The CEO to CEO podcast is hosted by Kevin Campbell, CEO of Syniti.
This week's guest, David Axson is a global strategist, consultant, keynote speaker, and author. Known as the CFO Whisperer, he has worked in strategy, finance, and technology for more than 35 years, advising CFOs and businesses in more than 50 countries across multiple industries. He has served as a global leader, driving global mergers, acquisitions, and divestitures at a number of organizations, including Bank of America, Accenture, and Hewlett-Packard. He was a co-founder and chief operating officer of The Hackett Group, led Accenture strategies, global finance thought leadership for nearly a decade, and served as head of corporate planning at Bank of America.
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Kevin Campbell (01:28):
Welcome to this week's CEO To CEO podcast. Today, we're excited to have on with us David Axson. David is what I like to call the CFO Whisperer. He spent his life and his career working with CFOs. He was at The Hackett Group in the original founding and was the COO for them for years. He also spent time at Bank of America and also spent time with Accenture. Now in retirement, or semi-retirement, he's pretty busy for a retired guy. He spends time counseling CFOs and CEOs about a wide variety of subjects, including M&A. So we're pleased to have David on, and David welcome.
David Axson (02:17):
Thank you, Kevin. It's a pleasure to be here. Thanks for having me.
Kevin Campbell (02:21):
David, how about if we start out with, you spent a career counseling CFOs and CEOs, when you get in a first meeting with them, what do you want to establish? What are you looking for? Are you looking for what are their priorities? What are their pain points? How do you get the discussion going?
David Axson (02:41):
Yeah, I think it's very easy to go in and ask, what are your pain points? I always take a slightly different approach. I'm much more focused on what they're trying to accomplish, and that has two dimensions to it. I'm thinking that both from an enterprise standpoint, and also personally as a CFO. I think it's important to understand what a CFO's agenda is, and how I or my organization could help furthering that personal agenda, as well as that professional agenda. A mantra of mine a long, long time ago said, "If you can help your clients be successful both personally and professionally, you're in a really good situation."
And that's what I've always tried to accomplish. So I'm really thinking about, what are the CFOs' goals? How do they measure success? And then what are they actually doing today to try and further their progress to those goals? And then you can get into a conversation about perhaps more negative stuff. What are the pain points? What are the challenges they're facing, but you're doing it in the context of where they want to end up. I always think that's a more constructive conversation to have in terms of building a relationship with the CFO, but also beginning to understand what their agenda is and how we can work together to help them further that.
Kevin Campbell (03:50):
That seems like a really good approach to try to figure it out because we all have personal objectives along with our company objectives that we're trying to work on. And I know at least for me, and I'm sure for you just getting them talking in the beginning, then it falls out. We're living in strange times right now in the COVID era, moving to... It's going to be a long recovery I think economically. The Atlanta Fed's now saying we might have as much as a 33% GDP growth in the third quarter, which I think will be a surprise to all of us, if that turns out to be true and be great. But when you're talking to CFOs today, are they more focused on cost cutting or growth, or do they need some of both?
David Axson (04:45):
It's really a combination. Certainly when we entered the downturn in March, the speed and velocity, and the magnitude of the decline really turns CFO's focus to cash and capital conservation. And actually, if you look at results that companies are reporting, they've done a pretty good job. Companies have done a pretty good job of managing their balance sheets through what has been a rather unprecedented period. Some of that has come through cost optimization. Clearly managing your expense base is the number two or number three job behind the integrity of the financial statements of every CFO. But what I'm seeing is, and we're beginning to see this play out now, those companies that done a successful job at managing their balance sheet are rarely in the best position to start to think about investing in growth, whether that's organic growth or increasingly we're seeing increased activity in the M&A space.
So when I talk to CFOs about cost optimization, their agenda, the real question I'm asking you is why? Is it to fuel growth? Is it to increase competitiveness? Is it to create a fund to be able to make acquisitions? Is it to return cash to shareholders? Because the reason why they're trying to do it helps you begin to understand how you should prioritize different activities. But I've certainly seen, and I saw this in the financial crisis 10 or 12 years ago, that CFOs have really done a very good job of husbanding cash and capital to create some cushions, some flexibility so that when growth does return, if we see a 33% increase in the third quarter, I think we suspect, we'll see some companies start to look for opportunities in the marketplace. In fact, that's already happening.
