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From Data Rails, this is FPNAA Today.
Welcome to FPNAA Today.
I'm your host, Glenn Hopper.
Today, we have a truly exceptional guest joining us.
Ravikumar Ramanan brings over three decades of global experience in finance, consulting, and sales.
Having held key roles at iconic companies like IBM, where he served as CFO of IBM India.
He's not only a seasoned finance leader, but also an accomplished author.
His latest book, The CFO Lens, How to Thrive in the Fast Changing World of Finance, has been widely acclaimed for its practical insights and storytelling approach.
In this episode, we'll dive into the strategies, stories, and lessons that Ravikumar has gathered throughout his illustrious career, offering invaluable guidance for finance professionals, looking to accelerate their growth and impact.
Let's get started. But first, Ravi, I've got to say I'm so excited to have you on.
After our previous guest, Christian Waddig, he mentioned you and held up your book in the episode.
And then our producer, Jonathan, saw that and he said, I'm going to see if I can get him on the show.
So I'm very excited to have you here.
Thanks for coming on.
Thank you so much for inviting me to this very popular and prestigious platform for FPNAA, for the FPNAA and the finance community.
Yeah, I'm really looking forward to diving in to some of the insights that you found.
And we've talked previously about your book.
And I want to just, I really want to focus on that and talk about kind of the lessons that you learned and what you've picked up in your career.
So in The CFO Lens, you talk about the role of CFO as accelerators of business growth.
And I love this so much having spent my career in finance, you so often get labeled with the cost center and oh, finance is just we're an expense category, we don't add value.
And I think you really drove in and talked about how finance can in the office of the CFO can really accelerate business growth.
So can you kind of share specific strategies or examples of how finance leaders can go beyond those traditional roles and sort of our reputation that we had in the past and how they can actively drive growth?
Yes. So, you know, if we just take a step back before we get into the finance role and look at the larger business environment, which is obvious to everybody, is that there are two things that are happening, extraordinary speed of business and change.
That has accelerated, particularly in the last five years, but even if you take the period of 10 to 15 years, the last 10 to 15 years, the speed with which businesses have to evolve and respond and take action has gone up quite dramatically.
And investor expectations have gone up quite significantly too.
Investor patience, investor expectations and returns, everything around it.
And the CFO is the center of the investor expectations.
And other people, the investors say, hey, we gave you the money, you're the face.
That's one part. The second part is organizationally, because of the speed of business and the speed of change, it's no longer possible.
It became no longer possible.
Many years back, and more so now, for sales to be the primary engine of growth in the organization, there was sales and then there were 10 support functions around it, manufacturing, HR, finance, et cetera.
But when you have an expectation of running at the kind of speed that people have to run, you can't have this hub -and -spoke model beyond the point.
Everybody has to now contribute to growth in their own ways.
You can't say, hey, you go...
Sales will still be the front end.
But we have to start thinking like we own the customer, we own the business, and we own the problems that arise out of the business problems that arise.
We were advisors earlier, then we moved to become a support function, or we were analysts earlier, and then we became advisors and support functions.
But we're not like everything else.
It's not true of the finance function.
It's true of all the functions.
We're in a constant state of evolution.
And the next stage of evolution is where you actively participate and contribute to the growth.
Now, what does that require?
One is a change of mindset, saying, I'm not a support person anymore.
And if you're talking about, I need to play a part in the growth, then you have to own the results of the growth.
You have to feel that the results are yours.
The results are not of the business unit leaders.
I gave them all the advice.
I told them what to do or not, what to do or not to do.
It doesn't work that way anymore.
The CEOs and the investors and the CFO, as far as his or her teams are concerned, are expecting you to partner with the business unit leaders to own the performance and the results.
So it's a significant change in mindset.
And I have noticed from experience, and it's been my experience, and I'll share some of those experiences later.
I was in one instance where on a particular initiative in the organization, this was a big strategic...
One of the top three strategic initiatives of the organization at the beginning of the year in IBM India.
And I played the role of a typical CFO, investment evaluation, go no go, how do we do it, etc.
And then we signed off.
And sometime later, I realized that that's traditional finance.
The expectation of a partner or of an owner is to not stop at the sign off.
It's to say, okay, I have now committed $10 million.
I'm taking a number of $10 million of company money, $50 million of company money.
I just signed off saying, okay, you can go spend it.
But I was then getting involved in the execution of the strategy.
So what I did was I changed my hat from just being the person who signed off and then would ask for periodic reports of how it was going to actually go out and be in the field and start taking and feel like an owner.
I used to go out, I used to meet customers, I used to meet employees, I used to meet the different stakeholders, and started tracking the performance of that initiative.
So what I did for myself was I changed my role from being a traditional CFO who brings in financial prudence, but also is now engaged in making the initiative successful.
And that's what is the role of an owner.
Partnership and ownership go together.
You're a partner, and when you're a owner, you're a partner, and you do things together.
