Five CFOs Who ‘Engineered’ a Finance Career

Don't tell these finance chiefs they should have majored in accounting. Engineering school taught them how to solve problems in their present-day j...
David McCannJanuary 24, 2014
Five CFOs Who ‘Engineered’ a Finance Career

A search in the S&P Capital IQ database, for sitting CFOs with undergraduate degrees in engineering, returns 1,466 results. No, there’s not a mistaken extra digit in there.

Some portion of those are duplicates — people who run finance for multiple entities under one corporate umbrella, for example — but still: If you didn’t know anything else about this topic, you would have to acknowledge that an engineering education is sweet-spot training for a finance executive.

How Startup CFO Grew Food Company 50% YoY

How Startup CFO Grew Food Company 50% YoY

This case study of JonnyPops’ success highlights the unusual financial and operational strategies that enabled rapid expansion into a crowded and highly competitive frozen treat market. 

To be sure, a majority of CFOs were accounting, finance or business majors in college. But after speaking with a number of finance chiefs who have engineering degrees, one must question whether those traditional educational backgrounds are really the optimal entry points. As it turns out, the way engineers think is very much the way finance executives think.

“If you think about what people say a CFO should be or what a good CFO is,” says Vasant Prabhu, finance chief at Starwood Hotels Worldwide, “you’ll hear things like he or she has got to be strategic, analytical, fact-based, willing to deal at a detailed level, objective, results-oriented. All that is what you learn when you become an engineer.”

Engineering is strategic? Really? Yes, says Prabhu, who has a degree in mechanical engineering from the Indian Institute of Technology. “Engineering is about conceptualizing problems and how to solve them. I call that strategic.”

NASA engineers test mirror components of the agency's Webb Telescope.

NASA engineers test mirror components of the agency’s Webb Telescope.

An ability to solve problems is probably the one skill CFOs rely on most, and every single day, says Wade Miquelon, head of finance for Walgreens. What remains with someone from an engineering degree is knowing how to frame a problem, how to use the scientific method and how to think about the problem logically, he notes.

Miquelon, who earned a civil engineering degree at Purdue University, is leaning heavily on that experience right now while working on a merger with Alliance Boots, one of the largest European pharmaceutical retailers. “It’s a sort of an unprecedented deal, and every day there are 10 things I’m trying to solve that are basically new problems,” he says.

The same mindset helps with finding flaws in arguments. “CFOs are often labeled as skeptics, the people who say ‘no,’ which may be a little unfair,” says Miquelon. “The CFO is the one who has to be able to vet things, to say, ‘What has to be true for this other thing to be true? And what are the consequences if we’re wrong?’ Engineering teaches you to think logically in different ways, to question assumptions and to cross-check facts.”

Switching Gears
Many engineers-turned-CFOs work at mining, energy and other kinds of companies that employ lots of engineers. It’s easy to see how that happens: join the company after college, eventually get interested in the business, switch departments. But often when that happens, the ex-engineer later pursues finance at other kinds of companies.

Such was the case with Shannon Hyland, who headed finance at Radius Travel, a corporate travel management company, for five years until being promoted to CEO in 2013. After getting a degree in industrial and aeronautical engineering at Arizona State, he went to work first for Continental Airlines and then United Airlines as an airplane engineer.

After a couple years at United, Hyland took a leave of absence to get an MBA from New York University (NYU). Why? “Any project I was developing always had to go through finance for approval,” he says.  “I was intrigued by that decision process, and I wanted to understand what those guys knew that I didn’t know.”

Hyland’s engineering training helped him see his way through a tough decision-making process at his previous CFO job. The company, Groople, was pursuing two business lines: making group bookings at hotels and other meeting facilities for commissions, and developing group bookings technology enabling other entities to fulfill group travel.

The two sides of the business had very different margins and timelines for becoming a strong player in the market. The company’s CEO, Hyland says, had a business-to-consumer background and was most interested in the more consumer-like bookings business.

“But when [the finance department] looked at all the data,” he says, “we saw that we just didn’t have sufficient scale to achieve realistic margins on that side of the business. The time-to-maturity was going to well exceed our cash.” So Hyland had to come up with a strategy for abandoning the bookings business and focusing on the technology platform, and it had to win over a CEO bent on pursuing a business-to-consumer play.

