Leadership during economic crisis

When consumer behavior drastically shifts, leaving companies with little time to react, chaos is bound to ensue. It often falls to CFOs to step up and help their businesses remain agile, flexible and sufficiently cushioned to weather unforeseen events, like the pandemic. 

The stakes are different for nonprofit organizations, which have struggled in their own right as the in-person volunteering and events they often rely on were canceled and streams of income dried up. But no two organizations are the same, and no two CFOs have been able to rely on a common playbook.

“The nonprofit sector is anything but monolithic,” Andrea Wilson, a managing partner at BDO’s industry specialty services and co-leader of its nonprofit and education practice, said. “And the CFO’s role changes dramatically based on an organization’s mission. 

Additionally, “nonprofit” is somewhat of a misnomer. “It really means the organization can't have net assets at the end of the year, so a nonprofit CFO’s role is to put mission first," she said.

Balancing mission with money

In the best of times, CFOs function as financial advisors, Wilson said, to keep things on track and to strategically move an organization forward. But the past year has tremendously increased the demands put on CFOs in the nonprofit sector; Wilson puts these executives’ workload second only to those in the healthcare sector. 

“The number of beneficiaries and demand for services increased, but traditional funding outlets were harder to come by,” she said. “So it [became] incumbent upon the CFOs to do robust scenario planning to understand what services their companies could provide, and to whom.” 

Measuring a nonprofit’s financial success is not as straightforward as with a for-profit, John de Wet, CFO of global poverty alleviation nonprofit Evidence Action, told CFO Dive. 

“Metrics like return on equity or earnings per share are easily measurable; our metrics of success are the impacts of our programs,” he said. “That said, our organization is founded on principles of evidence and cost-effectiveness, so getting to the lowest possible ‘cost per impact’ is critical.”

Additionally, nonprofits are generally more resource-constrained, de Wet said, not only in access to cash reserves and lines of credit, but also in human resources; as a rule, nonprofits run as lean and efficiently as possible.

And when the C-suite is solely mission-driven, effective financial management suffers, Raj Kapur, a consulting nonprofit CFO of 30 years, told CFO Dive. “CFOs have to strike that balance of mission and thinking as though they're running a profitable organization, because nonprofits can’t run without money.”

Nailing the specifics

Kapur specializes in helping turn things around for well-programmed nonprofits coming up short financially. He’s helped organizations working with up to 20 budgets stemming from different sources, including federal, state and city governments, local funds and donors.

“When you're working with so many different sectors, all of them have their own rules and regulations,” he said. “If you're getting money from the federal government, you have to follow some very strict guidelines.”

Learning all the specifics is incumbent upon a nonprofit CFO, as is understanding the machinations of how the government works, particularly the Office of Management and Budget, which most nonprofits deal with in some capacity. CFOs with for-profit backgrounds often fail at nonprofits, Kapur said, because they don't grasp the depth of experience needed. 

As such, the best fit, generally, for most nonprofit CFO roles will be someone who has actually risen through the ranks at that company, and has learned the operational basics first-hand.

Sustaining income from outside funding streams can also be an issue. Take the government; if there are budget cuts, as in 2020, they inevitably trickle down. “Anytime the government changes, the donor base changes,” Kapur said, emphasizing the need for sustainable reserve funds. 

Accessing CARES Act funds

Salaries for personnel can take up to 80% of a nonprofit’s spend, so when income or donor streams dry up, layoffs are typically the first move, Kapur said. During COVID-19, PPP loans helped many nonprofits keep their doors open.

Evidence Action's PPP loan, received last spring, saved it from layoffs, de Wet, said. Martha's Table, a Washington, D.C.-based nonprofit centered on providing educational programs and food assistance to families, received a PPP loan in August, which let it keep its 120 employees, too.  

“We expanded our benefits, actually,” Martha’s Table CFO Bhumip Patel told CFO Dive. “We rolled out a new professional development program, including full in-state tuition reimbursement, and did a full compensation analysis. I think that's really a testament to Martha's Table’s commitment to putting the team first, and a testament to the health of the organization.”

Unpacking the nonprofit CFO’s role

Large, better-supported nonprofits can likely employ a big staff to handle management work, Kapur said. But at mid- to low-level nonprofits, CFOs are responsible for rolling up their sleeves and doing everything. That became more common at companies of all sizes amid pandemic layoffs, when CFOs ended up taking on an accountant or controller role in addition to their standard duties. 

