9. CFO Stories with Jonathan Howell, CFO of Sage Group

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So thank you Jonathan for joining us on the show. It's great to have you.

After Birmingham University, I then decided to follow an accounting qualification and career, not really definitely committed to it for the long term. I came down to London then and joined Pricewaterhouse as was. And it was a good introduction to life. You know, we talk about the big four accountants now.

Well, the accounting firms are quite small and they really still did feel like real partnerships. And there are about eight of them. And the consultancy practices weren't very big. And so I came to London. It was great fun. Enjoyed the London lifestyle enormously. And probably, I think...

We certainly probably didn't work as hard as the new graduates and trainees do at the Big Four these days. And I did that for a good few years. And then an opportunity came to join the London Stock Exchange. And I spent 12 to 13 years in total at the London Stock Exchange.

And to start off with, I was head of all of secondary market regulation for the traded market. And also what was known then as the UK Listing Authority, which was the authority that listed all of the UK companies on the London Stock Exchange and all their disclosure and prospectus requirements. So I did that for about two or three years.

And then I was approached by the chairman and CEO who said, look, Jonathan, we are about to IPO the London Stock Exchange. It was a mutual. It was owned and run by the large member firms who traded on the market. We are going to demutualize. We are going to IPO and list ourselves in our own London market. We need a finance director to do it.

So I said, yes. And I did that job for 10 years. And it was absolutely fascinating. And that was really what switched me on to a finance career. Partly because there I was, you know, my first few months I was doing this very important IPO of the London Stock Exchange.

Secondly, we had to put in place the processes and disciplines and culture of a for-profit company as opposed to a not-for-profit mutual. And then lastly, I don't know whether you recall, but we had six hostile bids. during that 10 years that I was there as finance director. And in my last three years, I think we had about five in total.

So that was very, very all-consuming, very rewarding, extremely hard work. But I wouldn't have missed it for anything. And then after doing that for 10 years, I thought, well, I do need to do something else.

And I joined Close Brothers, which is a very, very high-quality UK asset manager, trading house on the London Stock Exchange, but very importantly, an SME lender, lending to SMEs up and down the UK and also in Germany and one or two other continental European countries. And I did that job for 10 years as group finance director there.

And the interesting thing was that I sort of joined the banking industry for the first time right in 2008, right at the time of the credit crunch. and then the big recession. And I was extremely fortunate. I was new into the banking industry, but I'd inherited a really strong balance sheet, very good underwriting, lots of deep capital reserves.

And we were able to grow very rapidly, lending to the SME community in the UK in particular, just when they needed finance. And we had a wonderful period of serving our customers but really investing in the business and expanding it. So I did that for 10 years as Group Finance Director there, having been at the London Stock Exchange for the previous 10 years.

And I was just getting to the end of my stint there. And for the last five years of that period, I was also a non-executive director of Sage Group. And I was chairman of the Audit and Risk Committee and had been working on the board.

And just as I was coming to the end of my time at Close Brothers, I was very kindly approached by the chairman and the CEO. Steve Hare is the CEO of Sage now. And so we are looking for a finance director. Would you like to join us as part of the executive team? And that I did two years ago.

And now I have obviously been part of the executive team here for two years. So that's a sort of a quick snapshot of where my career has sort of led me.

I really believed in the story and what we're trying to do and what the company is trying to achieve. And I also was able to observe that Steve as the CEO and the new executive team he's put together are building a very strong supportive culture. The Glassdoor score is currently 4.3.

Real progress was beginning to be made on the SaaS transformation and the great strides to move Sage, its partners, and its customers into the cloud environment.

And the thing that I think the key remit for me, as a new member of the executive team, was to take, we've got a really talented group of people in the finance function, dedicated individuals, but really to drive that team forward and to be a top quartile finance function, really servicing the business, making sure that we can allocate investment to the technology and

the innovation, making sure that we've got the right go-to-market functional capability in place to support you as partners and ultimately obviously our shared customers. And for me, it was a very, very easy decision. And I'm glad two years ago, just about two years ago, that I did join as an executive capacity.

Unusual to move that way from a non-executive director to an executive

So you've sort of seen them through a real transition process, it sounds like?