So one is the change from support to ownership, which means you are not now just resolving finance issues, not saying, I did my piece, I did my approval, I sent my mail, I've given my part of the input.
Organizations are expecting, they don't have time for Glenn to do his piece and me to do his piece, and the overall piece still remains undone for some reason.
So can Glenn and Ravi also find out what else needs to be done to get to the final result of the output, which you'll do anyway as an owner.
You do it in your personal life.
You'll never say, I'm only the husband, I'm only the father.
You will say, a fabulous problem needs to be solved.
So resolving issues is a very, very important closure of issues.
When you do these things, you become a direct contributor to growth.
You start playing the acceleration part.
One is the funds, the raising of funds, making funds available, investor relations, all that is now taken for granted as part of the key finance funds.
They become very important finance funds.
The other part is on the day -to -day partnering part, people are probably observing you and it's not just about people observing you.
What I noticed was that, I know it's a long answer, I've got to go to a close, what I noticed is when I took the approach of an owner on my own, I felt more like a stakeholder rather than a CFO.
That makes sense. And I think that in recent years, FP &A, the term business partnering has been used a lot.
And I think that it's so important to me because it takes finance out of this sort of ivory tower where you're not integrated with the business.
And it brings you, it says we're partnering across the business to help the departments and to add value to the departments.
And I think that goes along so well with another strategy that you talk about in the book.
And to me, it goes back to like Andy Grove, management by walking around.
So my background, a million years ago before I went to business school, my first job was as a journalist.
And I remember our editor telling the young journalists, coming in some afternoon, we're all sitting at our desks.
And he says, why are you sitting at your desk?
There's no news stories happening here.
Get out of here. So kick this all out.
And I think that's stuck with me.
And it sounds like you've had a similar approach because you advocate and this is going to sound crazy to people, but you talk about spending more time in the market with the actual customers so that they're not just numbers on a page.
But tell me a little bit about how does this external focus improve your financial decision making and what are the best ways to implement this in practice?
Because that seems, for someone who's not doing this now, it seems like that's a big ask.
It's, wait, I'm the finance guy and you want me to go interact with customers.
How does that work?
Yeah. So one of the complaints against businesses, we always say that for all the work that we do, we don't get respected sufficiently for the business.
We don't get enough credit.
We work so hard, which is all very true.
But one of the grosses and complaints that business units have with finance people or support functions in general is that the solutions that they provide are good, but are theoretical.
I cannot go impose that on the ground.
Our role is now no longer to provide just financial solutions.
There was a time when finance would typically be about what are the terms and conditions and how can I get my money faster and are there terms that are not going to be conducive to the company's health and all those kinds of things.
Businesses now are always on the fly and they have problems constantly at them.
And they want business solutions, which means that you have factored in not just the finance point of view, but the business point of view you've factored in the various stakeholders.
What is the difference between how a business leader makes a decision versus a finance person makes a decision?
The business leader is like the hub and spoke.
He gets inputs from HR, he gets inputs from legal, from market, from the industry networks that he has, or she has, and then makes those decisions.
Ours is only one spoke in that whole wheel.
Now, we can't be all of that.
That's not the design point.
But can we be somewhere in between?
Can we take a step forward beyond being the finance spoke of the business wheel?
And we can do that.
I have the story that the CFO of a food delivery company, and this was about 7 -8 years back when food delivery was still at the initial phase and startup phase.
That was a startup company and he joined as a CFO of that company.
He spent a month in the office and said, now that I've got some basic knowledge, I'm going to spend the next 2 -3 weeks only in the market, not wearing my finance hat.
Literally, practice bags went out to the market, met restaurants.
Who are the stakeholders?
Stakeholders in food delivery are the restaurants.
They are the delivery people, the food kitchens, and he went and met all of them.
His explanation to me was, if I didn't understand their perspective and somebody coming to me with a CapEx requirement to say, I need to spend $4 million on this initiative, what am I going to base my decision on if I don't understand how it is going to play out in the market?
And when you have those conversations, you have those sound bites and you build empathy.
People ask us to build empathy for the sales people or the people we work with, or even the next gen children at home.
The way to do it is that you actually go out in the market and there's tremendous opportunity today to go out in the market.
If you go out in the market, you will get a pulse of what's happening out there.
Next time you have a financial solution, you build, you use a little bit of a pulse.
I agree, it's never going to be as much as the sales guy.
And then factor those in, or you know why the business leader will not accept your solution because of these other factors.
The solution was I used to make it earlier but I know the market situation, this won't work.
And this is not just somebody who is at a senior level or something, you can do it at all levels of the organization.
Even if you're a 26, 27 -year -old, young, FBA, professional, and let me list out all of them and then people at different levels can pick.
You can go make visits to the market, if possible to the customer, if not possible to the customer, at least to the dealer.
Or you can go to the stores if you are in the retail business and see for yourself what stores are experiencing.