Even at Evidence Action, which kept all its employees, de Wet’s responsibilities span from accounting, budgets, audits, tax and reporting to investments, grants administration, contracts, operations, IT, compliance, risk management and legal.

“There are a lot of responsibilities as you peel it back,” de Wet said. “From ensuring good stewardship of donor funds, to providing information to leadership, to managing risk and compliance. Then, of course, there's the global dimension, with operations in seven countries and growing, not to mention the strategic role supporting the board, Audit & Finance Committee, CEO and leadership.”

Outsourcing accounting functions has been a recent trend, which Kapur doesn’t recommend.  “When an outside team comes in and does the work, there’s no loyalty,” he said. “A real CFO would look into how to actually increase the impact. An outside CFO generally doesn't have that mindset; they come to do the work.”

During the pandemic, Martha’s Table distributed $1.4 million in direct cash assistance to families enrolled in its education program. It also distributed vital non-cash goods, like grocery store gift cards. Drawing up the projections and the analysis to ensure that that type of bold programming was possible was Patel’s biggest challenge; he spent the past year and a half prioritizing risk management, developing financial projections, and ensuring fiscal strength and asset management.

Focus on digital

Many nonprofits entered the pandemic already behind on their digital infrastructure. As things went further digital, this proved to be the distinguishing factor between those that could maintain business continuity and those that struggled, Wilson has found. 

“Nonprofits also saw an increase in cyber crime, which led to significant losses. You would think, well, that's the CIO’s terrain,” she said. “But at many organizations, the CFO oversees IT, often on a shoestring budget. Most CFOs I work with had to get smart very quickly about that critical infrastructure so their organization isn’t put at risk.”

At Evidence Action, most systems were already cloud-based and, because of its globally dispersed team, many staff members were well-versed in remote work. This meant de Wet and his team avoided disruptions to day-to-day tasks like making payments, closing books, or generating reports.

“We quickly changed processes, and thank goodness for technology that allows us to deposit via the bank app,” de Wet said.  “It was both a relief and satisfying that decisions made over the previous years, especially building reserves and opting for cloud-based solutions, paid off, and we were likely better off than many other nonprofits.” 

“Many of my CFO colleagues have said they've needed to do a full systems assessment to see where they can digitize, and improve productivity,” Patel said. “From my perspective, the difference is that nonprofit CFOs have to work and communicate across the organization with a diverse set of stakeholders: board members, community members, staff, members, funders, government funders, foundations, et cetera.”

Martha’s Table, Patel said, is well-accustomed to innovating and, when needed, pivoting. Its biggest change in 2020, then, was to digitize its systems that previously required in-person interaction.

It was a blessing in disguise, he said; as a result of those programming innovations and a more accessible user experience, the company saw a jump in online donations. It also saw more volunteers, as more people worked remotely and found time to show up for their communities. 

Key to success: fiscal conservatism

During the pandemic, Evidence Action, like Martha’s Table, was buoyed by several years of prudent financial management. Also like Martha’s Table, Evidence Action’s donors remained supportive. Even though overall revenue was lower than in previous years, it raised $4 million of new funding within the first six weeks of lockdowns.

Evidence Action’s largest program relies on a school-based delivery model, and with schools closed for most of the year in the countries it serves, its program activities and expenditures dropped by about 35%. This led directly to a lower recovery of indirect costs, which are critical to paying for the programs. 

“I expect increasing attention within the sector to building reserves to buffer future impacts, but those are difficult funds to raise," de Wet said. Going forward, he’ll explore how technology can leverage efficiencies like payment automation and system integration while being cognizant of growing cybersecurity threats.

Martha’s Table’s fiscal prudence over the last 40 years, Patel said, helped position it to “really act boldly” during the pandemic.

“We have continuously worked, at least during my tenure, to ensure diversified revenue streams, and ensure we're maximizing our unrestricted dollars,”  he said. “So we've been in a good place, even during the pandemic, to really take those bold steps to even better serve the community without too much of a shift on the financial side.”

To best serve the community, Patel said, Martha’s Table is often in the position of trying new approaches and starting from scratch, which can be difficult, particularly for a CFO. 

“CFOs want to reduce risk; that’s one of the key responsibilities, managing risk,” he said. “We want to maintain revenue streams, try to reduce costs and increase profits. So innovation in pivoting can sometimes be difficult. But don't be afraid to innovate, to pivot, or to listen and take leaps. Just try your best, from the CFO seat, to ensure the organization is ready to take those leaps."