It takes time to build the right culture, the right processes, have the right level of investment available to do all of those things.

Therefore, I'm a great believer in building the quality, putting the foundations in, and then moving progressively onto the front foot to really drive the business forward for the benefit of colleagues, shareholders, and obviously, most importantly, for customers. And I suppose, what have I learned along the way in the corporate environment?

First of all, every year, you know, since I've, you know, I've been doing this role, which is over 20 years now, you know, you get together all your senior finance team. And we, you know, we did that at Sage, you know, 40 or 50 of the key finance people from all around the world come together for two or three days.

And I say it, you know, with a degree of seriousness, you know, with a slight sort of, you know, wry smile, because I say, look, in finance, the first thing to do to get the numbers right there's lots of other things that we need to do but if you you know if you can build off a platform of consistently and regularly and on a timely basis getting the

numbers right that is a good start because you know particularly as a public company with very important external reporting requirements and shareholder attention and analyst attention Just getting the numbers right is a great start because if you don't, particularly this day and age as we've seen, then that does undermine confidence. That's the first thing.

The second thing is really, really understand the business and get close to the products, understand the customers, meet with customers, talk to them, really own the strategy. alongside the CEO, the COO, chief marketing officer, chief technology officer, the CTO, really understand and know the strategy and help drive it forward, which is really, really important.

Thirdly, particularly in these larger organizations, you have to invest a lot of time in the team, which I really enjoy. That's one of the things I find quite very, very rewarding is that you need to understand the strengths and capabilities of the team.

You need to understand where you can help and coach people to improve and how they can develop and really, really empower and enable and liberate the people with real talent to step up and take responsibility, get visibility and credibility for their achievements, And whilst they're helping the organization, they're also developing themselves as finance professionals.

And with these large finance functions distributed around the world, it is genuinely a team effort. And the more time that I can spend in investing in getting everybody aligned, people feeling confident and comfortable about what their roles are, understanding what really good high quality looks like. It's like a virtuous circle. It gets better for everyone.

So the team is critical and mustn't be understated. And then I suppose the other thing is you have to be a leader. You have to be a decision maker. It's not just a matter of sort of providing the information and the data for others to decide. I mean, you need to debate it.

You need to find the right answer with experts in their domain on the executive committee. But you've really got to go into it saying, well, I will be a joint decision maker. I will be helping this organization make those critical decisions.

And then the other thing I say to finance people is really don't underestimate your importance and value to the company and everything that the company does. And be confident about it. And that's something that I've seen change in my... In my sort of career, there was a tendency, well, just let the finance team get on with it.

No, but they aren't dealing with customers. They aren't designing the best products. They aren't sort of putting the best advertising campaigns in. They aren't supporting. Well, we are. We are, and we should be confident about our critical role in developing a business. So those are the types of things that I suppose – stand out for me over the last 25 years or so.

Is there any, could you talk to me about your top tips for how to get to that point? Because very often, like you said, finance could almost become an afterthought and seen as, like you say, the the people just doing the doing around the numbers.

But actually, it sounds like you've managed to create a culture where finance are fully visible and integrated and supporting the wider executive team with decision-making. Is there any magic bullet around that? How did you approach it?

into valuable information and it's done on a timely basis that just builds confidence and if you can't do that to start off with Then other people in the senior leadership team will say, oh gosh, can we rely upon the finance numbers? Why are the numbers late? Why do they have to come out with amendments?

And so getting those foundational things right in the first instance, I think is very important. And then secondly, the broader leadership, the top five or 10 most senior people in the finance function need to have as a mindset that they get out around a large organization. I mean, we have 12,000 or so colleagues around the world.

And so once they have got the team working well, producing what is required, then their role develops into a more elevated position of reaching around the organization in the in the functions in the in the you know in the in the go to market and cmo functions cto and product functions getting to know them getting to understand them getting to be able to talk the

same language and then naturally naturally you know a a a relationship of shared experience, shared objectives emerges, and then we are able to come forward to these functions and say, look, actually, we can give you some more forward-looking information here. We can cut this data in a slightly different way.

We understand immediately what you want more of from us and what you want less of from us in finance. And that's just a process of evolution.

