My good friend and colleague Nilofer Merchant (www.nilofermerchant.com) is a strategy consultant, prominent speaker and Ted Talk presenter. She coined the idea of a “walk and talk meeting” which we had last week. During our walk and talk she asked me an intriguing question about the role of a CFO and how much value had been created in the companies where I placed CFOs? I was a bit taken aback as I had no idea. So back to my office I went and with a little research, I figured that the value created is a staggering $10–$12 Billion in the last eight years. Now that seems like an accomplishment to hang my hat on!
The companies that have gone public have a combined market cap of over $8B.There have been a bunch of M&A transactions that resulted in at least another $2–$4B. Of course, the CFO cannot take full credit for all of this value creation, but certainly it speaks to having placed capable CFOs into winning companies. This is just one angle to consider, but I think it will be a useful metric to track as we move forward.
Another measure of success: creating enterprise value
Many CFOs I speak with talk about creating enterprise value through a number of methods, and revenue growth cures a lot of ills. This is timely because more and more of the CFOs I speak with are out in the field selling their companies goods and services. Just last week I met with a CFO who was headed to Wall Street to meet with a number of CIOs and CFOs of leading investment banks about using their SaaS platform—really a peer to peer sale. This is a good example of the role of a CFO on the front lines of selling.
In another case, one of my placed CFOs said she spends a great deal of her time on negotiating customer contracts. These contracts are multi-level, multi-year service agreements with large corporate and government agencies. She says after the initial sales process is done, it is actually her job to negotiate the final pricing, terms and conditions of the agreements. Certainly this is another example of the CFO driving direct enterprise value.
Other measures of CFO success
What other ways could we measure the success of a CFO? I think the longevity of employment is important. Another positive stat for my work is that at least six CFOs I have placed survived CEO transitions; this serves as a good testament as well.
While we are proud of creating real dollar increased value, we are equally proud of our long-term relationships with all of our investor, CEO and CFO partners that we have been building from day one. The core value we offer our partners is the ability to tap into an ever-growing pool of talent and resources, and find winning CFOs to help build enterprise value.
If you are interested in exploring the issue of value creation further, the role of a CFO, or if you are ready to find your next CFO and build value for your organization, email me at Dave@arnoldpartners.com.