Having a good working relationship with your counsel — whether inside or outside — can be a safeguard in itself. In fact, says John Iino, a partner at Reed Smith LLP and co-chair of the firm’s Corporate & Securities practice group, lawyers are most efficient “when they are kept close to the internal decision makers.” Only then, he adds, can they help companies “draw the line between legal compliance and financial compliance” in such areas as executive-compensation disclosure. Stephan worked close enough with his inside counsel, in fact, that he became adept at spotting legal red flags.
Of course, there are times when outside counsel must be called in. This is especially true, says Jamison, “if you are in a defensive posture — say, a customer threatens to sue or you get subpoenaed for a court appearance.” That’s when the CFO’s skills come in handier than ever. “It’s just like managing anything else,” says Stephan. “You want someone who is working in your best interest. And you want to avoid anyone with a tendency to overlawyer or who’s just out to win points.” If you don’t, you’ll regret it when the bills come in, he adds.
Increasingly, a wide range of stakeholders want direct access to the CFO. Knowing what communication techniques work with which audiences can help finance shine, both within and outside the company.
But honing your skills as a public face of the organization requires a bit of homework. Before his company went public in March, Steffan Tomlinson, CFO of Aruba Networks, listened in on some 20 conference calls and kept a log of questions asked by analysts so that he would know just what to expect when Aruba held its first call. From that, he learned that “tone and tenor mean a lot, especially over the phone,” and “how you answer questions about competitors is telling.” He says that when executives on one of the calls he listened in on stumbled over certain questions, their company was soon described by an analyst as faltering.
Frequent calls, road shows, and meetings can be a grind, but Boland of Bright Horizons says it’s critical to stay focused. “You get very routine about how you do your presentations and what you think people want to know,” she says. “Try to hear what they’re really asking.”
If the audience is internal, be prepared to forgo finance jargon in favor of plain English. “I’ve worked with many CFOs who aren’t CPAs but became CFOs because they were able to synthesize financial information into something useful,” says Bruce R. Evans, a managing partner at private-equity firm Summit Partners. Offer a few select bar charts and graphs when possible, instead of tables of numbers. And don’t talk too much. “Even when the work behind something is extremely complex,” says Gatti, “your audience really just needs to know the headlines.”
Leading by Example
As the head of the finance department, the CFO must lead and inspire — and know when to get his hands dirty.
It is a delicate balance, says Joseph E. Esposito, recently retired CFO of Concord, Massachusetts-based SolidWorks Corp. “You have to demonstrate that you are a leader, but without interfering.” That means offering the guidance and counsel of a top executive, he says, but letting your employees do their day-to-day jobs. Boland echoes that idea: “As CFO, you’ve got the title and authority to be involved, but you have to make other functions feel like you’re an assistant, that you’re there to make them look good.”
There are times, however, when the pressure is such that a CFO must step into the fray. Esposito has found that a particularly effective approach is to jump in as a short-term project leader. As a CPA, he says, there have been many times when he’s been able to lead a technical project, such as dealing with stock-options accounting, and that when he has done so it has come as a big relief to his staff. “To them, something like that is just a big pain in the neck,” he says, “since many have never seen it before and may never see it again.”
At the same time, sometimes it’s the little things that count. For ETS’s Gatti, for example, leading by example means getting his expense reports in on time so that he can encourage others to do the same.
Alix Nyberg Stuart is a senior writer at CFO.