And it's important to have the caliber of team, the caliber of processes, which enable to free up the time for the senior finance people to take on that additional sort of connection and relationship with the rest of the business.

And in order to do so, it's having those people that you can trust to get the numbers right and go out and work with the wider organisation. But like you said, you can only do that once you've got your numbers right and your process is sorted.

So no really great on that so if you if you think about your journey going back you know is there anything that you wish you knew from the start so if you look back you think oh um if i'd known that i would have done things differently

You've got an open mind. You're flexible. you can take the bumps and bruises very well because you don't know too much at the time. And therefore your skill sets and your interests emerge and that leads you on the particular direction of your career. And I think from my point of view, that served me quite well.

And when you're young, you're confident, You don't have deep concerns about the areas where you're not as skilled or trained as you might be. Perhaps you're a little bit naive, but I think that makes for you following your interests with confidence, and from that, the right career emerges from you.

rather than trying to have a you know a pre-planned blueprint of um of of you know where you should be because there's no such thing as as that is that in my mind or in my experience i'm sure it works differently for others

down a route that you never even dreamed of. And I do wonder whether, as we look at the finance function as it is today and what it's going to be in the few years, whether the same career paths will actually exist. So how do you think the CFO role and finance teams are going to change over the next few years?

You have to report high-quality, consistent management accounts internally. As a limited company or a public company, you have to do critical external financial statutory reporting. As a public company, we have to get accurate and high-quality historical reporting on a quarterly basis, full set of half-year interim statements, and a full year-end preliminary results announcement.

you know, backwards historical reporting, it still is important. But what's been added to that, which is quite, you know, I think a very, very important development is that, you know, with the use of technology, there is so much more financial data that is available and at the disposal of leadership teams.

And it's using that data to turn it into useful financial information, which can give an immediate in the moment commentary on what is going on in the business on a day-by-day, week-by-week basis.

And then the next step, which is most companies are absolutely embracing now, is then becoming very forward-looking in terms of planning, forecasting, forward-looking financial strategy, identification of areas of investment, and identification of areas where there's potentially over-investment and we need to reapply that. And that forward-looking element is now very, very important.

And the real skill is that with this integrated provision of very large amounts of data for the finance leaders of now and the future is to turn that into focused, useful information and KPIs that enable the leadership team in a very straightforward, to rapidly access the key drivers and the key decision points.

It's very easy to produce huge amounts of data, provide that in an unstructured way to a leadership team, and there's a potential risk that people don't see the wood for the trees. And I think that's an important thing. There are some things that have not changed in finance.

I think the dna of a finance function um is just as important and is is not too similar in many ways to as it has been you know over the past you know you know over the past decade or so which is you need an organized group of disciplined people with high levels of integrity and and resilience and application um who are always calm under pressure.

If a business is changing dynamically quickly, if there are changes that the business needs to make in the direction that it's going, if you get hit by external events such as COVID-19 at the moment, the first port of call is the finance function to give immediate visibility of what's going on and what the impact is on the business and how we are going to make

those critical decisions to allocate investment and plan the financial strategy. That always comes to finance very early on. And therefore, you need those sort of fundamental foundational attributes to be running through the core of a finance team. And I don't think that's changed too much in recent years.

In addition to that, though, going back to my previous comment, we do need to have the capability to model and to look forward dynamically and use all of the data capture and data analytics power and capabilities that we have in a smart, forward-looking way. So that is the build-off, what I've described as the core responsibilities of a finance function.

Because like you said, there's a danger, isn't there, if you just give them the raw data or data without context, decisions can be made based on that data and based on an interpretation of data as well.

you know um and you know you're sitting at home and and you know how am i going to get through this and and and you know the real skill these days i think is to to identify what is really useful and to test and learn and and to you know and say to the executive committee periodically or the board of directors you know we've we've changed the approach we're

changing the way that we're providing information to you is that helpful or not and you're constantly sort of testing and adapting, you know, according to the needs of the business and the users in that particular time.

