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If you're a finance leader inside a PE-backed portfolio company, you already know the drill: tighter timelines, higher reporting expectations, and a board that wants to see the value creation plan before the ink on the deal dries.
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“We’re looking for a strategic finance leader.”
The word “strategic” has become lip service. Jargon. As Shakespeare would say: Full of sound and fury, but signifying nothing.
My working definition of what strategic actually means is:
Helping to make resource allocation decisions throughout an entire company using unit economics.
Being strategic comes down to making A DECISION based on the BEST TRADEOFF OF DOLLARS. It assumes you have limited resources, and you have to make a call.
My friend Steve Isom, COO and CFO at PE backed company Bloomerang, weighed in with a much more succinct answer:
If I’m living in an investor backed or private equity backed company, I would tie it closely to value creation.
If you’re hired by investors, or investors are brought on, you need to fundamentally understand what they’re underwriting. And it doesn’t mean that the underwriting case is a hyper specific 5 year roadmap for the company. There are multiple ways to get to the same destination. But you better understand what that expected destination is.
If you can start to view all decisions and constraints through the lens of what you’re ultimately trying to progress towards, you’re being strategic. As the CFO or COO (sometimes both like Steve) you’re uniquely positioned to understand the full picture and help to optimize for the entire system..
Many department leaders are not strategic, not because they aren’t smart and talented, and not because they don’t do meaningful shit day to day, but because they optimize for their own department. They don’t look at what they do as part of a system.
It’s hard to be strategic, in the way we’ve defined it so far, if:
The VP of Sales pushes for higher OTE for their reps to attract "better talent," but they know the comp model breaks if attainment drops below 70%
The CFO builds a super conservative forecast so they can look like a hero when they beat it and their surrounding execs smile and get their bonusses
Engineering over-engineers the product because technical elegance is how engineers earn respect from other engineers
The head of CS hoards customer relationships like Gollum in Lord of the Rings, refusing to enter all necessary details into the CRM
These are all department level optimizations that don’t advance the system.
Here are three things you can do to actually be more strategic:
Communication
There are two lenses here: the timeline you’re addressing and the way in which you do it
In terms of timelines, you should speak in a future oriented way, linking today’s activities to tomorrow’s outcomes
Being strategic requires you to communicate what today’s actions mean for the future.
I’ve seen many a finance manager read off the month’s results: we added $2.2M in net new ARR.
OK. But what does that accomplish for our longer term vision? The P&L is connected… right?
And when it comes to how you say it, try to communicate in the same language your board and boss talk.
What does this mean for our P&L?
What does this mean in context of our larger market?
Bundled Execution
Executing the things you say you are going to do in the strategy you’ve outlined
Having a high ‘say to do’ ratio
But making sure you are executing a group of related things, and not knocking off single tasks in isolation
You’re actually working against the common goal if you are making changes to the budget in isolation
Understanding what your stakeholders care about
Related to #1 - you need to know where they are trying to push the overall org, not just your department
Incentives drive outcomes at all levels of the organization, and it’s your job to understand how ownership is incentivized and what good looks like for them as a firm and professionally
I've worked alongside people who were very, very good at being perceived as strategic. They had the superfluous vocab. They got invited to all the offsites for some reason (good at politicking). They could connect any question back to the company's north star in about forty-five seconds flat (in a hand wavy, ultimately empty way).
They also couldn't tell you, when pushed, what they would actually cut if the budget got tight. The did not make decisions. They talked around them. And they were not executors themselves. They didn’t personally go out and “do” a lot of the work we agreed upon. In many ways, they liked playing serious, but were not really serious people.
Being strategic, in the end, is mostly just being willing to make the call. Not describe it. Not facilitate the conversation around it. Make it, own it, and show your work so everyone can see exactly why you chose a direction. Then go follow the map and report back later. Ideally it’s all for the greater good.
Thanks for reading, and make sure to check out our sponsor, Abacum.
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