How Ruth Porat Succeed To Get Google Financially Disciplined
- Building financial discipline doesn’t mean just cost cutting. A good CFO should also invest in the future to help grow the company. Ruth did that by hiring people to support and sell the Google Cloud business, which is the company’s entry into the enterprise computing industry.
Businesses perform better when you have diversity of view in your senior leadership positions. This is not just the right thing to do socially; it’s the right thing to do for your business. Ruth Porat
Ruth Porat made a name for herself as the CFO and Executive Vice President of Morgan Stanley. When it was time for her to move on to a new challenge, one thing she was clear about was that she didn’t want to be a CFO. But, when she had a conversation about becoming the CFO for Google she jumped on the idea.
Google has been a great company and Ruth loved it enough to invest in it long before she took a job there. Market analysts were skeptical about her, but within a few years she was able to build financial discipline in the company and build a roadmap for the future. Her efforts bore fruit and the rising stock price of the company is testament to her achievements.
How was Ruth able to build financial discipline in Google? She made some deliberate and sometimes uncomfortable choices.
Choosing the Hard Road
CEOs and CFOs have to keep an eye on the stock price of their companies. This is one of the most important measures of their performance that investors hold them accountable for.
One of the ways of jacking up the stock price is by giving dividends. With $100 billion in cash, Ruth had as an easy route for Google. All she had to do was declare dividends, but she didn’t do that. She chose a hard road.
Ruth decided to build financial discipline at Google. The company was doing too many things at that time and not every project was working. Ruth shutdown some of these projects and moved others into the “other bets” category.
Investing for the Future
Building financial discipline doesn’t mean just cost cutting. A good CFO should also invest in the future to help grow the company. Ruth did that by hiring people to support and sell the Google Cloud business, which is the company’s entry into the enterprise computing industry.
Some of the other businesses that Ruth focused on were the voice interface, autonomous vehicles, and health sector. Verily is a subsidiary of Alphabet, the parent company of Google, which is focused on combining data analytics and clinical expertise to empower patients. The company is conducting research to understand how people get sick and it is building products like miniature glucose monitors.
Being Bold With Changes
Some of the changes that Ruth brought in Google were not popular among the employees. She even got the nickname Ruth-less for her actions. But, her undeterred work in the company eventually bore fruit and that earned her the nickname Ruth-full.
Ruth had managers set business milestones, factor in the cost of employee stock options into their budgets, and she focused on return adjusted innovation. She was able to do this because of her core belief that every leader should invest for the long term.
The financial crisis of 2008 was fertile training ground for Ruth. She learnt that when times are good, companies have to prepare and invest for the future. The two things that should come together for leaders to make this investment for the long term are ability and the will. If you have the ability to invest when the economy is growing, you should also have the will to invest.
Focusing On Data
Ruth’s main objective at Google was to enable the partners to make the right decisions. She was able to do that by creating visibility for all the data that they had.
Data was available to all the partners, but Ruth knew that her job was to convey the insights from the data and communicate that in a way that is easy to understand. With the right insights, the partners were able to prioritize their tasks and stack-rank all their activities.
“Anchor everything in data and the rest will follow” – phrase at Alphabet and Google.
Data, according to Ruth, should help you arrive at a decision. Analytics will help you to rank your objectives or the problems you want to solve. Numbers should tell you what the opportunities are, what’s the potential downside, and what the trade-offs are.
Thinking Clearly- The Quark Test
Ruth’s father taught himself physics while he was a soldier in the British army. When Ruth was just a little kid, her father used to tell her that if a physicist isn’t able to define a quark in less than 60 seconds then they do not know what they are talking about.
That clarity of thought on a subject is something that Ruth has used for years, including her time at Google. According to Ruth, if you are not able to explain what you are doing and why in 60 seconds it means that you are not thinking clearly. If you can’t explain what you are doing in numbers, you are not thinking clearly.
Future of Google
Google may not rely too much on the revenues it generates from its highly popular search engine in the future. Earlier this year, Ruth confirmed that the company has been investing heavily in the Cloud. While invests in search continues, Ruth is focused on building up revenues from other businesses to diversify the revenue streams of the company.
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