Open Addendum to CFO Bookshelf Interview

Dear, Mark Gandy ,

As always, it was a pleasure to be on your podcast, even more so that this time, Dr. Steve Spear joined us to discuss what we learned writing our book Wiring the Winning Organization!

Here's something I wish I had mentioned on the podcast. (And for those of you who haven't subscribed to the "CFO Bookshelf" podcast yet, you should! It's one of the most wonderful series of interviews of leaders, through the lens of a CFO: https://cfobookshelf.com/)

During my 13 years at Tripwire, I so much appreciated the role of the CFO as the de facto COO. I got to work with an amazing CFO, Robert McCarthy , for eleven years. He is now retired, but he was a huge influence on me, and I learned so much from him.

In fact, in The Phoenix Project, the CFO played a major role in the company's planning and operations, which was modeled after what I observed in Bob.

Among many other things, Bob was in basically in charge of the annual planning process. He was a major force in helping steer the company, balancing the needs of all the other executives. I saw him help rationalize the revenue plan and sales targets and without him, I don't know how the company could have ever agreed upon the percentage of revenue spent on R&D, marketing, sales, and, of course, G&A.

He also got involved in many of the problems that spanned the different functional departments. He was the reason I was able to work on a project to better understand and streamline the processes that bridged the sales and order administration processes, which always got especially heated during the last few weeks and days of the quarter.

(The problem sounded like this on the second-to-last day in the quarter: "The VP Sales is screaming, wanting to know why the XYZ deal isn't showing up in the revenue report!! Is it stuck in order administration? Or is it because the salesperson still hasn't put in all the required information?" Which is where I learned about "FOB Origin," a field that needs to be filled in for revenue to be recognized. ??)

During our interview with Mark Gandy, I wish I had talked about how CFOs, especially in smaller organizations (sub-$100M revenue), are in a unique position to improve the organization, not only as the defacto owner of the planning process, but because of how they see almost all aspects of company operations.

What I learned from Bob is that the CFO is in one of the best positions to spot areas of the organization that have poor wiring. They also have the operational experience and instincts to coach leaders on how to improve the wiring.

This also reminds me of a panel interview I did in 2019 with the CEO and CFO of the famously resurgent mainframe software vendor, Christopher O'Malley and Joe Aho , respectively. I love how Joe models how visionary CFOs talk and act. What I love about this interview was when Joe described how Compuware had great people, but it wasn't easy to get things done. At around "It would take four salespeople to get something done, or how cumbersome the order to cash, order to pay, and commissioning systems were.

I marveled at how Joe described their endeavor to massively simplify their internal processes. Despite his justifiable skepticism and sensitivities to operational risk, they were able to reduce the G&A costs from 10% of revenue to under 6%, which allowed them to allocate more money to invest in things that customers actually cared about (great products and services).

Using the terminology of Wiring the Winning Organization, Joe Aho helped find the places in the "back office" areas of the business that made it difficult for people to do important work. By simplifying processes and systems, they not only made life easier for people inside the company, but also for people wanted to do business with the company. As a side effect, they also unlocked more capital for the other functional areas of the company to create value for their customers.

(They both joked about how back office functions are all the areas of the company that customers don’t care about: payroll, email, HR system, etc. This is in contrast to things that R&D works on, which are all things that customers care about and want to pay them money for.)

Here's the video link: https://videos.itrevolution.com/watch/485154716

Footnote to this 2019 interview: Chris O'Malley's tenure started after Thoma Bravo acquired Compuware in 2014 for $2.5B. They focused on creating great products that delight their customers, and systematically improved or eliminated those activities that customers didn’t care about. In 2019, they spun out APM vendor Dynatrace, now valued at $13B. And the remaining and thriving mainframe software portion of the company was acquired by BMC in 2020 for an undisclosed amount, but rumored to very much reward the great work of Chris, Joe, and everyone else in the organization.

I want to thank both Chris and Joe for everything I learned from them and for teaching the technology leadership community what great leaders look like.

Citations:

• https://www.reuters.com/article/idUSKBN0GX1HD/
• https://www.marketscreener.com/quote/stock/DYNATRACE-INC-63216144/news/Dynatrace-Inc-completed-the-Spin-Off-of-Compuware-Software-Group-LLC-34244615/
• https://www.thomabravo.com/press-releases/bmc-to-acquire-compuware