When Mohit Daswani was head of finance and strategy at Square in 2017, the fast-growing payments company was at an inflection point. It had shown Wall Street it could grow like a rocket but now it needed to demonstrate it could also grow its margins and make money for investors.

For Daswani, the challenge was to manage that pivot in a way that didn’t prevent the company from going back to growth mode when the time came to reinvest in new products.

"We said, 'Look, our focus was to go deliver you profitability dollars,'" Daswani said in a CFO Thought Leader podcast. "But we're going to retain the right to be flexible on the margin we're delivering, which means we’ll give you that dollar of profitability, but if our revenue growth is higher than what we guided, we’re going to invest that back into the business."

Making that pivot is always a delicate maneuver for fast-growth companies, and Square pulled it off well, Daswani said. 

"If you looked at it from IPO in 2015, to 2017, when I got there, the margins went from … single digits to 14%, so a rapid expansion," he said. "At that point, the stock started responding quite nicely. That helped build the confidence."

Prior to 2018, the company was growing margins at a steady 5-6% a year, and it was leveraging its flexibility to put capital to work in the business efficiently, Daswani said. In 2018-2019, the focus shifted to EBITDA dollar growth, with more moderate margin expansion of about 2% annually. It was spending on marketing when needed and also showing investors it continued to innovate from a product perspective.

Today, Daswani is with ThoughtSpot, another fast-growing tech company, which he joined in January as its first CFO. The company provides c-suite executives and frontline business users with a natural language, AI-driven platform to extract business intelligence from internal and external data.

Before the downturn hit, Daswani was assessing how he would build his teams, processes and systems so they can scale along with the company without requiring him or a successor to implement a full-scale transformation. 

"Why do you have to go through a fundamental transformation a decade in?" he said. "Can you be building ... in a way that’s modular and scalable and gives you the system you’re going to need as you grow your business? I know platforms change, and the cloud and new capabilities emerge. I guess it’s natural. Maybe it's unavoidable. But for me, one of the things I'm trying to do, in the design of the organization and design of our systems, is be very intentional that we have some things that are going to scale with us."

Trust and intentionality

As CFO, Daswani's portfolio is broader than many in the role. In addition to his finance and accounting teams, he oversees legal, IT, corporate development and strategy. 

The variety makes his job interesting but it also gives him a chance to set up the strategy team so it’s integral to company planning and not just creating plans that don’t get put into action.

"I want it to be a group that is speaking to our strategic direction and helping to move the needle, not just a passive organization," he said.

For Daswani, who began as a private equity banker before moving to the operational side as a finance executive, first at PayPal and then Square, one of the CFO's main roles is to be part of the organization that drives business and doesn’t just operate as a back-office check on ambitious growth plans. 

"As CFO, you can't just say no," he said. "You say no too many times and you’re not going to be in the role. You won't be seen as an enabler. The discipline is to find creative solutions while working within the constraints."

Daswani said the creativity of the office comes from finding ways to say yes while protecting the company as a fiduciary. "You’ve got to be there to think ... how to move things around from a budget perspective, how to generate the top line and then free up resources for investment and align interests," he said. "That’s the kind of creativity I want to have on the team, but that takes a certain intellectual curiosity, ambition to have an impact, and the grit to just go in there and get the data and go figure it out."

Along with the creativity, Daswani says the CFO needs to build trust with business partners.

"It's a two-way street," he said. “When there’s a budget request, come in with what you need. Let’s talk through it. Show me the why. If you’re growing the team, how is your team currently used? What are people working on? If you finish up delivering on a product, didn’t you just free up a bunch of people from that?”

Daswani said it’s incumbent upon him to shoot straight. “Here are the trade-offs we’re going to have to make,” he said. “Are we going to put that incremental dollar in marketing or are we going to put it in product? And let’s bring stakeholders around the table and make that decision. We have to decide, ‘Yeah, we’re not going to grow margins right now; we’re going to instead invest more in the business, because we think that’s the right thing to do and now let’s go explain that to our board or whoever our stakeholders are.'”

As his company embarks on a difficult chapter navigating the downturn, Daswani will have a chance to test his plans against a global event that will be uniquely challenging.

"We’ve had SARS and other global pandemics that have come along," Daswani told CFO Dive last month. "There's a human toll, which is scary, but it will pass. And when it recedes, we will see our way through, absorb the impact, and move forward." 