“I use my engineering background all the time, and this was just one example,” Hyland says. “As a CFO you’re constantly confronted with situations that are outside the norm. You start out with an annual budget, say, and all the best intentions to achieve targets. Then a couple of months or even weeks in, you see what’s really going on and you have to make changes. As an engineer, you’re taught how to leverage the information at hand to do that.”

Have Degree, Will Travel
Sometimes, those with such training don’t ever go to work as engineers. Prabhu fits that description; by the time he finished his undergraduate education, he had decided he was more interested in business, so he went off to business school at the University of Chicago.

He certainly doesn’t see his undergrad experience as a waste, though. “It taught me how to think and was excellent training for finance,” he says. Aside from the purely conceptual, it helps him understand a very nuts-and-bolts aspect of the hotel industry: construction. “I sort of have an intuitive feel for what goes into building a hotel, what the risks might be, and where costs could get out of whack,” Prabhu says. “But there is engineering in the heart of almost every business.”

Even those who didn’t like engineering and weren’t good at it may not regret having majored in it.

A case in point: John Ragazzini, who recently retired after 14 years as CFO at Spraylat, a privately held, $140 million paint and coatings business. Growing up, his father was dean of the engineering school at NYU, and after he got accepted at Princeton, he decided to be an engineer too.

“You could say that was a big mistake,” he says. “My mind was not the mind of an engineer; I barely made it out of Princeton.” He joined the Navy and was put into a missile battery on a destroyer because he supposedly was an electrical engineer. “Well, not really. After the Navy I said to heck with it,” and he went to Columbia for an MBA.

But as Ragazzini got well into his finance career, most of which he spent at Ford Motor, he realized that his education was really helping him out. “As an engineer, you like to know how things work,” he says. “Whether it’s a transistor or a diode or an accounts receivable system, you get really zoned in on trying to understand how things link and work together.”

That trait came into play when Spraylat installed an ERP system. To do that, he says, you have to understand how each type of data affects other information in the system. “I had to understand things like how the way a chemist put together a formula for a paint would impact inventory and cost of goods sold. That was driven by my engineering background. It helped me be a better CFO.”

Early Adapters
Some CFOs knew all along, from their first day in engineering school or earlier, that they were not going to be practicing engineers.

One such person is Kevin McEnery, a partner with professional services firm Tatum who’s currently interim CFO at Empire Petroleum Partners, a distributor. He went to Cornell University for industrial engineering because even as a high-school student he had discerned that it would provide a strong foundation for a business career. He wanted rigor, and he got it: in a class that initially numbered about 800 students, only 350 graduated.

“Many of those who decided to leave, or were asked to leave, had decided they didn’t want to be engineers. I never had that problem, because I was never striving to be one,” McEnery says.

For 10 years, until 2004, McEnery was CFO at Scholastic, the educational publisher. In 1998, the company undertook a fundamental reappraisal of its operations. It re-engineered nearly every activity — purchasing, customer service, order entry, distribution. The result was $100 million a year savings in operating costs. “I was the manager of that, and having that analytical, engineering background was very beneficial,” he says.

On other occasions, Scholastic pursued complex, alternative financing options. “It’s wonderful to have the discipline not only to break those things down, but also to describe it in a manner that’s logical to people who are not quite as involved with the numbers and the analytics, like the CEO and the board,” he says.

The same kinds of skills came into play for McEnery in a later job as CFO of Omega Engineering, which was a $200 million maker and distributor of scientific instruments at the time it was acquired by Spectris, a U.K.-based public company, in 2011. Omega had been a family-owned company.  The CFO left upon the consummation of the sale, and the new CEO brought in McEnery two weeks after the acquisition.

“We had to totally recast how the inventories were done,” he says. “My engineering experience was extremely useful for that,” especially since that experience had landed him after Cornell at Arthur Anderson, where he specialized in serving manufacturing clients.

As much as anything else, an engineering education taught McEnery not to be afraid. “After the rigor of a program like that, when you get to a situation in business that has a mathematical aspect, like looking at cost allocations or alternative financing scenarios, you have a sense of confidence that you can come to a conclusion that’s accurate,” he says. “I say to myself, ‘If I survived those four years at Cornell, I can certainly get through this.’ ”

Photo: NASA/Chris Gunn