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Q&A: Nick Araco, CFO Alliance

Q&A: Nick Araco, CFO Alliance
Outsource Q&As

Nick Araco is the President and CEO of the CFO Alliance, a “community that brings together the experience, knowledge, and collective wisdon of peers, subject matter experts, and academic authorities to enable senior financial leaders and decision makers to be more effective and act with greater confidence throughout their careers”.  Prior to Nick’s appearance chairing IQPC’s forthcoming CFO Exchange in Switzerland, November 11-13, we spoke with Nick about his organisation, his views on the economic landscape and trends within Finance, and what keeps his members awake at night…


Outsource: Nick, thanks for joining us. What is the CFO Alliance, and what are you trying to do there?

Nick Araco: I am CEO and President of the CFO Alliance; we have built and extended this community as a means and mechanism to bring CFOs and related finance leaders round the US and the globe together, with the intended purpose of providing them with a meaningful, safe place where they can openly debate, discuss and dissect critical issues and opportunities as the roles continue to increase in scope visibility and as the economic climate continues to change on a global level. We bring CFOs together face to face and online for very focussed, strategic and tactical discussions; we capture these discussion points and create an opportunity for the CFOs to access the discussion takeaways and add those to a vibrant online community platform.

O: How long has the organisation been going?

NA: We began the development of the CFO Alliance community in late 2008 and piloted the development of the community here in the north-east US in late 2009 and 2010. On an ongoing and forward basis we have expanded the community to about 3,500 CFOs from around the US, and are now gathering together additional participation from around the globe – the common tie being the middle market in terms of the companies that these CFOs serve in and the role they play.

O: What’s your definition of the middle market?

NA: So I would say that 70 per cent of our CFOs are finance leaders inside privately owned companies, with revenues of $50-500 million and anywhere between 50-5000 employees – so a very unique demographic, one that is hard to reach at times and one that is critical to a global economic recovery.

O: A recovery which is obviously sorely needed… One of the problems assailing the finance community at the moment is how to drive that recovery in terms of growing their own organisations whilst minimising their exposure to risk. From your perspective what risk management technologies in particular are CFOs looking to invest in?

NA: It’s interesting that you bring this up. We actually gathered in Chicago last week to talk about risk management and the key areas around risks – more than just a philosophical approach but the practical elements and resources and approaches the CFOs need to take in managing risks. There is heavy emphasis on managing risks in areas around the supply chain of vendor and customer. They are looking at technologies and data capture processes that provide them with an accurate and ongoing snapshot that tie directly to both top line and bottom line performance. We are seeing an increased interest in technologies that can capture and manage human capital and/or employee risk areas. And we are also seeing interest in technologies around enterprise risk with regards to cybersecurity and social media as well.

O: That sits squarely within the broadening trend of CFOs having more and more visibility over IT, doesn’t it – with an increasing number of CIOs reporting to CFOs and with IT generally being told to become a profit centre. Is this a development the CFO Alliance is working to adapt to?

NA: It is; in fact we have had a number of discussions attempting to better understand and create comfort in improving the communication and languages that the CFO and CIO and CTO speak. The CFOs themselves agree that it’s best to keep the approach to measurement in any area simple: one that can be quickly understood by all involved. We are really driving our members to remind each other that they should not expect IT professionals to intuitively understand financial principles any more than the IT team should expect that the CFO and their teams intuitively understand the act of producing those type of data for their use.

O: And how is that trend influencing discussions over bringing in new technologies?

NA: You know, we had a roundtable discussion on this in Miami about eight weeks ago: what happens when the CTO or the CIO brings you, the CFO, a request to stand to? What is the most effective way to approach this, and how do you not just evaluate but communicate and make your decisions? The key factor that came out of the discussions is that there needs to be some direct understanding about how it could impact the top line or bottom line in the short term. It needs a short-term focus. Part of that is the uncertainty now tempering confidence in investment decision-making – and especially investment decisions like this, and a reluctance to make decisions that require significant dollars, process or resources if it can’t be easily understood or transferable for short-term bottom-line or top-line impact. This is tempering the way CFOs are evaluating and making decisions coming from IT.

O: So there’s a reluctance around making longer-term commitments – are we going back to the situation in the early stages of the economic crisis when many people were paralysed vis-à-vis discretionary spend?

