financial and strategic plans.
“We continue to see challenging times,”
he says. “It’s not just the U.S. presidential
election, but there are issues with economies
throughout the world, including the British
exit from the European Union, and unrest in
Southeast Asia.”
Thus, his firm has to consider a variety of
global political, social, and economic factors.
“Of course, it’s not just us,” he adds. “In 2017
and beyond, the clients that we work with
also have to deal with issues like the changing
workforce, as baby boomers retire and
millennials enter the ranks of management.”
Addressing the Workforce Mix
These and other kinds of change mean that
companies have to be prepared to innovate
when it comes to their own work and
management practices, and Baldwin says
Kepner-Tregoe is gearing up to help them.
“We’ll probably add some people, but as
part of our budget considerations we continue
to fine-tune our workforce,” he reports. “We’ve
been balancing the mix between full-time
employees and independent contractors. We
used to have more full-timers, and expect to
add to them in 2017 and beyond, but we are
continuing to balance the mix.”
As a professional services firm, Kepner-
Tregoe is not as capital-intensive as some
other categories of businesses. “Most of
our hard assets are laptops and software,”
explains Baldwin. “But because we maintain
leased offices around the world, we’ve been
reviewing our real estate footprint.”
In a bid to reduce lease costs, he says the
firm may consolidate space, adding that one
option is to let more employees, especially
those in support functions, work from home.
Rising health care costs prompted Kepner-
Tregoe, in 2011, to move its 48 U.S. employees
into a PEO, or professional employment
organization, a third-party firm that becomes
the employer of record, maintaining employee
benefits, payroll, workers’ compensation, and
other services. “Becoming part of a larger firm
enabled us to obtain better benefits and overall
pricing,” Baldwin says. “We pay 85 percent of
our employees’ health care premiums, but we
had to find a way to reduce the costs.”
GDP and Election
Baldwin is also concerned about the sluggish
pace of economic growth — Gross Domestic
Product rose at an anemic rate of 1.1 percent
in the second quarter of 2016, according to
the most recent data released by the federal
Bureau of Economic Analysis. “Businesses
need to be more innovative to grow,” says
Baldwin. “But many industries have not been
embracing innovative change. We need tax
and regulatory reforms to help create growth
and drive innovation.”
He would also like to see a reduction in
the federal corporate tax rate, which he notes
“is much higher than international rates.”
He suggests a lower rate would spur more
companies to repatriate profits and increase
their domestic investment. It’s an issue of
growing concern, since published reports
indicate that U.S. companies have parked
more than $2 trillion overseas to shield the
profits from high U.S. taxes.
PREPARING FOR 2017
Dave Pearson, CFO, Vonage
Bill Baldwin, CFO, Kepner-Tregoe
19. Q1 2017 WWW.CFOSTUDIO.COM 17
Baldwin believes the outcome of the
presidential election will likely have a big
impact on the economy.
Both candidates suggest more action
on the corporate tax front. In a bid to
bolster the economy, Republican candidate
Trump has proposed a low, 10 percent tax
on corporate profits that are repatriated
back into the U.S. According to Clinton’s
website, Hillary will close tax loopholes
like inversions that reward companies
for shifting profits and jobs overseas, but
her proposals do not address repatriated
profits directly.
“The candidates’ approaches to business
and economic stimulus are starkly different,”
Baldwin asserts. “A Democrat as president
will continue some or many of Obama’s
current policies. The question is whether
you’re happy with the performance of the
U.S. economy over the past seven or so
years, or do you want change to stimulate
economic activity?”
Wellness Emphasis
Despite the uncertain economy, Morristown,
NJ–based Atlantic Health System — a
not-for-profit health care organization that
comprises six medical centers and hospitals,
in addition to Atlantic Rehabilitation,
and Atlantic Home Care and Hospice —
continues to “make investments in our
services, facilities, and employees to develop
the infrastructure necessary to be successful
for the future,” according to Kevin Lenahan,
Senior Vice President and Chief Financial
and Administrative Officer. “Our capital
and budget plans are developed with the
objective of creating a trusted network of
caring to serve our communities and ensure
every patient can access the right care, in
the right place, at the right time, at the right
quality, and at the right cost.”
But, even health care providers have to
keep a close eye on their own health care
costs, he adds.
“Internally, we are aligning our benefit
structure with an emphasis on wellness. Our
successful and nationally recognized Atlantic
Accountable Care Organization is making
strides to better manage and reduce the overall
cost of care.”
As the company plans for 2017, Atlantic
Health “will continue to manage its cost
structure and look for opportunities to grow
as health care reimbursement transitions from
fee-for-service to value-based care,” Lenahan
details. “We are building an economic engine
able to support the infrastructure needed to
provide high-quality, outcome-focused care.
We will continue to recruit and retain highly
qualified, talented staff.”
Head Count, Interest,Taxes
AtlanticHealthSystem’s2017budgetprovides
formoreinternalinvestment,headds.“Our
workforceplanninganalyticsfrom2013–2015
showsasteadyincreaseinthenumberofhires.
In2015weshoweda14percentincreasefrom
2014.For2016,basedonourhirestodate
andanticipatedhiresfortherestoftheyear,
weprojectaslight increase. We continue to
steadily recruit for new and replacement
positions across the system. In addition, our
internal hires continue to be strong and are
trending about the same or a slight increase
from 2015.”
Still, he’s concerned about the prospect of
higher interest rates in the near future.
“I think interest rates will go up in 2017,”
reports Lenahan. “Atlantic is preparing for an
interest rate increase by taking advantage of
current rates and going to market for a $225
million bond refinancing [in September].”
Lenahan is also closely monitoring
tax issues in New Jersey, where hospitals
have been roiled by cash-strapped
municipalities’ and private citizens’
challenging their tax-exempt status —
Atlantic Health System’s Morristown
Medical Center among them.
“Atlantic Health System had supported
the proposed legislation which would
have provided much-needed clarity on the
fair-share community service contribution
from New Jersey’s not-for-profit hospitals to
their host communities with predictability,”
he says, referring to failed proposals like a
fee-based formula of $2.50 per day per bed,
or $250 per day for satellite facilities, in lieu
of traditional property tax assessments. “We
continue to work closely with legislators
and the New Jersey Hospital Association to
define a clear path on how hospitals and host
towns can agree on a fair-share community
service contribution. However, in its absence,
Atlantic Health System has opted to begin
this process with its own host communities,
and has reached agreements in both
Morristown and Newton.”
For CFOs who are annually asked to be
their organizations’ financial navigators
despite limited visibility, challenges like
these simply represent the latest in a long list
of obstacles they’re expected to overcome.
But most CFOs would probably agree with
Kepner-Tregoe’s Baldwin, who says the
review, forecast, and planning that go into a
year-end budget are a significant part of the
task of creating positive growth. C
“We do expect further rate hikes and have built
that scenario into our capital plans.”