You can get... A lot of business is now done on Zoom calls or video calls that your sales guy is interacting with a customer.
You can go join and sit down in a sales call and just hear out the problems.
One CFO told me, Ravi, you need to interact with customers just to understand how unreasonable they can be.
Right? So when you go and sit down and hear that, instead of saying, Oh, my sales guy is useless, he can't sell this to the customer, you have a different perspective saying, the customer was unreasonable.
Let me help the sales guy.
Yeah. Didn't we get into finance so that we didn't have to talk to customers?
It feels like that's it.
Otherwise, we'd have gone into sales, right?
Yeah. No, you just do 5 % of your job, 2 % of your job.
This is not 20 % of your job.
But it makes a lot of difference.
And you can... Or you have call logs.
You have complained call logs.
Go through the call log to find out what customers are complaining about.
And you don't have to go through the entire call log.
Marketing has call log summaries and analysis for business leaders.
Go through marketing reports to understand the market and the customer.
So these are things that people can do at all levels.
And then build in those learnings into your work.
More than anything else, it's more fun to your work.
You move on from these are just numbers and looking at a spreadsheet and looking at these reports to know this is actually...
This is the actual widget that we're selling.
This is the customer who's receiving it.
What I love about the CFO lens, it's really like a 360 view of the finance operation.
And it really gets into how you can be more valuable.
And so, you mentioned something in the first question too.
So now, I'm looking at...
If you're the CFO, you're not just signing off on a project and then throwing it over the wall and waiting for the results.
And you're not just treating customers like numbers.
You're looking at the whole chain of service delivery to your clients and everything.
But then I want to go back and get a little more detail.
Because for finance people, you may think, well, I approve this in the budget.
We can kick off the project.
They're giving me periodic reports.
Great. I'm making sure that we're staying on budget.
It isn't my job done here.
But you talk about the finance professionals being involved in the execution phase of different strategies, initiatives, projects.
And I'm thinking that seems like a change for people who may be used to just the old way of doing it.
So, how can CFOs ensure they're effectively contributing to the execution side of these initiatives?
So, if you... Organizations...
And this is probably well -documented globally.
CEOs and business leaders will tell you that many strategies are good.
They fail in execution.
Even the best of strategies fail in execution part.
And where the CFOs...
Execution is the key.
In fact, there's a very good book on this by the ex -CEO of global CEO of Honeywell, Larry Bossady called Executions.
One of my favorite books talks about the importance of execution.
But if you take a strategic initiative, we all want to get involved in strategy.
In finance, there are these couple of people who get involved in strategy.
Right? Maybe it's the business unit CFOs and the CFOs, the controllers, or the senior people, or whatever.
But that is only a...
As is the nature of its strategy, only a limited amount of people will always be involved in strategy making or in formulation.
But strategy execution is the entire organization, no matter which function you're in, is involved in some part of strategy execution.
It could be manufacturing.
It could be logistics.
An entire strategy could be about reaching customers much faster to beat competition.
In which case, logistics has a very big role to play.
So every part of the organization, every employee has some part to play in the execution part.
And if you're a finance person, if you're a CFO, if you're a FPNA, business finance, one of those things.
One of the things, for example, I typically look at is we make a lot of assumptions when we build a strategy.
When we convert a strategy into financial numbers, we make a lot of assumptions around revenue, cost, geopolitics, and internal behavior, talent, all of the big variables.
And the key is in realizing those assumptions.
So the first job in finance, for finance, is to make sure that all of the key assumptions that were made in any given strategy need not involve a $10 million or a $50 million or a $100 million capex.
It could just be a strategy that says, okay, in the next six months, I'm going to focus on this particular area or build talent in this particular area.
It's to say, okay, what are the assumptions I made there?
And have those assumptions been converted into operational metrics to track them?
And are they being tracked?
Because one of the problems is that the sponsor of the project of any business unit or the sponsor of any project when large amounts of money is being spent, have a tendency to bring their own data to meetings and always declare that their initiatives are successful in doing very well.
It's just that some other part of the organization is not.
The operation is successful, but the patient died kind of stuff.
We did everything right, but I'm sorry, I couldn't deliver the numbers.
So finance has this role of bringing everybody on the same page through a very focused approach, saying these are the metrics that we will look at.
This is the frequency with which we will look at them.
And we will keep changing the assumptions as we go along.
We'll keep changing course.
We're not getting stuck to something, but tracking those, highlighting the issues, making noise about things that are not getting close and have become impediments.
These are things finance can do in the process of execution.
And in execution many times, and this is again a changed expectation from the CFO, from the CEO to the CFO, is bring people together to solve problems.
It may not be a finance problem.
It may be some other problem, but something is not getting done.
And you are the only one, finance, who has a 360 degree view of the entire organization.
You work with all the leaders in my team.
Nobody else does that.
So sometimes bringing people together, cross -functional collaboration to solve issues is, and that's how execution happens.