NA: It is not so much around cost. When I say there is reluctance, it is not a reluctance because of the cost in mind  but a greater visibility, a greater spotlight on if there is any way to project with some degree of certainty the actual positive impact to the top-line and bottom-line performance. That’s the posture and approach – so very different from the reluctance during the earlier recovery climate where cost was the factor. In this case there is a focus on growth, there is a focus on performance, and there is an opportunity for investment that will directly or indirectly positively impact either pipelines or margin performance – but it’s a short-term one still.

O: How short term?

NA: Everybody’s focus is on the next 12-18 months. Anything thereafter for them is the great unknown. That’s not just around technology but also as it relates to decisions around adding additional people, or human capital, looking at M&As as a strategy for growth or organic growth meant to drive performance.

O: That must have serious implications around the whole idea of planning – do you see this in your conversations with your members?

NA: I really do.  I saw this begin to play out about a year ago in a roundtable we had in Boston; we brought the CFOs together to fuel a discussion around how to approach budgeting and planning in a continuous 24/7/365 environment versus an annual, semi-annual or quarterly event. That is a huge change – not only as it relates to the approach of the CFO and the workings of the C-suite and the various functional leaders within companies, but as regards a very different approach towards the capture and use of data on an on-going basis. It is a bit revolutionary in my opinion, and I think for a CFO who is managing their greatest asset – which is their time – and still attempting to do more with less with people and resources, it may be an opportunity to position themselves in a much more strategic role than ever, impacting the decision making – but at the same time I am sure it’s moving them outside their traditional comfort level.

O: So you see the typical job description for a CEO having changed?

NA: One of our board members – the CFO of a pretty sizable consumer product company in the US – stood up at one of my roundtables and said to his peers “I want you to raise your hand if you view yourself as an outstanding collector and analyser of the numbers” and the hands went up; and he said “if that’s the only thing you are good at I am going to ask you to leave at this point in time because the role continues to increase in scope and visibility and we are here to better ourselves to play a much larger and more impactful role in driving corporate performance and growth”. That set the tone that, yes, we need to master the skills that come with the leadership, accounting, financial reporting, the traditional areas – but the CFOs need to view it as an opportunity to bring their own leadership to the forefront given the changing climate.

O: One of the skills or areas of knowledge now required is presumably a familiarity with new, fluid organisational forms utilising models such as outsourcing and shared services. Are you seeing these models (and thus the skills to utilise them optimally) penetrating your mid-market membership as they have done the larger enterprises?

NA: Taken as a whole or collectively, the movement towards outsourcing and its impact and effect would be a slower-moving trajectory in the middle-market space – but I can tell you that there is an appetite for efficiency and streamlining and more importantly improved performance in things like HR, customer service, marketing that have traditionally been done in house or with teams physically on the ground inside of within an outsourced model. There is an approach that if we have a limited pool of resources, capital and time then we are going to focus on owning what we do best not only to the betterment of the company, exploiting competitive advantage, but really maximising the culture internally. So I think there is a real ability in the middle market to look at outsourcing as a way to focus that effort.

I can tell you that CFOs both individually and collectively believe that if we are going to optimise an area both internally and externally as it relates to performance we need to have the best approach in mind regarding the resources and assets that are at our disposal – so when they look at areas that have been treated as overhead historically CFOs are now asking how they can use these resources and required operations to impact the top and bottom lines. So if we can get more out of outsourcing our customer service to an area that can provide us with competitive intelligence versus just customer intelligence – real market intelligence – why wouldn’t we consider it? Because we can tie that directly to not only our strategy but our performance. That’s just one specific example where there is an real appetite for looking at things differently.

It’s not easy to make change. But this gets back to what I originally said: there is really openness and willingness to say if it can be impactful and provide us with greater confidence in the short-term, or greater performance, we are going to look at it.

O: What would you say are the biggest challenges facing your community right now?

NA: A better way to address that would be to tell you what’s keeping us up nights… I think we are at a stage where the middle market is really looking to create a collective voice for itself, to provide a conduit around creating a more meaningful and maybe more positive business environment for the middle market space. I think it’s a group that individually and collectively believes that their own performances are certainly material towards a global economic recovery. They don’t feel they have got the voice to be heard on either regulatory compliance or the overall business climate. So there’s a real opportunity and I think a real desire and demand to have their voices heard.

O: And to sign off: what are your secrets for finance success?

NA: I think that a strong basis in understanding financial principles that will guide your decision-making is still core – so we are not asking or prompting CFOs to step away from applying what got them to be where they are. But the willingness and ability to create a collaboration environment internally across the C-suite so that the leadership in finance can effectively work with his or her counterpart in operations, sales, marketing technology, human capital strategy and development is increasingly critical. So much of what the CFO has traditionally done has been done behind closed doors and then communicated. And I think the CFO now needs to take the doors off the hinges.


