CFO Talk: The CEO/CFO Relationship with Tom Burke - Transcript

Steve Rosvold 00:04

Welcome to CFO talk. I’m your host Steve Rosvold Chief Learning Officer at CFO.University. Joining us today from the Twin Cities and Land of 10,000 Lakes is Tom Burke, a serial CEO in the pharmaceutical space. Currently, Tom runs two companies specializing in early stage drug development, and is the founder of Vail scientific LLC. He performed his undergraduate work at the University of Minnesota and earned his MBA from the University of St. Thomas in St. Paul. Tom is an avid cyclist and keeps in shape during the chilly Minnesota winters by lacing up his skates and playing ice hockey. Welcome, Tom, it is a big treat for me to have you on our show.

CFO Talk: The CEO/CFO Relationship with Tom Burke - Transcript

Tom Burke 00:45

Well, thank you, I’m excited to be a part of the show and talk a little bit about the CFO relationships I’ve had in the past.

Here is a link the CFO Talk Video CFO Talk: The CEO/CFO Relationship with Tom Burke

Steve Rosvold 00:55

That’s what I’m excited about too, Tom. You’re a serial CEO. You been working with finance teams and finance leaders your whole career. You can spread a special light on CEO/CFO relationship. What works, what doesn’t and what’s been successful for you in the relationship. Let’s start off with the changes you have noticed in the CFO role over your career.

Tom Burke 01:23

Well, yes there’s an important footnote on this. My career is a long one. So, for some this may not so relevant. But over the years what I have seen is that acquisitions and mergers or becoming more the norm than exception today. Early on in my career, that wasn’t true. Companies typically grew organically. That has changed over the past 20 years. Today it seems just as common for companies to grow via either acquisitions, mergers or some other combination. And because of that, the CFO role is critical. You could have a great idea about the merger of two organizations or the acquisition of an organization, but you really need someone in the CFO role that will understand if it is truly accretive to the business? You need to know what needs to be adjusted when merging companies together or acquiring a company. Much of this fall on the shoulders of the CFO. Identify the issues and run them to ground. The technical folks will probably do a decent job of finding those things. But when it comes right down to the numbers, you really need the CFO to put it into dollars and figure out what’s going to be important, what’s it going to cost us to, to make these adjustments. So, that’s something I have seen change over the years. It’s just critical in order for an acquisition to work that the CFO be a big part of it.

Steve Rosvold 03:44

Interesting, Tom. The focus of finance has shifted from a backward looking, historical perspective to one that is future focused. When you consider creating growth opportunities and especially growth through M&A being future focused certainly fits into these new requirements. And I think the finance part of the chief financial officer is becoming more important. It used to be the chief accounting officer was kind of the role that was being played most often by CFOs.

Today, what are some bullet points you would include in your ideal job description for a chief financial officer?

Tom Burke 04:39

Yes, well, future looking. As you said, if all the CFOs delivering the historical or most recent financials, that’s the chief accounting officer, that’s not a CFO and CFO has to be very forward looking. If I were to describe the job description in one sentence, it would be that CFOs role is to do anything that the CEO doesn’t want to do relative to finance. It’s that simple. (smiling)

Steve Rosvold 05:15

That is an interesting answer. (smiling) I’m not sure our whole audience will buy into that role, but I think it’s important to understand that perspective. Something we can learn from even if some of us might take exception with.

Tom Burke 05:35

So, given that, one of the things I just want to add, I have been in companies where the CFO is referred to as the brakes, the brakes on the organization. And I know, I’ve actually seen some CFOs, live up to that moniker. I don’t think that’s in their best interest, number one, and two, that’s not really their role. Their role is to determine how best to work in a given situation and noting that not every idea that a CEO has is good, probably less than half are good. So it’s, it’s important as the partner that the CFO, inform the leadership group, including the CEO, about what some of the challenges could be. But I think its way more important that the CFO consider ways we could make it work. And yeah, those ways may be way too expensive or they may be outside the organizational scope. But that said, I think that that’s part of the role.

Steve Rosvold 06:57

Yeah, that that’s a really good point, the Chief No Officer is a common reference people give to CFOs.

I think it comes from the accounting/control background that CFOs have historical had. But the strategic growth and forward looking roles you were talking about earlier demand creativity and innovative thought. We’re not going to break the rules, but finding new ways to develop and share new concepts with the leadership group is important.

