Interview with Louis Desiderio
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio interview between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and finance executive, Louis Desiderio.
Visit www.CFOstudio.com to read about this interview and to watch the entire video interview.
Leadership and Strategy Execution
Zezas: You are watching CFO Studio and I am your host Andrew Zezas. I am joined today by dear friend and one of the brightest finance executives I have ever had the pleasure of working with, Mr. Lou Desiderio who is recently CFO of Knovel Corporation. Mr. Desiderio has been a finance executive for over 25 years and has held CFO positions in software and technology services, media and commercial real estate for companies including Knovel Corporation, Visible World, Real Estate Strategies Corporation and Princeton Softech.
Lou recently led the sale of Knovel including coordinating negotiations, due diligence and transaction closing and integration to Reed Elsevier. Lou is here to today to talk to us about leadership and strategy execution and the CFO’s role.
Lou, it’s so nice to have you here on CFO studio.
Desiderio: Great to be here Andy.
Zezas: Lou from a perspective of leadership and strategy execution, share with me the qualities that are essential for effective leadership as a CFO.
Desiderio: That’s a great question Andy. I think there are a couple of things. First there is the assumption that the person has the technical skills and the ability, understands the financial side of things but I think it’s the soft skills and personal communication skills that really makes the difference in that process. The CFO has to have to ability to effectively communicate with all members of management that participate in that process in order to extract the data points and the information that’s going to be most critical to developing a good strategy for the business going forward which is obviously going to be the key to moving the business forward from an execution standpoint.
Zezas: Forward backward 360 degrees, up down, I would imagine that communication skill is essential between CFO and CEO as well.
Desiderio: It is absolutely. The CFO and the CEO really have to be in synch. Make sure that they both understand one another. The CFO job is to really understand where the CEO is from an overall vision and strategy perspective and be on board with that. I think it’s important that the CEO and the CFO have dialogue about that prior to stepping into any kind of strategy and planning process.
Zezas: Talk to me about as it relates to strategic planning, how has the CFO’s role evolved specifically with regard to strategic planning?
Desiderio: On the planning side, the CFO historically has been very much the steward of the numbers. Strategy will get developed and from that is a financial plan and it’s the CFO’s job to pull that together and then deliver that financial plan. That’s a byproduct of planning. In today’s environment, the CFO has to be very involved and really drive key elements of planning and strategy and the development of that strategy. That’s really where the dynamic has changed particularly in growing business and in today’s competitive market you really have to have a plan that is well thought out and the CFO really does drive the process of having a very good exchange of information and dialogue in that process and why it’s important that the communication is open at various levels within the organization.
Zezas: That ties back to your concept, your first comment about communications. In the planning process if you are looking for productive and results oriented process, what are the keys to ensure that, that will occur?
Desiderio: Couple of things. First you have to have a mechanism in place as you step into that process and I think it’s very critical that a company understand that the planning process can be segregated into various stages and you have to be very good about knowing what you are trying to accomplish in each of those stages and don’t move on to the next stage until you are comfortable that you satisfy the previous stage.
Zezas: It is a term I have used before about eating the elephant.
Desiderio: You have to eat the elephant one bite at a time and the planning process is a big process. A lot of companies step back from it and say, “Oh here we are again, the annual planning process.” It becomes this painful process that they go through. Companies today that do it well actually make it a very participative process among more people in the organization and that’s how you develop a good plan.
Zezas: That participative process or something needs to be led by the CFO.
Desiderio: In many cases.
Zezas: If it’s done well.
Desiderio: If it’s done well and in conjunction with the CEO because the CEO is driving the vision. The CEO is the face of the business.
Zezas: If the CEO is driving vision, how does the CFO drive execution?
Desiderio: In a couple of ways. First is being sure that everyone in the organization is very clear about what are the key performance indicators or KPIs as they are typically called that are going to assess how well we are doing against plan? What measurements are important for the business? The CFO has to drive the establishment of those KPIs so that everybody understands. These are the drivers of the business. This is how we measure how well we are doing and then you have to have periodic checkpoints against those KPIs. That gives you the ability to make adjustments if you need to make adjustments based on how your plan is progressing. The CFO really has to drive that process. The other piece is there are three key things, accountability, responsibility and authority.
Zezas: Accountability, responsibility and authority.
