Yeah! Nothing wrong being alone when you’re in the right! That’s power posturing for sure and who doesn’t like it? But mostly it’s self-serving platitude. Because who doesn’t want to claim, be seen and believe to be in the right? Especially when coming from a position of power like the CFO!
Its self-serving because it gives an instant sense of self elation, the sense of pride attached to being heard loud and clear and the grandeur sense of sounding defiant against what’s being touted as the preferred approach by ‘all and sundry’. Because the collective wisdom of those ‘all and sundry’ does not stand a chance against the high and mighty CFO.
Why?
• Because obviously CFO knows the numbers that others don’t.
• Because CFO interprets numbers like no one else.
• Because CFO can manipulate the numbers in making sense, which others simply can’t.
• Because numbers matter the most.
CFOs would like you to believe that the numbers came before the business idea. That the numbers came before the things to be numbered. That the need for measurements arose ahead of the stuff that’s to be measured. CFOs know that one ought to begin with the end in sight. That end is the numbers game!
And thus, for CFOs, numbers are all that matter! Afterall, any and all business entities are measured in terms of their numbers, be it in the form of wealth generated, revenue share, profitability, EPS, returns on investment. For the CFO, business success is not about the impacts it has made or the goodwill it has established, it’s about the numbers.
That’s how the CFO earns the title of number cruncher. But there’s only one problem to all of this introduction I’ve covered above. The CFOs need to be reminded all too often that it is business activity that generates numbers that can be crunched. If there’s no activity, the numbers do not arise!
As I’ve most befittingly covered here, the ideation is always first and foremost. Can we cap it before it has been reviewed for having a business rationale, simply because it’s not likely to be good in terms of numbers? You brainstorm ideas, you run simulations, you make projections based on a number of assumptions, then run the numbers or sometimes you don’t even run the numbers but get on with them.
Why get on with it without running numbers? Well because sometimes it’s a matter of survival. Don’t we navigate through a number of significant risks without caring about the costs? Don’t we put in certain controls even when the costs of the risks they’re mitigating cannot be calculated perfectly, but the controls cost is definitely there?
Don’t we see many a times entrepreneurs getting into startups without reviewing any financial models, simply because the idea is a novelty and looks promising? Why do we go for seed funding then? And what exactly do those venture capitalists see the most when promising funding? Only the returns on investment numbers or the prospects, commitment and potential success of the ideas too? And why do they commit funds when it is clearly known that the investment won’t yield anything until year ‘n’ when it breaks even and becomes profitable afterwards?
And what about future or later stage failures in perfectly worked out numbers? What about a business running smoothly in terms of numbers until it starts getting south? If numbers hold the key to everything, they should also be the answer to the dynamics of the ever changing operating environment. Isn’t it?
CFOs would argue, “of course we do that, that’s why we’ve budgets, that’s why we have scenario building, that’s why we run simulations, that’s why we have fall back plans. We’ve all the ammo the business could ask for while fighting the risks it encounters.”
And yet businesses fail. Sometimes after take off and sometimes without taking off. And many a times it’s the insistence to focus upon numbers, simply because the rationale to survive or sustain and start or grow is outside the ambit of numbers like risks the business or the idea could have taken and converted into opportunities but was ignored because numbers did not add up.
While the CFOs try their best to derail any ideas, the business executives keep reminding their CFOs not to put the cart before the horse. Their rationale is simple; you can’t have numbers before the transactions, because transactions yield into the numbers!
But then the business executives are “all and sundry”. They are the people who belong to a flock or a herd, the CFO likes to keep at bay. Until the entrepreneur steps in and tells the CFO the tale how it all started. And when it started, the numbers that made any sense at all came many years afterwards, when a brand was established and trust was won!
Apart from starting off without making financial sense, business executives even have reasons to continue investing in a loss making product/service. For instance, a loss making product/service may not be discontinued because:
• The business needs to have its complete range of offerings in the market.
• The business needs to have its presence in a certain market, geographic region, and not cede space to competitors.
• The business needs to tout its presence region wide.
• The product/service enables or complements sale of other profitable products/services.
• The product/service puts and keeps the business at the map.
• The product/service keeps the customers locked in because the brand has established its trust in them.
Spoiler alert though! It’s not that CFOs don’t make sense with their arguments deeply rooted in numbers. Numbers need to make sense after all! Financial viability is a significant component of a successful business. But here’s the catch…. It’s after all!
Recently, a CFO friend tried to remind the business executives at a contract renewal meeting, that it was him around whom the decision to continue or wrap up revolved. Even though the paying party had been and is willingly paying a premium that’s double the cost it is owed and the additional cost for keeping the brand afloat, the CFO said exactly what he was supposed to say; the numbers didn’t add up!
Guess what? The payment partner did not need to argue with the CFO. The CFO’s business development colleagues did the payment partner’s bidding by showing them the way out for renewal. The way was all too familiar, and the CFO found himself at his most comfortable spot…… solitude of course!
When I pointed this out to my buddy, there was silence. No response.
I told him the businesspeople did what they do. They told the payment partner to get in touch with the entrepreneur, and this will all be sorted out yet again!
But it was like, point heard but not taken! I imagined him saying, “I’ve also done what I was supposed to do, and now I’m at my preferred spot, getting comfy!”
That’s exactly what CFOs have learnt when they were being trained through the past many years to start acting as an advisor to the business rather than a number cruncher; be at the executive meeting and do your thing.
That some of us never learn is a fact!