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CFOs Building Business in Bad Times

Posted by: Nanette Byrnes on September 11, 2009

While much of the blame for the economic downturn has landed on the shoulders of corporate CEOs, the melt down has raised the profile, and value of their corner suite-mate and top lieutenant, the chief financial officer. According to a study done by ACCA, a global association of professional accountants, 83% of senior financial executives surveyed said the finance chief’s role is more important today than it was a year ago.

I blogged about this yesterday on our Managing Forward blog.

The post goes into some detail on the story of Virgin Mobile’s CFO John Feehan and how he does his job. In August, Sprint Nextel proposed a $483 million merger with Virgin Mobile that might on its face have looked like a case of “in the right place at the right time.” Virgin specializes in pre-paid cell phone minutes, a cheaper alternative to contracts that’s risen in popularity since the downturn.

But Sprint already has a pre-paid business, Boost, so that had some scratching their head.

When you learn more about Feehan and how his company’s integrated the finance mind frame into its business, you come away with a clearer picture of why the company is of so much interest to Sprint.

Virgin Mobile started to feel the pinch of the global economic troubles early. The company went public in October 2007. Within two months, as gas prices climbed, customers’ usage had started to drop, directly hitting the company’s bottom line.

But some smart financial maneuvering created a silver lining to the downturn for Virgin Mobile: the 2008 $39 million deal to buy Helio, a cellular operator. The credit crisis had left Helio few options on how to fund their growth.

That deal paid off in two ways. First, the deal convinced Virgin Mobile’s original backers Richard Branson’s Virgin Group, and Helio’s, SK Telecom, to invest more in the combined firm, bringing down its debt.

Second, the deal provided opportunities to cut costs for the combined business. Virgin then funneled some of those savings into “Pink Slip Protection” plans that continued service for people who’d been laid off, helping to create a competitive advantage in a highly competitive field.

Feehan says there is a high level of financial savvy among his colleagues, that he helps fuel with a steady stream of financial data. Every day he sends key executives the company’s average revenue per user per day, the number of new customers coming on board, and other vital stats.

On the flip side, Feehan is steeped in every operating aspect of the business from marketing to consumer behavior. “I know enough about the business to know if I’m putting the business at risk if we take money out of one thing versus another,” Feehan says.

Are there other stories of heroic CFO contributions in the downturn out there? Will financial officers continue to be influential when the economy rebounds?

Reader Comments

Martyn Drake

September 16, 2009 7:12 AM

You're right about the downturn raising the profile of, not just CFOs, but other senior executives as well, particularly COOs.

As the downturn increases the pressure on CEOs to manage external battles and relationships, they have a choice. Either to increase empowerment to their most trusted colleagues, or risk being stretched too thinly, making less effective judgements and becoming isolated in the firm.

This article uses Alchemy partners as the case in point, and the analogy of the pilot/co-pilot relationship - nice to have in good conditions, but essential as situations become more severe.

Will the trend continue into recovery? I think it depends on the CEO. Those that value their co-pilots and don't feel threatened will make sure it does. Those that don't will probably part company within a year or two - it's no fun losing your influence.

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