I think you made a really important point for CFOs who want to be successful in the future. If they play the brake officer role, they’re going find it difficult to hold a CFO job.

Describe the relationship you want to have with your CFO.

Tom Burke 07:55

So, the relationship I want to have is a true partnership. My style is such that I don’t want this to be a didactic relationship. In other words, what I’m saying is I don’t want tell my CFO, do this, do that. I don’t want a CFO who simply responds to my requests. I want them alongside me. I want to feel comfortable bouncing ideas off them. I want them in front of issues and opportunities. We need to be close. Which doesn’t mean friendly, but a very close business relationship, where they view themselves as a true partner. And, frankly, I think it’s important that the CEO, view them as a partner and make sure that’s very clear and understood by the CFO. Not a subordinate. And yeah, at the end of the day, the CEO gets to make the call, that’s the job. But I think the CFO, the relationship in the partnership is critical in order for the team to make the best possible decision at the end of the day.

Steve Rosvold 09:17

That’s a good way to look at it. I know from experience as a practicing CFO, where had the most success was when that partnership occurred. Where I felt like I was a valued partner, I brought skills the CEO didn’t have any. Where the CEO recognized that and we made a great team. Which brings me to the next question. If the relationship doesn’t click, can the partnership be successful? Can the company get a good team if the two don’t get along?

Tom Burke 09:51

Yeah, and it depends on what you mean by click. So, let me explain the importance of that, in my mind. I’m not a psychologist, but typically speaking a CFO and a CEO might have a very different personality style. And that’s probably good. So, given that, they may not be, you know, golf partners, they may not find themselves enjoying one on one another’s company, not outside the work day anyway. Although that would be great if they did. But they’re two different cats at the end of the day, and maybe that can work out or maybe not, but that alone isn’t a showstopper. If on the other hand, what you mean by clicked is their ability to work together, building the team together, if they can’t do that, it isn’t going to work. And as much as you know, you all try to make these things work as best you can, particularly when you have a highly skilled CFO, if you can’t click on a business relationship, then I don’t think that’s going to work long term.

Steve Rosvold 11:30

I know exactly where you’re coming from. If we have different goals and objectives, if we’re fighting about the company’s strategy, and not able to work through those kinds of things, it creates a distractive relationship, that is very hard to make work. In my experience, some healthy tension can be good for growth and being able to have the tough discussions that you need to have. But in the end, both need to see the same path forward in the same way or the company is going to lose along with one or both of these leaders.

Tom Burke 12:12

Well, that’s a very important point that I think goes beyond the CFO role. But, you know, within the leadership team if you can’t have authentic discussions around business issues, strategy, whatever it might be. If everyone can’t or isn’t willing to lay their cards on the table about what their concerns are, what the issues are, that’s not going to work either. So, yes, you have to be able to have those difficult and authentic discussions. And those should be okay. As matter of fact, the best companies are okay with those kinds of interactions. If whatever the CEO says, goes, that’s a different relationship and unless the CEO walks on water, it’s not going to be good for the long term.

Steve Rosvold 13:23

Interesting. Well, that brings me to another question that fits in right now. Name two or three traits that you’ve really appreciated from CFOs that have worked for you?

Tom Burke 13:39

Yes. So we’ve mentioned about future thinking or being able to think strategically out in the future. That’s important. Not all great ideas have to come from the CEO. Great ideas can come from anyone on the leadership team, including the CFO. And, so, to that end, at times the CFO can be ahead of me. Thinking about things that I haven’t thought about, bringing those thoughts forward or identifying issues or opportunities that I haven’t considered, or the rest of the leadership team hasn’t considered. That’s what I would be looking for in a CFO. So, a forward-thinking proactive CFO is really again, I think that critical to the nature and critical to the role of the CFO. And I think if you if that’s something that just isn’t in your blood, then it’s going to be tough to be an effective CFO.

Steve Rosvold 14:51

Thanks for that. It’s a great response.

What happens if the CEO and the CFO disagree on a pretty significant topic for the company? Let’s say it’s a big enough issue that the board would get involved. And I’m trying to think, you know, the relationship between the two how do you work something like that out?

