How CFOs can promote a culture of financial discipline.
Transparency, along with educating and empowering teams to spend smarter, can help sustain momentum in a downturn.
The upside
As companies grow, reinforcing a culture of financial discipline is a role that’s tailor-made for CFOs.
Transparency fosters trust and empowers employees to do their best work.
Instilling an ownership mindset among employees can help position a company for continued success.
“We’re in a fundamentally different environment today than existed within the startup world over the last two to three years.”
— Michael Tannenbaum, CFO and COO of Brex
The first things that typically come to mind when people talk about a company’s culture are value and mission statements, bonding exercises, employee all-hands, and maybe some insider lingo — not financial acumen or office hours to discuss the economy.
After years of relatively easy access to capital and companies growing rapidly, employees may be unfamiliar with more measured approaches and a focus on profitability. They’re suddenly being asked to understand and embrace notions like financial discipline and smart spending.
“We’re in a fundamentally different environment today than existed within the startup world over the last two to three years,” says Michael Tannenbaum, CFO and COO of Brex. “You have to have a more stable perspective on what is an appropriate return on investment, and adjust how you run your business without relying on 0% interest rates.”
Leading that shift in mindset is a role that’s tailor-made for CFOs. It starts at the leadership level, where CFOs can help establish — and create buy-in — around a new approach toward spending. And it continues with evangelizing those rules across the organization. This helps individual employees feel more empowered to contribute to new ways of growing the business.
There’s no single formula for doing this effectively. But here’s what leading CFOs on the frontlines shared with us about how they’re approaching the challenge.
Balancing top-line and bottom-line focus.
In March 2022, as the Federal Reserve was preparing to increase the federal funds rate for the first time since 2018, the leadership team at global payments company Spreedly began looking at budgets with a new perspective.
“We didn’t really make any solid moves to change at that point, but we started the conversation,” says Nellie Vail, Spreedly’s CFO.
Until then, the message across the company had been focused exclusively on top-line growth. But by late spring, company leaders had decided to create more sustainable growth by considering the bottom line and viewing every position through the lens of key priorities: Did the role directly contribute to revenue or growth? Was it mission critical? The evaluation exposed inefficiencies, as well as opportunities to fix them.
As a result, some people were shifted into new roles that were more in line with the company’s priorities. The exercise also led to the decision to postpone hiring for some open positions. The board endorsed the company’s proactive approach, but the shift, Vail says, “certainly caused a company culture shift” that called for more transparency.
By the time summer rolled around, Vail shared leadership’s new view on spending at an all-hands meeting.
She began by reminding everyone that Spreedly still had plenty of upside potential. “I was able to reinforce that we’re still looking at a solid 40 percent-plus year-over-year growth,” Vail says. “It’s still a competitive labor market, so the last thing you want is high performers moving on to another company because they’re concerned about the company becoming more cost focused.”
That combination of candid communication and forward-looking mindset can be critical in helping rally employees around a common mission of sustainable growth.
Opening new channels of communication.
Transparency and over-communication can also go a long way toward empowering employees to participate in the company’s growth. At Brex, for example, co-CEO Pedro Franceschi sends out regular emails to the entire workforce, and the company hosts employee all-hands meetings every other week. Spreedly employees also get detailed updates on the state of the business, says Vail. To reach distributed employees, there’s more reliance on messaging apps, and the once-quarterly all-hands video calls are now once-a-month global check-ins.
Similarly, Danielle Murcray, the CFO of security business AttackIQ, says she may not always be able to talk about sensitive details behind a strategy or spending shift, but adds: “I can always explain the ‘why.’”
Telling employees “why” something is happening makes it easy for them to do the right thing. Understanding why certain expense policies exist, for example, often makes teams much more likely to act in a financially disciplined and responsible way. They feel empowered when they are trusted with information.
At Cleo, a family benefits company, CFO Amy Kux holds office hours to talk about the economy and what it means for Cleo. “I find what we’re doing a lot right now is easing everyone’s state of mind so they’re okay with the unknown,” she says.
This kind of dialogue is especially important at a time when so many employees work remotely, and many companies have offices distributed around the globe. It helps generate a culture of trust that can be a motivating force and boost productivity.
“I find what we're doing a lot right now is easing everyone’s state of mind so they’re okay with the unknown.”
— Amy Kux, CFO of Cleo
Making financial discipline concepts accessible.
Transparency as a tactic is essential, but how much do you share and how can you be sure your message gets through? Not every employee spends hours going through company financials. “It’s not a topic that is as natural to pick up as, say, something like marketing where everybody can enjoy an ad,” says Tannenbaum. “Not everyone tends to enjoy an income statement in the same way.”
When Tannenbaum is presenting Brex’s financials at the quarterly operations all-hands meetings, he has made a point of going beyond charts and takeaways. He provides definitions of the terms and uses analogies to convey use cases. Employees have said they find the meetings very accessible, interesting, and approachable.
Another practice is having more intimate conversations — like the office hours Kux holds at Cleo — where employees can ask questions around financial topics. The more financial terms become ingrained in conversations, the more people speak a common language around some of the CFO’s key goals of spending smarter and being more financially disciplined.
Establishing an ownership mindset.
These efforts can also yield a bonus benefit: establishing an ownership mindset across the organization. Employees feel accountable for the continued success of the organization and empowered to flag both opportunities for smart investments that can contribute to growth and potential cost-savings.
Another tactic is to assign budgets to department leaders to share the responsibility for profitability with their teams. This empowers them to make smart trade-offs on behalf of the business. The idea is that workers closer to the customer often have a sharper sense of where opportunities lie. “I find frontline employees have some of the best ideas because they’re dealing with things day in and day out,” says Joseph Gwozdz, who worked as a CFO for 20 years at various companies before becoming an operating partner at the investment firm Edison Partners.
With these practices, CFOs can help set the right tone around spending inside their companies. As they become part of the culture, they will position companies to remain focused on the long-term opportunity in front of them. And when done right, they’ll have another payoff: helping employees across the organization understand that financial discipline is not a scary mandate at odds with growth, but rather a smart approach to creating a sustainable business.