— Dave Pearson, Chief Financial Officer of Vonage
Kevin Lenahan, CFO, Atlantic Health System
20. MONEYBUSINESS
18 WWW.CFOSTUDIO.COM Q1 2017
Finance – HR
Collaboration
Is Key, But
Management
Sees Difficulties
in Alignment
Management and Leadership:
What’s the Difference?
Aggressive Goals and Leadership Failures
at VW, Mitsubishi, Wells Fargo
78% of Finance execs consider HR a strategic partner, however:
32% expect HR to go over budget
34% expect mismanagement of Affordable Care Act reporting
35% expect to have to pay IRS audit penalties
IN ADDITION:
97% of Finance execs have significant concerns with benefits costs
93% have significant concerns with HR’s missteps on executive liability
88% have significant concerns with HR’s Affordable Care Act audits
Under pressure from the U.S. Environmental
Protection Agency, Volkswagen admitted
last year that the company faked data on diesel
vehicles’ emissions. Confessed the company’s
chairman (and former CFO) Hans Dieter
Pötsch, engineers could not design a legitimate
way to meet U.S. emission standards within
VW’s time and budget requirements.
At Mitsubishi fuel-economy readings were
manipulated by falsifying tire pressure. The
precipitating factor for that dishonesty: That
automaker, in a two-year period, increased its
fuel-economy targets for certain models five
times. Those were the models where cheating
occurred.
And then, Wells Fargo confessed to opening
1.5 million fake bank accounts and creating
565,000 fraudulent credit card applications.
The Wells Fargo employees who engaged in this
swindle did so because they felt “pressure” to
meet targets.
Who is to blame for all this malfeasance?
Employees who pervert the truth to meet
improbable goals, or leaders who set the goals?
Setting big goals is one of the primary jobs of
leaders. Helping managers and their teams meet
those goals — motivating and listening — is
another part of leadership. Addressing Wells
Fargo’s delinquent behavior, Richard Cordray,
director of the Consumer Financial Protection
Bureau warns, “Financial incentive programs, if
not monitored carefully, carry serious risks that
can have serious legal consequences.”
How could management have foreseen the
results of their actions? By keeping an ear tuned
to receive bad news, and then learning from it.
As John F. Kennedy once said, “Leadership and
learning are indispensable to each other.”
In theory, managers and leaders are viewed as performing very different roles, but do they really?
A recent study based on semi-structured interviews with eight leaders from business, government,
and NCAA Division I sports that was reported in the Harvard Business Review raises this question.
“We think of managers having a different focus from leaders. And yet this distinction blurs
significantly when we look at the daily activities of these people in charge. The majority of the activities
described were very similar, or even identical — delegating, learning, motivating, and so on,” writes the
study’s author, John O’Leary, in HBR.
The major difference between leadership and management seems to be whether the behaviors are
others-focused or results-focused.
Differences described by interviewees:
Leaders’ Interest Managers’ Interest
Trusting people...................................................Gaining trust
Engaging people..................................................Being accountable
Motivating & encouraging people........................Being optimistic, Being visible,
Providing recognition and reward
Delegates to empower subordinates...................Delegates to increase efficiency
SOURCE: Hub International Limited survey of more than 400 senior-level HR and Finance executives at U.S. companies with 50–1,000 employees
(“Employee Benefits Barometer: SMB Perspectives and Priorities in an Era of Disruption,” conducted December 2015)
While finance executives consider HR a strategic partner, these same executives’ assessment of the job done
by HR in the employee benefits area reveals a shaky partnership:
21. MONEYBUSINESS
Adopting a Digital Business Model
Delete the Phone Data in Your Rental Car
Q1 2017 WWW.CFOSTUDIO.COM 19
The cloud is enabling companies to move more rapidly toward new business models that
engage, enable, and support increasingly tech-savvy customers and workers:
Lack of Sleep Can Kill Your Charisma
Sleep-deprived followers are not apt
to notice the boss’ positive emotion
(aka “charisma”), and leaders who
don’t get their essential slumber are less
likely to display charisma as they go
through their day. That’s the conclusion
of a recent study testing whether the
perception of a leader’s charisma is
undermined when either of these two
conditions exists: sleep-deprived leaders
or sleep-deprived team members.
The scientists, who reported their
results in the Journal of Applied
Psychology, first manipulated the
sleep of “leaders,” giving them about
two hours less sleep than the control
group of “leaders.” The sleep-deprived
leaders, who were told to prepare
and deliver a speech, rated their own
feelings of enthusiasm, excitement,
and attentiveness before speaking and
after. In addition, evaluators rated the
charisma of each speaker.
In the second part, the subordinates
were deprived of sleep and then asked
to rate videos of those “leaders” as to
their charisma. Sleep-deprived followers
attributed less magnetism to any of the
“leaders” whose speaking performance
they were shown.
Real-world business leaders may
be sabotaging their own success
by requiring subordinates to check
smartphones late at night, proposes the
lead author, Christopher M. Barnes, an
assistant professor of management at
the University of Washington’s Foster
School of Business.
Connecting a mobile device to a rental car can result in the inadvertent sharing of your call and
message logs, contacts, and text messages, warns Lisa Weintraub Schifferle, an attorney with the
U.S. Federal Trade Commission.
The system may “keep locations you entered into the GPS or visited when traveling in the rental
car — like where you work or live,” she warns.
To be safe:
•Do not use the USB port to charge devices; instead use the cigarette lighter.
•Do not ok access to your contacts if you just want to play music. Give the system as few
permissions as you can.
•Do delete your data at trip’s end. The settings menu of the infotainment system is where you’ll
find your device’s code name. Follow prompts to delete your device.
SOURCE: The Wells Fargo Insurance 2016 Network Security and Data Privacy Study, conducted from June 3–9, 2016; answered by 100 decision makers in the area of cyber and data privacy risk.
72%of
executives see a
digital business
model as critical
for success
15%
view their
organizations as
nimble enough
for full digital
businesss
55%
of the companies’
apps are already
in the cloud
88%
cite cloud security
as a top priority for
competitiveness in
the digital world
SOURCE: Unisys survey, June 2016, of 175 IT and business executives in the U.S. (125), U.K., Germany,
and France whose organizations employed 1,000 employees and up.
Private data leaks are the No. 1 concern of decision makers at companies with $100 million or
more in annual revenue. Here are the data breach issues that most worry business executives:
»» 47% Leaking private data/loss of data
»» 26% Hackers/outside threats
»» 26% Security breach
»» 9% Maintaining reputation/keeping compliant with regulations
»» 7% Viruses/disruption of operations
»» 7% Software vulnerabilities
»» 7% Employee misuse of technology
»» 7% Other
While one of the biggest areas of vulnerability is employees clicking on links in phishing scams, a
sophisticated twist is when a directive purports to come by email from a senior executive, requesting
that payment be made to a specific bank account.