Kevin Campbell (06:28):
Even at our company, just in the last month, the number of opportunities we've been presented where people are saying, "Hey, this division is no longer strategic to us. We're interested in talking to you." is on the rise. Now, David, you have a ton of M&A experience, you're involved at Bank of America when they acquired the Boston banks fleet and so on. And I know you were involved at HP in the spin-out there. So a lot of experiences with that, so when you're sitting, talking to CFOs about M&A, what do you tell them is important to get right?
David Axson (07:13):
I think it's a portfolio conversation. Every growth strategy has a buy, build partner or potentially a divest component to it, divesting businesses that are perhaps are underperforming. So you can invest in higher performing businesses as well as making acquisitions or partnering. And I think when you thinking about buying, it's what are you trying to buy? Are you buying revenue, are you buying products, are buying intellectual property, bank customers, market access? Because the discussion and the decision as to how much you're willing to pay will largely be driven by the elements that you're willing to purchase. And so CFOs are really focused on portfolio value, are the sum of the parts of the business greater than the whole, which may create a divestiture opportunity. We're seeing that happening in a lot of different businesses at the moment where there's consideration of spinning off paths that may have a standalone value, this significantly greater than the value when it's buried in part of the enterprise.
And the same thing is happening in reverse when companies are looking at acquisition opportunities. We've seen some valuations over the last six months, there've been incredibly volatile. Well, volatility creates opportunity. A lot of people think volatility just creates fear, but there's a positive side to it too, in terms of creating that opportunity. So I think it's really about understanding the overall portfolio value. One of the biggest changes I've seen in the CFO agenda over the last 20 years is going from being inward-looking and backward-looking to outward-looking and forward-looking.
In most companies today, the CFO is the number one executive after the CEO. You listened to the earnings call in almost every public company, and there are two people that are on every one and it's the CEO and the CFO. The CEO is telling the strategic story, and the CFO is telling the financial story that supports the strategic story. So that combination, I think is key. So when you're thinking about merger acquisition or divestiture, that partnership between the c-suite between the CEO and the CFO is crucial. The CEO has an agenda that is driven by financial outcomes largely, and they're looking to their partners in the CFO office to create the capacity, to create the energy, to be able to execute on that agenda.
Kevin Campbell (09:33):
Again, helping work with the CEO is an important part of the CFO's role, right? And is there any particular advice you give the CFOs about what they need to understand from their CEOs and how do they make sure that they work that relationship the best?
David Axson (09:53):
Yeah, I think one of the biggest changes I've seen is forward-looking capacity. So understanding what the CEO is looking to do, not just the next quarter. CFOs mentally have always been attuned to the next quarter, tend to be very short-sighted, in the September, October, November timeframe. And if they're on a calendar fiscal year, they may be looking at a full year. And maybe they do a rough set of five-year financials that may be just the financial trending exercise, that's changing significantly. In looking at the portfolio of the business and understanding the trajectory of those businesses, not just in the near term, but in the medium and longterm, the CFO is really looking at what those capital requirements are going to be, how much cash those businesses are going to generate. And what's the best use of the cash that's going to be generated.
Is it paying down debt? Is it returning to shareholders? Is it reinvesting in the core business or is it making acquisitions to begin to expand the company's footprint? And therefore that conversation about objectives and strategy, and that's a board level conversation and the investor level conversation, as well as just a CEO conversation, is really at the heart of what top performing CFOs are doing today. A lot of the backward-looking accounting activity is A being largely automated, and B has been moved to a shared services organizations or third-party outsource providers. And it's largely under the responsibility of a corporate controller these days. And that's freeing up capacity for the CFO to take this more strategic outward-looking role within the organization.
Kevin Campbell (11:25):
Let's switch for a minute and talk about one of my favorite subjects, data. How important is data to the lifeblood of the CFO?
David Axson (11:35):
CFO to data, that's always be job one. Ensuring the integrity of the financial statements is job one for any CFO. If you don't do that right, you have no permission, you have no mandate to explain your footprint. And in some cases you may even end up going to jail if you don't perform those responsibilities successfully. So CFOs are actually in a perfect position in many organizations to begin to understand the importance of data governance and data integrity. Now, initially when I started in finance 35 years ago, that was limited to a small subset of financial data. That was in the chart of accounts, the trial balance, and the financial statements and the general ledger. But increasingly today, regulators, investors, board members, and management are looking at a much broader set of data. They're looking at operational data that is a precursor to what financial outcomes might look like.