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It's an understatement to say that current market conditions are rapidly changing, and uncertainty is high. The waters are troubled, and business leaders are coming together to help steer their ship through turbulence. The fast-moving and unanticipated changes have required flexibility and weekly and sometimes daily analysis of the impact of these changes on financial statements. The current environment has:

• affected how we work and engage with each other
• impacted how companies sell and deliver products and services to customers
• influenced corporate crisis planning and procedures
• changed corporate strategies

During a finance leader's career, it is inevitable that they will navigate financial volatility and uncertainly, but we are living in unprecedented times with immense economic uncertainty. Due to this recent uncertainty, finance leaders are making critical decisions to sustain their businesses through these difficult times. Leaders are evaluating the impact of changes in market conditions on the company's ability to preserve cash, deliver to customers, make debt payments, and ultimately survive this difficult period. As a result, finance leaders are prioritizing short-, medium-, and long-term goals and evaluating the impact that key drivers have on their businesses.

In this moment, finance leaders are required to spend immense time analyzing and evaluating scenarios to provide critical insight that inform decisions with enormous and potentially long-term impacts on their organizations. These leaders are managing the company’s financial statements and liquidity by:

• assessing their ability to deliver to their customer base
• developing new products and services to better serve the market
• evaluating operational efficiencies and synergies
• considering mergers and acquisitions
• restructuring debt

Consequently, having the tools to efficiently understand the impact of changes in market conditions to effectively communicate the impact and make critical decisions is imperative. The ability to model and analyze assumptions and strategies to assess the impact on cash flow, liquidity, the balance sheet, and P&L allows business leaders to make critical decisions more effectively while also providing visibility and transparency to answer critical questions. These tools allow finance leaders to understand the "why" behind results and provide the ability to change levers efficiently to proactively understand the impact of fast-moving variables. As the market stabilizes, companies will be faced with new critical decisions, including:

• what to sell to their customers and how to deliver to them
• staffing requirements
• square footage needed for office space and sales floors
• additional technology needed to support these changes

The key to achieving all this is a strategic financial plan to help decision-makers run the businesses. Traditional management financial plans explain "what happened," not "why" and "what should we do?" A strategic financial plan effectively links business strategy with operational levers to interpret the impact of today's challenging business environment as well as the impact on the future. 

When states began ordering people to stay home in early March, Meritage Homes CFO Hilla Sferruzza called all the land owners her company had deals pending with and asked them to hold tight. Future land and development spend is the one cost the company had absolute control over, so it was the first lever she pulled when the economy turned downwards.

"I connected with every one of our sellers with a near-term expected closing, or a near-term development deadline, and said, hey, we're all in this together. You guys don't want this, and we don't want this. Let’s pull back," Sferruzza said in a CFO Thought Leader podcast.

Sferruzza, who joined Meritage in 2001 and has been CFO since 2014, said the majority of sellers agreed to put the deals on hold.

"I wouldn't say they're altruistic," she said. "It benefits them as well. They don't want us to drop a deal. If it takes an extra couple of months to get through the darkest time and gain some visibility, I think they were willing to hold our hand and walk through that darkness together."

By early May, the prospects of the company — the seventh-largest publicly traded home builder in the United States — looked good, despite the slowdown. Sferruzza said she continues to forecast her company hitting its near-term goal of building 300 communities, up from 250 today, but instead of reaching that at the end of 2021, she's projecting it a few quarters later.

"We're now working those phones again," she said. "I wouldn't say we've opened up the purse strings just quite yet, but we can see some green shoots and we’re having conversations about, hey, if things continue to hover along the current trajectory, it’s looking like maybe in the summer we'll start being an acquirer and close on some of those transactions we’ve successfully delayed.”

Technology connection

One reason for her company's solid prospects is its use of technology, a function she took over when she became CFO. 

"Hands down, the most intimidating part of becoming a CFO was having the IT team [fall under] my umbrella," she said. "Having to oversee an IT department was not something I ever saw in my path."

That function has become key because of how it integrates the company's back-office operations with new, customer-facing applications that let customers look at and buy homes efficiently, even during the pandemic.

"Fifteen percent of all of our sales volume in April came from virtual tours," Sferruzza said. "That's an incredible number, when you think people are making a commitment for a couple hundred-thousand dollar home purchase through a virtual tour. It's a much higher number than we were targeting. Now that we've seen this 15%, I really think the sky’s the limit."

