Eric Lougher is a versatile CFO who comes from an investor background. He has served as Chief Financial Officer for both VC and PE backed companies that provides Eric a balanced and insightful view of today’s CFO.
Eric talks to two key points:
- The art of balance various department budgetary needs and fiscal health of the company and achieving strategic goals
- Board relations and the role of the CFO during and in between the quarterly meetings.
Eric views balance needs of sales, marketing, HR, IT and others with the overall vision and trend of his company. Sometimes that leads to an awkward conversation with a department head. His relationship and management style is one of trust, collaboration and openness.
When it comes to Board relationships, Eric’s sees teamwork as the key communication, strategy alignment as the cornerstone of trust with the Board.
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Episode Transcription
Michael Mitchel:
Yes, I want to go do all these things. At the same time, we don’t have unlimited capital, nor could we even really execute on that. How do we really think through what this means for the business? And there is an art to that.
Eric Lougher:
All right, we want to kick it.
Michael Mitchel:
Today’s CFO, Eric Lougher joins us. [00:00:30] Eric is the CFO for a company called Task right here in Denver, Colorado. Also, he’s got a combination title, COO and CFO. He’s been the CFO going back to 2016, so he’s got a real diversity of experience. I’m really looking forward to the conversation. Welcome to Conversation, Eric.
Eric Lougher:
Thank you for having me.
Michael Mitchel:
In the course of the podcast we’re going to hit on a couple topics such as his view and approach to the CFO role such as steward of capital, translator of different departments, but also the art of the board/CFO [00:01:00] relationship. What’s your view and approach on the role of the CFO?
Eric Lougher:
So I think for me, the CFO role has been defined in a way that fits my own skill set and personality. I think there is flexibility in that definition. The traditional sense of it was you went through public accounting and built up to being a controller. And then really from an accounting lens, [00:01:30] taking that CFO steward of the financials and-
Michael Mitchel:
Right there-
Eric Lougher:
… you have a visual of someone right there.
Michael Mitchel:
Right there I have visions of IBM punch cards, but go ahead, sorry.
Eric Lougher:
You trust them, they’re the bean counters, right?
Michael Mitchel:
Yeah, yeah-
Eric Lougher:
And I think that-
Michael Mitchel:
It’s polyestrous-
Eric Lougher:
… that definition never really fit me and I think the more I’ve, from time to time, seen the verbiage out there of a modern CFO or a CFO that has to be much more [00:02:00] strategic and agile, and for me the CFO has been more of a business partner for the CEO where there is a really close relationship. There is much more that you’re engaged in helping the CEO navigate than just purely the numbers side of it.
Whether that’s the operations side, the people side, working and collaborating along with the board, it’s a unique role within the C-Suite to have [00:02:30] that, where you’re peers with all the other C-Suites. But you also do have a unique relationship, I think, typically with that CEO and with the board than a CMO or someone else may not quite have that same aspect to their role.
Michael Mitchel:
We’ve talked before about steward or capital. Can you expand on that, what do you mean by that, what your thoughts are on that?
Eric Lougher:
I think it partially comes down to trust and [00:03:00] when you’re thinking about the relationship you have and the responsibility that you have with the company and with the board, and with your peers and everyone, they trust you to make good decisions with financials. And so there is always those checks and balances and there is board meetings and financial reports and things that you’re going to do. But ultimately, if the board doesn’t trust you, then that really changes the whole dynamic.
And so, building [00:03:30] up that relationship, building the trust and demonstrating that so that when things aren’t going as well, that you’re proactive and you’re also navigating those things in advance and communicating, those are all key aspects to building trust. And even before things go wrong you’re thinking ahead in terms of the risk factors. And so I think that really does take a holistic approach to how you communicate, how you manage the business and how you think about [00:04:00] what it means to be that steward of capital.
Michael Mitchel:
Because you used the word holistic, so before you even get to the board, you’re working internally with the company, sales, R&D, marketing, all of the different departments of the company. So from your lens, what does that look like?
Eric Lougher:
Yeah, so if you think about these different departments, they each have their own critical [00:04:30] role within the company. And so there is somewhat of a common thread though of, in most cases, they’re spending money to generate a return. Whether that’s developing new features for a product that maybe you can sell to an adjacent market or to new customers, or whether that’s marketing, trying to figure out how to bring in more customers. And so I think partially being that translator for how they can think about [00:05:00] investments in their own department and what that means in terms of should we spend more money on marketing or should we invest in product? And I think partially, you want to have that ability to think without constraints, but also come back and be like, “Well, that’s maybe not the best use of how we should be spending money.”
Michael Mitchel:
So someone once said, I can’t remember who it was, that the COO [00:05:30] is the person that makes the trains run on time. If that’s true, then the CFO is the roundhouse for the trains. You could be in sales and say, “We want to do a new product launch, we want to break in a new market. Well that all involves capital and they can’t just go rogue, it’s a team planning, right?
