OP-ED: The Art and Science of the New-Age Unicorn CFO

The new-age CFO works closely with the CIO to pursue a company’s long-term strategic welfare and management of the organization’s investment portfolios.

Igor Sill

A few years ago, getting an accounting degree, spending a few years in public accounting, handling accounts receivables and payables, and managing finance operations may have been the typical career path for a high-tech chief financial officer (CFO), but the world has changed significantly. The new-age CFO has been elevated to new heights.

In the old days, the CFO would compete for corporate resources so as to optimize company performance, but today’s organizations and market challenges have changed considerably. Boards of directors and investors demand greater performance with higher valuation expectations along with market disruptive strategies. Today, the CFO needs to be a strategic team player, collaborating with the chief investment officer (CIO), chief security officer, and chief marketing officer to securely assess, analyze, and manage data; collaborate with the head of HR to shape the corporate culture; collaborate with the chief operating officer or executive vice president to gain the most cross-functional perspective; and maximize high-value capabilities from the overall organization.

The new-age CFO works closely with the CIO to pursue a company’s long-term strategic welfare and management of the organization’s investment portfolios. In the case of Salesforce’s corporate investment arm, the CFO and CIO have collaborated to create the world’s largest ecosystem of enterprise cloud companies. Salesforce elected to form these beneficial partnerships in order to accelerate the growth of over 300 technology startups who depend on Salesforce’s marketplace. Salesforce invests in next-generation enterprise technologies to help companies connect with their customers in entirely new ways. Invested companies receive capital as well as access to Salesforce’s cloud ecosystem along with the guidance of Salesforce’s executive team. This strategic approach has helped build market credibility and accelerate Salesforce’s growth and valuation.

A new generation of new-age “unicorn” CFOs have already made their indelible mark and contributions on the high-tech industry. This new breed of CFO is much more strategically-oriented, understands the value of digital transformation, artificial intelligence (AI)-financial planning, and applied analytics, and links them to corporate strategy, market trends, valuation creation, and greater public-facing external interaction.

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CFOs have always played an active role as a key advisor for founders and CEOs. The difference today is the tremendous next-generation technology tools available that provide and enhance decision-making. In today’s disruptive market economy, technology is no longer a “nice to have” luxury, it’s a definitive “must have” that propels companies beyond their competitors. These new-age CFOs recognize that creative thinking and calculated risk-taking is the defining factor in leading their organizations through successful digital transformation journeys. Now, with the integration of advanced AI-based finance technologies, CFOs can analyze a wealth of information rapidly while offering greater strategic guidance than ever before.

This isn’t just about finding, recruiting, and hiring a new-age CFO. If you’re searching for a CFO, you already know that he/she needs to be an absolute “A” player with potential for success determined by their levels of intellect, pedigree, work ethic, and creativity—that is to say that he/she fully understands where technology can be best leveraged in:

Your business
Your market opportunities
Your long-term growth strategy
Your financial fundamentals that encompasses processes, controls, systems, and reporting
Managing conflict
Attracting senior executive talent
Controlling chaos

The new-generation CFO brings together critical information from every aspect of the business: worldwide sales, marketing trends, operations, human resources, and finance and accounting, and speaks the same founder and CEO language about the business, its growth, strategy, and value appreciation. The right CFO is capable of advising founders and CEOs on how to transform this breath of view into specific executable initiatives with a solution-bias, versus the typical naysayer bean counter. This combination of cross-organizational views and leveraging AI to model the impact of internal and external factors on future performance will transform finance leaders into more strategic advisers to management and the board of directors.

In order to prosper and gain competitive advantage, companies need to see around corners, adjust as needed, making appropriate course corrections, and harness advanced technologies to re-purpose business models. The agile company understands the importance of delivering greater value to its customers.

These are the skills that define the uniqueness and added value of today’s CIOs among business executives.

Ideal Unicorn Profile

If a company’s ultimate objective is rapid, sustained growth, valuation appreciation, and a successful public offering, a finance leader with an MBA from an top-flight business school and a successful investment banking track record coupled with a passion for valuation growth is a good bet. Those with an investment banking background make attractive CFO candidates because they are highly skilled in deploying resources and capital to generate greater value appreciation.

“The first rule of hiring exceptional CFO talent is to recruit where the very best talent lives.”