They're looking at market competitor and customer information to gain insight into behavior, so they can begin to optimize resource allocation to take advantage of the opportunity. We're also getting new types of data, the CFOs are being held accountable for. Most CFOs now have to sign sustainability or carbon footprint statements as part of their compliance returns. So the CFO's purview over data has expanded significantly. The good news is, high performing CFOs understand the importance of data governance and data integrity. Now it's a little bit of a challenge when you expand that footprint beyond the financial domain. And in some organizations, you see some tension as a CFO tries to apply governance and standardization to data in marketing, or engineering, or sales organizations. But data governance today is now about managing not just the data within your own organization, but it's about managing data within the ecosystem, within which you operate. Significant amounts of your data may reside in your supplier systems.
And therefore the ability to be able to govern that and ensure integrity and security of that data, is at the forefront of every CFO's mindset. One of the things that came very clear to me when I was at Bank of America was, the CFO focusing on a different type of risk that perhaps we had thought about before. We've always thought about financial risks, market price risk, exchange rate, interest rate, but what about reputational risks? And one of the biggest reputational risks we've seen over the last few years is the impact on a company's reputation of a data breach. The financial impact of that is dwarfed by any short-term loss. The reputational risk over the long-term is huge. And therefore for a CFO, who's looking at that balance sheet and is looking at enterprise value, and is trying to understand risks that may have in the future, the ability to effectively manage data both from a compliance, a security, and a strategic value standpoint is one of the whole lots of success in today's world.
And when I look at data, there are really three values that we have with data. There's a value to execute a transaction. Do I have the data to do a buy or a purchase transaction? But is that the informational value of that data? How much have I sold to this customer? How much have I bought from this supplier? But there's a newer dimension that's really emerged in the last five years, is really the analytic value of that information. Now we do a pretty good job today in managing the transaction value of data, buying and selling things and making sure we account for them correctly.
The information value, okay. But the multidimensionality, that's increasingly important we're pretty good in some areas like account and customer, we're less effective at bundle. If you're doing bundle services, we're less effective at channel profitability. The analytic value, I think we've barely scratched the surface, with AI and machine learning and cognitive, we're seeing a lot of new tools coming along, but we're still really in the pilot prototype experimentation stage. And relatively few organizations have got to the point where they're really unlocking the analytic value of the data they have available. And CFOs are part of that. They don't own it alone. It's a partnership, but from a data governance standpoint, we're seeing CFOs play a much broader and a much stronger and effective role in that space.
Kevin Campbell (16:04):
Very talented CFO at one of our clients, the team had come to him twice now saying, "Hey, the project is delayed because of X, Y, and Z." And he finally got the team, including the CIO and stuff in his office. And he said, "Listen, when are you finally going to tell me your problem is data, right? And here's the new approach we're going to use to get data, because all we're doing now is swatting flies, right? And they just keep coming in droves and we're not focused." But what I thought was great was that he was the one, not anybody else in the organization that said, "Come on, the answer is data. And we got to get on top of how we're going to organize and structure our data, or we're going to have a problem."
David Axson (16:55):
It's foundational to every enterprise today. And we're still operating in a fragmented way in many organizations which is why the potential of technology to change that game is much richer today than it ever has been in the last 35 years I've been looking at this. And therefore there's not really as many excuses today as there have been in the past, if you're not able to harness the power of your data and govern, and manage it effectively.
Kevin Campbell (17:20):
David and in M&A, when we talked about it, I've been promoting data as an asset, just like anything else in M&A, when you look at acquisitions, what's your experience been about data, both things people have done well, and maybe things people haven't done so well at looking at data in M&A.
David Axson (17:41):
Well, when I think of M&A. There are really six elements you need to get right if the deal is going to work. The first one is really initial candidate screening and identification. What is your portfolio of potential targets? One of my groups at Bank of America, when I was head of planning there, we actually had a portfolio of companies that we were tracking their performance every quarter, as they announced results. We have thresholds, targets, and trends that we were monitoring to see when those organizations may fall into the most attractive segment for potential M&A. So rather than being in a reactive mode, we were on a continuous basis, sucking data out of the market to really begin to understand the attractiveness of particular targets. Number two is really due diligence. There's no excuse for not doing due diligence. There are limits to what you can try and accomplish, but with the data that is now available in the marketplace, and internally as you begin to execute due diligence, there should be no excuse.
But one of the challenges we face is two companies will speak two different languages, and therefore to be able to quickly harmonize your view becomes very important. Number three is day one operation. Can we run this acquired or merged business on day one effectively? Number four is accounting control and compliance. And number five is synergy realization. Well, all of those things are really fundamentally based upon your ability to get transparency and visibility to performance across the enterprise, which requires the harmonization of data. The final element is strategic value creation.