Everyone’s Worried About Network Security — for Good Reason
22. 20 WWW.CFOSTUDIO.COM Q1 2017
Interview by Andrew Zezas
Q A
A
nna DeJesus, the Chief Financial
Officer for the Family &
Children’s Service of Monmouth
County, joined Family &
Children’s Service in 2011. FCS is the
oldest not-for-profit service agency in
Monmouth County, caring for 18,000
underserved individuals and families
annually, from children to seniors. Andrew
Zezas, Publisher of CFO Studio magazine
and host of CFO Studio On-Camera,
spoke with Ms. DeJesus about the role of
the CFO in the tax-exempt sector.
n (ANDREW ZEZAS) Your organization
services the whole gamut, from young children
to seniors. What is the most unique feature of
FCS and its mission?
DEJESUS: Without us, our clients would
have nowhere else to turn. It’s extremely
unique because there aren’t any other
agencies in Monmouth County that
provide some of the services that we do.
We have a “Rep Payee” program in which we
manage Social Security monies for clients
who may not be able to handle their own
budgets. Going on right now is Operation
Sleighbells. It’s a great program. It provides
toys, clothing, and even gift cards for the
parents of children in the Christmas season.
Other programs are KIDS Corps, offering
opportunities for teenagers to volunteer;
and Reading Buddies, where seniors go into
slightly underprivileged schools and read to
children to spread literacy.
n How do you think the role of CFO differs in
the not-for-profit world vs. the for-profit?
DEJESUS: It is similar on the level of reporting
finances, as my role is to be sure that the agency
is fiscally sound. Management of revenue and
expenses — that’s all very similar to what a
CFO does in a for-profit.
n But you’re not just a rear-view
compliance officer.
DEJESUS: No, I am not. My goal is to keep this
agency fiscally sound so that we can continue
to serve our clients. I don’t have to worry
about the bottom line, so to speak; or making
sure that our stockholders get a dividend
at the end of the year. I have to be sure that
this agency stays in a position where we can
continue to operate.
n What are the most important steps that
a CFO can take to have the greatest positive
influence within their tax-exempt organization?
DEJESUS: When I first came into the
agency, there were no reports. A lot of our
departmental managers and directors
are nurses and social workers — not
businesspeople. So, it’s important to me, to
explain to them how their departments are
doing, but also how to keep everyone solvent.
n Would you characterize your management
style as aggressive? tough? You explain it.
DEJESUS: I think it’s a combination of a lot
of things. I try to be fair and honest. I can be
direct. I like to get to the point, especially with
finances. What I strive to do is show a path. C
Finance in the Tax-Exempt Sector
Anna DeJesus
Watch the Entire Interview on
www.cfostudio.com
n Mariano Balaguer
Taro Pharmaceutical
n Joe Budd
Reagent Chemical
n Blake DeSimone
WebMD Health
n Matthew Ellis
Verizon
n Mark Erceg
Tiffany & Co.
n Jennifer Fleissner
Relayware
n Gordon Lavalette
New York Racing
Association
n Ralph Nicoletti
Newell Brands
n Jane Nielsen
Ralph Lauren
n Michael Vesey
Wayside Technology
Kudos, Congratulations, and Reasons to Celebrate I Join us in congratulating CFOs:
Email new CFO info to Christopher.Borgese@CFOstudio.com
23. PROMOTE
YOUR BRAND
TO CFOs....
Trust...a CFO!
Publish your CFO-focused content, promote your company’s
brand and share case studies and thought leaders’ insights.
CONTACT
Craig Fallon
Director of Business Development Partnerships
Craig.Fallon@CFOstudio.com
732.868.0000 x127
...REGIONALLY OR NATIONALLY
IN CFO STUDIO MAGAZINE
24. EVENTS EXECUTIVE DINNER SERIES
22 WWW.CFOSTUDIO.COM Q1 2017
BUSINESS AS USUAL,
NO MATTER WHAT
STIMULATING FINANCIAL GROWTH IN
THE FACE OF ECONOMIC UNKNOWNS
IS THE KEY TO SUCCESS
M
ostexecutiveswouldagree:Inorder
tostayinbusinessandoutpace
competitors,companiesneedto
growandexpand,regardlessofwhat
isgoingonintheworldmarket,ortheirown
backyard.Howthat’saccomplished,however,
isa“challengeandagoodquestionthatmay
nothaveonedefinitiveanswer,”accordingto
JasonMulliner,CFOofEdmundOptics,a
supplierofoptics,imaging,andoptomechanical
components,basedinBarrington,NJ.
Mr. Mulliner spoke on “Driving Domestic
and Global Growth Despite Currency
Swings and Economic Uncertainty” at an
invitation-only dinner discussion attended by
CFOs from middle-market companies in the
Philadelphia and New Jersey areas. The event
was held recently at Morton’s The Steakhouse
in Philadelphia and is part of CFO Studio’s
Executive Dinner Series.
Mr. Mulliner began the discussion by
acknowledging how “economic uncertainty
can be very much domestic in nature.”
For companies based in the U.S., he said,
“there are so many things that can create
uncertainty — like what’s going to be the
gross domestic product growth for the
upcoming year, and what might the Fed do
with interest rates?” He continued: “How
about the unemployment rate and its effect
on the cost of employees?” And, naturally,
he didn’t stop short of mentioning the veil
of ambiguity that typically surrounds a new
president in the Oval Office.
With those questions dangling in the
room, Mr. Mulliner then posed the most
important one to his fellow financial
executives in attendance: “How do you
budget and plan for the upcoming year in
the shadow of so much uncertainty?” That
question was answered with more questions,
and an observation agreed upon by all: “It’s a
considerable, yet exciting challenge.”
Most companies, Mr. Mulliner noted,
begin budgeting for the next year in
September, with such calculations continuing
until December. Any good plan, he said,
“probably needs to be amended every three
or four months anyway, which is a good thing
when so much is up in the air.”
At a time like this, Mr. Mulliner suggested
“rolling forecasting” could be considered a
best practice: “You always have a 12-month
plan ahead of you, as opposed to working with
BUSINESS DEVELOPMENT PARTNERS
25. Q1 2017 WWW.CFOSTUDIO.COM 23
a plan that is very calendar-year focused,” which
forces everyone to be constantly thinking ahead.
While it sounds positive, he called the process
of creating a rolling forecast an “arduous, but
important task” that takes a huge amount of time
and resources, as “every organization within the
company has to sit down about once a month
to think through the plan and project out.” A
fair deal of grumbling is often the result of such
“reforecasting,” but Mr. Mulliner opined that
“only good can come from repeatedly going back
to the drawing board during unclear periods.”
