Advice for CFOs on Managing High Growth

The CFO Leadership Council’s NYC chapter held a panel discussion recently on the topic of “Managing High Growth.” The moderator of the panel was Gretchen Tibbits, COO of Little Things.

The panelists included several executives with experience in high-growth companies: Steve Cakebread – CFO of Yext, Michael Cohen – CFO of Birchbox, and Daniel Lang – Partner at Goodwin Proctor.  Here’s a summary of the key points raised during the panel discussion.

How to Prepare an Early Stage Company for Growth

A number of the panelists advised getting the best legal counsel and accounting advice when the company is at an early stage.  It pays to think big and plan for growth 3-5 years down the road.  In addition, getting the right legal advice at an early stage can save the company time and costs in the future.  It also helps to have outside legal counsel plugged into the business of the company at an early stage, even attending board meetings.  This makes it easier to get support for key initiatives, when needed.

Companies need a strong foundation to grow on.  The panelists advised getting standard documents in place for hiring employees, granting stock equity, and setting up other processes.  It pays to ensure consistency in basic processes.  Another panelist advised that, in early stages, CFOs shouldn’t overthink systems and processes.  They should allow for flexibility and growth – not be too rigid.

When to Start Initiating External Audits

One panelist advised setting up external audits at an early stage.  This is especially true if the company is planning to raise capital, looking for loans, or considering an IPO or any exit opportunity.  Another panelist advised getting a public company auditor engaged prior to an IPO, even to help in creation of the registration statement.  Big 4 auditing firms are accessible to small companies through their fee structures, and 2^nd tier firms are also viable.

On this topic, a member of the audience asked if there’s a need for an audit to support the applications for a line of credit.  The panel agreed that it definitely helps to be prepared.  A “going concern” letter is expected.  However, CFOs need to weigh the cost vs. benefit of doing a formal audit.  Going through an audit before the right formal processes are in place can help highlight weaknesses and areas to focus on.

Managing a Changing Workforce

The most valuable asset at an early stage of a company is its people and culture.  The panelists advised that it’s important to maintain this as the company grows and expands.  The “best athletes” are not always the best choice in hiring, so CFOs need to ensure cultural fit as well in hiring new staff.  Companies should “inoculate” new employees with the mission and vision of the company as part of orientation.  This can be easy to maintain if the company puts in the work.

The panelists went on to comment that, as the company grows, people with experience are needed but maintaining the startup culture is vital, too.  Having a combination of people with big company, as well as startup, experience is helpful.  Organizations need people on board who have gone through a high growth phase before.

Training and development of staff and managers are also key to supporting growth.  CFOs are advised to give managers the opportunity to innovate and do new things, as well as to provide a safety net in case new initiatives fail.  It helps to put a time limit on new experiments and to closely monitor the results.

Balancing Culture with Formal Policies

Transparency and communication are important.  Panelists stressed treating people like adults, but making sure they understand the importance of key processes, such as expense policies, budgets – people need guardrails.  Companies should seek to leverage technology as much as possible to enable formal processes – for example, mobile approvals.

Company processes should limit the number of approval levels.  This ensures people aren’t over-burdened with too much “red tape.”  Reducing cycle time on approvals makes life better for employees and the company.  The more user-friendly the process is, the better it is for employees.

Transparency – How Much Is Too Much?

One panelist commented that he was a bit conservative on this initially, but is now getting more transparent.  CFOs need to share financial results with employees, provide details on performance and even cash flow.  This helps get buy-in and support from employees.  At the same time, CFOs need to trust staff to maintain confidentiality.

Other panelists agreed that being transparent is key.  It’s fine to share results and forecasts at an early stage to keep employees informed and engaged.  However, as the company gets closer to an IPO, then more care should be taken with sharing forward-looking forecasts.  And after an IPO, it’s even more critical in light of insider-trading regulations.

A question was raised about CEO resistance to transparency.  The panelists commented that many CEOs understand the need.  But if they don’t, CFOs should highlight the value of transparency from an employee-motivation standpoint.  It helps with creating visibility across functions and with highlighting the importance of key roles.  If left in a vacuum, employees will assume the worst.  It’s better to share the truth.  Another suggestion was to get the CEO to network with other CEOs to share best practices.

Employee Training & Development

Some of the topics the panelists advised focusing on from a training standpoint are negotiation skills, customer support, leadership, and management skills.  Project management skills are also important in growing companies.  Panelists advised looking for low-cost training options – such as mentoring and online training classes.

CFOs should consider both formal and informal training approaches.  But it also helps to hire the right people, monitor performance, and churn out the low performers on a regular basis.  The 20/70/10 approach of ranking and managing staff is a good best practice to adopt.

Setting Priorities and Measuring Performance

One panelist advised daily meetings with other key executives to review daily sales results and the status of key initiatives.  Others agreed that, in early stage companies, sales transactions often get a lot of focus.  But they advised that CFOs focus more on how to move forward to improve key processes and grow the business.  Let the CFO’s management team focus on day-to-day issues.  The focus needs to be less on the current quarter and more on the year and longer-term future.

One of the key roles of the CFO is to make sure the CEO is well-informed.  CFOs need to report on the right metrics, at the right cadence for the business, and help make CEOs successful.

Having the Right Tools to Support Growth

A number of the panelists leverage cloud-based applications for their high-growth companies.  This includes cloud-based CRM, T&E management, procurement, accounting, and planning and reporting.  One panelist commented that, by using a cloud-based planning solution, the annual budget process was completed in 2 weeks.

The key is to make sure the internal systems selected all work together and that information-sharing takes place.  It also helps to hire people who have experience with standard tools, such as Salesforce.com.  Also, the panelists advised CFOs to ensure the systems they choose provide scalability and growth for the future.

Leveraging EPM Solutions to Drive Growth

The CFO Leadership Council’s NYC panel discussion on “managing high growth” was a lively one that spurred a number of questions from the audience and could have gone on for hours.  During the discussion about having the right tools in place to support growth, the panel acknowledged the need for enterprise performance management (EPM) solutions for planning and reporting that can support current and future needs.