Wharton Program Prepares CFO for Role as CEO
When one of his plants was struck by lightning, Jim Hurley had a chance to directly apply the real options tools that he had learned in Wharton's The CFO: Becoming a Strategic Partner executive program. "Part of what we learned in the CFO class is Real Options theory," said Hurley, CEO of Vegetable Juices, Inc. "This has to do with applying more complicated aspects of options modeling to decision making. The decision-making software that was introduced to us in the program allows decision makers to quantify what their gut may be telling them — or not."
When his plant was struck by lightning and disabled, Hurley had to estimate the insurance recovery. "The insurance recovery process was something that had been historically done by a guess, but I used decision-making tools I learned in the class to decompose that into a much more quantifiable and supportable estimate. Some of the losses were insurable, and some were not. I got into what the estimates should be for each one of them, put them into the options modeling software, and educated the auditors about how to reserve for the recovery."
From CFO to CEO
At the time that Hurley participated in the Wharton program in early 2004, he was CFO of HPR Partners, a division of HAVI Group, which provides food, packaging, and operating supplies to more than 2,600 McDonald's restaurants in eight countries, among other customers. But his goal was leadership of a company.
During the program at Wharton, HPR Partners was restructured by HAVI. With his experience gained at Wharton's program, Hurley decided it was time to find a CEO opportunity. "My time spent at Wharton was an awakening of sorts. I gained the confidence to take the next step into a leadership role." A few months later, he received the offer to serve as CEO of an independent company, Vegetable Juices, a leader in manufacturing onion, garlic, and other vegetable juices and purees; diced vegetables; and oils. When he became CEO in August 2004, he kept the notebooks from his Wharton program on his desk and the software on his desktop.
He now uses the real options and modeling software in his presentations to his board. "I run Monte Carlo simulations and walk my board through all that. Some of the graphical interfaces are really intuitive. The board can see the dispersion of risk, and it helps them understand the most relevant elements of risk. You can't just dump books on board members. The graphs that come out of this work are very helpful."
While private companies don't face the same SEC scrutiny as public firms, they are still held to the same standards. This means Sarbanes-Oxley has also had an impact on their work. "We always look to the public side of the business world for best practices in corporate governance issues," said Hurley, who has worked for both public and private firms, including Britannia.com, LP International, LaPreferida, and Beatrice Specialty Foods Division. "In a private company, it is just a different group of investors. There are fewer of them, but you still have stewardship over their company. It is a very profound thing for people to trust you with their company."
Living Your Values
Understanding the financial side of the business is only part of the role of today's CFO. "You have to live your values," he said. "You can't just talk about ethics. It has to be management and leadership by example."
Leadership has become even more important as CEO. "It is absolutely essential to get the right people on board and continuously evaluate people. It is understanding your people, believing in them, investing in them, empowering them, and having enough sense of your own self worth and their self worth that you get out of their way and let them do what they need to do."
Shifting from CFO to CEO means concentrating more on creating the context in which others can work. "You've got to let go, set strategic objectives, and trust people," he said. "We just implemented a strategic plan. We've defined who we are, our values, and beliefs and established strategic initiatives populated by project. We'll have anywhere from 30 to 50 different projects to support our strategic initiatives. What's been fun is designing a system of initiatives, compensation, and benefits to set benchmarks and ensure accountability."
One of the strategic initiatives of Vegetable Juices is to create a learning environment, said Hurley, who taught finance in the MBA program at DePaul until this past year. A focus on learning, formally and informally, has always been a hallmark of Hurley's own career. "I was very blessed to work with some incredibly gifted people over my career," he said. "I've just taken the best of each person I've worked with."
His personal priorities for education are now focused on organizational development and strategy, so he has been looking at further executive education. And, of course, he'll be looking at Wharton. "Wharton is on the cutting edge of what is relevant," Hurley said. "I think of a surfer, and Wharton always reads the break and catches the wave way before anyone sees it breaking. Then, they communicate it in class in a very practical and beneficial way."
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