Leadership in Finance: NetApp’s Steve Gomo

The CFO makes some tough human-capital decisions but takes comfort in sitting on a big pile of cash.

Yet you still felt you had to restructure your work force.

We’re probably no different from most companies in that the economy has had a significant impact. It was very difficult for us, especially coming right after the recognition by Fortune.

We’ve heard from human-capital experts that businesses often cut too many people when the economy is down and then have a hard time ramping up to take advantage of new opportunities when things turn around. What guides you in deciding how many jobs to eliminate?

That is the heart of the issue. At a time like this investors will say, well, you should have done even more. But let me be very clear here. Great management teams separate themselves in a single way: They grow their business, and they do it over a sustained period of time. Anyone can cut expenses; all you have to do is say “no” — don’t sign the P.O., or whatever is the case. I don’t give a lot of kudos for that. It’s just a base level of capability that management teams need to have.

Now, back to your question: Deciding how many people to let go, and who and where, is a delicate trade-off. In the short run you’re probably going to lean toward taking a little more expense out. But most analyses show that, particularly for a company with a big growth margin like ours, if you miss a step in growth because you took too many people out, very quickly it turns out to be a bad decision. You look forward and say, what’s going to happen next quarter? I couldn’t tell you. I don’t think many people can, because visibility is so poor right now. Now the decision becomes very complicated and hard.

Management has to make decisions like this as a team. You have to listen to each other, the pros and cons. There are economics, morale, and motivational aspects to the decision. There are complications that come up about developing or marketing products or go-to-market activities. A CFO has to be right in the middle of all this.

It sounds like you’re not one of those CFOs who is just a “numbers guy.”

The job starts with making sure you’re meeting all the compliance requirements. If you do that you move up to the next level, where you are the economist of the business. If you do this or that operationally, what is the impact on profits? Then if you do that well you move up to the third level, where you have enough knowledge of the business to participate at a strategic level.

Today, frankly, CFOs who are not at that level are probably not going to be in their jobs for long, because the expectations of boards and CEOs have gone up dramatically.

What happens when members of the management team don’t see eye to eye on a strategic decision?

I like to think I’m working with people who evaluate your argument on the merits and are open-minded to change. I can’t tell you I’ve agreed with every decision that’s been made by CEOs and other high-level managers I’ve worked for, but I’ve always been able to make my point. When the decision goes the other way, your job is to support it as best you can.

Coming back to costs, to what extent is all the scrutiny of executive compensation and marketing expenses at financial firms spilling over to a company like NetApp?

It a fact of life that in today’s environment, right or wrong, those things will get more visibility, and you need to understand that as you plan them. Today I feel like I can stand up in front of any shareholder and justify what we’ve done. I’m happy to put everything up on a slide and be totally transparent about it, and ask them, what would a rational man have done differently?

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