Sferruzza thinks the consumer-facing technology, coupled with the advantages of a new home over an existing home, is one reason her company has fared much better than existing-homes, which have seen sales plummet.

"It's pretty tough during a quarantine to show an existing home," she said. "If you're living in it, you don't want people in your house. It's also a little bit tougher to do a walkthrough using a virtual tour for an existing home. You can see things and get a feel for it, but you don't know if there's a ding behind the door. In a new home, it's a new home, and you're getting a new-home warranty."

Cash visibility

To help Meritage develop resiliency, Sferruzza made improving its cash forecasting process a priority.

"This is a long business," she said. "When you buy land, then develop it, then build the model, then build all of the homes, then start selling, you have to have a confident outlook on cash. If there's not enough cash, you gap out of [lose brand visibility in] communities. If you have too much cash, it's a wasted opportunity."

To get a better handle on cash projections, she asked her planning team to improve their understanding of the cash flow process, and to get comfortable with the building aspect of their business, in part by making visits to construction sites.

"You have to touch the dirt and walk through the home construction process," she said. "You have to really live it and breathe it to model it correctly. That’s maybe the difference to where [the planning team] used to be and where we are today."

The increased attention to accurate projections has made the company more comfortable in making long bets. 

"In the past, we maybe over-simplified it," she said. "People would say, in Arizona, for example, my trajectory is 18 months and I have sort of a bell curve, so I’m going to spend money here and there's going to be a big pop in months 9 through 15, with kind of a drag coming down, and by month 18 I should be ready for sales. That’s not reality. We have weather, municipal delays, inspections we don't pass the first time."

"The more we dug into it, the more we realized that is maybe too far of a generalization," she said. "The cash flows definitely did not follow that pattern, and for us, no money comes in until we sell homes. So, it's really important to time the community openings, both because of cash flow — we want to know when the money starts getting returned to the company — but also we’re very concerned about gapping out, which is more of a marketing concern."

Entry-level focus

The company's newest focus is serving entry-level buyers, a priority it set shortly after Sferruzza became CFO. She knew it would cause a spike in cancellations, because first-time buyers are likelier to back out of their purchase than move-up buyers, so Sferruzza set out to find why buyers were backing out, so the company could get more of them to stay with the transaction through closing. 

"It's okay that we saw a spike," she said. "If my funnel is bigger for potential customers, there's going to be a higher cancellation rate. But because the cancellation rate increases, you really need to understand why and whether the reason is within your control."

In addition to metrics that showed her the scope of the problem — appointments made, appointments kept, conversions of appointments to sales, and cancellations — she and her team created buckets of categories to put each cancellation in, instead of relying on one-sentence summaries written by sales and mortgage teams.

"We didn't have consistent categories," she said. "It was really up to the loan officer, or sales agent who took the response, to come up with a sentence. It was hard to analyze."

Once the reasons were categorized — job loss, problems getting financing, insufficient money for a down payment — she could pass along the data to the appropriate business leader. 

"If we're hearing that a lot of folks are having issues with down payments, or a lot of fear about being furloughed, we might change our sales incentive for the next month to address that concern," she said. "Instead of offering you a discount on your appliances, we might switch that to helping you with your down payment. Because if that’s the hurdle you need to overcome to buy the house, let us help you with that. That helps us make better operational decisions."

It also has helped the company continue its growth plan even during the downturn.

When states mandated staying at home in March, the School of Rock, like every other type of school, felt the impact. But with insights gleaned from modeling by its two-year old FP&A team, the company rolled out a virtual program in just 12 days, giving it a revenue base until in-person classes are feasible. 

"We’re deriving 100% of our revenue from something that did not exist two months ago," John Cappadona, the company's CFO, said this week in a CFO Thought Leader podcast. 

Rather than reduce tuition because virtual classes can't include the in-person band-practice component it was known for, the company held firm on pricing and brought in premium features, including classes led by popular recording artists. 

"What’s been great is, a lot of the artists are home," he said. "They’re not on the road, and they want to help. So, for an hour, an artist will get on Zoom with our students. We're also doing master classes and songwriting classes."

The premium additions haven't kept the company from losing revenue but they've helped keep the losses under control. "We've lost a bunch of students, but we've preserved many more than we've lost," he said. 

What’s more, the company now has a product that it plans to continue even after it can hold in-person classes again, Cappadona said.

New FP&A capacity hits the right note

The company's ability to do the kind of modeling that helped it map out its pandemic response had to be created from scratch when Cappadona joined the company in 2018. 