Eric Lougher:
Yeah, absolutely. And I’ve always led that budget process. And I think that is [00:06:00] where it becomes very obvious what your plan is for the next year, how you’re thinking about incremental investments or head count. And I’ve worked with teammates that say, “Hey, I need these 10 or 20 people,” and we bring it back down to three, which is a tough conversation. And so, the times when I’ve been most successful in having that conversation is when we really try to look through it through the numbers lens.
And so I think that becomes this way of taking some of [00:06:30] the emotion out of it, of “Yes, I want to go do all these things.” At the same time, we don’t have unlimited capital, nor could we really even execute on that, how do we really think through what this means for this business? And there is an art to that. I have a lot of respect for marketing, for example, because there is a whole aspect of performance marketing, which I think is really important.
And I’m a big believer in really measuring that return. It’s not [00:07:00] easy to measure and it constantly changes in terms of digital attribution and how you think about which levers to spend, and the effect that that’s having where you even have to apply a statistical aspect to measurement. But also at the same time, you’re going to look at it in a way that, “Okay, we can’t measure everything perfectly, is this having an impact or not? Should we do more of this or less of this, or how do we change things if it’s not working, and how do we [00:07:30] know?”
And those are difficult things to do, and so translating that from, “Hey, I have great ideas in how we build the brand and all these sort of things into something the board will buy off on,” I think, is a challenge.
Michael Mitchel:
That’s got to be kind of cool, right?
Eric Lougher:
It is. It’s a unique vantage point that I’ve always enjoyed. And I think that’s one of the reasons that when you use a term like, quote, unquote, modern CFO, is because you have that vantage point, especially at a smaller [00:08:00] company, you have an ability to connect the dots for people. Whether that is the board members or investors, or the rest of the company, you can help create that cohesion. Which I think comes, both, from an operating role as a COO, but also from a CFO, in particular, through numbers in some way. And that’s generally when I’ve had more success across those departments, is to be able to tie that back in some way to numbers that make [00:08:30] sense to people. And it helps them detach from some of the emotional aspects of running their department into like, “Oh, okay, this is maybe how this rolls up together.”
And I think the learnings I’ve had from working with departments in that is, you can’t be overbearing in that relationship. This is about empowering them to be successful and also starting with how they view the world, not necessarily how you view the world, and then working toward how you help them tell that story. [00:09:00] Not necessarily how I want to tell it, but if they’re thinking through it a certain way, how can we maybe bring that to light and maybe take that extra step to help connect the dots a little bit more? And also, how does that cut tie to the company strategy?
So I’ve also had a role in shaping it and helping to own that strategy in connection with the CEO. And, as someone, if you’re really deep into the strategy you can help others both, think [00:09:30] strategically and make sure that what you’re doing and where you’re investing aligns to the strategy. And so I think taking that strategic lens across these different departments, taking that financial lens across these different departments allows you to point out more of why you’re doing what you’re doing. And also if we shouldn’t be doing something, we can prioritize something else that maybe has a little bit lower risk profile and help provide that direction so that you can empower those departments to be successful.
Michael Mitchel:
[00:10:00] I would believe that every time you interact with these departments with new initiatives, projects, you’re also learning something. And so, to be, as we say, the modern CFO, it’s not just a top/down, it’s going to be more collaborative, back and forth.
Eric Lougher:
Yeah, absolutely. I’ve learned so much from them. And to the point when, for example, there was a time in my past where I wasn’t seeing as eye to eye with one of the departments. And that did create friction. [00:10:30] And I think that friction was good to some extent. Because it also helped flesh out, “Well, hey, let me go research this myself so that I can become educated enough that I can maybe make sure that what I’m saying isn’t in a vacuum.”
And so I think I’ve also taken the approach of, “Yes, you’re looking across these departments, you’re working with everyone.” But also, I’ve spent time externally with [00:11:00] other types of C-Suite leaders and understanding what they’re doing, what’s working well, what they’ve learned. So that you can also bring that back to these departments and these other leaders within the organization and help either poke holes, or challenge certain aspects in a respectful way, or help bring new ideas to the table, too.
Michael Mitchel:
I interviewed a CFO on another search. I think we were talking about modeling. And he’s not in the oil and gas sector, the energy sector at all. [00:11:30] But he talked about how he did a model for this energy company and that he had to come up with a model. They normally do 14 wells per quarter, they develop 14 wells per quarter.
And so he had to do everything related to that industry, the cost of production, the prevailing cost for oil and projected changes and all of that. And he had no energy background so ever. I was like, “How do you even start something like that?” The research you have to put in before you can start [00:12:00] doing the modeling, for example, I find pretty cool.
