"Perfection is a Prison", First Principles, and CFO Frameworks

I think there's a fallacy of a right decision.

I think as you gain more and more experience, the great leaders understand that at any point in time, they can only be 80 or 85 percent right.

I'm never going to say that any leader is more than 90 percent right. It's just not true. In any walk of life, in anything that you do, if you're 80 to 85 percent right, you will be remarkably successful… unbelievably successful.

Being 80 to 85 percent right is awesome. But what does that mean?

That means you're 15 to 20 percent wrong.

And if you’re a CFO or leader, you’re thinking, I can't be 15 20 percent wrong, I've gotta be perfect.

No, you have to course correct quickly.

Here's an axiom of life, right - in order to grow, you have to, you have to learn. You have to improve from learning. In order to learn, you have to fail. We don't learn how to walk and talk without falling down a lot and, and having our speech corrected and everything we've ever done as humans means that we've failed, we've learned from failure, and we've grown.

But if you're 100 percent right all the time, or you're so restricted that you have to be 100 percent right, guess what? You're not in that 15 to 20 percent zone of learning.

One of my favorite phrases that I think I came up with is perfection is a prison.

Why is perfection a prison?

Because there's nowhere else to go but down, point one.

And point two, you are constraining yourself so much from any new learning that you're not growing…

So living that line of what's right and what's wrong and course correcting quickly is the key to being a great leader, a great CFO and embracing it.

-Jim Cook

One of the biggest problems at every level of finance leader, is thinking that everyone wants to see the same level of detail you do. Because that's how your brain works.

They don’t really want to see a sea of numbers on a spreadsheet. They want to see the three numbers on a chart that make a difference.

Listen carefully when you're presenting these numbers. You need to be a listener, not as much of a talker. Listen for questions from your audience because the questions are where their heads are at.

Let's take investors or a board meeting. You can almost pattern match the same questions the board members will keep asking every time you throw a financial chart up. And it’s always around revenue growth, EBITDA growth… maybe if you're in a Saas business it’s about CAC, or lifetime value, because that's where those investors see value in the company. But if you miss listening for those patterns, and you just keep presenting the same numbers over and over, that investor or that board member doesn't feel like they're connected to you.

Now, alternatively, if you come back and say, okay, I know you care about revenue growth and EBITDA growth and, you know, the five metrics, whatever they are, they'll be like, oh my gosh, this person's reading my mind.

Now that's where you want to be. You're delivering the insights before they have to ask it. That takes a listening skill; that takes a sitting in the audience's seat; that takes framing and then delivering just a portion of your material to them which satisfies their need. And you wait to go deeper until they lead you deeper.

First principles are determining what are the three to five things that have to be true amongst this tyranny of knowledge we are inundated with. What are the three to five things amongst all of this that have to be true for us to be successful?

If you challenge yourself, there are really only a handful of first principles that must be adhered to, and everything else is subservient to those.

It's hard making that list simple, but the great CFO's focus on those.

When you can think using first principles as a finance leader or a CFO, it then helps you in the most struggling moments, the most critical moments, when people's emotions and their lizard brains are going off. When they're panicking because we're not hitting our numbers.

You want to return to first principles when you’re going down rabbit hole after rabbit hole in an exec meeting. When you can hold these first principles up and remind the group, “Hey, above all else, we just have to make sure we do this right.”

When you can be that leader and remind people what those first principles are and then tell a story about how you get there, that’s when you escalate your influence.

It's super difficult to build a relationship with a group of people.

If you want to influence the five people on your board, you have to divide and conquer and try to establish relationships with each one individually. That way when you get into the room, and everyone gets together as a team, they've heard it before from you one on one, and they can echo what you're saying. And that brings you more credibility.

But you have to carve out the time, right? Many of us are so busy, and I had to learn this lesson, that just closing the books, just getting it done, just trying to make a perfect report, is missing the target here. You might feel great about that, but many times, what separates the great CFOs is they actually carve out time in their calendar to have those one on ones and say, just, “Hey, I just want to update you.”

Tell your CEO very transparently that you're having these meetings and why you want to establish these 1x1 relationships. It's to the benefit of the CEO - CFO partnership to have the board hear two different voices. We have to represent ourselves as being partners with each other and having different viewpoints.

The board doesn’t want a yes person to a CEO. They don't want a CEO that only does what the CFO tells them to do. They want a healthy partnership.

In times of crisis, because there's always crisis you want to tell people:

This brings transparency because all of the people in crisis expect all these leaders and the CFO to have the answer. You have to tell me that you're not going to fire me. You have to tell me that we're not going under. They're looking for that one answer, that one number.

And in doing so, you can be vulnerable.

You do so by saying, “Hey, here's what we know right now. Here's what we don't know right now, because this situation is developing, but here's when we'll know and we’ll be ready to make decisions…”

“We'll come back to you when we do figure it out. We're just telling you that we don't have all the answers because, guess what? Nobody does.”

And the feedback you get from teams when you do this and are direct is great, immediately.

They feel like they’re there with you and have some vested interest in figuring it out. It kind of brings them into the fold. So it's not like us versus them.

You’ve changed th situation so you are now winning as a team and you're losing as a team. You're not guaranteeing that things are going to work out, but we're a team and I'm going to tell you what I know what I don't know. I'm going to tell you from my CFO lens or the CEO lens,

People respect you when they see, “Hey, they didn't treat me like a baby. They told me what they didn't know. I’m a hundred percent confident they'll fix it.”

That's a huge framework. Please, please, everyone listening to this, you use that. Like, you will find it works. It works. I've used it several times. I didn't used to have this in my arsenal, and it works.”