Dave Rade became the CFO of Frito-Lays in 1998 and served as CFO and later senior vice president till 2010. He is widely considered as a person who changed the work profile of a CFO from a pigeonholed finance role to a broader role as a strategic partner. In an interview to Delloite, he provides important wisdom about the role of the CFO and how it has changed over the course of the years.
New Challenges for a CFO
Dave talks of the increasing speed of taking business decision. Nowadays a CFO needs to be top on things they need not worry about a few years ago like the impact of social media on the company’s stock and cybersecurity to protect valuable data. The faster clock speed to take decisions also puts pressure on the CFO to deliver strong quarterly earnings which can lead the CFO to sacrifice long term success for short term gains.
“I see some companies hesitate to make long-term investments and strategic shifts because of the pressure on quarterly earnings”
To manage this accelerated pace of decision making he suggests that the decisions need to be pushed down at a lower level than to pull up all decision making to senior level. The CFO should strive to build an organization where there is a culture of trust between the various levels of management so that the organization is able to move quickly and swiftly.
Relationship between the CFO and the CEO
The CFO should look for the opportunities to shift the costs of business to support the long term strategy of the CEO and the business. One of the accomplishments that he is particularly proud of was his ability to inculcate and drive a productivity culture throughout the organization, which enabled them to cut costs without impacting the productivity of the employees or the quality of the product and shift the savings into the business as well as the profit stream. For e.g. if the business felt that it needed to invest more in Advertising and Marketing, then they could cut cost in other areas, without affecting the productivity, to invest in Advertising more. This agility in cost cutting meant that he needed to build a tremendous amount of trust with the other stakeholders and to achieve this trust he demonstrated that his focus is on the success of the business, not just the success of his department.
“To be a true partner to the business and be a leader in your organization, people have to believe that you’re trying to do the right thing for the business, not just the right thing financially… For example, when I became CFO, the finance organization worked separately from operations. I changed that by moving the supply chain finance people to the supply chain wing, marketing finance people to the marketing wing and so on. I wanted my team to work alongside their business partners. Doing that sent a message to the organization that we weren’t just saying we wanted to be a partner to the business—we showed that we wanted to work with operations.”
A “How” CFO instead of a “No” or a “Yes” CFo
A CFO who says “No” more often is bound to get isolated quickly and a “Yes” CFO is more likely to end up in trouble by committing to undeliverable promises. The ideal is to bea “How” CFO – one who says “How are we going to take your idea and make it work financially?”
“If people believe your objective is to help them be more effective, they’ll allow you to work with them. At some point, you may have to cut their budget, but if you do it from a position of the trust you’ve built with them, they’ll accept those cuts.”
A CFO also needs to make sure that there is a measurable return on any investment so that he/she can communicate to the analyst and explain why the investment was made in a credible manner.
While we tend to put a lot of onus on the technical ability of a CFO, the interview by Dave Rader illustrates how important it is for a CFO to build trust, communicate with honesty and develop a culture of productivity to be successful in his/her role.