Eric Lougher:
Yeah, I agree. I’ve always benefited from very early on when I would work with the company is building that initial financial model, and almost always starting from scratch in some way because it forces you to think through all the inputs and the variables that are those drivers that even if we have to boil things down to assumptions that [00:12:30] are going to be wrong, of course, it forces you to learn and think through how you would organize your own thoughts around what the drivers are for this business.
Later on then, when you’ve been using the model and it has 100 tabs on it at this point or whatever, it’s taken on a life of its own, you still come back to those initial drivers. And when you’re explaining later, variances, and why we hit or exceeded or missed a number, [00:13:00] you come back to those key drivers and be able to point to, “Well yeah, this is the one that really helped us move the needle, or helped lead to greater margin expansion because it’s a higher margin product and our mix shifted, and those kind of things.
Michael Mitchel:
When we talk about credibility with a board, for me, two sets of numbers come to mind, the hard numbers, sales is reporting up what they brought in, development is reporting what they spent on [00:13:30] X, HR on talent and so forth. So those numbers don’t lie, assuming the numbers coming in, right? Garbage in-
Eric Lougher:
Right-
Michael Mitchel:
… garbage out-
Eric Lougher:
Sure. Sure.
Michael Mitchel:
But then you got the modeling aspect which could be more strategic, forward thinking, for example. And then you go to the board and say, “We want to invest X amount of capital for this, and here’s a model.” And now you’re putting credibility on based on these modeling assumptions. [00:14:00] How does that make you feel? What are your thoughts on that?
Eric Lougher:
I think you earn credibility with the board in a variety of ways, over time, in each interaction being able to speak intelligently about the business and how you’re thinking about it. I’ve always taken an approach, too, where when I’m in those board meetings and they’re asking questions about the financials that you do know those numbers very well. And so if they ask about something that’s not on the page and you can recite it, I think [00:14:30] it’s a subtle thing that does buy you credibility.
When they see the numbers they start to believe that you have really thought through them, knowing that all your assumptions for the future look and stuff are going to be wrong. But also, I think if you can also get better at forecasting to where you’re not continuously missing numbers, but you’re very close to the numbers that you’re telling them, that also is an art in terms of expectation setting and aligning then, as an internal team, how we then go make sure that we deliver [00:15:00] on the promises and the things that we said we were going to go do.
Michael Mitchel:
Because we’ve talked about this a little bit before, during this interview or prior, but there is an art to the board relationship as a CFO. Yes, the CEO is the point. And you always want to make sure that the two top leaders … Well, I’m not trying to diss the COO, the CFO and the CEO are on point, on message with the board. But the CEO, I think, can [00:15:30] tend to be a little more optimistic on strategy and direction at a company. And so the board will look to the CFO saying, “Okay, that’s great hearing from her.”
Eric Lougher:
Right.
Michael Mitchel:
“But, come on, Eric, what’s-
Eric Lougher:
Yeah-
Michael Mitchel:
… the real story-
Eric Lougher:
… “Eric, what do you think?” Yeah. Yeah. No, and I think, you learn when you go through the traditional finance path that, “Okay, here is how we calculate a net present value.” And I think those things and those tools, to be able to say, “Hey, here’s the five different investments we can make and here is the one with the highest [00:16:00] return,” never really works in practice of painting that direction for the board. I think it’s important to come with that recommendation, “Hey, this is what we are going to do unless you think that there is something that we’re missing. What have you seen from your past? What are the pitfalls that you’ve seen, maybe, other companies make in doing this.” But not like, “Hey, here’s a bunch of options, and which one do you think we should take?”
So I think coming with where you’ve already thought through and have [00:16:30] conviction in what you’re doing is important. Sometimes that comes from information gathering earlier, via one-on-one conversations with board members. And so by the time you actually get to the board meeting you’re already aligned on that direction.
Michael Mitchel:
Well there’s not supposed to be any surprises at board meetings.
Eric Lougher:
Right, exactly. And so, I think usually the CEO is having those one-on-one calls. But the CEO also needs to make sure that they have the information behind it so that they’re prepared and ready for those questions on a one-on-one call, too. [00:17:00] So I think there is a lot that happens just outside the board meeting, too, your entire team having that consistency of messaging and how we are approaching the future investments and what we’re doing.
Michael Mitchel:
I got to mention, and this is a concept discussion, not a real-world part. But I would imagine it would put a CFO in a spot, especially if they don’t want to be the CEO of that company, if the board starts [00:17:30] calling the CFO directly behind the CO’s back. This stuff happens, right? And this has got to be a really tough position for the CFO … Or, look what happened to Disney, for the CFO to finally say, “I got to pop a flyer to the board.” That’s just got to be not an easy decision.
