Think Like a CFO

What were you thinking about on your way to work this morning? The big project you have due? Whether or not you have time to make a Starbucks stop? Your child’s upcoming school play? Chances are you weren’t fretting over Wall Street’s latest analysis of your company.

 

If you go to work each day giving little thought to your employer’s financial picture, you’re not alone. During CTHRA’s 2010 HR Symposium, world-renowned business advisor Jim Shanley states that many professionals leave the numbers up to the company’s finance and accounting specialists. However, he cautions that a hands-off approach “could be holding you back from taking your career to the next level.” Says Mary Collins, pres/CEO of the Media Financial Management Association: “Employees who make an effort to understand their company and how they can contribute to its profitability will be the ones who are singled out for promotion.”

 

Top financial executives of both MSOs and programmers point out that even employees who are far removed from corporate headquarters benefit by keeping an eagle eye on the bottom line and finding ways to improve it. “Even if you don’t realize exactly how your activities are related to the company’s profitability, you better believe that your boss and your boss’s boss do,” says AETN svp, financial planning Art Vomvas. “Everything you can do to help improve financial performance will make their jobs easier and definitely get you noticed.”

 

As for why employers look especially favorably on employees who take an interest in the bottom line, Discovery Comm CFO Brad Singer sums it up this way: “A financially educated workforce enables our company to make thoughtful decisions in all facets of our operations, whether it’s investing in more people, marketing, programming, or facilities."

So how does someone who works in the field, the call center or the production studio tap into this win-win game plan? Mark H. FitzPatrick, Group vp, corporate finance for Time Warner Cable, recommends that you start by realizing, “financial statistics and business performances are outcomes of decisions and actions taken by all employees in dealing with customers, fellow employees, and vendors. Almost every action we take—rolling a truck, handling a phone call, running a promotion, selling ad time or approving a capital project, to name a few examples—shows up somewhere in our results.”

 

Next, make it your business to understand the metrics that matter to your department. For instance, if you deal with customers in any capacity, study your firm’s customer satisfaction and retention figures. And count your lucky stars, for you are in a prime position to alter those numbers for the better. As MFM’s Collins points out, with every interaction you “directly impact customer retention, satisfaction, and revenue, which are three key components of profitability.”

 

Although not all departments offer such a broad array of opportunities to boost the bottom line, in every facet of a company there are ways to increase efficiency, lower operating costs, and save cold, hard cash. For example, Discovery’s Education group recommended a way to cut event costs—the biggest marketing expense in the division. According to CFO Brad Singer, “We bartered appearances by members of our Education Speaker’s Bureau for space at trade shows and events. Not only has this maneuver saved our division over 35 percent of its events costs, but it also has given Discovery Education greater exposure in the marketplace.”

 

Even if you don’t have a clue about corporate finances, you have plenty of helpful resources close at hand. For starters, AETN’s Vomvas recommends that you “talk to the people in your finance and accounting departments. They have a vested interest in helping you understand how your work affects your employer’s financial performance because at the end of the day this is how they will be evaluated.”

 

Bill Fitzsimmons, Cox vp, corporate finance and CAO, points out another reason employers are eager to help non-specialists understand the basic financial figure: “We are in the business to service our customers, and by giving employees a sense of the financial health of the organization we can support their belief in a solid foundation behind our commitments,” he says.

 

Fitzsimmons believes sharing the numbers is especially important now, pointing out that “in tough times, people want more than ever to understand they work for a stable employer, and sharing how we are doing in realistic and clearly understood terms is one way we can help.”

 

Matt Siegel, Time Warner Cable svp and Treasurer, suggests a non-threatening way for even number-phobic folks to ease into the financial waters: “Simply start reading weekly business magazines and the business sections of daily newspapers, which present general corporate finance information in a user-friendly format. Once you’ve become comfortable with the subject matter, you may want to pursue various subjects elsewhere on a deeper level.”

 

For example, he says, “One way to gain a better understanding of your own employer’s corporate finances is to read research reports written about the company by Wall Street analysts. These may not always be one hundred percent correct, but the external view they present will help increase your understanding of your company, its competitors and industry trends.”

 

Many companies offer periodic seminars, detailed financial reports and other forms of information to help their employees (especially those with budget responsibilities) understand the ins and outs of corporate finances. Some employers, like Discovery Communications, have formal programs on the subject. Each quarter, CFO Brad Singer delivers a company wide presentation called “Beyond the Numbers,” which provides an in-depth analysis of how the company and the industry are performing. In addition, Singer says, “We have a global learning management system, One Learning Place, that provides courses in the fundamentals of finance for all employees, and we have a ‘one day MBA’ classroom learning experience for our managers.”

 

No matter what kind of tutorial help your employer may provide, MFM’s Collins recommends supplementing it with a publication that cuts right to the heart of the matter for those in the cable industry: a book entitled Understanding Broadcast and Cable Finance: A Primer for Nonfinancial Managers. Published in 2008 by the Broadcast Cable Financial Management Association (MFM’s former name), the book covers topics that every employee needs to understand, at least at a basic level, including revenues, expenses, capital, budgeting, strategic planning, credit and collection, music licensing and tax issues. You can order a copy online or from a local bookstore.

 

No one expects employees outside the financial offices to keep on top of all of the company’s money matters (if you did that, you probably wouldn’t have time to do your own job) but it is important to be familiar with the figures that most affect your part of the business.

 

FitzPatrick points out three statistics that every MSO employee should know and understand, “Average revenue per unit (ARPU) represents what our customers pay us each month. Our employees should be thinking of ways we can increase this metric by offering our customers value added services.

 

“OIBDA, which stands for operating income before depreciation and amortization, is basically revenues minus operating expenses. It’s a commonly used metric to show profitability in continuing business activities, and it’s important to employees because it helps them understand that they need to focus on both revenues and expenses.

 

“The third figure, free cash flow, is how much money we actually put in the bank after we’ve covered all of our obligations such as operating expenses, capital expenditures, cash interest and cash taxes. This is a key metric as it indicates what is actually available to shareholders.”

 

On the programming side, AETN’s Vomvas recommends that employees focus on three numbers that determine a company’s value, “namely the rate of revenue growth, operating efficiency as measured by operating margins and capital efficiency as measured by return on invested capital. All major investment decisions relate to driving improvements in one of these statistics and, while they are stuffy ‘business school’ terms, employees should be able to relate their own activities to one or more of them. It is also important to understand that these figures are interrelated; efficient revenue growth is the key to success.”

 

Both of these numerical triads represent the results that corporate shareholders track. Time Warner’s Siegel sums up the reason the figures should also be front and center on employees’ radar screens: “Our objective is to have employees who have a vested interest in both the company and our customers. We believe that in order for employees to have a vested interest in the company and truly enjoy their jobs, they should act like owners.”

 

The bottom line is that thinking like a CFO is a smart strategy for any and every employee. So, as you head into the office tomorrow, make a mental note to review your company’s latest financial report. It could be just what you need to take your career to the next level!

(Pamela Williams is Executive Director of the Cable and Telecommunications Human Resources Association)