Execution fails when problems come, there is no collaboration, and it fails and it stops.
So this ability to bring in people together, bringing people together doesn't mean you take all the action items.
It's just that you're being the anchor of bringing people together to solve a problem.
And that can be done even if you're in a small problem, not at a CFO level, that can be done if you're a mid -level manager in the areas that you work in.
That can be done if you're a 30 -year -old young FPNA person in your particular area, something is not working.
It need not go get the head of sales.
It could be bring manufacturing, logistics, and finance together, something like that, which is not happening.
So we have an opportunity to step beyond traditional roles.
Now, all these things that I'm saying, I just want to be very clear to the listeners is, I'm saying you can do this, that, that, this.
It's not necessary for you to do this in every single problem.
It's not possible. Pick one area.
Pick one area, a quarter.
Pick one initiative, a quarter.
Meet two dealers, a quarter.
Take two for cross -functional collaborative assignments in six months, in nine months.
You can't get into everything.
You'll be all over the place.
But I'm saying there's an opportunity to do those little steps to help execute better.
Yeah. And you know, just everything you're saying and what you talk about in the book really brings me back to this is giving CFOs and really anyone in finance an idea of being well -rounded.
And I think in understanding, and you mentioned empathy before, understanding who, you know, as the CFO or as someone in finance, who your customers are.
Yes, there's the business customers, but who the internal customers are.
And I'm thinking about really understanding the business outside of just, this is my forecast, these are my models, these are the budget variances, and just looking at everything in that black and white.
And I think this feeds into something else you talk a lot about and is actually getting traction in the finance world right now is storytelling.
And you know, I think storytelling is a major theme in your book and some of the stuff you've covered when you have empathy, when you understand these other groups, when you're interacting with these other groups on more than just the person who's delivering the reports, then you also understand more
how to speak their language and things that aren't just EBITDA, net income, gross profit, you know, the stuff that is finance language, I think it makes you a better storyteller so you can interact with them.
But, you know, from your perspective, how can CFOs leverage storytelling in their communications with the other stakeholders and, you know, kind of use that to enhance decision making and influence business outcomes?
Yeah, this entire topic of storytelling is becoming more and more important has been more spoken about now.
No, it's very interesting.
This is one of the ways of looking at it.
Whenever we have any conversation, whether it's in our personal lives, whether it's talking to people who are influencers, whether it's business leaders, your people who work for you, we are always trying to influence their thought.
We are in the thick of election.
We always have these conversations around who to vote for in an election in the family of friends.
And through your view, you're always trying to influence the other person's view, saying, this is why you should do it or not do it.
Or if you're in a business meeting, you're telling a business leader, this is why you should spend the money or not spend the money.
You're trying to influence them to do or not do a certain thing.
And even in personal conversations at home, we do that.
Now, influence, it's important to understand how we influence.
For very long, we believe that data influences decisions.
And there are enough studies, not recent, but even some years back that show, in fact, there's a Stanford University study by a professor who said that at the end of any presentation, in any audience, the audience remembers 63 % of the stories told and 5 % of the data.
Now, is there a more compelling case that we need to tell stories instead of data?
If something is 12 times more powerful, you better do it.
But we have been, for a long time, and there's nothing wrong.
This aligned with our role of being analysts.
So we focused on the data.
But with the shift from not being analysts, not even being an advisor, to being a partner, whatever language you want to use, you are trying to...
And you want to influence.
Whenever I go with a presentation, I'm coming to you with a presentation, you're the business leader.
I want to influence you to do or not do a certain thing with my presentation, to think in a certain way.
And therefore, I think it is time to shift our focus from what we say to how we say.
For very long, we've been focusing on what we say, the data, the trends, the analysis it shows, versus how we say it.
And there is enough psychological studies and other things to show that data, when combined with stories, is what makes an impact on the listener.
And you want to create an impact on the listener.
You're in a business meeting, you prepare maybe till 11 o 'clock last night, 9 o 'clock meeting next morning, you want to influence the listener.
And combining it with stories is really what people make decisions based on emotions, less on data and more on emotions.
And stories appeal to emotions.
So there is a very, very strong case.
Because stories build the context in which something happened or did not happen, that then becomes very critical.
And we need to build that ability.
In not many countries or not many institutions in the finance profession, in finance, is storytelling part of a strong academic curriculum.
It's getting into there right now.
So many people come out with strong financial qualifications.
But communication and storytelling is evolving in the finance head.
And we just need to pay a lot more attention to it.
So I'll just repeat this one line, focus on how you say as much as on what you say.
That's a great point.
And I think as data people, we think, well, certainly you're influenced by data, but you see it every day.
I mean, in an election year, if somebody believes that we're in a recession, they don't care what the economic indicator is saying, whatever is being reported by the Federal Reserve, they're going on how they feel.
And so you can give them all the data you want.
But if that's what they feel, it's hard to convince them.
