As Seen in CFO Studio Magazine Q2 2017 Issue
INSTINCT, FLEXIBILITY, AND PATIENCE ARE THE KEYS TO MANAGING HEAD-SPINNING GROWTH
When you’re dealing with a company that’s moving so fast you can’t even gather enough data to make an informed decision, you need to get very comfortable with your gut, according to Anthony Conte, CFO of EPAM Systems, a global provider of product-development and software-engineering solutions. The Newtown, PA–based company has been in a state of “hypergrowth” for the past decade, having grown at an average rate of 35 percent per year over the last 10 years, said Mr. Conte. “And in some years we grew as much as 50 percent.”
Mr. Conte spoke on “Re-engineering the Finance Function while Managing Hypergrowth” at an invitation-only dinner discussion attended by CFOs from Philadelphia and New Jersey–area middle market companies. The event was held recently at Morton’s The Steakhouse in Philadelphia and is part of CFO Studio’s Executive Dinner Series.
Mr. Conte explained that the term “hypergrowth” can be applied when “a company expands at an industry-exceeding rate — roughly 20-30 percent per year for an extended period of time.” In the case of EPAM, “We were a $70 million firm with a presence in five countries when we were preparing to go public 10 years ago. Today, we’re in 25 countries and generate $1.2 billion in annual revenue.”
This kind of accelerated growth is “dizzying,” he admitted, “not to mention incredibly stressful.” And it creates a lot of extra work. “It basically forces us, on a regular basis, to rethink and redefine how we do things.”
On the upside, there are many ways to not only “survive” this type of environment, but to excel at it, according to Mr. Conte, who then discussed what it takes to lead the finance team at a company that is growing like a weed.
First and foremost, advised Mr. Conte, be very, very flexible. “As a company grows in scale, routine goes out the window. You have to accept that, and get used to working without a set procedure in place.”
He said this calls for a comprehensive change in approach. “As an accountant, you’re controlled and orderly, but in reality, when everything around you is moving so fast, you may need to think about different directions in which you might go to get the same result.”
In addition, your decision-making skills need to become more clinical. “You have to learn to make decisions based on very little information, and without the transparency and normal financial reporting that most companies would have,” Mr. Conte said.
This is particularly tough for “us finance types,” he said with a laugh. “We prefer to make decisions with as much data as we can get our hands on,” yet Mr. Conte pointed out that many of his moves are “gut reactions.”
Finance executives at rapidly growing companies “need to get comfortable dealing with the repercussions” of those quick decisions. “You need to be prepared that you’re going to be wrong a high percentage of the time,” he cautioned, “because when things move too fast, things get broken.”
Fix It Fast
Knowing that many decisions will be a bit off the mark, Mr. Conte continued, CFOs need to acquire an ability to take risks — and clean up after themselves. “You’re making a decision, and you know there’s a good chance you’ll be wrong, but you need to go with your gut, and then scramble to fix whatever went wrong.”
When something does go awry, “Don’t focus too much on the wrong or the ‘why.’ Figure out how to fix it, and move on.”
Mr. Conte said the emphasis must always be on propelling the business forward. “You want to learn from the past, but you don’t want to harp on the past.” He went on, “You want to understand why you made the wrong decision, and discover what you were missing so that you don’t repeat history, but you need to look forward,” because, as he pointed out, “the company is going to keep moving, regardless, so you need to patch things up and look ahead.”
“To a certain extent, you need to be MacGyver,” Mr. Conte said, recalling the 1980s television series about a secret agent who solved complex problems with the use of everyday objects. “You have to be able to take a rubber band, some duct tape, and a few pencils and build a support structure. And then continue to reinforce that structure as the company gets bigger and bigger.”
Keeping It All Together
When it becomes clear that a wrong turn has been made, “It’s critical to remain calm, cool, rational, and focused. And very, very patient with those around you.
“Everyone looks to the CFO to set the tone,” noted Mr. Conte. “Others follow my lead and react the way I do.”
That resonated with Matt Pantera, Partner at CFGI, a finance and accounting consulting firm with offices in Boston, New York, and Philadelphia, and a CFO Studio Business Development Partner. “So much falls to the CFO in terms of managing the challenges that come with hyper-expansion from both organic and inorganic growth.” He went on: “In the case of inorganic growth from an acquisition, it makes sense that a company with little or no trial balance or financial information is preferable in this environment, since there is less structure and process to be amended during integration.”
Mr. Conte acknowledged that his biggest challenge is controlling the company’s global transactional liquidity. To which Elaine Cheong, Senior Vice President of Global Commercial Banking at Bank of America Merrill Lynch, and a CFO Studio Business Development Partner, pointed out: “The ability to manage global cash efficiently can substantially reduce working capital needs and funding costs. When you have global liquidity flows, centralizing FX [foreign exchange] management can further minimize foreign currency risk exposures.”
Mr. Conte said that there are pros and cons to working at a company that is growing at the speed of sound, but he wouldn’t trade it for anything—not even for MacGyver’s prized Swiss Army knife.