The company, which owns 49 schools and oversees more than 200 franchisees in eight countries, had just relocated its corporate offices to the Boston area, from Philadelphia, and had few senior finance people in the new location.

"We had a senior accountant that started a couple of months before I did," he said. "I had a controller ... who decided she didn't want to continue. The day I joined, my new controller and I walked through the door on the same day, not knowing anything about how to make this thing happen. And we were going through our audit, year-end. So, it was like, 'Oh boy.'" 

The company also had no financial planning and analysis (FP&A) function, which is the background Cappadona brought to the job. "That was my first big hire," he said. "[The person I brought in] has been outstanding and really helped us navigate these waters."

At the start of the pandemic, Cappadona worked with his FP&A chief to model three scenarios, including a worse-case scenario that envisioned the company losing 50-60% of its revenue, selling no more franchises, and running out of cash. 

"We isolated all the scenarios, with the same cost variables," he said. "It was a menu approach."

The scenarios gave company executives a set of levers to pull based on what was happening. "We said, 'What if we have to do more cuts? What if we do these types of things? How much more will that give us in EBITDA by month?'"

Cappadona honed his skills at scenario planning in 2012 when he had to wrestle with the impact of Hurricane Sandy while heading up FP&A for WB Mason, an office supply company concentrated in the northeast.

"Pretty much all of their operations were out of business for several days after the hurricane," he said. "So, we had to quickly enact our forecast models and ... shore up costs because we had bank covenants we had to maintain. We had to look out and say, when are these businesses going to be coming back? Very similar to what I’m facing today."

Cappadona said decisions based on the scenario planning have to be made knowing you're not going to get everything right, so you have to be prepared to shift tactics as your forecasts get replaced with actual data. 

"If you have to course-correct, do that," he said. "That's what we've been doing here. If we had waited to get all of our data in, we still wouldn’t have an offering right now with School of Rock Remote. We did it in 12 days. If you're going to fail, fail quickly and move on."

Engagement is key

Since he's been on board, Cappadona has been tracking three metrics: revenue, student count, and net promoter score. "As revenue and student count go, that's how the business is going to go," he said. 

He tracks engagement as well, and that's taken on new importance since the virtual classes started because it can let the leadership team know if the premium features are working or if they need to do something else to keep students coming back to the Zoom sessions.

"People canceling lessons is a key indicator," he said. "It tells us how student count will perform going forward."

The metrics are a central talking point in meetings the CEO holds three times a week with his executive team and franchise owners that attend.

"That's where we've been able to get some of our best ideas on how to keep the ball rolling," he said. "How do we come up with other things that are able to entice customers to come in and then turn the ideas into processes quickly?"

"We kid we need a vacation," he said. "It's been 24-7 for two months now."

Commodity shortages and price increases will mostly cancel out a 3.5% to 4% menu price hike Chipotle Mexican Grill announced in May to pay for higher employee wages, the company's CFO, Jack Hartung, told analysts. 

But even with the price of ingredients rising, the company stands by its decision to raise the average wage to $15 by June, which Hartung called "a very bold move" that has paid off in staffing retention that's “as good or better” than it was before the pandemic. 

Chipotle reported $188 million in quarterly net income, compared with $8.2 million the same quarter last year, and a 24.5% operating margin, a twofold year-over-year jump, and its highest quarterly gain since 2015.

“There is so much going on right now with inflation, and the question about whether inflation is transitory or permanent,” Hartung said. “And now [with] the Delta variant, there's a lot of unknowns, so we don’t want to declare, with certainty, what we’ll do between now and the end of the year.”

Consumers have been “really, really good” with the elevated menu prices, Hartung said. “We’re really seeing no resistance whatsoever.” As for pricing decisions going forward, “let's see what happens to inflation and the economy over the next several months, and we'll make the appropriate decisions at the appropriate time.”

The brand maintains pricing power and significant upward mobility on its margins, Hartung added. “Now, it's just a matter of how and when we decide to use that pricing power to either protect margins or to invest in our people, like we just did with the wages.” 

Digital sales, which account for nearly 50% of Chipotle’s business, grew 10.5% even as dining rooms reopened, and it opened 56 new restaurants, 45 of which include a Chipotlane drive-thru. Locations with Chipotlanes have 20% higher sales than those without, Hartung said. 