And I also think about there's that Maya Angelou quote where people don't remember what you said or what you did.
They remember how you make them feel.
And us being number guys, that feels like such a stretch to think, wait a minute, I came into finance because I love the numbers.
I love building these models.
I love doing the cool things.
Now you're telling me I've got to also sell to people.
So it expands the challenges.
But if you're going to move beyond just being the bean counter and the report person, you've got to be able to add that value and show where you're adding the value and convince people of what you've learned from the data, what you're taking with your expertise.
Yeah. Can I just add one more point to that?
We often think we don't have enough stories.
Life is full of stories.
Every time we grab a colleague and say, come, let's go for a cup of coffee.
There are some five different stories that come.
There are customers who yelled at one of your sales guys, an invoice that could never be collected but was collected that morning, or some funny behavior that happened.
You're always discussing stories.
Now, some of it is too informal, but many of it is formal.
And when you have those stories, all that you have to learn is now to fit that into your conversation.
The stories are there.
You don't have to think about, oh my God, what are the stories I have to create?
And the stories are all there.
We need to narrate that story along with the data.
Then the data becomes more powerful.
I think we are in a very, very unique situation today.
The finance community is probably at an excellent point in the scheme of things.
One of the big asks of us is insights.
To provide business insights, you need data and information.
And data information is available in abundance.
And data is numbers.
And your skill is numbers.
You're very good at numbers.
So the ask of insights is very well matched by the resources that are available, which is abundance of data and your own personal skill.
I can play with numbers.
You give me a spreadsheet with a thousand rows in it, and I can play with it.
So the end ask of insights is very well matched by the resources that are available to you and your own skill.
So why not bring that together and build more insights into it?
Yeah, it's the old quote lies, damn lies, and statistics.
If you're a skilled statistician, you can make the numbers say pretty much whatever you want.
Without even changing numbers, just changing what you're reporting on.
And that's a big thing in business intelligence too.
And obviously, you don't want to misrepresent numbers in any case.
But if you're informed by the data, and then you're trying to convince people of it, you can...
It's the editorial move of newspapers where this is where we're going to provide the data.
So these are my insights.
So my expertise is not just building models, entering data.
It is in interpreting the numbers, giving feedback and input, and being able to communicate that and get people bought into it.
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So the other thing with storytelling, I love talking to finance people who also are authors because I think it just maybe at first blush, it doesn't seem like that makes sense, it seems like right brain, left brain.
But going from numbers to writing, but to your point, we're not just reporting numbers, we're telling stories around it.
And I think in your book, I love that you didn't just rely on your own experience.
You reached out to I think it was what eight different CFOs and got their inputs as well.
And I think that that's so important because obviously, you have a lot of experience doing what you do, but actually reaching out to others and getting their insights.
Tell me a little bit about some stuff that was surprising or insightful that either you were surprised to hear or maybe even that challenged some of the stuff that you thought before talking to these other CFOs.
Yeah, I mean, these are CFOs in India of some of the largest companies.
In fact, all the eight companies that CFOs spoke to are like household names.
Everybody knows those companies, very successful companies.
And I also wanted a cross industry flavor because people think finance is finance, but when you manage finance of retail store, it's different from a petroleum company.
So I got different perspectives of that, but the interesting part was the storytelling part, they gave me a lot of stories to talk about.
But there are two or three things that stuck with me.
One was one of the CFOs of a very large retail company.
He spoke to me about when we were talking about cost cutting and managing costs.
And he says, we've all in recent years become familiar with this terminology of good costs.
There are some costs, not all costs are bad, some are good, you need to spend them, you need to spend more of them, training, talent, acquisition, that kind of stuff.
Those are good costs.
But he started with one example, which took me to a broader thing, which is, he says, when I cut advertising expense, I always segregate brand advertising from product advertising.
He says because brand advertising, people buy brands, people don't buy products.
When you go to the shop, the first thing you look at is who made it?
What brand is it? Where is it coming from?
And that brand is very powerful.
And he says, I cut it if unless it's really necessary, I don't cut that.
I asked people to go slow.
If my results are not good, if the numbers are not good, I want to do cost cutting on product advertising by this product by this date and that kind of stuff.
But the brand has to keep, has to sustain.
And that took me to a much broader point, which is the importance for the CFO and finance to understand the intangibles of a business.
We all look at numbers, they are tangible.
They are the result.
How many of us would intuitively have linked the power of the brand to the number of revenue growth or decline to gross margin, which we analyze in depth.
If your brand takes a hit, your gross margins will take a hit.
And several of the other intangibles in the organization.
So what are in your respective industry?
It took me to the point of thinking where saying, okay, the advertising is one intangible, brand is one intangible, not an advertising brand, but there are other intangibles in the organization.
Some intangibles could be the USP of your organization, speed of delivery.
That's the core. That's what Amazon is, reliability.
That's what it's known for.
So making sure that the customer recall about your company is this company, not just Amazon, but many companies, is this company is reliable.
