High-performance

means you

constantly

do things better

This week we get Up-Close with Julian Lange, Chief Financial Officer at Upvest where we discuss the crucial skill of financial planning and analysis, and how Julian identifies this skillset when building out high-performing teams. Additionally, Julian discusses his approach to navigating tumultuous economic conditions, and how routinely getting into the nitty gritty of the balance sheet can alleviate tensions during tougher times.

What are the top three attributes of a good finance leader?

The first one is really team building. If you cannot build a team, then I think all hope is lost and I think in the next question we will get into the specifics of why I believe this attribute to be so critical.

Secondly, where I see a real difference between a good and great CFO is their ability to combine a certain technical depth and breadth. On the flip side, I've encountered average to poor CFOs who sometimes distance themselves from the details, thinking they can stay above the fray. This is especially the case on the topic of FP&A and I am lucky that my functional history at GE really prepared me well to be one of these more modern CFOs that really does have business impact and does not just report the numbers. It’s hard to take too many short cuts so I think you need some depth in certain topics and also have a certain range to be successful. When I talk to more junior finance professionals, I always advise them to take different roles to build a wide-ranging skillset.

The third key aspect is what I was just alluding to: connecting the dots between different functions when making business decisions. In my opinion, this is one of the primary responsibilities of a CFO, or what I referred to earlier as FP&A business partnering experience. There are certain business decisions that can only be effectively moderated by finance. If you lack experience in this area or struggle to bring people together and understand different perspectives quickly, it can hinder your ability to be an exceptional finance leader. So, those are the three crucial elements, in my view.

“It’s hard to take too many short cuts so I think you need some depth in certain topics and also have a certain range to be successful”

Expanding on the importance of building a team, tell us about some of your experiences building teams and what your priorities were.

I always consider the initial months after joining, often stretching from three to six, as immensely crucial for assembling the right team. In my first three months at Upvest, we brought in two new leads. While we had a strong foundation in accounting reporting, we needed to bolster our capabilities in FP&A and analytics. Consequently, a significant portion of my time was dedicated to interviews and recruitment - a testament to its pivotal importance.

Equally important is comprehending the existing team dynamics and swiftly addressing any issues. In my prior role at Aiven, I initially led a team of seven. Over the following six to nine months, three members left, while the remaining four stayed and in most cases took on additional responsibilities. This underscores the urgency of discerning who fits where and identifying potential leaders.

In the fast-paced environment of Aiven, where we grew the team to 40 members in 18 months, rapid identification of leadership potential was paramount. Therefore, I believe in not delaying decisions. For instance, at Upvest, we streamlined management layers and restructured certain roles to rectify some team internal issues. This proactive approach, guided by an outsider's perspective who has a fresh set of eyes, can be invaluable.

Regarding building teams, I prefer a forward-thinking approach. Given my background in FP&A and business partnering, I am fine with developing junior/mid-level talent in these areas. In contrast, in accounting and reporting, I seek seasoned professionals. Already during my interview process, I engaged in detailed discussions with the incumbent VP at Upvest. This step, while ensuring continuity, allows me to leverage their expertise in a domain not directly within my functional background.

Recognizing one's strengths, weaknesses, and passions is vital. Personally, I gravitate towards the strategic aspects of finance, and only delve into the operational/technical side when necessary. This discernment shapes my hiring choices and development strategies.

To me, high-performance means you constantly do things better. To do this, you have to establish a routine. E.g. at Aiven, we referred to them as 'after-action reviews' and here at Upvest the team prefers to call them 'recaps'. Regardless, I believe in the importance of this routine. After each month-end close e.g. we convene to discuss what went well and what didn't. this may sound overbearing, but I never want to close two months in the exact same way as there is always something we can improve. So, the aim is to avoid repeating the exact same processes in consecutive months. There's always room for enhancement, be it in planning cycles, systems and tools, or various projects. It's about maintaining the mindset that we can never stand still and we should always think of some way to improve.

What is also closely aligned to this is to have a feedback culture where we can tell each other if something didn’t go well. And this is self-enforcing: the more we practice this, the more natural and effective it becomes. This ensures that people aren't hesitant to voice when something doesn't go as planned. It's about making these discussions a routine part of our work culture.