Well, none of those six elements, candidate screening, due diligence, day one operation, accounting control and compliance, synergy realization can succeed without data. So it's absolutely foundational. Now, it's a journey. The ability to exercise control when you're doing candidate screening is somewhat limited. Clearly when you bought the business and you're integrating it, and you're trying to realize strategic value, you have a lot more levers that you can play with, but you really need a playbook that allows you to manage the data journey through those six steps, if you're going to get value from M&A in today's world.
Kevin Campbell (19:50):
We've talked a lot about what CFOs do, what's important to them, how they go about it. What career advice do you give CFOs today when you talk to them? What do you say based on all the probably 500 CFOs you've talked to just in the last week, no, in the last couple of years. What really is it that you tell them makes the most successful CFOs?
David Axson (20:23):
There are a couple of elements that I'm emphasizing increasingly today. The first one is technology, which is the foundation. The most important is talent. And frankly in the past CFOs have not done as good a job as they might. CFOs are numbers guys. We like numbers. We'd rather start a spreadsheet and talk to somebody. So developing talent within our organization has always been a challenge. But as we go through this transformation around data technology and analytics, it's the combination of the technology and the people that really delivers the ultimate value. And when I talk to CFOs today, they recognize that it's the ability to build a high performing team that can evolve with the technology and data environment that's now available to us. And one of the things I advise all of my clients, CFOs and finance people say, "If you want to be successful in today's world, the job of the finance organization starts when you deliver the report of the analysis."
Now for much of my career, when I hit send on that email with the PDF 400 page monthly management report, I said, "Thank God that's over with for another month. I can get back to doing some real work." Well, that was actually a very flawed mindset. Today, we can automate a lot of that basic stuff. Our job as finance is only as good as the decisions that result from the information, the insight, and the analytics that we provide. So if I do great analysis and no decisions result from it, have I really done a great job? And what I increasingly see CFOs being is almost a catalyst or a facilitator for the executive team, and increasingly the board to help them understand and interpret the information that's being made available to them, the analysis that's being made available to them. So they're in a much better position to take action and make decisions based upon that.
We're pretty good at answering the what happened question. We're okay, why did it happen? The hardest question, but the most valuable one is what do we do about it? And so for a CFO to add value, and it's a much more interesting job by the way, closing the books and doing the accounting statements is not the most exciting job in the world. I like to say that being in finance is the coolest job in the world today, because of the data richness that we have available to us, our ability to tell stories that are fact-based on data that help people understand what's going on and equip them with the tools to make better decisions that help them both personally and professionally. This is an all-time high. And the good news is like Moore's law, is going to get better every year. So as a finance professional coming into today, I think there's a wonderful opportunity to have a very different career than perhaps our predecessors.
Kevin Campbell (23:12):
Speaking of careers, David, you've had by any dimension a wildly successful career, you've been in big companies, you've been in startups and consulting everywhere in between. What's the best career advice? We always like to ask people on this podcast, what's the best career advice you've ever gotten?
David Axson (23:31):
Take time to have some fun. We can get wrapped up. I was doing 200 plane flights a year for 10 straight years, and I left something behind and I found out in the next 10 years, I could actually be more productive and add more value and have a lot more fun along the way. And that was absolutely key because I've seen a lot of people who get so wrapped up in their career. It's the exclusion of all else. And they either burnout or they suffer in their personal relationships, or they're just not happy. And it's perhaps not what you're looking for, but getting that balance right, I think is fundamentally important. I remember when I started in consulting, if you said you wanted to only spend three nights away from home, and four nights at the client, and work at home on the fifth day, I would be fired on day one.
Getting that balance right actually recharges your batteries and gives you a perspective to start to ask those difficult questions. Because when you've been doing the same thing every month, every quarter for 20 years, as a finance professional or a CFO, you have no frame of reference to what's going on in the rest of the world. So I think that's both liberating. It's exciting, it's refreshing. And it helps you perform to the maximum potential.
Kevin Campbell (24:48):
David, so how does somebody get ahold of you if they want to tap in that big brain for some advice?
David Axson (24:54):
Very easy, email@example.com is my email address. And davidaxson.com is my website. So find out there my phone number is available there. Happy to talk to anybody anytime. I love the coaching and counseling that is now a big part of my semi-retirement role.
Kevin Campbell (25:11):
Well, David, thanks for joining us on a CEO To CEO podcast. I really appreciate your insights. And most importantly, I want to make sure we get you off to your next golf game. Getting that balance right is critical. So tune in everybody next week for the next episode of CEO To CEO podcast. And thank you again, David.
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