Frank D’Amelio, CFO-in-Residence, on Setting Priorities in Challenging Times

When Frank D’Amelio was named SVP and CFO of Pfizer in 2007, he had more than two decades of finance and operational leadership behind him, including serving as both COO and CFO at Lucent Technologies. For the next 15 years at Pfizer, D’Amelio held roles of increasing responsibility, including for the pharmaceutical company’s worldwide global supply chain, with the manufacture and distribution of its COVID-19 vaccine. He also led business development transactions at Pfizer totaling nearly $200 billion, including the acquisitions and integration of Wyeth Pharmaceuticals, King Pharmaceuticals, and Hospira Inc. During his tenure, Pfizer’s market capitalization increased by nearly $165 billion.

Following his retirement from Pfizer in 2022, D’Amelio was named independent senior advisor for Deloitte’s CFO Program as CFO-in-residence. On a recent CFO 4Sight webinar, he shared his management perspectives with Steve Gallucci, US national managing partner for Deloitte’s Chief Financial Officer Program.

Gallucci: What is your perspective on how to manage through a challenging economy? What are issues CFOs should be focused on?

D’Amelio: If I were a CFO today, I’d focus on three main issues regardless of whether we’re in a recession or not, starting with a focus on execution excellence, because execution is everything for any CFO. Financial performance is, of course, also critical, but if a company executes well, the financials will follow. Second is cash management. When I was CFO, I would push for performance from the income statement to identify savings, but it’s also important to get efficiencies from the balance sheet. For instance, when I was at Pfizer, our balance sheet at any given time had roughly $25 billion in working capital between receivables, inventory, and payables. If I could get a 5% improvement on that, that’s $1.25 billion of found money.

Capital allocation is a third essential focus for CFOs facing heightened uncertainty. While strategy and talent management are also obviously important, when you’re a CFO going through a period like we have today, you’ve got to find the sweet spot that balances managing risk and taking advantage of opportunity. At times of significant uncertainty, CFOs may tend to be more prudent and lean in more on risk over opportunity, but with valuations much lower, those can be times to deploy capital in a productive way with M&A. Pfizer acquired Wyeth during the recession of 2008-2009, at a time when the capital markets were closed and valuations were way down. Pfizer still managed to execute on a $68 billion transaction, a deal that included  a vaccine business and would later make Pfizer’s COVID-19 vaccine possible.

At Pfizer, I used to say the role of the CFO allowed me to get involved in anything inside the company on any given day.

— Frank D’Amelio, Deloitte CFO-in-Residence

Gallucci: How did you manage communication about the Wyeth acquisition to gain the  support of investors and other stakeholders at the time?

D’Amelio: To me, the priorities are to communicate a lot, execute, and make sure the message is getting out to shareholders. With a big deal like that, once the prep work is complete and the board has agreed to it, you need to start explaining the investment thesis to shareholders. The morning of our Wyeth announcement, we held a big investor meeting to discuss what we were planning and followed that with one-on-one meetings and a dinner meeting at the end of the week with our largest shareholders. With the initial announcement, we put out our combined revenue growth, earnings, and synergy targets for the next year and for longer term. One of my favorite sayings is “under commit, over deliver.”  If I’m going to reset targets I’d much rather be raising guidance than reducing it.

Our investment thesis with the Wyeth acquisition was simple and easy to understand: it was a diversification play. We were a pure-form pharma company at the time without a vaccine business, and we concluded that vaccines were going to be one of the value drivers for the industry in the years ahead. Wyeth had a strong vaccine business with healthy margins. There were other factors as well, including significant synergies of the corporate centers, but I think the key was how we conveyed the investment thesis and put numbers around that to the investment community.

Gallucci: I know talent and leadership development are important to you. When you mentor executives for future C-suite roles, what are the skills and experiences you help them focus on for their development?

D’Amelio: Building a strong team should be a top CFO priority because outstanding talent wants to be on an outstanding team. At the individual level, one of the things I did for my team members was getting them visibility in front of the audit committee and the board. I also believe in not limiting people’s work to the specific job they have at the moment; when we were working on a deal, I’d call in one of my direct reports who wasn’t involved in M&A but in a commercial support role. Just being in the meetings can be an opportunity for learning, and once they got comfortable, they would begin adding value.

I would also encourage people to look for assignments outside their comfort zone. One of my former direct reports who was the commercial finance lead at Pfizer is now running one of the business units. I had made a similar move earlier in my career; before I became CFO at Lucent, I ran one of the most technical businesses at the company. For me, numbers come easy, but technology doesn’t. It was a way to learn a set of skills I wouldn’t have had if I had stayed in my comfort zone.

I also think it’s important for the CFO to be an advocate for folks on the team and be open to them taking opportunities inside and outside the company to advance their careers. More than 25 of my finance team members over the years have gone on to CFO and CEO roles elsewhere. I never worried that losing people could hurt our team; I always kept a bench of talented employees ready to move up when openings arose.