And you make sure that those reliability metrics you track as a finance person, whether they are relevant directly to your job on a day -to -day analysis or not.
Because if the reliability goes away, as is happening now with one of the companies, I just read an article yesterday, and we can talk about it offline, is that if some of those intangibles go away, it immediately hurts business performance.
But we don't see it.
So it taught me to think of that perspective when I look at numbers, when I look at the root cause of why something happened or did not happen.
Because ultimately, you want to find out when something did not happen, say, hey, what's the real reason?
Now, we all want to say, oh, that guy is the head of sales.
He's not good. Just change him.
That's the easiest answer.
The finance guy, he's not providing me analysis, change him.
It's funny why you were saying that.
I was picturing the old -school CFO approach of, we have value for the brand.
Look on the balance sheet.
It's right here. It's good will.
That's the value of the brand.
It doesn't go over to the income statement.
It's all right there.
But point well taken.
And that is something to think about.
And again, it goes back to that well -rounded, holistic view of the company and the function.
There's one interesting observation which an HR coach told me in the process of writing the book, which is that I was talking to her about your perception of finance people versus other people.
And she told me that the world of today is one of ambiguity.
Lots of decisions are made in a state of ambiguity because there's just so much uncertainty around us.
And we need to learn to be more comfortable with ambiguity in making decisions.
Whereas finance people are typically trained for everything to tie up.
My books need to tie up.
My percentages need to align.
My graphs need to show the right things.
We are more about procession.
Our mindset, financial integrity of numbers, they need to be accurate.
I am responsible to the investors for that.
Nothing's wrong with that.
But that's one hack.
But when you're in the decision making hack, when you switch over from financial integrity to decision making, you need to remember that everything may not ideally tie up and add up on day one for you.
Don't look for that.
If it's there, fine.
But if it's not there, don't dismiss it and say, come after one week.
Go along with the ambiguity.
And I thought that was a very simple way of classifying finance people.
And I used to think like that.
I mean, I'm as guilty as what she called finance people about.
But that I thought was quite interesting.
Well, it's funny, you can't almost close the books every month.
You have to close the books.
You can't, you know, so I get it.
And there is sort of that satisfaction of the ticking and tying and the trial balance all matches up and all that, you know, everything is like, okay, this is done.
It all matches, move on.
There's no ambiguity.
So it is, it's an ask.
Now we have to be able to tell stories, we have to be able to thrive in a world of ambiguity and not have all of our answers in black and white.
It's a challenge, but it's as we evolve to add more value to the business, this is the world that we've got to live in, right?
Yep. You talked about good costs.
And that's an interesting thing, because it's, you know, I think of the old school CFO, the CF know, as we used to call them, where, you know, just everything is about the dollars and cents and what's budgeted and meeting budget and all that.
When you talk about good costs, the other side of that is good revenue.
And I think that for a long time, especially through COVID and for a number of years, it was just grow the top line.
All revenue is good revenue.
And you make the point that it's not just growth, it's the quality of growth.
So I want to talk about that a little bit, because if you, if you're looking and your top line is growing, and, you know, all else remains the same, it sounds great.
So it's easy to just fall into, Hey, we're growing the top line.
This is good. But talk to me a little bit about like, what indicators should finance leaders monitor like, how can we measure whether something is, is good growth, or that there's issues around it?
Yeah, I actually read, and I've used that in the book, I read an interesting story about, you know, how the idea of forming Netflix came to its founders, what triggered it.
And one of the things that triggered is that the existing companies in that space were making revenue from what could be perceived as unsustainable.
So a lot of the revenue would come from, you know, delays in returning videos, delays in taking a certain action on the part of the customer.
And similarly, you have several examples of customers whose revenue came due to excessive borrowings.
They grew very well, but they were borrowing so frantically.
And, now your numbers may not match on a quarter to quarter basis within a quarter or a quarter to quarter basis, but on a six, 12, 18 month basis, your balance sheet has to align with your P &L.
And I've asked a question as a test of the quality of revenue, which is a very important aspect of the quality of growth.
So, you know, we all do things to meet current targets of, you know, putting through some things that are maybe quick and dirty or whatever is the right word to use for that.
Maybe it's okay for the short term.
It's not that there's something illegal being done.
Maybe something is okay to do something for the short term.
But is that the question that salespeople will do that and move on?
The finance people, and this is the CEO explained it to me saying, Ravi, the sales people worry about today.
They worry about today's target, this week's target, this month's target, the role of finance, and they're worried about this year's budget, and their commissions associated with that.
The role of finance is to look for day after tomorrow.
What does day after tomorrow look like?
Right? Not what today looks like.
I think you summed it up very well, saying short term, yes, we need short term.
Without short term, there's no long term, but it can't be all short term.
And finance is the only one who can step back from the noise of the quarterly numbers and the results and everything and say, look at some of the major parameters.
So you asked me what are the major parameters to look at in terms of quality of growth.
