The CFO'S Perspective

At CFO Selections, we may work in numbers… but we’re in the business of people. Because behind every financial report is a person making hard decisions, and behind every engagement is a human-to-human connection. In this series, we’re shining a light on those stories — introducing the consultants who guide our clients forward and the leaders who bring those numbers to life.

When Connection Is the Strategy

Ask Rebecca Alderfer what she loves most about her role, and she doesn’t mention policy (even after two decades working at the intersection of strategy, social impact, and public policy). What lights her up is connection, forging new partnerships, linking strategies across silos, and aligning people around shared goals.

“It’s really that chessboard,” Rebecca says. “How can we all support each other? Where can we leverage resources and opportunities that already exist? How do we grow the platform together, so that everyone benefits?”

That mindset has defined her career from the White House to the frontlines of maternal health in Colorado. As CEO of the Colorado Perinatal Care Quality Collaborative (CPCQC), she’s no longer advising from the sidelines. She’s leading the charge, helping the organization grow from a startup into a statewide force for improving maternal and infant health.

At CFO Selections, we may work in numbers… but we’re in the business of people. Because behind every financial report is a person making hard decisions, and behind every engagement is a human-to-human connection. In this series, we’re shining a light on those stories — introducing the consultants who guide our clients forward and the leaders who bring those numbers to life.

Public accountant. Investment banker. CFO. Former president of the largest Italian car show in the world.

If you’re a collector of Italian cars, you might recognize Tom McDowell from Concorso Italiano. But closer to home, he’s known as a connector of people.

“Have you ever heard the phrase ‘the Seattle freeze?’” Tom asks. “People who are new here have difficulty establishing relationships. It took me years before I finally felt like I was accepted.” Now, he pays it forward. “I’m sensitive to that when I meet people who are new to the community. I talk with them, get to know them a little bit, and introduce them around.”

Tom has been in Seattle for over three decades now, but his storied career stretches even longer (and farther south).

As executive financial recruiters we work with companies every day who have lost their CFO for a variety of reasons. The CFO may have left to pursue a better opportunity, retired, or made a career change. And in some instances, the CFO may have been shown the door due to subpar performance.

In all honesty, the latter scenario is the least common. Most organizations are hesitant to let their CFO go because of the inherent doubt in the process of doing so. First, there is the big question of how to determine whether your CFO is making the grade. (You certainly do not want to let your CFO go if you cannot be certain that someone else will be able to do the job better!) And, secondly, there is the daunting prospect of needing to find a replacement that is going to be better performer.

But just because it is not very common in practice does not mean it should be. Companies, especially those with owners and CEOs that do not have strong financial acumen themselves, do not typically evaluate their financial leadership as thoroughly as they should. Unfortunately, if your CFO is underperforming, not identifying this in a timely manner or not doing anything about it, can be extremely costly. When your financial leadership is falling short of expectations, strategic planning can fail, affecting revenue and profitability.

For those not familiar with the term, a decision tree is a flow chart that works through all possible response options in a scenario to analyze resulting outcomes. Basically, it is a visual version of an “if this then that” statement across all possible alternatives.

The “branches” off each decision alternative that result use data analysis to forecast the most likely outcome of each decision. When one decision leads to another decision that must be made, that branch splits to continue extrapolating the effects of each subsequent decision. The result is a tree-like diagram (hence the name) that is easy to understand and interpret.

Decision trees can be more conceptual in nature or have numbers to back up decision scenarios, as is the case of pricing changes affecting revenue figures. For decision trees with complicated calculations, a software program can assign values and probabilities to streamline decision-making. A decision tree is a critical part of strategic planning because it allows decision makers to analyze the effects of a significant change throughout different areas of the business.

As fractional CFOs (Chief Financial Officers) we get a lot of questions about COGS (Cost of Goods Sold) and SG&A expenses from our clients. They want to know how to classify different types of expenses, which one to focus on when trying to control costs, how to think about them when evaluating business opportunities, and what kind of impact each can have on profitability. As such, their questions often span the two interconnected worlds of accounting and finance.

From an accounting perspective, categorizing expenses correctly helps to ensure regulatory compliance and aids in ongoing cash flow management. While from a finance perspective, understanding their impact on revenue growth allows for effective long-term financial management. For these reasons, having a firm handle on the difference between SG&A and COGS is a critical component to running any business.

Creating authentic connections with customers can help companies to attract new customers, retain existing customers, and develop brand advocates to increase customer lifetime value across the organization. It can also benefit employees, strengthening the company from within. Having a meaningful connection with the people they are serving allows employees to find meaning in the work that they do, simultaneously increasing employee retention and making it easier to attract top talent for new roles. The net effect of these internal and external shifts is greater, more sustainable revenue.

These days business owners looking to get an injection of cash into their companies have an almost endless list of possible funding options. However, that does not mean that all business funding options are created equal. They will vary by approval requirements, rates, conditions, payback terms, and other criteria. As a result, knowing the difference between funding types is meaningless without understanding what you hope to gain from securing financing.

A recession or downturn in the market is one of the most demanding scenarios for senior leadership to weather because there are so many possible responses to consider. Each decision leadership makes during this critical time can have a significant effect on the company’s ability to come out on the other side at all, let alone seize available opportunities to grow in the process. So, how can you strategically invest in your business during a downturn to increase the likelihood that it will be able to emerge stronger?

It is critical to act swiftly instead of ignoring the warning signs that a downturn is coming, worsening, or may last longer than anticipated. However, that does not mean giving into kneejerk reactions. A Harvard Business Review article summarizes it best by saying,

“Inaction is the riskiest response to the uncertainties of an economic crisis. But rash or scattershot action can be nearly as damaging. Rising anxiety (how much worse are things likely to get? how long is this going to last?) and the growing pressure to do something often produces a variety of uncoordinated moves that target the wrong problem or overshoot the right one.”

Have honest conversations with your leadership team to solicit feedback on how to proceed while leaning on the data. Focus on efforts on strategically managing expenses, acquiring assets to achieve your goals, prioritizing customer relationships, and developing new markets while focusing on your core competencies.