Thomas Mayrhofer is CFO and deputy COO of EJF Capital, which manages hedge funds, private equity funds and structured products. He joined the firm in 2018 having previously been a partner and managing director at the Carlyle Group and CFO of Carlyle’s corporate private equity segment.
How has your day-to-day role changed in the last five years?
The role of the CFO has evolved along with the growth in the industry. There is an increased emphasis on the things needed to effectively manage larger pools of capital. Firms are integrating technology platforms, automating processes and enhancing data quality to build seamless operating environments across all functions within a company.
Last year, I moved from a large firm where I was principally focused on private equity to a mid-sized firm, EJF Capital, which manages hedge funds, private equity funds and structured finance products. My responsibilities are broader but in many ways focused on the same things: how do we run our funds and our firm so that we can report reliable and timely information to the investors in our funds and the partners in the firm.
How do you think the role of the CFO will change if we’re faced with a recession in the coming years?
It shouldn’t fundamentally change. CFOs have the opportunity to get involved in a variety of elements of the business, but at heart the role must ensure that the firm operates with integrity and produces high-quality financial information for internal and external consumption, while ensuring that the firm spends money prudently. That said, in a downturn, a CFO should lead the way in evaluating where prudent belt-tightening is possible.
As the CFO role becomes less focused on financials, how exactly do you think CFOs can excel at what they do?
First, I don’t agree that the role is less and less focused on financial responsibilities. Managing the firm’s financial operations and ensuring integrity in reporting is and always should be at the core of the job. As the industry has evolved and grown, the ability to put in place more robust and automated control and reporting infrastructures has required the CFO to develop a broader set of skills to oversee technology and data initiatives. Simply put, the modern CFO needs to be more involved in where the business is going as opposed to just tracking where it has been.
However, with a strong financial infrastructure in place, CFOs are often able to take a broader role within the executive leadership team managing the business. You see this as firms evolve through leadership succession and a generation of executives emerge who are more focused on using data and internal reporting to manage the business versus founders who tend to be more intuitive decision makers since they have grown the business from inception. The CFO also takes a leading role in managing the firm’s capital structure as it evolves – whether to raise debt or take in outsider investors.
How much of your work do you feel could be automated?
You have to distinguish between the executive function, which is focused on culture, strategy and leadership structure, and the day-to-day financial operations that a CFO is responsible for. In a highly functioning organization, the CFO should spend as much of his or her time on the judgement and leadership elements that can’t be replaced by a machine.
In the near to medium term, we will see the industry move further along the automation curve in terms of basic financial operations. Currently, only the largest managers have the size and volume to automate significant portions of their business processes the way a traditional operating company might. Over time, I expect the technology and data quality initiatives throughout the industry to drive the automation bar lower and lower.
This is not always about cost savings or reducing headcount. It may reduce the need to add staff over time, but more importantly, it should allow the existing staff to function at a higher level, do more analysis of data and spend time improving internal and external reporting.
What skills would you like to develop to do your job better?
Most CFOs grow up in a binary world: yes and no, right and wrong. As CFOs progress in their careers hopefully they learn that when someone else has a different opinion, it’s not necessarily that one is right and one is wrong, but that each has a different point of view. This perspective helps when a situation requires consensus building or change management. Over the years, I have evolved along this path to see the shades of gray and other folks’ points of view, but like most people I could always do a better job of walking a mile in someone else’s shoes before I make a decision.
How can the relationship between auditors, valuators and CFOs be better optimized from the beginning?
You have to invest in service provider relationships and treat them as a partnership, just as you invest in your own team. I’ve made an effort to meet our service providers at their offices from time to time as opposed to always expecting them to come to us. It’s a subtle distinction and does require an investment in time, but I find that I am more focused on the relationship when I am at their office and meet a deeper group of their staff.