Desiderio: In any planning process, various managers within that process are going to be charged with those three things and if those three things are not aligned, if you have a manager who is accountable but has no authority they are going to have a very difficult time executing on their piece of the plan. That’s the key element and the CFO can help drive that and accountability is the key piece so everybody knows where the buck stops on various elements of that plan.
Zezas: You are an execution guy?
Zezas: Let’s say execution, what’s the most critical aspect of ensuring that a strategy get properly [inaudible 00:08:30].
Desiderio: It’s the discipline on a regular basis whether it’s monthly, bi-weekly, quarterly of assessing where you are against your plan not just from a financial perspective but also from an operating perspective. Are we doing the things that are going to be critical to deliver the numbers that we are trying to achieve? You really have to have a very tight and disciplined reporting process tied to it. It is very easy for a financial organization to fall off the timing of that reporting. Managers have a very difficult time if they do not have timely information. It is difficult to make forward looking decisions when you have stale or old information but that’s critical.
Zezas: Talk to me about tools and mechanisms. Which tools and mechanisms are critical to managing not to strategy but execution?
Desiderio: From a tool’s perspective, it’s really driven by technology. In today’s environment, it’s important that the company and the CFO in particular embrace technology in that process to make it more efficient and to establish a cohesive process so that the planning process is integrated well into both the financial and the operating systems that the company uses to run the business day-to-day and that’s really the key driver and the CFO has to drive that technology element of that process.
Zezas: Does that cover mechanism and tool?
Desiderio: It covers primarily tools and from a mechanism standpoint it’s sticking to using those tools and when you make decisions and use certain tools to help you guide your business going forward, you have to stay the course and be committed to that but you also have to be able to quickly assess whether you need to make changes. You do that with good information and if you don’t have these types of integrated systems leveraging latest technology, you may make a bad decision which is really because of bad information. May not have been a bad decision based on the information you had but if it was the wrong information you have made a bad decision with bad information.
Zezas: Agreed. We talked earlier about the connectivity or the connection between CFO and CEO and the perception is that the CEO is really responsible for a company’s strategy. I would like you to comment on that but then share with me your view of the difference between the CEO’s role and the CFO’s role in executing strategy.
Desiderio: The CEO and a CFO again as we talked about earlier, the CEO drives overall vision and strategy. It’s the CFO’s job to question, challenge, drive, question set, a dialogue, information gathering that will enable that CEO to be in the best position to make decisions. As a CFO, I have to bring all of the right data points to the tablet for a CFO to consider. If that’s not done,
Zezas: The CEO .
Desiderio: I am sorry, the CEO to consider. Thank you. If that’s not done, then mistakes will be made and bad decisions will be made. There is a very clear delineation in role there. From an overall perspective though the CFO once that plan is set has to be the one charged with an execution and driving that whether it’s as simple as letting the CEO know we are doing well in these areas and not here so that the CEO pays attention to the areas that they shouldn’t and be working with members of that bad area of the company to move it forward but I think the key is bringing that to the table and the willingness to bring that to the table in partnership with the CEO.
Zezas: Lou, we are out of time. I have time for one more question. I already think I know the answer but given a choice if you are to work at a company that was focused on strategy or execution where would you work?
Desiderio: Great question, I think this is debated a lot. My preference would be execution. Execution wins in the market place. You have to have a good plan. It does not have to be a perfect plan or the best plan. Execution is what wins in the market place.
Zezas: If you have a great plan and poor execution, you fail. If you have an okay plan and stellar execution, you may win.
Desiderio: You may win, absolutely and you see that particularly in high growth company’s technology businesses, venture private equity backed businesses, there is always a mantra out there of you know who is the first one acquired in that space and then there is questions around why were they the first one? Was it their strategy or was it their execution? At the end of the day, execution is what gets you to the point where you can actually have that conversation and have those discussions with the potential acquirer in that situation.
Zezas: It’s all about execution?
Desiderio: I believe so.
Zezas: Lou, this has been great. It’s been so nice to have you here. It’s been a long time coming because I have been wanting to interview you on CFO studio. I thank you for giving us your time. Hope you will come back and see us again.
Desiderio: Andy, I would love to and thank you. I really enjoyed it.
Zezas: This is Andrew Zezas, your host at CFO Studio with Lou Desiderio saying thank you very much for watching. We will see you again.