Nick Araco will be chairing the CFO Exchange, November 11-13 2012, in Switzerland. For more information, see the event homepage.

Outsource: Nick, thanks for joining us. What is the CFO Alliance, and what are you trying to do there?

Nick Araco: I am CEO and President of the CFO Alliance; we have built and extended this community as a means and mechanism to bring CFOs and related finance leaders round the US and the globe together, with the intended purpose of providing them with a meaningful, safe place where they can openly debate, discuss and dissect critical issues and opportunities as the roles continue to increase in scope visibility and as the economic climate continues to change on a global level. We bring CFOs together face to face and online for very focussed, strategic and tactical discussions; we capture these discussion points and create an opportunity for the CFOs to access the discussion takeaways and add those to a vibrant online community platform.

O: How long has the organisation been going?

NA: We began the development of the CFO Alliance community in late 2008 and piloted the development of the community here in the north-east US in late 2009 and 2010. On an ongoing and forward basis we have expanded the community to about 3500 C,FOs from around the US, and are now gathering together additional participation from around the globe – the common tie being the middle market in terms of the companies that these CFOs serve in and the role they play.

O: What’s your definition of the middle market?

NA: So I would say that 70 per cent of our CFOs are finance leaders inside privately owned companies, with revenues of $50-500 million and anywhere between 50-5000 employees – so a very unique demographic, one that is hard to reach at times and one that is critical to a global economic recovery.

O: A recovery which is obviously sorely needed… One of the problems assailing the finance community at the moment is how to drive that recovery in terms of growing their own organisations whilst minimising their exposure to risk. From your perspective what risk management technologies in particular are CFOs looking to invest in?

NA: It’s interesting that you bring this up. We actually gathered in Chicago last week to talk about risk management and the key areas around risks – more than just a philosophical approach but the practical elements and resources and approaches the CFOs need to take in managing risks. There is heavy emphasis on managing risks in areas around the supply chain of vendor and customer. They are looking at technologies and data capture processes that provide them with an accurate and ongoing snapshot that tie directly to both top line and bottom line performance. We are seeing an increased interest in technologies that can capture and manage human capital and/or employee risk areas. And we are also seeing interest in technologies around enterprise risk with regards to cybersecurity and social media as well.

O: That sits squarely within the broadening trend of CFOs having more and more visibility over IT, doesn’t it – with an increasing number of CIOs reporting to CFOs and with IT generally being told to become a profit centre. Is this a development the CFO Alliance is working to adapt to?

NA: It is; in fact we have had a number of discussions attempting to better understand and create comfort in improving the communication and languages that the CFO and CIO and CTO speak. The CFOs themselves agree that it’s best to keep the approach to measurement in any area simple: one that can be quickly understood by all involved. We are really driving our members to remind each other that they should not expect IT professionals to intuitively understand financial principles any more than the IT team should expect that the CFO and their teams intuitively understand the act of producing those type of data for their use.

O: And how is that trend influencing discussions over bringing in new technologies?

NA: You know, we had a roundtable discussion on this in Miami about eight weeks ago: what happens when the CTO or the CIO brings you, the CFO, a request to stand to? What is the most effective way to approach this, and how do you not just evaluate but communicate and make your decisions? The key factor that came out of the discussions is that there needs to be some direct understanding about how it could impact the top line or bottom line in the short term. It needs a short-term focus. Part of that is the uncertainty now tempering confidence in investment decision-making – and especially investment decisions like this, and a reluctance to make decisions that require significant dollars, process or resources if it can’t be easily understood or transferable for short-term bottom-line or top-line impact. This is tempering the way CFOs are evaluating and making decisions coming from IT.

O: So there’s a reluctance around making longer-term commitments – are we going back to the situation in the early stages of the economic crisis when many people were paralysed vis-à-vis discretionary spend?

NA: It is not so much around cost. When I say there is reluctance, it is not a reluctance because of the cost in mind  but a greater visibility, a greater spotlight on if there is any way to project with some degree of certainty the actual positive impact to the top-line and bottom-line performance. That’s the posture and approach – so very different from the reluctance during the earlier recovery climate where cost was the factor. In this case there is a focus on growth, there is a focus on performance, and there is an opportunity for investment that will directly or indirectly positively impact either pipelines or margin performance – but it’s a short-term one still.

