A chief financial officer is a companys steward, ensuring that spending doesnt spin out of control. But when creativity is essential at that company, it can pose a unique set of challenges.
Balancing the demands of fiscal responsibility with the creative mindwhich embraces innovationisnt easy, especially when there are associated high costs. To successfully walk the tightrope, companies need to have departmental cooperation and managers who can live in both worlds, often spotting issues before they get to the CFO level.
In larger companies, the product review process acts as a good filter. Projects are assessed before they get too far underway and are reviewed regularly to ensure theyre on track. For smaller businesses, though, thats not always possible.
To see how the problem is approached on both ends of the spectrum, and in different industries, Fortune spoke with the CFOs of a multimillion-dollar video game publisher and a successful regional brewery to get a better idea of how the two, often conflicting, demands are handled.
Managing mad scientists
WeldWerks Brewing Co. technically doesnt have a CFO. Eric Hashberger instead holds the title of director of finance. Two years ago, the brewer adjusted titles to C-suite equivalents, but quickly learned it just didnt fit with company culture, making executives feel disconnected from the rest of the staff. So they switched back to familiar titles within a year.
Regardless of what it says on his business card, Hashberger is the person responsible for keeping an eye on the profit and loss lines at a company that made its name by constantly experimenting. While most brewers tend to focus most of their efforts on a few flagship beers, WeldWerks decided a long while ago to be known for its innovation, brewing 100 or more new beers every year. And not just small, experimental batches, eitherbut full-on production-level brews.
That mad scientist mindset grew as the company did, with WeldWerks introducing more than 200 beers in one year. That number has since receded to between 85 and 90 new beers created last year.
What seemed to work for us was that brewing style was our identity, Hashberger says. It became what customers expected of us. And they were more willing and more forgiving when something didnt work out. It didnt turn someone off from trying next thingKnowing that, we found ways to take risks, but with a lower [financial] risk, since we knew our customers and fans would go on the journey with us.
Working with the director of brewing and the supply chain manager, Hashberger is able to keep an eye on expenses versus revenue potential. In fact, he says, its often one of those two who flag a beer or beer line as not worth the expense before he does.
For example, a beer line called Froot Camp was launched as interest in smoothie-like beers (with lactose and high levels of fruit) were in vogue. Last year, though, both directors came to Hashberger to let him know it might be time to pull the plug, as fruit prices were skyrocketing and interest in the style was ebbing. Since Froot Camp required between 1,200 and 1,800 pounds of fruit per batch, it was an easy call.
They were recognizing this before I stepped in, he says. Luckily, Im working with folks who pay attention to the costs before it comes to my area. Ive found in my time here, I havent had to stop something from happening. Its the other parts of the leadership team that are able to identify when the cost is too high.
Getting ahold of Grand Theft Auto
Thats true for Lainie Goldstein, CFO at Take-Two Interactive Software, as well. The company has many studios, from Rockstar Games (maker of the Grand Theft Auto franchise) to Private Division (which oversees a variety of internally developed and third-party titles), and most of the creative workers are within those departments. Each of the labels has a business and publishing team that works with Goldstein to keep an eye on costs.
Its not unusual for a game in production to be scuttled at Take-Two or any video game publisher. But, like WeldWerks, typically that happens long before the matter gets as high as Goldsteins desk.
If a game gets cut, it usually comes from the label, because they have P&L responsibility also, she says. Its important for us to invest in research and development, but also be efficient at the same time. Its certainly a challenge, but its important for us to do that so the games can perform.
Studio heads might alert the publisher that the game doesnt make sense anymore in the companys overall strategy or is running so far behind that it no longer makes sense. Alternatively, they could propose a new direction for narrative or gameplay or offer a new revenue model, such as micro-transactions instead of a traditional retail one.
Before it gets to that point, though, Take-Two puts ideas through its product investment review process (similar to the green-lighting process at other firms). All products are reviewed on a quarterly basis, looking at where they are in the development processwhether theyre hitting milestones, how they stand in regard to their budget and staffing, how the games will stand out commercially, and what makes them special.
It can make the corporate types nervous, from time to time, she admits.
Ultimately, though, that trepidation fades as the freedom given to the creatives translates into games that go on to sell millions of copies.
I view it as a partnership, says Goldstein. They lean on us in terms of supporting them in lots of ways, including promotion and marketing. And were able to give them the information they need to do the job they need to do.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.
