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, theres 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 didnt know anything else
about this topic, you would have to acknowledge that an engineering education is
sweet-spot training for a finance executive.

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, youll 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.

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. Its a sort of an unprecedented deal, and
every day there are 10 things Im 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 were 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. Its 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 didnt know.

Hylands 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 companys 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
didnt 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 youre 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 whats really going on and you
have to make changes. As an engineer, youre taught how to leverage the information
at hand to do that.

Have Degree, Will Travel

Sometimes, those with such training dont 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 doesnt 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 didnt like engineering and werent 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 its 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
whos 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 didnt
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. Its

wonderful to have the discipline not only to break those things down, but also to
describe it in a manner thats 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 thats accurate, he
says. I say to myself, If I survived those four years at Cornell, I can certainly get
through this.