And so, for instance, here at Sage, as you know, we are making this, you know, this really important transition from effectively, you know, what was a good few years ago, an on-premise license business right the way, you know, to the other end of the scale to a, cloud-native subscription SaaS model with a high attention to retention of customers, to providing customers

with solutions from the Sage suite of modules and capabilities. And to do that, therefore, we've been producing SaaS metrics. So we are able to go to sort of a country level, a segment level, and then ultimately the product level. We're able to identify what additional services and capabilities our existing customers are choosing to buy from us.

We're identifying which territories and which areas and which products where we're seeing, you know, focused new customer acquisition.

And we're also sort of identifying byproduct where the migration is happening rapidly towards the cloud native subscription environment and those countries where we need to understand how we can access that customer transition in a more effective way.

So that is a significant amount of additional information and data that we're applying to assisting the executive committee in driving the business. And similarly, really understanding the cost of acquiring new customers on a unit economics basis is very, very important to us.

And then understanding their propensity to buy additional services from us and therefore comparing that cost of acquiring those new customers and comparing that to the lifetime value that we would typically see from that customer base is very important.

So there's an example where dynamically as the business is changing, the finance function needs to be on the front foot and being right at the leading edge of innovating how we capture that data and and how we provide that to the you know to the decision makers

fundamental shift and change

in a business that spans across 20 countries. And so really identifying those talented people and giving them the environment and the confidence to be able to undergo this transition is critical.

And just giving them and myself the space and time to be able to think and forward look and constructively identify what's working well and what's not working so well is absolutely critical. The other thing is, as a CFO, you must never lose the capacity to be willing to drill right down into the detail where you're concerned about something.

And so therefore saying, stop, I've heard one or two explanations here. It doesn't quite stack up for me.

let's get a team of people onto this and we will check in you know sometimes quite rapidly you know on a weekly basis to understand what's going on here and you must never lose that capacity but equally you need to know exactly when to empower and enable that senior team to go and do it and times when you need to say you know you know work You know, we

just need to stop and look at this and drill down. And I want to be part of that process. And that's, you know, something that you get, you learn that judgment over time and, you know, and over sort of many experiences.

And then the other thing is to give the leadership team in finance the space and the confidence when I'm talking to them, they can say, look, this is going really well, Jonathan, this is working. And there are some learnings of what we can read across here. This is going okay at the moment. And the third category is, look, we've got some problems here.

And I think I know the answers to them, or can you help me try and find the solutions to them?

And that confidence and the ability to say, give me the full sort of spectrum of what's going well and what's not going well is absolutely critical and that just saves so much time energy um and misalignment if that's not done done properly but you know people are working in senior positions under a lot of pressure and that's always not the natural thing to do you

know to sort of sit down amongst the leadership team and say look you know i've got a list of things that um aren't going quite as well as they should have done. And some of that's down to us in finance, some of that's down to a misunderstanding with the business.

But as soon as you can enable that sort of open and constructive dialogue, you can accelerate into problems and through problems much more quickly.

We talk about the importance of those numbers, but actually you need to have a team that is able to step forward and go, I don't think this is right or I don't think this is working well.

And being able to, as a CFO, shift from that top level view to going straight back down to detail where you think you need to understand something as well is an incredibly important attribute. And it's not one that's normally discussed as much, is it? So I think that's an incredible way to sum up the importance of that CFO role and what a good CFO looks like.

so uh thank you jonathan um i think that's a that's a brilliant way to sort of um to to finish our podcast we are almost out of time but is there anything else that you'd like to add in terms of what you think that that cf a good cfo role looks like

But I must say that some of those foundational attributes that make a strong finance team, I don't think will change over time and won't go out of fashion. And that is, you know, the right processes, the high quality people, the appropriate level of integrity, you know, with a clear understanding of what high quality delivery looks like.

So I don't think those attributes would change at all. So I think we've probably covered it all, to be honest.

It's been wonderful having you on the show.

Feel free to tell me what topics interest you most. I would really love to hear your feedback. Don't forget to check out our latest CFO 4.0 webinar on budgeting and planning in a volatile environment. Click the link in the show notes or visit www.itassolutions.co.uk and click on our events page for more info and great content.

And if you want to reach out at any point, tell us what you liked, tell us what we can do better, then feel free. Just email us at cfopodcast.itassolutions.co.uk. Thank you and speak soon.