O: How short term is it going to be?

NA: Everybody’s focus is on the next 12-18 months. Anything thereafter for them is the great unknown. That’s not just around technology but also as it relates to decisions around adding additional people, or human capital, looking at M&As as a strategy for growth or organic growth meant to drive performance.

O: That must have serious implications around the whole idea of planning – do you see this in your conversations with your members?

NA: I really do.  I saw this begin to play out about a year ago in a roundtable we had in Boston; we brought the CFOs together to fuel a discussion around how to approach budgeting and planning in a continuous 24/7/365 environment versus an annual, semi-annual or quarterly event. That is a huge change – not only as it relates to the approach of the CFO and the workings of the C-suite and the various functional leaders within companies, but as regards a very different approach towards the capture and use of data on an on-going basis. It is a bit revolutionary in my opinion, and I think for a CFO who is managing their greatest asset – which is their time – and still attempting to do more with less with people and resources, it may be an opportunity to position themselves in a much more strategic role than ever, impacting the decision making – but at the same time I am sure it’s moving them outside their traditional comfort level.

O: So you see the typical job-description for a CEO having changed?

NA: One of our board members – the CFO of a pretty sizable consumer product company in the US – stood up at one of my roundtables and said to his peers “I want you to raise your hand if you view yourself as an outstanding collector and analyser of the numbers” and the hands went up; and he said “if that’s the only thing you are good at I am going to ask you to leave at this point in time because the role continues to increase in scope and visibility and we are here to better ourselves to play a much larger and more impactful role in driving corporate performance and growth”. That set the tone that, yes, we need to master the skills that come with the leadership, accounting, financial reporting, the traditional areas – but the CFOs need to view it as an opportunity to bring their own leadership to the forefront given the changing climate.

O: One of the new skills or areas of knowledge now required is presumably a familiarity with new, fluid organisational forms utilising models such as outsourcing and shared services. Are you seeing these models (and thus the skills to utilise them optimally) penetrating your mid-market membership as they have done the larger enterprises?

NA: Taken as a whole or collectively, the movement towards outsourcing and its impact and effect would be a slower-moving trajectory in the middle-market space – but I can tell you that there is an appetite for efficiency and streamlining and more importantly improved performance in things like HR, customer service, marketing that have traditionally been done in house or with teams physically on the ground inside of within an outsourced model. There is an approach that if we have a limited pool of resources, capital and time then we are going to focus on owning what we do best not only to the betterment of the company, exploiting competitive advantage, but really maximising the culture internally. So I think there is a real ability in the middle market to look at outsourcing as a way to focus that effort.

I can tell you that CFOs both individually and collectively believe that if we are going to optimise an area both internally and externally as it relates to performance we need to have the best approach in mind regarding the resources and assets that are at our disposal – so when they look at areas that have been treated as overhead historically CFOs are now asking how they can use these resources and required operations to impact the top and bottom lines. So if we can get more out of outsourcing our customer service to an area that can provide us with competitive intelligence versus just customer intelligence – real market intelligence – why wouldn’t we consider it? Because we can tie that directly to not only our strategy but our performance. That’s just one specific example where there is an real appetite for looking at things differently.

It’s not easy to make change. But this gets back to what I originally said: there is really openness and willingness to say if it can be impactful and provide us with greater confidence in the short-term, or greater performance, we are going to look at it.

O: What would you say are the biggest challenges facing your community right now?

NA: A better way to address that would be to tell you what’s keeping us up nights… I think we are at a stage where the middle market is really looking to create a collective voice for itself, to provide a conduit around creating a more meaningful and maybe more positive business environment for the middle market space. I think it’s a group that individually and collectively believes that their own performances are certainly material towards a global economic recovery. They don’t feel they have got the voice to be heard on either regulatory compliance or the overall business climate. So there’s a real opportunity and I think a real desire and demand to have their voices heard.

O: And to sign off: what are your secrets for finance success?

NA: I think that a strong basis in understanding financial principles that will guide your decision-making is still core – so we are not asking or prompting CFOs to step away from applying what got them to be where they are. But the willingness and ability to create a collaboration environment internally across the C-suite so that the leadership in finance can effectively work with his or her counterpart in operations, sales, marketing technology, human capital strategy and development is increasingly critical. So much of what the CFO has traditionally done has been done behind closed doors and then communicated. And I think the CFO now needs to take the doors off the hinges.

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