Another aspect of cultivating a high-performance culture, particularly in financial operations, is my strong advocacy for checklists. If someone thinks they are too cool for checklists, then we are probably going to have a problem! Checklists are employed by doctors, pilots, and we should use them in finance too. For instance, when you itemize the tasks involved in a standard month-end close, it usually totals to around 100 to 150 items. You’re going to be hard pressed to find a group of people that will remember all of them without writing them down. Hence, a well-organized checklist is indispensable for maintaining high performance. I may be jumping ahead to later questions here, but I love the 'Checklist Manifesto', written by a heart surgeon who explains how they (and other expert professions) do their jobs. They take you through step by step, things like “make sure you wash your hands”, “make sure you know what part of the heart you are operating on” and all these other steps. It elucidates the importance of checklists in high-stakes environments. While our work may not be life-or-death, the principle still holds true. In terms of feedback and communication, 'Radical Candor' by Kim Scott is a standout. It addresses the tendency to lean towards 'ruinous empathy', avoiding necessary critique for fear of hurting someone’s feelings. This book provides valuable insights into fostering open and honest communication within a team. These are two of my perennial favourites for building a high-performance culture.

Following on from that, what is your approach to building a high-performance culture?

How has the current economic context impacted how you lead the business and finance, and how you plan for the future?

It's a mixed answer for me. On one side, if you're starting to delve into new areas that weren't part of your routine before—like, let's say, diving deeper into costs or making sales your focal point, or engaging more with commercial functions to explore pricing strategies—if you only do this in response to external pressures, it's a clear sign of mediocrity. So, as I mentioned in my initial comment, you need depth. There are certain areas you should consistently delve into, regardless of the circumstances. For instance, conducting monthly balance sheet reviews. This ensures you're on top of things. For instance, if your customer receivables are consistently overdue, i.e. you're not receiving that cash, you'll know. This, to me, is the foundation. It's one of the practices I recently introduced here at Upvest, and we had it in place at Aiven as well. It involves delving into the balance sheets in detail, truly comprehending what's transpiring, not just when it's forced upon you.

Simultaneously, in planning, I usually advocate for keeping the workload relatively light. Perhaps contemplate scenarios a bit more, and look further ahead. The business environment might compel you to do so. It's possible you might find yourself in a situation where fundraising isn't viable in the next 12 months. Back when I first entered the startup scene eight years ago, the standard advice was to plan for the upcoming year only, perhaps extending to 15 months. Nowadays, you might want to extend your gaze further and allocate more time to second-year planning, which may not have seemed as crucial a few years ago. There's maybe a tad more emphasis on scenarios, a bit more focus on the mid to longer term, owing to the practical necessity of potentially stretching your fundraising further than before.

But beyond that, I'd find it hard to convey something radically different to you. Take my experience at Marley Spoon, for instance. It was an operations-intensive venture with contribution margins ranging from 30% to 40%, not a software-based enterprise. We maintained routines for cost analysis and tracking, come rain or shine. It didn't feel markedly different whether our margins were up or down. The same queries and scrutiny persisted. That's the standard to aim for.

“If you lack experience in this area or struggle to bring people together and understand different perspectives quickly, it can hinder your ability to be an exceptional finance leader.”

Given that you have seen different scenarios, the ups and down and times of contractions and expansions, what would be your advice to a finance leader who is in these tough times for the first time, and how would you suggest they navigate through it?

Perhaps the foremost piece of advice would be to engage with your board. However, it's crucial not to blindly adhere to everything you read in the news or hear from your board. There might be instances where you're leaning too heavily towards short-term solutions or reacting impulsively to immediate challenges. So, one key consideration would be to remain aligned with what's truly best for the business, particularly in the long run. This can be more challenging when there's pressure to initiate fundraising earlier, and your board, echoing this sentiment, urges you to draft contingency plans, envision layoffs, and so forth. While these are valid concerns, they can divert significant attention and focus from actions that, deep down, you may sense are the right course. Thus, it's imperative to tread carefully amidst the plethora of well-meaning advice and the enthusiastic directives from venture capitalists urging immediate action. It's worth noting that while their counsel often holds merit, it must be balanced with your intimate understanding of your business, which, quite frankly, normally surpasses theirs.

“it's imperative to tread carefully amidst the plethora of well-meaning advice and the enthusiastic directives from venture capitalists urging immediate action”

From your perspective, how has the role of the CFO changed and evolved over the years?

I've delved into what I described to you as this modern perspective on business impact, where you get involved in various strategic decisions. This mirrors how I learned finance at GE early in my career, and it seems that this approach hasn't drastically changed. Yet, I do keep up with the news and engage in discussions with others, and from what I gather, this is considered a contemporary approach to being a CFO. So, I'm perpetually grateful to GE for instilling this in me, setting a modern foundation from the outset of my career.