Tom Burke 15:30

Well, I know you qualified the question with ‘ it’s a big issue’ , but I think it’s important to make a clear distinction about issues that need to be brought to the board, because oftentimes, I have seen issues come to the board that are really management issues. They may well be of a significant nature. But the board’s domain is not management, the board’s domain is strategy and the future. And if it doesn’t fit into those buckets, and it’s really a management issue, then I don’t think this should be brought to the board. I don’t think it’s right or proper for either party to debate this in front of the board. It’s something that the two have to solve. Depending on what your leadership team looks like, that is something that could be solved at that level.

That said, if it is something of a strategic nature, something about the future direction of the company, then they should be brought to the board. If the CFO has one position, the CEO has a separate position put out what is the rationale for your decision, what’s behind that, and what are the one or two key points. Keep it to one or two key points. If you give the board a laundry list of 15, things their eyeballs are going to start spinning. What you need to bring forward is one or two things that are really critical to make this thing work one way or the other. But really understanding the rationale of each individual, or, for that matter, the strategy, could be an important thing to bring to the board. And you might find out at the board that the rationale of the CFO is a better direction to go. But I really am not a big fan of bringing things to the board that the management team should be able to solve.

Steve Rosvold 18:16

I think you really hit on a few things out there. One, it’s a tough question to answer. Two, going to the board not being linked at the hip is a dangerous proposition for the CEO/CFO relationship. If you haven’t been able to work it out the issues between you it’s not right to dump them on the board. So, maybe the question wasn’t a fair question. But I think your whole point is, hey, you need to work these things out as a team, figure it out, and get comfortable with each other and go to the board as a team. And if you can’t do that, then you need to think about the relationship? I think that question set you up for an answer that really wasn’t there. There’s no answer. It’s like, don’t get to that point!

Tom Burke 19:04

Well, I think that’s true. Don’t get to that point. The two individuals have to figure out how to work it out. For the most part if it’s strategy, the strategy should be fairly clearly laid out. And if it isn’t, then that might be the CEOs problem. And so, clarity around what the strategy is, is, is super important.

Steve Rosvold 19:45

That’s a great answer insightful because it just he talks about the importance of that cohesiveness between the two and how that partnership needs to work. And if, if they can’t agree on critical issues, then it might not be the best fit.

What could CFOs or the finance function in general?

Tom Burke 20:21

Well, again, It’s being a partner. It’s, it’s thinking forward, it’s, it’s understanding the strategy, it’s being proactive. I think all those things are very important. Just as the CEO has to be decisive, I think the CFO has to be equally decisive about one, their strategy and two, their team. For instance, I think there is a real tendency in many organizations to try and work with the individuals you have. Maybe some really aren’t cutting the mustard, for whatever reason. Many years ago, when I was in grad school, we brought in outside speakers every week. These were business people who faced a variety of different issues. They were all C level folks. Could be a CEO or a CFO. One of these speakers said something that has stuck with me, it isn’t specific to CFOs, but it is specific to leadership.

He was asked the question, what’s your biggest regret you’ve ever had as a chief executive? His response was not what I expected. His response was “That I didn’t let people go earlier”. We probed into his statement further and he told us, “Look, there’s, there’s been a lot of times where I’ve had people that I’ve tried and tried and tried to get them up to speed and they just weren’t able to cut the mustard. And I knew somewhere back here in the back of my brain that this wasn’t gonna work out. But I really wanted to try hard to do it so I kept working at it. For too long.” His point wasn’t, you know, this isn’t about making a snap decision. So that’s not what I’m suggesting but it’s like, you reach a point where you say, Okay, this simply isn’t going to work. And, and to take that action, and make that change as difficult as it might be, is important. Oftentimes, people tend to rationalize keeping that person in place, because, gosh, what am I going to do without them, I need someone to be doing, counting the beans or whatever it might be. And you can find people like that, and you can find them pretty quickly. And the downside, The other downside from a leadership standpoint that I don’t think people take into account is, everyone around you probably knows this, everyone around you and around that person knows this, this person isn’t cutting it. And as a leader, you can lose respect, if you don’t take that action and allow things to linger. Chances are the others are picking up the slack. And you’re going to lose their respect about your leadership ability and your ability to identify needs in the organization. So that’s, that’s an overall leadership thing that I think is important for people, particularly at the top of the organization to really be considering.