An excellent example of such a profile is Sarah Friar who started her career at McKinsey & Co., then left to become the managing director of theEquity Research Division at Goldman Sachs. She was lured away to Salesforce to become senior vice president, finance & strategy, then became CFO and treasurer for Square, Inc. (SQ), guiding the company through an immensely successful IPO. Today, Sarah is NextDoor’s newly appointed CEO and serves on the board of Walmart and Slack Technologies, as well as being a member of the Aspen Global Leadership Network and serving on the management board at Stanford Graduate School of Business. Sarah received a graduate degree from the University of Oxford and an MBA from Stanford Graduate School of Business. There are many more such examples.

Perhaps the most important founder and CEO decision is that of hiring the right executive team. The most successful and effective CEOs recognize the importance of hiring the very best talent while creating a culture where that talent is empowered to do the best work of their lives.

Igor Sill is a Silicon Valley executive search and venture investor who worked with Larry Ellison, co-founder of Oracle, Marc Benioff, co-founder of Salesforce, and Steve Jobs, co-founder of Apple & NeXT. Igor distills common leadership traits these three legendary founders share in their ability to identify, select and recruit exceptionally talented finance leaders. Igor attended Stanford University and University of Oxford’s Said Business School. He can be reached at genevavp.com

Tags: C-suite, CFO, recruiting, team development

The investment committee of the California Public Employees’ Retirement System (CalPERS) has rejected a proposal for the largest US retirement plan to consider reinvesting in tobacco stocks.

The plan was floated by CalPERS investment committee member Jason Perez, a police sergeant in Corona, California. Perez joined the CalPERS board in January after defeating board president Priya Mathur. CalPERS board members also serve as investment committee members.

Two other investment committee members, Margaret Brown and Dana Hollinger, supported Perez’s surprise proposal at the March 19 investment committee but the three were outvoted by the rest of the 13-member committee.

“I don’t smoke, but my charge isn’t to worry about people’s health, it’s about making sure the fund is making the returns that it is supposed to,” Perez told CIO in an April 8 interview.

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The investment committee’s decision to divest from tobacco stocks had cost the largest US pension around $3.6billion in investment profits between 2001 and the end of 2016, CalPERS’s general investment consultant, Wilshire Associates, had concluded.

More recently, however, a downturn in the prices of tobacco stocks would have meant a loss of around $500 million for the pension system in 2017 and the first half of 2018, if CalPERS had remained invested in those stocks, Wilshire detailed at the March 19 meeting.

“We are currently losing money on tobacco, [if CalPERS had reinvested]. I don’t see any point in buying in at this point,” board member Theresa Taylor told the investment committee on March 19.

She said the investment committee should stick to its original plan in 2016 for the investment committee to do a “deep dive” on tobacco divestment once every five years, or in 2021.

Generally, investment committee members have been opposed to divesting of stock sectors. So much so, that investment committee members seemed poised to reinvest in tobacco stocks in early 2016 after hearing from Wilshire Associates that the pension plan had would have made several more billions of dollars if it had not divested.

Anti-smoking and health groups quickly criticized the investment committee. They also noticed that the CalPERS board purchased health care for many of its members, and was the second-largest purchaser of health care in the United States, after the federal government. They argued the irony of CalPERS‘s reinvestment in a product dangerous to its members’ health.

The investment committee backed down by the time of the vote in late 2016, not only reaffirming the 2000 divestment, but expanding it to external equity managers, who held more than $500 million in tobacco stock.

With the $354.2 billion CalPERS only around 70% funded, Perez has maintained that the investment committee decision to keep the ban on investing in tobacco stocks was wrong. “If it’s legal and it’s no way connected to terrorism and it’s profitable, we should be in it,” he had said in January.

At the March 19 meeting, at which Perez’s motion to reinvest in tobacco was rejected, the police sergeant tried to get CalPERS investment officials to offer their perspective on what the future will hold for tobacco stocks. The investment staff wasn’t biting.

“And it just speaks to the challenge around any of these things, is that we don’t know what the next one-year, three-year, five years is going to look like,” said Dan Bienvenue, interim chief operating investment officer.

Bienvenue said if CalPERS investment staff could predict when stocks would rise or dip, “we would all be billionaires.”

Perez told CIO from what he has read and heard, the future looks bright for the tobacco industry, and that “the big tobacco companies are just waiting for [President] Trump to make weed legal and they’re going to start jumping into that stuff.”

Given that, Perez said it appears obvious to him that CalPERS should reinvest in tobacco stocks, particularly in light of concerns about the pension system making its expected annual rate of return of 7%.

“If you’re just worried about the investments and just worried about your fiduciary duty, it should be a no brainer,” he said

CalPERS Says No to Legislation Forcing It to Divest from Private Prisons

CalPERS Buys Small Stake in Marijuana Stocks

Tags: CalPERS, Divestment, Tobacco