Leading CFOs and their teams are spending more time creating the future of their firms. This requires deep insight into business operations and evolving customer trends, as well as a high level of business acumen to boldly influence outcomes. It also requires the capacity to shift energies away from more traditional CFO functions towards an openness for change, and the ability to work across an ecosystem of partners and stakeholders.
Red Hat—the world’s leading provider of open source solutions—has experienced rapid growth in a quickly evolving industry. To support this level of growth, the finance team has had to update its processes, layer in new digital tools, develop deeper insights on customers, and work across the business to help the entire company better understand the new landscape. The finance team made this transition by studying the existing ecosystem of the organization and learning how to work within it. From there, the CFO has been able to put finance in a leadership role, guiding innovation within a sound governance framework.
Carolyn Nash, Senior Director of the Go-To-Market Finance team at Red Hat, has to navigate this complex system while also creating revenue from mostly free software. In her presentation at The 2018 CFO of the Future Summit: The Next Frontier of Value Creation, she explains how the finance team has been able to position themselves itself as a partner for growth.
Software developers are the original disruptors—digital programs have impacted everything from decades-old business models to everyday administrative tasks. Not surprisingly, software has disrupted itself too.
As technology and skills continually evolve, developers can stand up new and sophisticated applications in a matter of days. As a result, companies like Red Hat that offer open source software have to be fully dialed in to the ecosystem of new customer demands and technology capabilities to anticipate and respond to the market. In the past, that’s meant supporting enterprise systems with a single Linux platform. Now, the company is making a big bet on ecosystems and the hybrid cloud.
Hybrid cloud technology allows IT the flexibility to choose where their applications and data are located (on premise, public cloud or private cloud). With the benefit of cloud technology, IT can move workloads between public and private clouds, hosted on a single or multiple cloud provider environment. The result has been a market cap increase from $4 billion ten years ago to $29 billion today. To be effective in this rapidly changing environment, the finance team has had to scale quickly, identify strategies to stay in sync with business partners across various units, and remain nimble. With an increasingly complex business model, the external ecosystem also became increasingly complex. As Nash observed, the finance team needed to have “really bold, audacious goals” and “focus on delivering value, showing that we understand and we're listening, and we're making big, bold moves based on that.”
Growing revenue to $3 billion hasn’t been easy. Red Hat has had three CFOs in as many years and almost one hundred percent turnover in the finance senior leadership team. When Nash joined the team, finance was viewed as an enforcement agency rather than an enabler. In order to transform the role of finance within Red Hat, Nash and the rest of her team had to learn to swim with the tide rather than try to control the waves. That meant embracing the existing ecosystem in the company and learning how to work within an organization where all departments expect to weigh in on business decisions.
Red Hat software is offered as an open source, open architecture product. This means that users can see every line of code that helps power their systems. This approach also extends to the company culture, which is defined by transparency, engagement, and a unique open-decision making framework.
As one example, employees are encouraged to express their views via a company-wide email list. The opinions on that list drive the culture of the company, yet previous finance teams had failed to recognize the value of those opinions, that platform for sharing ideas, and the approach to garnering buy-in. As a result, there was a significant disconnect, and decisions were made without the inclusion of the finance team. In order to regain credibility, the finance team had to learn how to work within the existing Red Hat culture. To do this, the finance team refocused their energy on understanding and applying the four principles of culture that highlight why people work at Red Hat:
Freedom means having the ability to explore new ways of identifying and creating opportunities for value. Now, the finance team leverages the power of the company-wide email list to harvest the best ideas, wherever they are in the company. By working within the existing knowledge-sharing ecosystem, finance can help guide critical conversations.
Courage uses the company’s open culture to empower people to challenge ideas internally. Even if some people disagree with the final outcome, the organization is more likely to commit fully to an idea when disagreements have been heard and the idea has been broadly discussed.
Commitment stems directly from courage and helps the company scale innovations quickly by working from an ‘all hands on deck’ mentality. Finance works with each part of the organization and is involved in the discussion of ideas and business decisions. As a result, they bring that same level of involvement into the implementation of their own projects by focusing on cross-functional collaboration.
Accountability reminds everyone of what’s at stake. Red Hat must remain accountable to shareholders, customers, and the ecosystem of vendors to be successful. Open architectures rely on robust self-governance, and an open corporate architecture is no exception.
By leveraging the power of this framework, the finance team has been able to change how it is viewed within the organization. Instead of being seen as the people who say no, finance is now viewed as a leader of a growth agenda that has helped Red Hat scale. The finance team is able to raise issues and nurture new areas of growth while being viewed as a partner and not an adversary.
For Nash, working within the existing ecosystem, rather than against it, ensures that the company’s growth plans remain on track and that business decisions are made with the right people involved. The finance organization at Red Hat has learned that lesson and has gained a positive reputation for cross-functional collaboration within the company. This has helped to improve alignment within the organization and encourage other teams to come together for a more impactful generation of value for Red Hat.
Large organizations are diverse ecosystems. For any incoming business leader, it’s important to understand what the prevailing cultural climate is and how to work within it to gain buy-in. At Red Hat, a misunderstanding of cultural norms meant that the finance team wasn’t capturing valuable opinions and suggestions from throughout the organization. By taking a step back and learning how to work with the system instead of against it, the finance team has been able to increase cross-functional collaboration and create value across the organization.
When finance is an integrated part of company culture, new avenues for growth emerge. Finance teams can help nurture innovative ideas, implement agreed-upon initiatives, and craft a new narrative for markets. Doing this well means working throughout an organization to ensure that the perception of the role of the finance team is consistent and positive.
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