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Archive for March, 2008

It really is about your Finance team…..

March 31st, 2008 Comments off

I commented last week about an assessment of your Finance team and to pose the question of how strong they are.  However, the question as to the strength of your Finance team is not just an assessment of them and their skills, but your own strengths and what you have done to develop the team, mentor them, and create a cohesive group that brings value to the organization.  I have always placed a strong value and emphasis on the team so to see situations in which processes deteriorate and morale lags makes me question the skillsets of those leading the finance effort and their ability to deliver value within an organization.

Recently retiring Cisco CFO Dennis Powell commented recently on this same subject and noted that the quality of the team is as important as the accounting systems that are in place.  Without a quality team there is no efficient utilization of the systems in place.  Read more of his comments at http://www.cfo.com/article.cfm/10754935?f=alerts .

Categories: CorpFin Cafe, Management Tags:

Employee Compensation – the Sacred Cow….

March 27th, 2008 Comments off

     One of the most important lessons that I have learned over the years at the various companies I have been employeed with is to never, under any circumstances, incorporate error in any way into Employee related compensation.  I have had the opportunity to learn from others mistakes and have seen the effect that these types of errors invoke.  From decreased morale levels, to lost productivity, to a reluctance to act appropriately on behalf of the company.

 

Read more of my comments in Employee Compensation – Sacred Cow

HIRED! Senior Cost Accountant….

March 27th, 2008 Comments off

Senior Cost Accountant for a Southern California-based middle market manufacturer of sports optics, apparel, and accessories.  Congratulations!

There’s nothing like making a direct introduction and seeing it result in a hire!  (Except maybe my own hire…!)

Categories: CorpFin Careers Tags:

CorpFin Cafe Success Stories…..

March 27th, 2008 Comments off

With my first success in helping in the direct placement of a finance candidate, I’ve added a new page to the site called Cafe Success Stories.  Hopefully this list grows considerably over time.  Afterall, one of my primary goals is to offer assistance to those in my network!

CorpFin Cafe Success Stories is an itemization of positions that I have been able to play a facilitating role in the hiring process.  The roles that I have been playing is working closely with my small group of Recruiters to hear about their current projects that they need assistance with or to forward quality candidates to them whom I will personally endorse and would enjoy working with in the future.I hope this becomes a VERY lengthy listing of candidate hires over time…..

Categories: CorpFin Cafe, CorpFin Careers Tags:

A disconnect between B-Schools and Corporate Finance?

March 27th, 2008 Comments off

There has been an increased level of commentary lately regarding the disconnect between B-schools and the world of Corporate Finance.  Many are criticizing the lack of reality in the theory based programs that are taught.  Is that really a surprise?

During my MBA studies at USC there was an extensive offering of Finance classes and I couldn’t take enough of them.  I love the topic and it was difficult to make the final selections.  However, while they were absolutely thought and discussion provoking, I often found myself asking how some of these topics and approaches could really be applied in a true corporate capacity.  At the time I was working as the Manager of FP&A at Pacific Sunwear.  Could I really see some of what was getting discussed applied there?  Absolutely not.  What the classes offered though was a different perspective that might allow you to tweak an approach or process and improve your current corporate structure.  The true value was working with other individuals who had strong corporate backgrounds, in a variety of disciplines, and develop a cohesive team.

I tried to continue my commitment to students after graduation when I worked with USC to host a group of interns to work on special ad-hoc projects, typically during Spring Break.  Although the students typically needed some heavy guidance to understand the business and develop momentum, they often worked on projects I would have assigned to my own team had we had the additional time resources.

B-Schools are reaching out and attempting to create stronger links with day-to-day corporate environments, but it likely needs to be incorporated into the classroom more external speakers, panels, or other related focus groups. Read more on the recent article published on CFO.com : http://www.cfo.com/article.cfm/10927537?f=alerts

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What is the state of your Finance organization?

March 26th, 2008 Comments off

I’ve worked in a wide variety of Finance organizations for companies ranging from $30 million to $1 billion.  Within each one of those organizations I had takeaways that ultimately shaped my career and the manner in which I coach and interact with my teams.  From an assessment on morale, to turnover, to productivity levels, what is the state of your Finance organization?

I have been fortunate in that the first Finance position I held reported directly to the CFO, who was also an ex-Deloitte partner.  Most in the organization thought he was difficult, but ultimately, it became clear that he was asking the appropriate questions, which ultimately led to increased accountability.  However, turnover was negligent and we had extremely high levels of productivity within the department and delivered all closings and projects on time.  In fact, we even completed an ERP implementation with the current team, albeit with elevated anxiety levels. 

The contrast to this was another large public company that had a very significant Finance staff.  The group was run with an iron fist and was managed in a way that did not condone open thinking or questioning.  Projects were delegated with only the most general of instructions, regardless of any attempt to clarify upfront.  Ultimately, projects were never completed to “spec” and often resulted in condescending comments.  It was no surprise that turnover in this department was the highest for any department in the company.