MichaelMuccio,PartneratCFGI,afinanceand
accountingconsultingfirmwithofficesinBoston,
NewYork,andPhiladelphia,andaCFOStudio
BusinessDevelopmentPartner,discussedhis
dilemmaover whetherornottoslowhiringinthe
NewYorkmarketorchangethestrategicdirection.
“Our NewYorkofficeisexperiencingrapidgrowth,
includinganincreaseofmorethan200percentin
headcountover thelast18months.”Mr.Muccio
saidthatwhilethereisconcernaboutthegrowth
trajectoryofthismarket,“it’sdifficulttopumpthe
brakesandpassupgoodtalent.”
Responsible for growing CFGI’s New York
office, Mr. Muccio admitted his nerves were
calmed by the overall sense of optimism in the
room for sustained growth: “CFOs in attendance
felt an economic slowdown or significant change
were not likely on the horizon even with a new
president, and more of the status quo is expected.”
Globally Speaking
Mr. Mulliner moved the discussion to a global
focus. “It’s been a very interesting time, as the
U.S. dollar has had one of its largest moves ever
in terms of strengthening against all currencies.”
However, for global companies based in the
U.S., “this has added incredible volatility to their
financial statements.”
He explained: “As you’re selling in other
countries in different currencies other than the
U.S. dollar, you’re basically getting fewer dollars
for every foreign currency that you sell, so on
your financial statement it looks like you’re
selling less or contracting as a company, but that
may not be the case at all.”
For companies with both sales and expenses
(manufacturing, salaries, etc.) overseas, a shift
in the currency can also “artificially take away
growth” on their financial statements. Mr.
Mulliner said financial instruments like forward
hedging contracts can help preserve natural
growth, and can remove volatility from the
reports. “Such agreements allow businesses to
purchase a foreign currency at a pre-established
and fixed rate based on the current market.” He
continued, “So if the currency moves during the
prescribed period in the hedging contract, the
hedge will mitigate the actual financial gain or
loss occurring in the company resulting from
the currency move.” This will decrease volatility
in the company’s financial statements, he said,
“which is typically a good thing.”
The Bottom Line
In the end, the group agreed with Mr. Mulliner
that “if you want to grow, despite currency
swings and economic uncertainty, you have to
fund growth.” To do this, he said, “Companies
typically need banks.”
Elaine Cheong, Senior Vice President
and Senior Relationship Manager at Bank of
America Merrill Lynch, and a CFO Studio
Business Development Partner, offered: “Part
of a company’s risk-management strategy
should be negotiating with their lenders realistic
covenants that reflect earnings fluctuations due
to cyclicality of business conditions.”
In terms of a budget plan, Mr. Mulliner said
the banks understand that it’s just a plan and it
will change, but “they like to see that some rigor,
thought, and strategy have been put into it, and
that it’s consistent with past performance and
you’re not just making things up.”
And he added: “Don’t surprise your banker.”
Constant communication and “a good
relationship with your banker can help a business
weather most any kind of storm.” Whether you
know one is coming or not. C
BUSINESS DEVELOPMENT PARTNERS
Jason Mulliner
Chief Financial Officer
Edmund Optics
Discussion Leader
Catherine Adams Baldry
Senior Client Manager and
Senior Vice President,
Bank of America Merrill Lynch
Elaine Cheong
Senior Vice President, Global
Commercial Banking,
Bank of America Merrill Lynch
Michael Muccio
Partner, CFGI
Matthew Pantera
Partner, CFGI
Curt Allen
Vice President & CFO,
Subaru of America
William Curnan
Chief Financial & Operating Officer,
Advancing Opportunities
John Foody
Finance and Operations,
Double H Plastics
John Hagan
CFO, Procacci Brothers Sales Corporation
Dennis McGrath
President & CFO, Photomedex, Inc.
John (Jay) Roberts
CFO, VirMedica, Inc.
CFO Studio hosts the Executive Dinner Series, including World-Class Companies CFO Dinners and Middle Market Companies CFO Dinners quarterly in New Jersey, Manhattan, Philadelphia, Chicago, San Francisco, and other markets around the U.S. CFO Studio hosts the
CFO Breakfast Learning Series in multiple markets, as well, and hosts online Diginars, CFO Studio Receptions, the annual CFO Innovation Conference and the CFO Innovation Awards. The comments made by these guests are their own and may not reflect the opinions
and/or policies of their companies or of CFO Studio and/or its promotional partners.
CFO GUESTS
26. EVENTS EXECUTIVE DINNER SERIES
24 WWW.CFOSTUDIO.COM Q1 2017
All
Together NowTHE CFO CAN BE THE DRIVING FORCE BEHIND COMPANY ALIGNMENT,
EVEN WHEN ONE AREA OUTPERFORMS ANOTHER
K
eeping everyone in an organization
on the same page with all eyes on
a common prize can be quite an
undertaking. But it’s an even heftier
effort when running a business with two
similar, but very distinct, high-end products
that are directed toward separate consumer
markets with similar characteristics, but
varying demands. “This has been a challenge
at every organization I’ve ever worked
for,” says David Chambers, Vice President
Finance and CFO of Jaguar Land Rover,
North America.
Mr. Chambers, who appeared in the cover
story of the Q3 2016 issue of CFO Studio
magazine, spoke on “Driving Growth: Two
Luxury Brands at a Time!” at a World-Class
Companies CFO Dinner, part of CFO Studio’s
Executive Dinner Series, held recently at
Blue Morel in Morristown. CFOs from select
New Jersey–area companies attended the
invitation-only dinner.
Mr. Chambers began the discussion with
a rhetorical question: “How do you manage
growth vs. profitability with two luxury
brands that could be somewhat divergent
in terms of their targets and performance?”
Interviewed later, Mr. Chambers said, “There
was a pretty strong view in the room that
margin comes first, and you should always
manage to profitability instead of volume at
any expense.”
Although this “refusal to sacrifice
profitability” was the answer he expected from
his fellow CFOs, Mr. Chambers noted that
it often results in ongoing tensions within an
BUSINESS DEVELOPMENT PARTNERS
27. Q1 2017 WWW.CFOSTUDIO.COM 25
operating organization. “The sales guys are going to
have numbers they’re trying to hit, while the finance
folks are attempting to keep some level of credibility
in the system.”
In other words, he explained, “There are pressures
in the system to hit sales, but at the end of the day,
it’s your job as CFO to put the right data in front of
people, and ensure that that data is discussed so
that only the best sales decisions are made.”
And that’s why “things naturally get tense
when you say, ‘Yeah, I know you want to do this,
but it may not be the best thing for us to do,’ ” he
acknowledged.
Along similar lines, the group then had a
question for him: “They asked me about my
process for evaluating the potential of a product,
and how resources are allocated,” recalled Mr.
