One of the game-changing moves Ken Stillwell made when he became CFO of Pega Systems in 2016 was tracking the amount of value the company gets out of each of its customers — what’s often called annual recurring revenue (ARR) or, in his case, annual customer value (ACV). For companies that rely, or plan to rely, on recurring revenue, it’s the most intelligence-laden metric for the operational business leaders in the organization, the veteran CFO says.
"Every day that I come in, I look at how business is progressing through a quarter, through a year, what the impact is on our growth rate in ACV, and how that plays into our long-term strategy," Stillwell said on a CFO Thought Leader podcast this week.
He introduced the metric to the company to get all of the operational leaders thinking the same way about what will drive the company’s growth, he said.
"ACV or ARR, whatever metric you use to measure that recurring relationship, is really misunderstood in the marketplace until you start to track it," he said. "In the traditional world of companies selling perpetual licenses and thinking of bigger deals and one-time deals, a good quarter, a good year, [you’re] not really building that really tight relationship."
Stillwell came to Pega Systems, a company whose AI-powered, cloud-based software is used by companies to optimize customer interactions, after gaining experience as a consultant on mergers and acquisitions with Price Waterhouse (now PricewaterhouseCoopers) and then as CFO of several mid-sized companies, including Taxware (now Sovos) and DynaTrace, an application performance management (APM) company.
In his positions, he’s tried to be a partner to the other executives by thinking not just of the company financials but of what the company needs to grow and scale based on the perspective he brings from the numbers and the non-financial metrics.
He’ll put in front of the sales team, for example, a company’s buying and billing history, annual contract value history, and the applications being enabled for that company and the executives within the company.
"We’re really creating a robust dashboard for our teams, both sales and customer success and our services support team and executives, around the relationship that we have with specific organizations," he said.
He also taps metrics generated by a business data analytics team he heads up. For the sales team or other field-facing teams, he generates reports on the demographics of their customers, the in-flight opportunities (offerings beyond what a customer is already using), data around their previous transaction-based interactions, and so on.
"We have an AI customer decision engine that allows us to predict and model out certain activities and likelihoods of progressing things through a sales stage," he said. "There’s everything from a sales enablement tool all the way to our customer service solution, which is allowing us to have visibility into the client journey, the next best action, the next best offer to keep that client deeply connected to us as a partner. So, those solutions help in sales and selling activity, and also our customer service and also in out-bound communication marketing."
Strong accounting team
Stillwell said it’s important to put in place a professional team overseeing the finance and accounting functions so the CFO can keep the focus on the big picture and bring solutions, not just problems, to the operational leaders.
"[Our role] is to be the eyes and ears for leaders of the organization because they may not be able to see things that the finance partners are able to see and then also helping to solution those, not just giving that problem or challenge to a different executive or different part of the organization," he said. "Maybe we need to reposition marketing investment on to a new campaign, or it may be really important to get into a new market or a new vertical or a new offering, or it could be something around a hiring plan: how do we accelerate hiring in an opportunity area?"
Looking ahead, few things are more important for CFOs than preparing for the rise of younger finance professionals, who bring different experiences, background, and expectations to the workforce.
"We are in a different world of the merging of the baby boomers all the way down to Gen. Z," he said. "I think it’s incredibly important that we bring the right kind of culture to attract a diverse workforce and really focus on inclusion, because talent is at an all-time premium. … At the end of the day, if you don’t have the right people and the right talent, and a culture that supports them, you’re playing uphill."