The changing role of the CFO
Michael Dell’s decision to take the company he founded private in a $25-billion leveraged buy-out transformed the outlook for the computer and digital services group. It also had a marked effect on the career of 55-year-old accountant Tom Sweet, who has spent 18 years at Dell in roles such as chief auditor and chief accounting officer, and even head of sales.
After the buy-out was complete in October 2013, there were a number of changes at the top and Tom unexpectedly found himself appointed chief financial officer (CFO) 15 months ago.
“I was surprised because I did not expect our former CFO Brian Gladden to decide to leave because he wanted to do something else,” Tom says.
“On my first day I thought, ‘Oh boy, this is going to be interesting’, but I was looking forward to the challenge.”
The scale of the personal challenge, and indeed the ever-expanding role of CFO in many multinational corporations, can be seen in the broad range of his responsibilities.
Apart from obvious things, such as tax and treasury, Tom is ultimately responsible for industrial relations in the computer technology company which has more than 100,000 staff worldwide.
“I have the corporate development team under me that focuses on and helps drive our mergers and acquisitions activity and our joint ventures fund,” he says. “We also have a strategic planning team under me, a small team of professionals, who help us think through the longer-term vision of the company, working with Michael and the business leaders.”
There are a lot of grey areas in his responsibilities, which adds to the interest, he believes.
But the biggest challenge of all, both in strategy and culture, has come from the very manoeuvre that led indirectly to Tom getting his big opportunity – the changes flowing from the move to private ownership after 24 years as a public corporation.
“We’ve clearly had to pivot from a large US multinational public company to a large US multinational private company, with different rhythms, metrics and key performance indicators, no longer so strongly geared to a 90-day public company external reporting cycle,” the Dell CFO explains.
It’s also about trying to get everyone in the company to think longer term, invest longer term and become more entrepreneurial, which is of course the company’s history. Dell was founded in Michael Dell’s university dorm and the buy-out, with the help of Silver Lake private equity and a consortium of lenders, gives him greater freedom because he again owns 75 per cent of the enterprise.
Apart from longer time frames and concentrating on maximising cash flow, Tom explains that what has changed is “the pace and depth” of investment decisions.
He concedes that in the public-ownership past, short-term pricing initiatives would sometimes be used to get a transaction into a particular quarter. You might even have to hold back on certain investments, depending on how the quarter was going.
Tom is also involved with senior colleagues in trying to empower people throughout the organisation to contribute new ideas through “creative avenues”.
“We want to be thoughtful, but we do want to take some risks and make some bets on technology trends, and we know that some are not going to work. Bring your ideas forward and we will reward you and fund you,” is the mantra.
A new cyber-security service, for example, is showing strong growth and the team have been told they will be funded regardless, for now, of operating income.
“What I told them is generate $1 of positive cash flow,” says Tom, who likes sport, particularly skiing, golf and scuba – his most recent dive was off St Thomas in the Virgin Islands.
Obviously he has to think a lot about capital allocation and finding the appropriate balance between paying down debt from the buy-out, currently $14 billion – $3 billion down from going private – and investing in research and development, as well as setting money aside to back small startups in Silicon Valley.
We are all struggling with driving efficiency, how do we add value to the overall business, and how do we make sure our finance functions and capabilities are evolving?
The company, based in Round Rock, Texas, plans to stay loyal to its computer heritage, while as an integrated group, unlike a number of rivals, spreading out into higher margin end-to-end technological service provision.
“I think the CFO role is evolving across the industry and across the large multinational space. CFOs are more involved in company strategy and perhaps even day-to-day execution than the traditional, strict definition of a CFO,” says Tom, who is part of a numerate family. His wife Kathy is a retired accountant, his son David is in data analytics, first daughter Elizabeth is a financial analyst and daughter Emily an engineering student.
When he goes to chat with counterparts at other large multinationals, the conversations and focus, Tom notes, are remarkably similar.
“We are all struggling with driving efficiency in the organisation, how do we add value to the overall business, and how do we make sure our finance functions and capabilities are evolving as our businesses are being transformed?” the Dell executive adds.
“I think more of the CFOs I talk to are very involved in the strategy of the company, and influencing and shaping that strategy alongside the other partners they are working with,” he says.
Because of the nature and origin of Dell, the relationship between top management and the restless, entrepreneurial billionaire founder, who is chairman and chief executive, is key.
“I work pretty closely with Michael. He’s my boss and chief executive, and we interact very, very regularly. No matter where he happens to be in the world and what he happens to be doing, he’s reachable. We try to talk live at least once a week,” Tom says. And then there are the e-mails, and the flow of thoughts and comments.
Unsurprisingly, Tom is optimistic about the future of the company, considering what they have been able to achieve in the past 18 months, and dependent on “the opportunities and challenges of the cycles of technology”.
It is equally likely that Tom’s role as Dell’s chief financial officer is destined to become more, rather than less, significant.