“What we had hoped would happen is happening—we’re holding onto these digital transactions while people’s previous habits are returning when they feel comfortable going out and about,” he said.

Mike Rasic picked a bad time to leave his public audit practice at PricewaterhouseCoopers after 18 years. It was 2006 and, on the basis of a cold call from an executive search firm, he joined home loan brokerage Metrocities Mortgage as its CFO, his first time in the role. Not long afterwards the mortgage crisis hit, forcing him to rethink his new job.

“I went in thinking my world was just going to be predominantly finance,” said Rasic, today CFO of banking-as-a-service (BaaS) company Synapse. But the circumstances forced him to expand his horizons early on.

In addition to the strategic response he helped the company execute as credit froze up globally, he came face-to-face with the human side of his work. 

“On a daily basis I was making decisions, ‘Can we afford to keep people? Can we not afford to keep people?"' he said in a CFO Thought Leader podcast. “What are we going to be doing for the shareholders? How do we preserve value for them, if we can at all?”

The job forced him not to shy away from hard decisions, he said, “but at same time, you realize how important your decisions are.”

People management

His years managing people and teams at PwC, including his last six years as partner, taught him lessons that helped him get through the challenges, he said. To succeed, your teams must succeed, and for that to happen, you must know each team member as an individual. That’s the only way you can help them achieve their goals. 

“If you try to take a one-size-fits-all management approach to people, you will fail,” he said. “I had a few instances early in my career when I tried the one-size-fits-all approach and it bit me. Thankfully, I was able to understand what I was doing wrong and learn from that.” 

Building the function

At Synapse, which he joined in November, he’s taking a go-slow approach as he builds out the finance team and its infrastructure.  

“Synapse was an interesting situation to step into,” he said. “The finance function was kind of non-existent. The team had been eliminated and the function outsourced. I walked into basically a blank sheet of paper.”

His first hire was a controller. His next will be head of financial planning and analysis (FP&A), a position he’s looking to fill with a person who demonstrates a strong curiosity about the company’s core business drivers, a desire to grow intellectually about not just finance but the broader business, and a strategic mindset.

“An FP&A head that says, ‘I generated your report; here are your numbers,’ doesn’t cut it in today’s world,” he said. “I need a person that’s going to say, ‘Here are the numbers. I dug into this and here are the three or four things we as an organization now need to do to be better.'”

Decisions about technology systems and processes are on hold until after his team is in place and work being done on the company’s data infrastructure is completed. 

“Now’s not the right time to introduce new technology,” he said. “The controller is new. We need more time together to ensure we’re aligned on direction. I’m not a fan of being prescriptive. I’m not just going to make a decision. And I want the FP&A person in place. How the financial and FP&A systems interact is important. The data has to flow seamlessly.”

Growth metrics

At Synapse, which provides a platform for companies to offer branded credit cards and other financial products to their customers, Rasic tracks five principal metrics: sales growth, implementation time, revenue growth, gross margins, and referenceable customers. 

Implementation time refers to how long it takes for a company to get set up on the platform and start offering financial products to its customers. Synapse touts an 8-week implementation period, so Rasic looks for problems keeping that promise. 

“Average time from contract sign to going live is super important,” he said. 

Referenceable customers is a variant on net promoter score (NPS). It refers to contacts at companies using the platform who are willing to validate the product in the media or to others if the company requests it.    

“It’s the number of customers that, at a moment’s notice, we can ask to pick up the phone and talk for an article or to another customer,” he said. “The goal is what we want that number to look like at the end of the year.”

Beyond face value

While CFO at another financial services company, Zest Mortgage, Rasic learned how easy numbers can make it hard to grow if they’re not looked at carefully.

Like any business relying on recurring revenue for growth, the company was willing to bring in new customers at a low revenue point in exchange for gradually growing lifetime customer value (LTV). Although LTV was growing, inspecting the numbers closer showed the pricing strategy was standing in the way of growth, he said.

“We didn’t do a good job drilling down to when that lifetime value would be realized,” he said. “We made a strategic decision about what we were willing to accept for first-unit economics. We felt we could recoup it later on subsequent products and offerings. But we hadn’t focused on how that got staged.”

The result, he said, was a growing gap between the revenue the company was generating from new customers and how long it would take for those customers to drive growth.

“We were digging ourselves such a big hole that, yeah, we could get a good lifetime value, but it was going to take us a long time,” he said. “We needed to change that mindset.”

Raisc said the leadership rallied around the fact it had to do a better job with the first unit and be better at accelerating when it got to the second, third and fourth units.