Steve Rosvold 24:21

Well, that’s a great, great answer, because it actually answered my next question, which was a more general leadership question. So it’s perfect. You make a great point on people. There’s also a fairness to the person who you are letting Hang on. They’re realize they are not cutting it, they realize they may not be a fit, they may be more loyal or they don’t have other opportunities. But if you don’t let give them that feedback and find the right path for them, you’re really not being fair to the employee as well. So there’s a whole stream of ideas from what you just said, that are really great leadership strategies on how to deal with your people. I think tough love is, is important.

Tom Burke 25:30

To further build on that point. Because it’s a critical item as well. You don’t want to be constantly, ‘beating’ up so to speak on this person, or asking them to do things that are just not capable of doing. They’re not going to be happy. They know there’s a problem. The percentage may not be as high today but a number of years ago 90% of people that lose their job, ended up with a higher paying job. 90% I mean, that’s so you know, yet for the short term, it’s going to possibly devastate them, and you know, it’ll be hard on their family, and where’s my future income going come from? On the other hand, most of those people, the vast majority, those people go on to 1) something that is a better fit and 2) pays more.

Steve Rosvold 26:41

Is there anything else from the leadership side - we have an audience that’s more than just finance leaders and finance professionals. We get a lot of business owners, CEOs that kind of like to peek in and see what’s going on at finance world - any general other general leadership tips you want to share?

Tom Burke 27:16

We talked a lot about the business aspects of what’s expected of a CFO, how CFOs can work with the organization. But the last point that we just touched on about people is critical. When you have the right people, it’s important that you’re recognizing it and that they recognize that you recognize it. And oftentimes when you get up to the higher levels, you may not think this is all that important to relay on to the people that you work with, or you work around. But at the end of the day a business is really about people. Technology is important. As is what you know, what you’re delivering, and your strategy. But you’re not going to get there without the right people. And when you have the right people, make sure you recognize it. As you noted in your introduction, I do a lot of startups, early-stage stuff. To point out how important people are, most savvy investors will say, ’ Look, technology is important. But what I’m more interested in is the team. I invest first in the team. And then second in the technology. Meaning do I think these people can deliver? ’ That tells me teams are critical and have to be number one. As much as the dollars & cents and the strategy are important, making sure you have the best team possible is critical and making sure that the team knows you think they are the best team is important.

Steve Rosvold 29:25

Speaking of leadership and teams, I understand that you are launching a podcast on leadership for middle managers. Tell us a little more about it.

Tom Burke 29:34

Let me I’ll tell you a little bit about how I decided to start the podcast. I coach C level folks. And I find the coaching very enjoyable and very interesting. But it occurred to me that there aren’t a lot tools available to mid-level managers. Also, there are very few coaches dedicated to the middle manager. That person is working to move up into a C level role. But is still yet a middle manager. So much of what we focus on in our podcast is to help them grow in their careers. I do this alongside of a partner that I have worked with for a long time, Kat. The podcast is called the TomKat Chat. She is an HR professional and understands the HR world quite well. Anyway, what we’re trying to do is bring forward some thoughts and concepts, with guests about their road to the C level. And really, what were some of the challenges, the issues that they faced early on in their career? And how did they overcome them? The reality is, no matter where you work, no matter how great the place, you’re going to run into some issues. We want to give them some tools to figure out how do I navigate through this? And how do I navigate on to this? so that I can grow in my position and become more successful and eventually attain that goal. If that’s a goal I seek to be in the higher level, C level type of position.

Steve Rosvold 31:37

I think that sounds great. You’re filling a need. Middle managers don’t get the money thrown at them for coaches, certainly for one-on-one coaching. They’re left on their own. So I think you and Kat picked a great demographic to help. And people will know from what you shared with us in the last half hour that they can learn a lot from you. I can’t wait for the Tomcat Chat to launch. We’ll definitely be supportive and hopefully you will let CFO.University be part of it.

Tom Burke 32:08

Yeah, for sure, for sure.

Steve Rosvold 32:10

Well, that wraps up CFO talk, Tom, thanks for joining us.

Tom Burke 32:15

My pleasure. Thank you, and I really appreciate the work you’re doing. I think it’s really critical to get the education out there. So thank you for what you’re doing.

Steve Rosvold 32:25

CFO.University is a community of finance and accounting leaders, companies and trusted advisors dedicated to the professional development of Chief Financial Officers. Learn more about us at www.CFO.University. Until next time, Enjoy, Learn, Engage.

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