Growth vs. Profit – A CFO’s crucial challenge

Do you work in a growth or profit driven company? This business differentiation is commonly used today and investors seem to have split into two big groups worshiping only one of these directions. And as a finance leader, the respective company focus is of course shaping your daily business crucially.  

Being the CFO of ProSiebenSat.1 for more than 13 months now and having spent many years in a similar position at Zalando, I have gathered insights into both worlds that I would like to share with you.

Within a growth driven company, the first law goes without saying: Get out of the business’s way, but set clear rules and make sure that these are backed by the entire management. If not, you will never catch up with the wave. In my experience, you will then live through three phases:

1. Make it happen: Build a central team of (mostly) generalists that is solution-oriented to clean up the mess caused by growth-only focus.

2. Scale: Once you’ve found your way in this modus-vivendi, slowly transform the marketing / sales focused organization into one that is financially driven – start with a budget and end with (hopefully) audited accounts. How do you get to this point?

• Stick to a strict 80/20 rule, meaning that the bulk of efforts should be devoted to your daily business and crucial improvements that you need to make in order to stay on course.
• Plan ahead with regard to systems and processes and then execute fast, but don’t build for eternity (only for the next two to three years maximum). Always consider if the MVP stage is already sufficient to create improvement rather than waiting for the perfect big bang.
• Think big – I am a huge believer in the 10X rule. If I may quote: “The 10X rule says that A) you should set targets for yourself that are 10X greater than what you believe you can achieve and B) you should take actions that are 10X greater than what you believe are necessary to achieve your goals.” This may sound edgy, but exactly this mindset is needed in a growth driven environment.

3. Professionalize the organization: This is the crucial step to prepare the business for sustainable success. I do not only mean that you should now meet all reporting requirements and have established matching structures and processes to do so. This transition is also a cultural challenge as you need to convince the team that this is the way to go, that “process” is not the equivalent of limited creativity, but rather the condition to fuel further growth – and of course to really ride the wave from now on.

When you now look at a company whose investors focus more on the bottom line, you will find yourself in a different position: The finance team is already seen at eye-level with the business to keep close track on all EBIT-impacting decisions, has a much more decentral set-up and is well integrated in the organization. This doesn’t necessarily mean that you can put your feet on the table and relax. For me, there are three areas to focus on (apart from supporting the business in reaching its financial targets of course):

1. Challenge the status quo: Especially within a finance organization that has constantly grown and extended its responsibilities over the last years, it is necessary to take a close look at the prevailing systems:

• Use technology supporting you in order to automate when manual processes have been fully established and are more or less set. The link to your IT department needs to be constant and agile. Don’t get lost in huge multi-year automation projects and rather do it from sprint to sprint.
• In order to also introduce this mind-set across the teams, go for a “-20% challenge”: If you want to realize a crucial on-top project, what would you deprioritize/change? This helps to leave well-trodden paths in the work routine. There should never be “just on top” decisions – everyone needs to cut out the slack instantly.

2. Strive for a “think like an owner” mentality: I want every team member on any hierarchy level to treat her/his responsibilities like an owner of the company, and thus to try improving constantly. In order to establish this mentality, it helps to regularly set milestone plans for every key project and to define clear ownership and break-up points.

3. Invest in people: When it comes to people management, do not allow criteria such as age and seniority to become a gate keeper for promotion. It will always remain key to attract and retain talent (even more in the future), so put a careful focus on how you treat and develop your team members. Get more insights on how to do so in this article.

But now, over to you. In what type of environment do you work? I would love to hear your professional experiences on that topic and learn also from your insights.