“Taking numbers at face value is not a good thing to do,” he said.

It sounds paradoxical, but today’s planning and forecasting processes must balance adaptability with a steady, long-term strategy that investors, employees and stakeholders can appreciate. As an organization's strategic finance leader, it's on the CFO to articulate consistent, coherent and dynamic success metrics across teams and divisions.

Developing close partnerships across the C-suite and functional teams is a first step in creating an environment that prioritizes strong fiscal discipline. By communicating the contours of risk and return, CFOs can codify decision-making frameworks that support budgets without needing constant financial oversight. 

Fiscal discipline may sound intimidating, but it boils down to the basic concept of demonstrating and modeling behaviors that support a healthy balance between cash inflow and outflow. 

One practice I encourage is asking employees to spend the company’s money as if it were their own: to avoid overextending; to take measured risks; to avoid profligacy. Empowering employees to make investment decisions is important, but they must also feel accountable for their budgets and asked to explain variances and describe corrective action. Over time, this approach to investment can create useful cultural norms when supported with the right processes. 

Even a modest nod to fiscal discipline early on can pay dividends down the road. It will preserve more resources for expenses that can truly drive the business forward, and both employees and shareholders alike can see the company is serious about value creation.

While it can be very tempting (and fun!), taking and aggressively deploying large cash infusions is risky. When I joined Malwarebytes as CFO in 2018, one of my goals was applying the principles of fiscal discipline to spur responsible business growth. Over my career, I have relied on a few best practices to do so.

• Position finance as the “decision-making engine” of the business

Organizations may not consider finance central to the decision-making process; some may even consider it an obstacle. CFOs must work with their teams to build the trust that earns them a seat at the table, both at the executive level and within business or functional units.

Finance leaders must demonstrate, in both word and deed, that they are there to help and consult, particularly with resource allocation. This entails working shoulder to shoulder with business owners to better understand what will make them successful while providing thoughtful recommendations and insights. 

At Malwarebytes, the finance team members often sit among the functional units they support to increase informal collaboration and earn their partners’ confidence. 

• Make IT instrumental to the business

Today, financial success increasingly relies on software and data. The right IT tools can generate timely insights that can result in significant savings, so it’s important to consider the return on investment of your tools from different perspectives. Can a tool reduce your need to hire additional outside resources? Can it increase your team’s efficiency? 

IT can be an incredible resource and strategic partner in creating the right data for decision-making. At Malwarebytes, the IT and finance teams have worked hand in hand to implement a data store that aggregates and curates accurate, reliable data for planning and performance management. This data store is now the internal authority for nearly all the company’s non-financial business data—a major win for the business.

• Focus on business planning capabilities

Finance must develop strong business planning processes that let it partner effectively with sales, product and marketing. Clear plans and business goals can better rationalize the capital-raising process and let teams identify the right value creation levers in their departments. This facilitates stronger financial and operational discipline across teams, which benefits the organization in the long-term. 

At both Angi and Malwarebytes, I rebuilt the finance and accounting teams, and focused on finding leaders who could build trusted relationships across other operating units, rooted in a deep understanding of the business. Out of that understanding arises insights that can help our business partners plan more effectively, which, in turn, supports finance in being the steward of the balance sheet.

• Establish an operating cadence for performance management

​Remember: process and predictability go hand in hand, and adopting an operating cadence led by the CFO’s office will help position your business for more sustainable, responsible growth. 

Additionally, developing a consistent resource allocation process provides an opportunity to adjust when necessary. This is especially critical for software models in which operating leverage makes up a big part of the investor story. 

By creating the right “moments” with ritual and artifacts, companies can establish a business cadence that will spur growth, drive efficiency and promote cross-functional alignment. 

For example, at both Angi and Malwarebytes, I set up what I call the “Monthly Operations Review”, which brings together all our senior leaders every 30 days to review financial performance and the latest forecast, discuss leading KPIs, review roadmaps, and make changes to our key investments.

Paired with vigorous annual and multi-year planning processes, a regular cadence for performance management can help companies create spaces that encourage healthy debate among team members and identify opportunities on a timely basis while limiting endless side meetings. 

The famous English poet John Milton said, “Luck is the residue of design.” I believe that’s true. By developing robust processes that encourage preparation, guide decision-making and establish a rhythm to the operations, finance can become an indispensable part of the engine that drives growth, efficiency and innovation.