Eric Lougher:
Yeah, I certainly haven’t dealt with that-
Michael Mitchel:
Good, good, yep, yep-
Eric Lougher:
… firsthand. There are times when I would have calls with board [00:18:00] members, but they would be on topics that would be relevant as-
Michael Mitchel:
Yeah-
Eric Lougher:
… as a CFO. And there are times when I would reach out to board members on a specific topic because I wanted to see how they were thinking about something or if they had a resource for this. And the board is also great to tap into for their network, too, and like, “Okay, have you come across this,” or “We’re looking for this,” and be able to use them as a resource.
In terms of the board, the board does have to navigate. If the company is not as performing, they have the CEO to hold [00:18:30] accountable. And I’ve never experienced that where there is some toxic relationship or anything like that. But I think the CFO and the CEO are conjoined in a lot of ways. And so, because that CFO is that business partner for the CEO, I think there is definitely that trust that they’re working together and collaborating. And if that’s broken then the whole thing falls apart.
Michael Mitchel:
Between board meetings, how much collaboration with [00:19:00] any of the executive members would you say there is with the board? Is it rare, infrequent or-
Eric Lougher:
Yeah-
Michael Mitchel:
… common?
Eric Lougher:
In my experience, the board interacts with other members of the C-Suite. Maybe around the time of the board meeting there is a dinner that maybe certain members or the leadership team will join. There is also, during the board meeting, maybe there is one or two people who join for a certain part of it. [00:19:30] As a CFO I’ve typically joined for most or all of the board meetings. Which I think feels like, “Okay, maybe that’s different from these other departments.” But I think it also makes sense when you think about that role and that collaboration that happens with that CEO and being able to take this on together.
Michael Mitchel:
If you were to meet a newly minted or about to be newly minted CXO, what advice would you give to [00:20:00] him or her about board relations?
Eric Lougher:
I think the board is going to see through answers to questions that dodge the questions in some way, that may sound great. But if they’re asking for a number just give them the number. If they’re asking for something specific, you can tell a great story about it but they will know. They will see through that. And so I think that really understanding their metrics for success and how they view business, [00:20:30] and make sure you can translate from what you’re doing into that, will help you be successful with those conversations.
Michael Mitchel:
Is there anything else you want to add about boards’ relations, executive committee. I think we’ve hit that.
Eric Lougher:
Yeah, no, I think in my experience the board maybe has this perception of being this very hard-driving thing. And they’ve usually been very friendly and great and they know when to push. And a lot of times they’ll do it even just with questions, asking [00:21:00] you these questions that eventually make you realize like, “Oh, maybe we should be thinking through this a little bit differently.”
And so I’ve had a great experience with really high-quality board members that are really approachable and you can learn a lot from. And so I’ve definitely benefited by having the luxury of that vantage point and being exposed to them.
Michael Mitchel:
So, I ask this question of everybody. This is the last question of the interview. What’s the worse job you ever had, [00:21:30] and what was the positive influence from it that you still use today?
Eric Lougher:
So, the worse job I’ve ever had in which I also had a positive influence, would probably be, I worked for a season because it was a seasonal shift, when I was probably 16, for a company called Mervyn’s California, which was a department store with clothes.
Michael Mitchel:
Damn, you’re naming the company.
Eric Lougher:
Yeah.
Michael Mitchel:
You’re going there, okay, go ahead.
Eric Lougher:
No, okay.
Michael Mitchel:
Yeah, no, no, you’re fine. Go, roll, roll.
Eric Lougher:
Yeah, and so I worked [00:22:00] in the men’s department and I think it only lasted three months and they didn’t hire me back, which I was okay with. But I did learn to fold the shirts pretty quickly. And so, even though I mostly hang shirts now, I can still fold shirts pretty quick and I think back to that. That was one of the-
Michael Mitchel:
Oh, man, see I joined the Navy for that. I wish I’d thought of that.
Eric Lougher:
Yeah, you didn’t have to go to the Navy for that.
Michael Mitchel:
Yeah, exactly.
Eric Lougher:
Just go [00:22:30] to Mervyn’s.
Michael Mitchel:
Well, Eric, thanks for joining the podcast. I’ve really enjoyed the conversation, I hope you have.
Eric Lougher:
Absolutely, it’s been fun.
Michael Mitchel:
Yeah, it’s been a blast. And I made us a latte and I got a compliment from a coffee farmer, so I’m bragging to my wife about that tonight. So anyway, thanks for your time. Thanks for joining CXO Conversations. And to our listeners, thanks for listening. Please hit us up with a five-star review on Apple and subscribe to all your favorite platforms and we’ll see you next time. Thanks a lot, Eric.
Eric Lougher:
[00:23:00] All right, thank you, Michael.