Chambers. “I explained how we weigh the cost
of what we’re willing to put into the product vs.
the revenue we think we can get out of it. We
then consider whether or not that generates an
acceptable margin for us.”
Law and Order
The discussion then naturally morphed into
an examination of how to keep discipline and
control in an organization if there is rapid growth
in one area, but not the other. “We have seen a
tremendous amount of growth with Land Rover,
and although we’re preparing for an uptick in Jaguar
sales with two new models on the road, we’d been
losing people out of that sales funnel,” said Mr.
Chambers.
So about three years ago, Mr. Chambers and his
CEO adopted what he referred to as “a new system
to help us manage at the rate we’ve been growing.”
He described it to the group as an organization
within the organization. “We call it the executive
review board, and it’s composed of the CEO, CFO,
and the heads of marketing, sales, operations,
HR, and customer service.” All major decisions go
through that committee, he said, which “allows us to
have an aligned view, and a fully vetted approach in
terms of how we allocate our resources.”
Inaddition,Mr.Chambersnoted,thesystem
preventsacoupleofthings:“Itavoidsmovesoutside
oftheprocess,whichtendtooccurasyou’regrowing.”
And,headded,itpresentsaverydisciplinedand
unifiedapproachwithintheorganization.“Itallows
youtoexertalevelofcontrolanddisciplineinthe
companywithoutbeingtoobureaucratic,because
oncesomething’scomethroughthisorganization,and
it’sbeenreviewedandapproved,itmovesforward.
There’snofurtherdiscussion.”
Mr. Chambers said the new process has
been “highly successful” because it’s forced that
“alignment” within the company.
This resonated with Jacob Buchanan, Senior
Manager, Private Company Services at PwC, and
a CFO Studio Business Development Partner,
who noted that, “It can be very difficult to achieve
organizational alignment to a goal across functional
areas of management.” He continued, “For example,
marketing and finance may have the same overall
goal; however, aligning on the path to reach that
goal requires strategic thinking.”
Mr. Chambers responded by noting that
such “organizational alignment to a goal” can be
accomplished in one of two ways: “You can either
have a CEO that’s very strong in forcing that, or
you can come up with your own process working
with your CEO and heads of operations to put
something in place that everyone will align upon.”
This, he said, has been the key at Jaguar Land
Rover, North America. “It’s the big difference in
how we’ve tried to manage the brands because they
sit in two different positions.”
Mr.Chambersadded,“It’sallabouthavingtheright
partiesintheroomandthenhavingthediscussions.”
Hepointedoutthateveryonegetsavoiceinthe
process,andthen,onceadecisionismade,“it’snot
aboutwhetheryoulikeitornot,it’saboutexecution,
plainandsimple.”Andanoutcomereachedbythat
methodshouldgoalongway,hesaid,towardkeeping
everyoneinthecompanyinthefastlanetosuccess.C
BUSINESS DEVELOPMENT PARTNERS
David Chambers
Vice President Finance and
CFO, Jaguar Land Rover,
North America, LLC
Discussion Leader
Jacob Buchanan
Senior Manager, Private
Company Services, PwC
Brett Hertzig
Director, Private Company
Services Practice, PwC
Lalit Ahluwalia
Vice President and CFO,
Ferring Pharmaceuticals
Debi Chirichella
Senior VP and CFO,
Hearst Magazines
William Flynn
Senior VP and CFO,
SHARP Electronics Corporation
Sas Mukherjee
Executive VP and CFO,
York Risk Services Group, Inc.
Paolo Tombesi
CFO, Novartis Pharmaceuticals
David Wyshner
President and CFO,
Avis Budget Group
Burkhard Zoller
CFO, Evonik Corporation
Special thanks to Bob Varettoni for
assistance with reporting.
CFO Studio hosts the Executive Dinner Series, including World-Class Companies CFO Dinners and Middle Market Companies CFO Dinners quarterly in New Jersey, Manhattan, Philadelphia, Chicago, San Francisco, and other markets around the U.S. CFO Studio hosts the
CFO Breakfast Learning Series in multiple markets, as well, and hosts online Diginars, CFO Studio Receptions, the annual CFO Innovation Conference and the CFO Innovation Awards. The comments made by these guests are their own and may not reflect the opinions
and/or policies of their companies or of CFO Studio and/or its promotional partners.
“IT ALLOWS YOU TO EXERT
A LEVEL OF CONTROL...” CFO GUESTS
28. EVENTS
26 WWW.CFOSTUDIO.COM Q1 2017
EXECUTIVE DINNER SERIES
Cyber VigilantCYBERSECURITY CONTINUES TO BE A TOP CONCERN AMONG CFOS
F
ran Shammo was prepared to
talk about digital media and
corporate communications in
a virtual world that is rife with
cyber criminals, and found the roomful
of financial executives a more-than-
willing audience. “I am very interested
in knowing if CFOs at other companies
are experiencing the same kind of
apprehension and worry,” explained
Mr. Shammo, who stepped down as
Verizon’s CFO at the end of October
in anticipation of his retirement at the
end of the year. Less than a week after
he spoke, Yahoo, which, two months
earlier, Verizon announced it had plans
to acquire, revealed that half a billion
user accounts had been compromised.
Mr.Shammospokeon“Delivering
Your Company’sMessageinaDigitally
RiskyWorld—Communications
andMediafromtheCFO’sView,”ata
World-ClassCompaniesCFODinner,
partofCFOStudio’sExecutiveDinner
Series,heldrecentlyatTheBernardsInn
inBernardsville,NJ.CFOsfromselect
NewJersey–areacompaniesattendedthe
invitation-onlydinner.Mr.Shammosaid
theintensediscussionthatfollowedhis
openingremarksonthecybersecurity
concernsthatplaguehimprovedthat“As
CFOs,we’reallinthistogetherwhenit
comestodealingwiththeveryrealand
constantthreatsposedbycyber-attacks.”
Mr. Shammo cited statistics
from Verizon’s recent Data Breach
Investigations Report, which shows
that, among other things, passwords
are still the weakest link in the chain.
“Sixty-three percent of confirmed data
breaches involve using weak, default,
or stolen passwords,” he said. This
resonated with dinner participants who
said they do, indeed, take the issue of
passwords very seriously, and noted
that password-enforcement programs
are in place at each of their respective
companies. Mr. Shammo mentioned
that Verizon forces automatic password
changes on its corporate network every
30 days, which elicited several nods of
agreement around the table.
Participants expressed curiosity about
the kinds of attacks that have taken place
at Verizon. “Given the scope of service
Verizon provides,” Mr. Shammo said,
“we see almost every kind of attack on
a regular basis, and we’re constantly
trying to find ways to educate employees
to be ever-wary of phishing scams and
ransomware.” The group was familiar
with the more common phishing
scams in which a fraudulent email,
appearing to come from a legitimate
source, requests personal information.