Where is growth coming from?
You start with the basic role of accounting, which is the role of finance in revenue recognition.
And often I used to tell the team as a CFO saying, it's not about a 92k decision that came to you for a rule.
And you said, I'm not going to support this.
It is the tone that you set for the rest of the business as a finance person.
If I approve a small deal, it's not going to kill my numbers in terms of integrity.
But as an accountant, you need to worry about what tone am I setting?
What message am I sending to the sales teams for the future?
What is acceptable and not acceptable?
And believe me, I've seen this over a long period of time, they watch it.
They know what will work at the top and what is acceptable or not, and then go to business accordingly.
So accounting and revenue recognition, look at the quality of receivables.
I know this world is moving more towards B2C with advanced payments and all that.
But in the B2A business, quality of receivables is quality of business.
Why are customers not paying you?
The third one is, I told you the balance between short -term and long -term.
We spoke about it. Don't just worry about today, worry about is this sustainable in the long run.
Then the basic balance sheet ratio.
So one test that I've given in the book is to ask the question, is your balance sheet growing faster than your P &L?
Now, that balance sheet can grow faster than a P &L on a six or a 12 -month basis.
You may have had to make in a lot of investments to make something happen for the next two, three years, or you had to do a couple of things.
But if you take the global financial crisis problem in 2008 -2009, the balance sheets kept growing much faster than the P &L.
The receivables kept growing much faster than revenue.
And that led to uncollectible receivables.
The uncollectible receivables kept growing much faster than the revenue.
Initially, the revenue was growing, the receivables was growing.
Everything looked okay.
Some months later, all the quality of receivables came into question.
And suddenly, the balance sheet looked four times bigger.
And you had to write off all of that.
So is your balance sheet growing faster than your P &L on a eight, 12 -quarter basis?
That's another indication of quality of revenue.
And in the modern world, one last point is customer retention.
Look at customer attention numbers.
Are you just adding new customers by discounting and throwing freebies at them?
Or your customers who came in two, four, eight quarters back buying more from you?
That's the quality of revenue test.
So we talked before the show.
We have a wide range of listeners here from CFOs to mid -career folks to people who are just starting out in FP &A and trying to map out their career and figure out where things are going.
And just from your experiences in the corporate world and in writing the book and in what you learned and the approach that you have to the finance function, what would be your top advice for people, whether early career or mid career, if they're looking to expand and they aspire to be in the CFO seat?
Or even for people who are in the CFO seat, something to think about in the way that they're performing.
What sort of takeaways have you pulled from your experience and from working on the book as well?
Yeah, so I hope I've given the listeners some takeaways through my prior replies, but I would probably add a couple of things.
One is to understand if you're a young professional, if you're an FP &A guy who's a couple of years experience or even if you're a big manager or whatever, is spend time understanding the bigger picture of your work.
So if you're an accountant who's giving data to an FP &A guy, don't just give the data.
Understand what happens with the data.
What does the FP &A guy do with the data?
How does that get translated into a presentation, into an analysis, into decisions?
Do you have to do it every other day?
No. Do it a few days in a year.
Try and understand the bigger picture of your customers, your internal customers, or something like that.
Or try and understand the context.
This is the same thing that we spoke about earlier where we say, go understand the market.
By understanding the market, you are trying to understand the context in which numbers are happening.
So building that continuous ability, that thought process of understanding the context and the bigger picture.
So if you're a middle -level manager, if you're a business unit CFO, go talk to your CFO about what are the investors telling you?
You meet the investors often.
I don't meet them. What are the investors telling you about the company?
Because that will translate into strategies and business decisions or into communication, internal and external.
So understanding that context, all that information will be useful to you when you make decisions.
So that's one. Second one is, I think very generically speaking, if I think of myself and if I think of all of us in the finance community, because of the extent of change that is happening, whether you're 28 or 48, because the extent of change and the desired response time, our ability to manage change
and our ability to adapt to change is going to be a very critical factor in our success.
People used to talk about IQ, then it became EQ.
Now it's about adaptability, adaptability in terms of digital quotient, adaptability in terms of thinking differently from what you were doing yesterday.
And that's not easy because change is constantly happening.
So when I go talk to CFOs and organizations, I tell them saying, get your people training in change management.
Whether they're creating change, implementing change or at the receiving end of change, it doesn't matter.
They're all part of change.
You're in some part of that cycle.
So that will be very important in terms of both success as a professional and mental health.
I think it goes along with what you were saying earlier about ambiguity.
The world is not all black and white.
We want to match it up as well as we can.
We have to close our books and have them tie at the end of the month.
But there's the model of the world that we're representing, and then there's the world itself.
So being able, especially with tech and AI and everything advancing so much right now, you can't be rigid in your approach to how you do things and to what technologies you're going to use and to how you interact with the rest of the company and what you're going to present, what you believe.
I think that is very good advice.