Lately, I'm particularly enthused by the progression of our systems, which are adopting a much more modernized look. This isn't so much a shift in the CFO's role, but rather the availability of cutting-edge tools for all our operational needs. Whether it's payables, expenses, or planning systems, Finance professionals and other employees using Finance systems now have user-friendly tools at their disposal, eliminating the sentiment of bureaucratic form-filling for finance. This, to me, marks a significant departure from the days when the CFO's stance might have been, 'We have an ERP, I'll make do with whatever accounting module is in there, and get by with Excel for the rest.' It's an exciting shift, and the ease of implementation and training on these tools is a notable improvement.

In essence, this is an aspect of the role that I find particularly intriguing and worth investing time in to further explore. Similarly, the new AI tools that recently emerged on the scene have quite some potential to make Finance people more productive and better at what they need to do. We’re currently experimenting with this at Upvest, but there is much more impact to come, I believe.

Additionally, when it comes to the role of the CFO, I believe it's crucial to consider the context of the CEO and founder. Their strengths and contributions play a significant role. For instance, at Marley Spoon, I joined a setup where fundraising wasn't a major focus for me, as the founder excelled in this area and was genuinely passionate about it. On the other hand, at Aiven, it was a different story, and I found myself involved in fundraising to a much greater extent.

So, I think the CFO's role can be quite varied and you should be adaptable, depending on the broader environment and the composition of the executive team. It's not strictly bound by a fixed set of responsibilities, but rather influenced by the prevailing circumstances and individual situations.

“Finance professionals and other employees using Finance systems now have user-friendly tools at their disposal, eliminating the sentiment of bureaucratic form-filling for finance”

What would be your advice for first time CFOs or what would you say to your younger self back in the day?

Yeah, I mean, as I mentioned earlier, it's important not to cut corners in your career progression. I know that the role of a CFO, or a Head of Finance, is highly sought after. I've been on the other side of the table, interviewing candidates for the angel investments I make. Sometimes, I find myself thinking, 'You're perhaps a role too early, at least.' It's beneficial to have one more stint, perhaps in FP&A or another relevant area. While FP&A is often the route, there are other options too.

Even though the prospect of being offered a Head of Finance position with a substantial salary and responsibility is tempting, especially with five years of experience, it's crucial to weigh your options. Personally, I'm glad I held out. I actually had my first CFO role after eight years at GE, but I was able to gain a pretty diverse experience and learning from great Finance professionals until then. And – don’t forget – a business unit CFO role at a large corporate is much more limited than when you’re a standalone company like a startup. E.g. I didn’t have to do fundraising back then, deal with banks, pick systems, etc.

While I continued learning being a CFO later on, I believe it's vital not to rush through crucial steps. This is especially true for roles like FP&A and business partnering. Without a solid foundation in these areas, becoming a modern CFO becomes quite challenging. This advice applies particularly if you're transitioning from an accounting and reporting background. It's important not to skip any essential development steps.

So, my main piece of advice would be not to jump into it too soon. The job market may entice you with offers, but it's crucial to be prudent in your decision-making.

I guess I'm unintentionally expanding on the previous question, but if I were to offer advice to first-time CFOs, I'd say cherish the hard times. Some of the most impactful lessons and the experiences that shaped me into the person and Finance professional I am today were during tough times. A few instances that stand out were during my time at GE. However, if I were to pick one, it would probably be the Marley Spoon IPO.

The IPO process was quite intense. We managed to complete it in just six months, with the company being all but four years old! And during that time, the operational side of the business faced significant challenges. It was a true test of our capabilities. We had to hold everything together with minimal additional resources, mostly relying on advisors. What made it even more complex was the fact that we went public in Australia, with the majority of the team in Germany and the primary business operations in the US. I found myself juggling between three time zones constantly. It was perhaps one of the closest moments I've come to experiencing burnout in my career.

Despite the immense stress, achieving this milestone was incredibly satisfying. It highlighted the value of meticulous preparation done years in advance. We had already done all the groundwork, from implementing international accounting standards to getting fully audited from year two onwards. While it was an arduous process, it was immensely rewarding to see it all come together on the day we rang the bell in Sydney. This experience stands out as a clear highlight in my career, encompassing everything from strategic planning to enduring the stress and, ultimately, the collaborative effort of the entire team. So, yes, this would undoubtedly be the standout moment.