Although it goes without question that there are standards and absolute rules that need to be adhered to in any Finance organization, team members need to be treated with respect and the accomplishments of the team need to be recognized.  I strived to achieve, in a pre-merger capacity at MGE, one of the lowest (perhaps lowest?) rates of turnover for any department.  I was fortunate to be have great individuals who looked to challenge themselves and deliver great results.  Our team was looked upon as a source of expertise within the organization, was well respected, and mutually supported all other functional areas.  It was an approach that was validated through the feedback of the staff.  Turnover has a very real, and negative, financial and productive impact.

What is the state of your Finance organization?

Categories: CorpFin Cafe, Management Tags:

Views from inside a $6.5 billion merger machine….

March 25th, 2008 Comments off

Nothing prepared me for what would be a living case study in merger missteps.
     We were in the midst of a 3-year growth plan, were producing strong and improving results, and had finally achieved some stability in our management team when our parent company (Schneider Electric) announced the acquisition of our largest competitor APC in a $6.5 billion deal.  While no two changes of control that I had been through were alike, there are some basic premises that should be adhered to in order to ensure the highest level of success.  Unfortunately, the majority of these were tossed out the window in the merger between APC and MGE.  One of the more surprising elements to me was that Schneider took a very hands off approach and basically tossed our two entities into one large sandbox to “work it out”.  Aside from a newly assigned President and CFO from the parent company, the new management team was almost entirely comprised of APC personnel.  It made no difference that the majority of these folks were the same people that had failed to create value previously and subsequently drove their stock price to continual new lows and created and opportunity for Schneider to purchase their entity.  As with other situations in my finance career, this was certainly a living case study that I could take with me wherever I go.  Between my work with McKinsey, Boston Consulting, participating in the original “clean rooms”, and eventually the integration teams, it’s a combination of experience that I will take with me to my future companies. 
Although written in 2005, the following article by Kenneth W. Frank is a simple retro view about some of the more important aspects of merger work…after the financials!    Read
Making Acquisitions Work .

Categories: CorpFin Cafe, M&A Tags:

When autonomy is implemented without standards.

March 25th, 2008 Comments off

How international distributor issues were addressed in the G.T. apparel program.
     As a newly appointed Business Analyst for the apparel program at G.T. Bicycles, I was tasked with developing a structure and increasing the strength of a previously unmanaged program.  For a company that was so heavily influenced by hardgoods and manufacturing, the creation of a “Soft Goods Subculture” would not be an easy one and would take an extended period.  Especially so since this was to extend to the company’s international distributor network.
Read more of my commentary in
Autonomy without standards .

Revenue recognition – how clear are you?

March 25th, 2008 Comments off

     In the course of my recent interviews with prospective new companies, as well as recruiters, revenue recognition is one of the most sensitive topics out there.  If you don’t have a clear understanding of this area it very well may limit your possibilities.  The sensitivity to this topic is extremely high since there have been so many companies that have had to restate their financials due to inappropriate recognition of revenues.  While some have been honest mistakes, others have been clear-cut cases of fraud to improve the stated financial results.  With a significant portion of the MGE Service revenues being contract related, and with time periods ranging from one quarter to multiple years, we had to be very diligent in our review of the monthly service revenues to ensure we were appropriately booking our orders and revenues.  Although our system may not have been the most current, our review by the Auditors was always smooth and we were not subject to any restatements or adverse opinions in this area.
While there is no shortage of accounting bulletins to clarify this area, perhaps an equally important perspective is what initiated this standardization in the first place and what were some of the considerations in drafting FASB 97-2.  The attached article will help you with that.
Read more on
FASB 97-2 considerations ……

When traditional valuations no longer work.

March 25th, 2008 Comments off

How do you interpret a company losing 50% of it’s market value with good results?
     One of my interests is the financial markets and the factors that influence their movements.  Well before I was following the Retail sector at Wedbush Morgan I have always had an interest in retail and apparel stocks.  Recently, I’ve watched of company valuations plummet to values that are unexplainable with standard valuation methods.  Two of those in particular are Wet Seal and Crocs.  There’s no question that the Retail and Apparel sector has come under extreme pressure due to the economy and concerns of consumer spending.  In the case of Wet Seal, they have clearly had problems with same store sales, have recently put in a new management team, and are addressing multiple merchandising issues.  However, they have no debt, are still profitable on an annual basis, are doing over $600 million in revenues, and have almost $100 million in cash.  Yet the company’s stock price was driven to a low of $1.81 and gave the company a market cap of $165 million.  It traded at a 75% discount to sales and had cash levels of almost 60%.  UNBELIEVABLE!
With consideration to Crocs, the company was trading at $32 a share just before the announcement of their earnings.  They announced, sales came in at almost a 200% increase, earnings were up almost 100% and they provided guidance of $2.69 per share in 2008.  The company has no debt and they are expected to rack up over $1 billion in sales.  However, over the coming weeks the stock was beat down to $16 a share! 
Both of these companies came under extreme attacks from Short Sellers.  Don’t know what Short Sellers are?  You should, as they are having a pronounced effect on healthy companies and are driving increased volatility in the market.
The following article describes how one company is trying to battle them.
http://www.cfo.com/article.cfm/10904582?f=alerts 

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