Finance professionals with sights set on the CFO seat should rotate into as many roles as possible, both within and outside of finance, especially in the early stages of their career, according to former NetSuite CFO Ron Gill. There is no better preparation for a CFO job than a breadth of experience, Gill said.
"Twenty-five years in revenue recognition accounting is not going to prepare you to be CFO," Gill said in an Airbase webcast. "I encourage people to move around."
Obtaining that experience means switching from a role in, say, the controller function to one in the financial planning & analysis (FP&A) function, if possible, and then maybe to something in the treasury and internal auditing functions. It also means getting embedded with sales, product or another outside team to understand the business from a different point of view.
"Everyone thinks there's a natural tension between finance and sales, and there often is," said Gill, who left NetSuite in 2017 and now sits on the board of Hubspot, Benchling and Amplitude. "But I don't want this person to be a total stranger in sales land. They need to have some sympathy for what the sales team is trying to achieve."
Importantly, finance pros should try to rotate in and out of function areas as early in their careers as possible, because breaking out gets harder as more time goes by and they settle into roles.
"If I'm the global corporate controller, it's hard to move over to be global head of FP&A having never done it before," he said. "It's easier to move over and be an analyst."
Moving into different roles also gives people a sense of what they enjoy doing, which is also key, because the CFO seat will be out of reach if they're not enthusiastic about what they're doing.
"Like all jobs ultimately, the CFO becomes a sales job," he said. "You have to be able to communicate enthusiastically and passionately inside and outside the company."
Late to Silicon Valley game
Although Gill launched his own Silicon Valley technology company in 2000 and led it to an IPO exit in 2003, his career had a different start than that of most tech CFOs.
When he graduated from college in the early 1990s, Japan was in the news as the country whose companies were taking over industry, from cars to consumer electronics, so Gill learned Japanese and took a job with Sony in Tokyo.
After a decade working in finance for Japanese companies, and a brief spell at Dell in Texas, he moved to Silicon Valley to catch the tech wave by launching his own company, Softfront.
"I made every mistake," he said. "I had no one to turn to. No network."
He relied on Japanese investors to capitalize his company, and after exiting, he joined SAP in a top controller role, and then joined Hyperion as VP of finance.
Gill pointed to other must-haves for aspiring CFOs beyond getting breadth of experience. The first is communication skills. Finance people aren't always natural communicators, but they must become one as they rise higher in an organization.
"The one thing I was deliberate about was saying I need more experience standing up in front of an audience so I'm not nervous about it," he said. "Look for those forums if it doesn't come natural to you. You can get more used to it, and it matters."
The second imperative is knowing how to model the business at the deepest level, what he described as being able to "grok the inner workings of the company," a reference to emphatic, intuitive understanding used in Robert Heinlein's 1961 science fiction classic, Stranger in a Strange Land.
"If the CEO says, 'What if we're willing to up the burn $5 million more, how much more growth could we get out of it?', the answer can't be 'Give me two weeks and we'll go do the model and I'll come back.' That just doesn't work. The CFO has to have the working model of the company inside their head. They have to be able to answer, 'If we spend another $5 million, I think it's about like this. That would be my gut. Keep in mind we can't just use sales reps. We would also need to fund this, this and this. Customer support's already pinched. We need to do all these things, but I think it probably gives you this. Give me two hours, and we'll give you the exact number.'"
The third is having a cultural fit with the CEO. Absent that, no amount of preparation will bring success.
"If the CEO is a huge, big-bet risk taker, and the CFO is a super conservative slow-grower, the click's just not going to happen," Gill said.
These skill sets are more important today because the CFO role has changed, driven in large part because of the impact the software-as-a-service (SaaS) model has had on companies, Gill said.
Company success or failure rides, to a much greater extent, on the quality of the model the CFO has built for measuring performance. In traditional companies, success is based on how close revenue and earnings per share (EPS) match guidance, but today, because of the data that flows into companies over the cloud and other factors, analysts expect far more complex models and for companies to hit their guidance with pinpoint accuracy.
"People who've grown up in the current generation may not realize how remarkable this is, but it's routine now for companies to give annual guidance within half of a percentage range," he said. "This was not normal in the past. Tolerances have come way down."
In addition to massive amounts of data, how revenue is generated has become more complicated, adding to model complexity.
"There's more customer self-service in terms of signing up, churning off, and more deals get done because of the way the product is engineered," he said.
This added complexity is why CFOs, to be the best partners to their C-suite colleagues and board members, must help others understand what's important in the data and serve as the level-headed truth teller that every company needs.
Quarterly revenue and EPS performance, for example, especially in a SaaS context, are not particularly relevant for assessing company health, because these numbers are backward-looking while metrics like bookings and customer retention look ahead.
"Revenue for a SaaS company is like light from a distant star," said Gill, quoting former Salesforce CFO Graham Smith. "It came from something that happened a long time ago. There's a layer underneath what's being presented and it's important that [people] have their eyes on that."