However, ransomware needed a bit of
an explanation, which Mr. Shammo
provided: “It’s a type of malicious
software, or ‘malware,’ that prevents users
from accessing their system until a sum
of money is paid.”
This caught the attention of Greg
Douglas, Vice President of Sales for
Eatontown-based Yorktel, a video-
communications and managed
services provider, and a CFO Studio
Business Development Partner. “It’s so
important that everyone be informed
and trained on cybersecurity. It’s not
just for the people in Information
Technology (IT), as the threat is huge.”
BUSINESS DEVELOPMENT PARTNERS
29. Q1 2017 WWW.CFOSTUDIO.COM 27
CFO Studio
Advisory Board &
Technical Review
Committee
Tim Anglim
YesCFO
> Founder and President
Andrew Savadelis
> Finance Executive
Michael Eldredge
> Finance Executive
VIEW PROFILES AT
www.cfostudio.com
Bert Marchio
Edge Therapeutics
> Chief Accounting &
Operations Officer
Howard Reba
Marlin Equity Partners
> Finance Director
He continued, “Financial executives are choice targets for hackers because of their authority
to control company funds. They need to be particularly vigilant in their actions to avoid being
compromised.”
Mr. Shammo agreed, and offered his fellow finance execs a sobering reality: “There is a high
probability that every one of your companies has been hacked.” He added, “Most of you just
don’t know about it, nor do you have any idea about who has been in your system, when they
were there, or for how long.” In order to combat such cyberattacks, Mr. Shammo recommended
long-term contracts with security firms.
Does Privacy Still Exist?
The conversation then shifted to mobile devices: “Years ago, we were all issued a company
device that was for business purposes only, and secure. Then, we started bringing our own
devices to work,” Mr. Shammo said, acknowledging that this resulted in a whole host of
security concerns and problems for the IT department.
“Iseethingscomingfullcircle,”heopined,“withareturntocompany-issueddevices.”Attendees
wereinagreement;justabouteveryoneintheroomhadapersonalphoneandaworkphoneintheir
pocket.“Thisisactuallyagoodsign,”saidMr.Shammo,recognizingthat“wearesimplybecoming
moremindfulaboutkeepingpersonalstuffpersonal,andbusinessstrictlybusiness.”
Mr. Shammo predicted that the next wave in security is going to be triple authentication
procedures. “Double authentication,” he explained, “in which you log in to a website and
receive an access code to enter will no longer be sufficient.” He continued, “It’s going to come
to a point where, in order to get into a site, you’re going to have to allow location services to be
enabled on your phone for an extra layer of protection.” This led to a consensus that, as years
have gone by, there is simply no privacy anymore.
A Rock and a Hard Place
The evening was coming to a close as Mr. Shammo finally addressed digital media. “Verizon is a
network company as well as a digital media company,” he said, “so there are different regulations
that apply to different parts of our business, and different regulatory agencies that apply them. As
a company, we are very focused on protecting our customers’ privacy across the entire company.
From a regulatory perspective, however, it doesn’t make a lot of sense for consumers to have
different rules and different regulators dealing with different parts of the Internet ecosystem.”
Mr. Shammo concluded that it’s a “fascinating world” right now. “Things are converging, and
our ability to regulate or control privacy is just not keeping pace. We must be extremely careful
about protecting the work we do.” C
CFO Studio hosts the Executive Dinner Series, including World-Class Companies CFO Dinners and Middle Market Companies CFO Dinners quarterly in New Jersey, Manhattan,
Philadelphia, Chicago, San Francisco, and other markets around the U.S. CFO Studio hosts the CFO Breakfast Learning Series in multiple markets, as well, and hosts online Diginars,
CFO Studio Receptions, the annual CFO Innovation Conference and the CFO Innovation Awards. The comments made by these guests are their own and may not reflect the opinions
and/or policies of their companies or of CFO Studio and/or its promotional partners.
Daniel Apel
CFO, Bayer
Healthcare
Pharmaceuticals
Sas Mukherjee
CFO, York Risk Services
Group, Inc.
Han Kieftenbeld
CFO, InnoPhos,
Inc.
Claude Draillard
VP, Finance, Dassault
Falcon Jet
Sandra Clarke
CFO, Daiichi
Sankyo, Inc.
Fran Shammo
CFO, Verizon
Discussion Leader
Greg Douglas
Executive Vice
President, Sales
Yorktel
Bill Flynn
CFO, Sharp
Electronics Corp.
BUSINESS DEVELOPMENT
PARTNER
CFO
GUESTS
30. 28 WWW.CFOSTUDIO.COM Q1 2017
Principles for Growth
THE CFO OF JOHNSON & JOHNSON LINKS ETHICAL DECISION-MAKING
WITH STEADY, STRONG RETURNS
D
ominic Caruso, CFO of Johnson &
Johnson, told CFOs gathered at a
recent CFO Studio Reception held
in his honor that the company bases
all its important decisions on the Credo that
General Robert Wood Johnson II wrote
in 1943. But he said he realized that the
audience might be a little bit skeptical. They
might wonder “How stringent are you? Do
you ever bend? Do you ever flex?”
“Wedoflex theseprinciples,”hesaid.“We
constantlychallengeourselves.WegotoCredo
challengesessionstomakesureweunderstand
what[theCredo’swording]meansinthenew
environment.…Butwegenerallystaypretty
closetothoseprinciples.”
He noted that the Credo is “not an
aspirational statement,” but a set of
responsibilities by which “we live our lives
at Johnson & Johnson and make business
decisions.”
Each of its four paragraphs talks
about “what we must do for each of our
constituencies.” First, for patients; then for
employees — their welfare and careers; next
for the communities where the company
lives and works around the world; lastly,
for shareholders. General Johnson was a
shareholder, “and he placed himself last.”
Mr. Caruso said that the 32 consecutive
years of adjusted earnings growth that J&J has
returned is “the proof in the pudding” that the
company’s firm principles are properly guiding
J&J through turbulent times and changes in
economic circumstances.
An attentive group of around 60 finance
leaders from New Jersey and the tri-state area
formed the audience at the Heldrich Hotel in
New Brunswick, NJ. CFO Studio Publisher
Andrew Zezas introduced Mr. Caruso, who
was profiled in the Q4 2016 cover story,
stating that under Caruso’s stewardship,
Johnson & Johnson has strengthened and
built upon its position as the world’s largest
and most diversified health care company.
RECEPTION
B
C D
E FA
A L. to R.: Andrew Zezas, Dominic Caruso B Mr. Caruso C Della Cherchia D Daniel Loughlin E L. to R.: Patrick Toussaint, Subhas Wessels, Michael Schley
F L. to R.: James Derasmo, Christopher Borgese
EVENTS
BUSINESS DEVELOPMENT PARTNERS
The CFO Studio Reception is an invitation-only event held quarterly at elegant venues in New Jersey in honor of the CFO whose cover story
appears in CFO Studio magazine in that same quarter. Visit www.cfostudio.com to request an invitation.
