Thomas A. Fanning, executive vice president, CFO and treasurer at electric utility Southern Co. in Atlanta, believes that depth of industry knowledge is crucial for high performance. Fanning spoke with Business Finance editor in chief Laurie Brannen about working abroad, risk-management challenges and the key differences between managers and leaders.
Laurie Brannen: You've worked in leadership positions at several of Southern Co.'s subsidiaries. How does that experience translate into your current role?
Thomas A. Fanning: I'm in my 13th job with seven [Southern] companies. Southern allows people to build a base of competence and moves them around the system; it puts them into different circumstances, different assignments, both domestic and international. Being able to test yourself in different situations builds your expertise and gives you a lot more self-confidence. So now, as CFO, it really has given me a foundation of capability and credibility among a diverse group of people.
LB: Would you elaborate on the international aspect of that experience?
TAF: The international aspect was threefold. For a period of time, I was the CEO of Gulf Power, a subsidiary of Southern Company. When international privatization really started coming to the fore, I was also head of project development. So I traveled extensively, trying to figure out ways to bring value in the power markets around the world. The second element involved a deal in Australia. In a period of about six months I only came home once, but the work itself was a great experience. The third element of my international experience deals with what I do now. Southern Company, among American electric utilities, is the most widely held inter-nationally. I do extensive international travel in this role, meeting with investor groups. We go to Europe three times a year and Asia at least once a year.
LB: Describe the corporate culture at Southern Company and how it relates to your leadership style.
TAF: We kind of laugh at ourselves and say that we have conservative DNA at Southern. We have a model that we've developed that puts the customer as the first filter for every strategy and every execution of a strategy. We think if we're excellent with customers, that will ultimately determine success for shareholders. We define our excellence by three criteria: outstanding reliability, low prices -- significantly below national averages -- and the best customer satisfaction in our industry. And frankly that transcends the entire organization. Everybody understands it, and it pervades what I do.
When you look at the financial aspects, we have one of the strongest balance sheets and therefore one of the best bond ratings in our industry. We have an earnings-per-share track record that is reliable, predictable and sustainable.
LB: The future of the energy industry is perhaps more uncertain than most other sectors'. As CFO, what are some risk-management concerns, and how are you helping to address them?
TAF: Our industry has gone through some ebbs and flows, where different companies have sought higher returns. And in order to do that, many companies undertook business strategies that I think strayed from the tried-and-true, integrated, regulated electricity model. Now, some of those things have paid off, but I think it's very arguable that most of them have not. In fact, what you have seen is that risk has risen throughout the country -- not only to the shareholders but also to the customers of energy companies that have experimented with significant deregulation. I think the model that we've been able to employ here in the Southeast, which delivers value to our customers, has worked particularly well.
LB: What do you do to develop future finance leaders?
TAF: We create opportunities for people to demonstrate their capabilities in cross-functional and cross-company roles. We move finance personnel among our companies in the Southeast. We also have them work together with personnel across the system on solving problems outside their direct area of responsibility, like marketing or competitive generation. We use the feedback of all the people that they come in contact with to continue to develop them and to move them along as opportunities are warranted.
LB: There's a new book on leadership called "Why Should Anyone Be Led by You? What It Takes To Be an Authentic Leader." The authors, Rob Goffee and Gareth Jones, say that when they ask that question in seminars, almost nobody has an answer. Does that surprise you?
TAF: I think people confuse leadership and management. Management is the notion of having authority and coercive power. Leadership is the power to work through others and get people to buy in to what you're trying to do. I think CFOs these days have a really important role in the leadership of their organization. When I think about executing my leadership accountabilities and responsibilities, it's never more clear than when I have to sign the 404 certification along with our CEO, David Ratcliffe. That's a very stark moment.
CFOs must work across their respective functions to help and work with other functions to create value. Everyone has an ability to impact value. Leaders recognize that everything they say or do communicates something to someone. Having a clear vision and then acting on that vision in a disciplined, consistent manner creates trust in the organization, and that builds a foundation for future progress.
Finally, we must balance the "whats" and "hows" of our business. It's easy to get focused on the "whats" -- reliability, safety, customer service. But paying attention to the "hows" -- the way we work with each other -- may be the most important thing leaders can do. Companies must be bigger than their bottom line. The communities we serve must be better off in all aspects because we're there. And in interpersonal dealings -- a standard we call "Southern Style" -- we define our behaviors through achieving unquestionable trust, superior performance and total commitment.