Probably not just for finance, but for anyone in the working world right now.
I've often had people come and tell me that, oh, you can do it at your level, but I can't do it at mine.
You're asking me to do this, but I can't do it at my level.
And that is true. There is some truth in it.
So if I said they're saying, okay, you can go as a CFO and go meet a customer or go meet a large dealer, they're not going to meet us.
So the answer, that is partly true.
Yes, that's true. But is there somebody else at your level relevant to your level that you can still engage in?
Don't just say I'm not going to engage because I'm not senior enough to do that.
Find out, or in any other thing, not just market thing.
Well, I'm not senior enough to solve the problem, but at your level, can you bring people together to solve the problem?
You may not have the solution.
You may not be powerful enough to write a policy, but can you bring people together to write the policy?
So find out what is at your level that you can do to make something happen or to go beyond what you're doing, rather than saying, that's only for senior people.
And many of us are guilty of saying that in life, but I found that sometimes you hear it from the team more often than you'd like to.
And I think that's true leadership rather than feeling like or coming across as the victim where everything rolls down to you.
It's like, well, I may not be able to create a policy, but this is something that's happening.
I know it's wrong. I can actually affect change at this level.
So I'm going to do that.
If you are a problem solver, that is a big part of leadership in general.
So I think that's great advice.
No, that's the particular point.
Problem solver is probably, and I missed it and I'm glad you brought it up, is probably the key word that people must remember throughout their careers.
Organizations want problem solvers, period.
End of discussion. So I often give this example saying you're living in a community of 500 houses in an apartment complex.
There's some problem that arises.
Suddenly there's some problem with electricity or with some traffic situation or something.
Somebody in the apartment complex takes leadership.
He may not be the chairman of the building, but that person has decided saying, hey, I'm going to own this and get it done.
And we all love him because he's a problem solver.
We never went by the title.
We never went by the saying he's the chairman of the building association.
He was just the guy who solved a problem.
I feel like we could talk all day.
I mean, certainly, with our talks leading up to this and all the correspondence.
And I'm just so appreciative of your time here.
And whenever I talk to guests, we dive straight in and people tune into the podcast because they want to hear the great kind of advice that you've given too.
But I always like to, before we go, just get a little bit of the personal side of everyone.
So if you don't mind, I'd love to hear what's something that maybe not many people know about you, something they couldn't find from just googling you or some hobby or interest you have outside of your obviously very busy writing career.
Yeah. So I do the usual things of hobbies in terms of that everybody does in terms of travel, music.
I can hum and sing a bit.
It gets even better if you gave me a soap and a towel.
So I can do a little bit of that.
But I'm into the usual things that people do.
I read a lot of books.
They have very different subjects right from philosophy to politics, to a lot of things, management, and just helps build a wider perspective.
And I love music. Those are the two things that I do.
And my becoming an author is completely out of, if it's of any interest to people, I never even dreamt that I'd become an author.
I quit and I thought I'd take a break.
And then suddenly I said, what if I write a book?
And it's a longer story than that.
But anyone can write a book.
Now I believe anyone can write a book.
That's great. All right.
So when we talked about this before the show too, may have been a little bit since you've been in Excel.
But we always are curious, what is your favorite Excel function and why?
Among the Excel functions, if you say, what are the ones that I like the most?
You'll almost get a very predictable answer, which is the functions that are into scenario planning and financial modeling.
So the very simple ones like what if, or what if, combined with a width and an or, or a what if, combined with a choose, and choose which of these best options will work for the company or from all the parameters that I've set.
So these are some of the things that I very often or even when you're sitting in office and you come up of all the chatter in the meeting, meeting rooms, and you come back to your room and you're sitting in front of your computer.
The one that you want to play around with is there are two or three ideas that were thrown around in the meeting.
What if that happens?
And what does that do to your base, to your base plan?
Right? The scenario.
What scenario does it throw up?
So I used to just quickly have a kind of a template and do this and see, literally, you don't have to make a decision at that point in time, but you will see the idea.
Some ideas you would, in the meeting you would have thought were useless.
Some ideas you would have thought were great, but the moment you do this little playing around with scenario planings and what ifs, you get a quantified number which finance guys understand, is good or bad.
So I used to like to play around with that in office.
Excellent. Excellent.
So I guess last question, and we'll put this in the show notes too, but where can people find your book CFO Lens?
And if anybody wanted to get in touch with you to hear more, what's the best way for people to reach out to you?
Yeah, so people can reach out to me on LinkedIn and I go by the name Ravi Kumar Ramanan.
That's my full name.
My book, the CFO Lens, is available on Amazon platforms across the world.
You can be in any part and you can buy them.
So just search for the title CFO Lens and Ravi Kumar and you should be able to get it.
And if you have a problem, message me on LinkedIn and I'll try and find a way out.
All right, Ravi, thank you so much for coming on the show.
Thank you so much. Thanks for having me on here on such a respected platform.