31. G
H
G Mr. Caruso H L. to R.: Bill Curnan, Bob Barry, Michelle Findeis, Andrew Zezas I L. to R.: Donna Bernard, Craig Fallon, Elizabeth Miller
J Montgomery Emmanuel K Kathleen McGowan
CFO Studio hosts the Executive Dinner Series, including World-Class Companies CFO Dinners and Middle Market Companies CFO Dinners quarterly in New Jersey, Manhattan, Philadelphia, Chicago, San Francisco, and other markets around the U.S. CFO Studio hosts the
CFO Breakfast Learning Series in multiple markets, as well, and hosts online Diginars, CFO Studio Receptions, the annual CFO Innovation Conference and the CFO Innovation Awards. The comments made by these guests are their own and may not reflect the opinions
and/or policies of their companies or of CFO Studio and/or its promotional partners.
“During his 10-year tenure as CFO,
Johnson & Johnson’s share price has
appreciated over 90 percent,” said Mr. Zezas.
“Speaking as a shareholder, thank you,
Dominic.”
Finance’s Pillars
In his remarks, Mr. Caruso said, “I owe
a lot of credit to my predecessors. I’m
fortunate to be in a long line of previous
CFOs at Johnson & Johnson who have done
outstanding work.”
He went on to enumerate the four
principles by which J&J’s Finance organization
operates. These are: to drive competitive
profitable growth, generate sustainable cash
flow, allocate capital to maximize shareholder
value, and manage enterprise risk.
Regarding that third principle, allocating
capital to maximize shareholder value, Mr.
Caruso said, “We have very strict principles by
which we do this. We have a set of hurdle rates
and analysis that we use to ensure that each
decision we’re making is maximizing the value
that we set for the deployment of our capital.”
Mr. Caruso runs a global finance team
of 5,000. He spent part of his time at the
microphone discussing the role of “the great
financial people at Johnson & Johnson.”
Finance professionals at J&J “are asked
to do three things,” he said: “To drive
sustainable, superior financial performance.
And, I say that very clearly: to drive it, not to
monitor it, or to measure it, or to report on
it. To actually drive it. They’re also asked to
develop great leaders,” he said. “And they’re
asked to do one more thing, which is without
compromise the most important thing that
they do: To assure the financial integrity
and compliance in what we do as a finance
organization for Johnson & Johnson.”
Mr. Caruso and the finance leaders at
J&J have assured the company’s financial
integrity such that Johnson & Johnson
remains one of two companies in the world
with a AAA credit rating. The CFOs in
attendance gave him rousing applause for
that accomplishment. C
Q1 2017 WWW.CFOSTUDIO.COM 29
I
J
K
32. GUIDANCEADVICE
John Moskonas is president of ARExecutiveSearch, a search firm dedicated to accounting, finance, and audit search services for the insurance industry, helping clients identify executive talent for
critical needs. John has over 20 years in the search business with the last 17 years heading up his own firm. He has helped countless finance executives through the thought process of making their
next career move. John can be reached by email at jmoskonas@theargrp.com or by phone at (646) 688-2985 or through his website at www.theargrp.com.
30 WWW.CFOSTUDIO.COM Q1 2017
H
ere’s a new acronym to learn: POB.
It’s shorthand for Personal Online
Brand. Many people you meet as
you network will search online to
view your POB. So, although you won’t
find this word in a dictionary, it’s extremely
important. Your POB is the snapshot
of who you are. It includes your online
friends, points of view, and professional
accomplishments. If you haven’t thought
about how your POB stacks up, now might
be a good time to work on it. After all, year-
end and the beginning of the year are the
best times to assess, start anew, and focus.
But before you do that, why do you want
an online brand at all?
A strong POB mitigates your risk. Let’s
face it, the work environment is uncertain.
You want to be seriously considered for
any potential career opportunities that
may arise. You should have a solid online
brand presence that highlights who you are
professionally and personally. This way, you’ll
be found if a hiring manager or recruiter is
looking for someone like yourself; you’ll be
taken seriously when your accomplishments
are being assessed; and your POB will
support the message you are trying to convey
about yourself, your expertise, and the
value you can deliver. The best part is that
your POB, your online brand, is mobile, so
you don’t have to start over each time you
begin a new job. Now, when you decide to
strengthen/focus your POB, you should
keep one thing in mind:
A strong POB provides consistent
messages about you. If you go to a fine
restaurant that was recommended by a
friend, you can expect a certain experience.
As a matter of fact, that experience is
what makes you come back or not. If you
go back a second time and you have that
great experience again, you’ll solidify your
feelings about the restaurant and you’ll keep
going back. Why? Because you’ll know what
to expect.
How does this translate to your POB?
People want consistency when they think
about you and your brand and when they
consider engaging you for an executive
position, project, or otherwise. So, be
consistent in your POB and cognizant of
the messages you send when you highlight
your accomplishments when posting to
your online accounts, because those who
will consider engaging you like to know
what to expect.
If you’re unsure of how your POB reads
right now, just google yourself and you’ll
find out pretty quickly. The online world
is transparent, so the consistency of the
message you send about yourself should
carry through to your LinkedIn, Facebook,
Twitter, and other online brand platforms.
Create a strong POB yourself, or get help
with it. When you do decide to strengthen
your POB, you can do it yourself or you can
hire a professional online marketer who can
do it for you. If you decide to do it yourself,
you can get tips online and/or, since
imitation is the best form of flattery, you can
certainly see how peers in your industry are
building their POB, and then replicate their
approach.
Whichever way you choose, however, keep
asking yourself: What is my POB and how
well is it working for me? C
What Is My POB?
Like it or not, most of us have and
need an online brand
JOHN MOSKONAS
President, The ARGroup of Search Companies
33. In markets throughout the United States, CFO Studio hosts large and
small conferences and events at which CFOs share insights and forge
relationships with our business development partners and each other.
Capitalize on this tremendous business development opportunity.
THOUSANDS
OF CFOs....
Trust...a CFO!
...AT CFO STUDIO CONFERENCES
AND EVENTS
CONTACT
Craig Fallon
Director of Business Development Partnerships
Craig.Fallon@CFOstudio.com
732.868.0000 x127
34. 32 WWW.CFOSTUDIO.COM Q1 2017
GUIDANCEADVICE
No More Fuzzy Numbers
Monetize talent-related growth strategies
B
eingabletoattract,engage,andretaintoptalentisanimportant
growthstrategyofyoungorrealignedcompanies.Yetmost
organizations still struggle when talent-related investments
are involved because the discussions generally rest on vague
information(fuzzynumbers).
