During her tenure as CFO of a large company several years ago, Michelle McComb noticed a big variance between budget and actuals on the revenue side at the start of the fiscal year. The finance team used a longstanding Excel model for their forecasting, and it had appeared to fare well up to that point, but market conditions had changed.
"Some of the business was still doing well, but the variance in revenue was not making sense to me," McComb said last week in a CFO Thought Leader podcast. "I found an underlying assumption in the forecasting model that was really wrong."
The problem would have stayed hidden if market conditions hadn't changed, said McComb, today CFO of Bluecore, a marketing platform for enterprise retail companies. But changed conditions revealed a sizable forecasting error, and the company's leadership wanted to know where the fault lied.
"They were looking for who to blame so they could put the target on their back," she said, but she didn't want to go there. "I was to blame. I'm the CFO, the executive in charge of my team, and I learned really quickly you need to take responsibility for your team's errors."
To address the problem, she and her team revamped their model from top to bottom and adopted a different forecasting tool.
"I learned not to take historical assumptions and let them sit and stagnate," she said. "You have to challenge underlying assumptions. It drove me and my team to do a heavy look at revenue models, customer performance, and a deeper dive into the data side of things. I had so many people say to me, ‘Well, it's directionally accurate,' but you can have one situation where it might look like the variance is fine, when actually it's not fine. If you haven't really dug into these, you're going to be caught out. So, it taught me to pay attention to the details."
As professionally challenging as the incident was, she said, it taught her how to navigate a significant error and the importance of owning the situation as a leader.
It also reinforced the importance of a strong team, whom you treat fairly and equitably. "It's not about you," she said. "It's about the people around you. If you have mediocre people, you're mediocre. If they're better than you, you can leverage your team."
McComb started her career in the early 1990s as an Ernst & Young tax manager before moving to the operational side as a tax and treasury director at a startup and then as CFO at another startup, Vital Signs Software.
At Vital Signs, she oversaw the acquisition of another company and then the company was itself acquired, by Lucent Technologies, for which she became CFO of non-United States and Mexico operations.
She later joined another startup, cybersecurity company Datto, as CFO, and while preparing it for a possible IPO, the executive team shifted gears and agreed to be acquired by private equity firm Vista.
"If you're on the path to go public, it's a dual path to be acquired," she said. "Datto had shown all the right signs for a public company: growth, profitability and had good investors, but on that journey the opportunity came up to be acquired, and that journey is fine. You have to be open to wherever that path may lead."
Focus on data
McComb joined Bluecore in April, and is looking at ways to optimize its infrastructure costs.
"I dug in early with my FP&A and engineering teams to look at what our features, functionality, and products are doing to impact infrastructure costs," she said. "So our engineering team instrumented a lot of that so we could better understand expense drivers and also understand them at a customer level. So, what customer behaviors are working well for us. Which ones need improvement.
"An example would be customer performance at a gross margin level. That is in a detail for which you can actually take real actions, like how we instrument our customer success organization to bring value to our customers quicker and better help them generate more revenue. That will also help us," she said.
Bluecore's customers are big retailers like Nike, Under Armour and Gap, for whom it powers personalized and predictive customer email marketing campaigns.
"If you're an online shopper, you probably get a lot of emails from the companies you buy from," she said. "We're very personalized. We don't spam you with a whole bunch of emails and hope you buy. We want to be targeted based on what they're interested in and also be predictive around what they would be interested in based on their buying behaviors."
To help ensure Bluecore's incentive stays aligned with the retailers' incentives, the company sets its pricing based on clickthroughs; it's only when a consumer clicks through the email that Bluecore gets paid.
"If our customers are doing well, that means we're doing well and were aligned with their goals," she said. "As a finance person, I like that."
Although the pandemic has hit retail hard, it's also accelerated other, positive trends that have the potential to play into the company's strengths.
"This transformation to digital businesses was happening anyway," she said. "So, for us it's watching these signals around how our customers are leaning into this new online world. What do you have to do to survive? What's the new way of operating?"
In the near-term, she's focusing on cash management, which means getting ahead of problems with receivables before they get too far.
"On the collections side, if you're not noisy, you're not going to get paid," she said. "In these times, people are conserving cash, so in my short tenure at Bluecore, I've instrumented some cash awareness and cash management so that sales people can see what's outstanding with their customers in real time."
Her team created a dashboard with receivables information for the sales and customer success teams. "They don't have to come to finance," she said. "With the dashboard, when they're looking at renewals and upsells, and if their customers are in trouble they have visibility into that."