Vic Chynoweth is trying to shed his job. Not that the CFO of enterprise software firm Planview wouldn’t then have a job; it would just be somewhat different from the one he has now.
The company, which sells software and provides professional services that help companies optimize their assets — people, capabilities, financial assets, IT systems — is focused on growing from its current $200 million in annual revenue to the $500 million threshold within four to five years. That goal requires Chynoweth to relinquish some of his existing roles so he’ll be in a better position to address the strategic challenges that inevitably will arise as the company grows and evolves.
A key strategy, for that purpose, is training five of his financial managers and analysts to take over his roles as business partner to functional leaders, with sales being the most important one.
“To scale, I need to take myself out of those roles — to essentially process myself out of a job,” Chynoweth says. He’s already given up attending leadership meetings for the company’s professional services unit and has his eye on doing the same with the sales function in 2018.
The CFO says he’s always prioritized understanding his business partners’ jobs so well that he could perform them himself. And that’s the approach he’s taking to get the analyst team up to speed. “I have them present to me the functional reports as if they are the functional management team,” he says. “Via that process, they develop a much deeper understanding of their partner’s business.”
At the same time, the analysts are charged with improving the functions’ understanding of key performance indicators (KPIs), many of which finance has been fine-tuning. “It’s about connecting the dots so that they understand why certain metrics matter to them and help the function be successful, and how the function helps the corporation be successful,” Chynoweth says.
The sales team, for example, is typically focused on closing bookings, whereas Chynoweth wants them to care equally about the pipeline, which is the leading indicator of bookings. “If we have a great Q4, which is pretty typical in software, but a bad Q1, then we didn’t balance operations correctly,” he says.
For the professional services business, ramping up “billable utilization” is a key priority. Utilization is measured as a percentage of the number of professionals performing the services multiplied by 2,080 (40 weekly hours over 52 weeks). Then other KPIs are plugged in. “Moving the billable utilization needle is difficult without knowing where the unutilized time sits,” Chynoweth says. So the company is evolving its reporting to take a closer look at the different “unutilized buckets” — time spent on administrative tasks, travel, training, and internal projects.
Also, as Planview is a software-as-a-service provider with a recurring-revenue model, customer retention is a vital concern. A “more evolved strategy around retention,” the finance chief says, is looking at KPIs that are leading indicators, offering actionable information on factors that either increase or decrease the probability of retention.
For example, finance looks at software-usage statistics — log-in count/frequency and utilization of specific applications — to detect things like whether features that correlate to high retention might actually have low usage. Such a correlation would trigger a “call to action” to increase communications with customers about the low-utilized features. “We are mid-stage on this evolution, with some good understanding and capabilities but a lot of improvement still to go,” says Chynoweth.
Meanwhile, Planview isn’t just at the beginning of its growth surge now. Chynoweth was brought on board three years ago to scale the company, which was founded in 1989. It had begun moving its software — project-management, work-management, and asset-management tools — to the cloud and selling subscriptions in 2010. Today, 80% of its software business is SaaS-based rather than on-premises, and revenue growth has tracked alongside that evolution.
Given the company’s maturity, it has to focus on profits as well as growth. There’s a rule of thumb for a successful SaaS business called the “rule of 40%.” It looks at a company’s revenue growth during a particular year (expressed as a percentage change from the prior year) and its operating profit margin (EBITDA as a percentage of revenue). The rule of thumb is that if those percentages add up to 40 or greater, the company is healthy.
When Chynoweth arrived at Planview, he says, the sum of the two percentages was about 10, “which wasn’t very good.” For 2018, he projects the figure will be nearly 50.
The company has made some acquisitions since Chynoweth came aboard, but they don’t factor into that growth metric. It’s based “entirely on organic growth,” he says.
He expects that the result of positioning finance staffers as dedicated business partners to the company’s functional leaders and increasing their awareness of KPIs will be better data that he and his peers, the company’s other executive vice presidents, can leverage for better decision making.
Ideally, that will be part of a continuous cycle. “I want [the EVPs] to come back to me with insights of their own that we then feed back into the reporting and planning systems,” Chynoweth says. “My biggest strength is connecting the dots between numbers and operations, and I want to pass that on to my peers so that all of us, myself included, can continue to grow those capabilities.”