Think about what happens when the CFO tries to get quantifiable
answers to these HR questions:
o How can we tell if a stay bonus was necessary?
o Do career development programs pay off or are we just training
people to leave and be productive at competing companies?
o What degree of fit with our corporate culture does a job candidate
need to be hired?
o How can we tell if an employee is sufficiently engaged?
o How much should our business invest if the typical millennial only
stays with an employer a few years?
o How much turnover is acceptable to us?
o How do we know if we should be utilizing outside search firms or
building our own recruitment department?
o How much progress do we lose when key position vacancies linger?
Where You Can Start
The Society for Human Resource Management (SHRM), which
provides professional certification for human resource professionals,
leads the improvement of talent-related measurement, but there is a
long way yet to go.
It pays to help your company’s HR professionals generate talent-
related ratios to convey their proposed approaches to achieve your
goal-related ratios. With such ratios in place, when your HR department
wants to invest in a new engagement program, as CFO you can monitor
its impact on retention, productivity, and capacity utilization.
Examples of Talent-related Ratios:
$___ cost for recruitment, screening, selection, onboarding/hire
$___ cost for engagement and retention/employee
$___ cost for incentives and bonuses (above base salary or wages)/
employee
#___ average months or years with our company/employee
%___ job vacancies OR %___ capacity
Examples of Company Growth-related Ratios:
% ___improved capacity utilization
$ ___ productivity increase
%___ reduction in people-related operating costs/gross revenue
Increasingly, HR directors must be involved in the process of
monetizing desired outcomes. It makes sense to establish realistic
baselines for talent-related ratios now, or your company’s decisions
revert to fuzzy numbers, and your truly major investment decisions will
be based on wishes, hopes, and guesses. C
Known as The Growth Strategist®, Aldonna Ambler founded, built, and grew a global suite of companies to help midsized B2B companies to achieve accelerated growth with sustained
profitability®. A Certified Speaking Professional (CSP), Ambler has addressed over 2,000 audiences and hosted a syndicated online talk show about growth strategies for 9 years. As a growth financing
intermediary, Ambler has raised over $1 Bil for midsized companies. The winner of over two dozen prestigious national and statewide “entrepreneur of the year” awards, Ambler was inducted into the New
Jersey Business Hall of Fame in April 2015. She is available to speak about “profitable resilient growth” and/or serve on the board of a growth-oriented B2B corporation (NACD Board Leadership FELLOW).
ALDONNA R. AMBLER CMC,CSP
The Growth Strategist®
32 WWW.CFOSTUDIO.COM Q1 2017
35. XXX QUARTER 2015 WWW.CFOSTUDIO.COM A
CFO Studio conducts 10- to 15-minute
On-Camera Interviews with CFOs
about their experiences and insights
on matters of business, finance,
and strategy.
On-Camera Interviews are released
on CFOstudio.com, YouTube, and on
other Internet sites, and are promoted
via CFO Insider Emails, LinkedIn,
CFO Studio magazine, and
through other venues.
CFO Studio will take your headshot photo at no cost to you.
Contact Lorenz.Capalad@CFOstudio.com or 732.868-0000 x118
...powered by
ON-CAMERA
Is Your Headshot Old and Out-of-date?
If you would like to appear in an
On-Camera Interview or write an article,
please contact Christopher Borgese,
Christopher.Borgese@CFOstudio.com
732-868-0000 x120
Trust...a CFO!
36. 34 WWW.CFOSTUDIO.COM Q1 2017
CFO 2 CFO
T
o navigate a company through
rough market conditions requires
knowledge, experience, and leadership.
Management teams rely first of all
on timely and accurate financial data and
detailed business analytics. ROI calculations,
valuations, and future cash-flow predictions
are other critical factors. All this can give a
company a vital competitive edge — and this
is where controlling comes into play. Such
prognostic information is so essential to
management decisions, and the responsibilities
of the controlling function are so extensive that
I prefer to call it “ÜBER-Controlling” (“über,”
the German word meaning “in excess of,” “above,” or “over,” not to
be mixed up with Uber, the mobile taxi service!).
Basically, ÜBER-Controlling consists of three functions:
1 Sales & Marketing Controlling:
Information about revenue development by customer and product
as well as volume/price/mix effects; success of marketing campaigns
and price sensitivity; market-related versus cost-plus pricing models;
price entry points for new-product development, etc.
2 Production Controlling:
Information about material, labor, energy, freight, and other
manufacturing costs in total and by unit; make-or-buy decisions;
margin comparison based on standard costs and variance
analysis; discounted cash-flow calculation for capital investments,
depreciation alternatives, and inventory optimization.
3 Overhead Controlling:
Information on so-called fixed costs per department (Selling,
Marketing, R&D, Supply Chain, Admin) and cost category
(Personnel, Travel & Entertainment, Consulting, etc.); comparison
to budget and prior year expenses.
AnÜBER-Controllerdoesnotjustcollectdatafromthesethree
functions.Heorsheaddsanotherdimensionto
it:Insteadoflookingjustbackwardsorattoday’s
performance,heorsheconcentratesonlooking
forward.Throughstrategicandmid-term planning,
annualbudgeting,androllingforecastingsystems,
thefutureofthecompanyisbeingshapedby the
ÜBER-Controller’sinvolvementandexpertise.
Reporting
Nevertheless, ÜBER-Controlling can only be
successful when it works hand-in-hand with
the financial accounting department under the
leadership of the corporate CFO. Statutory
financial statements for external information
purposes (looking back) and management reports for management
decisions (looking forward) are closely intertwined. Modern,
fully-integrated ERP systems with new general ledger concepts
and dedicated FI and CO modules can provide a multitude of
management reports. For improved management reporting
purposes, it is important to use notional costs for depreciation,
interest, taxes, and asset and liability amounts based on actual
market valuations.
The ÜBER-Controller’s role and responsibilities are critical for
the success of a company. They transition the typical conservative
finance function into a future-orientated, vibrant think tank. The
more specialized and entrepreneurial the controlling knowledge is,
the better is this individual’s support as a business partner.
The function of the ÜBER-Controller and his or her entire
controlling team is highly delicate, because they are a hybrid in
an organization. Whenever I discuss my concept of an ÜBER-
Controller, the question comes up: Are they part of finance or of an
operational business function? The best way to deal with it is to have
controllers sit next to the sales and production managers and be their
day-to-day “sparring partners.” However, it is best for the ÜBER-
Controller to report into the CFO function, thereby guaranteeing
complete independence and objectivity in their judgment. C
ÜBER-Controlling
WHY BUSINESSES WITH GLOBAL CONCERNS NEED A NEW DYNAMIC
ON THEIR EXECUTIVE TEAM
GEORG ANNEN
Chief Financial Officer, Unger / USA & Europe
Learn more about the author
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