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Archive for October, 2009

S&OP, Inventory Levels, A/O, & Your Forecast….

October 29th, 2009 Comments off

            Lately we’ve started getting back into the heart of the earnings season and the scheduling of Quarterly calls to discuss results. With a keen focus on the Retail and Apparel sector, it’s been interesting to hear the shift in planning for many of the manufacturers.  Whether right or wrong, I’m hearing a consistency in the approach that we are taking, at my own company, relative to our peers in the industry. There’s clearly been a shift towards tightening the gap between inventory planning commitments relative to the PO commitment on the part of customers. With a decrease in PO commitment by customers, their shift to a reliance on A/O for the Holidays, how’s a manufacturer to plan if retailers are planning flat growth but PO submissions are noticeably down?

 

            Although this was not the quandary we were dealt at MGE, we had other significant challenges that forced us to implement a comprehensive Sales & Operation Planning initiative aimed at improving our supply chain, our demand & supply planning, as well as develop the indicators that would be used in the future to measure our success. For MGE, we were fortunate enough to have a team that believed in the potential of the initiative, but the support & involvement of our global executive team (ok…mandate) in the process. It was also a huge undertaking for our company due to the necessary personnel that needed to be involved. The scope of the project was truly impressive.

 

            However, most fail to appreciate the scope of such a process. “Oh…interesting – a new Sales & Operation Planning process. That must be some work….” Now there’s a simplistic view.

 

Let’s really break down what our S&OP process entailed:

Ø  Necessary involvement on the part of Sales & Marketing, Manufacturing, Product Design, Finance, and Planning & Logistics.

Ø  Development of Weekly, Monthly, and Quarterly planning schedules for all key areas.

Ø  Dissecting planning down to the levels of Lines of Business, Product Segment, Product Families, SKU’s, etc.

Ø  Identifying all the key variables that would affect the process, which included raw material lead times, manufacture lead times, freight times to key markets, processing times at destination port, etc.

You can quickly see that this is an incredibly involved and detailed process that will affect every area of the organization. This is not merely a Purchasing or Finance function, it’s an organization endeavor.

 

            When discussing a targeted improvement in your working capital, this process touches just about every portion. Let’s really break this process down:

Ø  The company engages in a data gathering process and determines the depth/detail of the reporting they want considering in their decision making.

Ø  All collected data will be used for the Demand Planning stage analyzing sales data, production data, and any other KPI’s or metrics currently in place.

Ø  All the data compiled and analyzed in the demand planning phase will be utilized in the Supply Planning stage. The need here will be to take into account any constraints in capacity analysis, the supply of existing product lines, introduction of new lines, and the review of factor supply plans.

Ø  The effort put forth in the supply planning phase will lead to a Preliminary S&OP Review, which essentially will be a nearly final supply plan, distribution plan, and the resulting financial plan.

Ø  The final stage is the Executive Review, in which the management team is reviewing the expected performance analysis, assessing the necessary investment decisions, resolving any potential conflicts, and escalating any necessary portions of the plan. At this stage, the Executive Team is expected to provided the necessary approval and support to execute.

 

            Need to cut your inventory levels a bit? Need to get a quicker delivery of your product? Need better terms from your vendors? All achievable with a rather simplistic approach. However, if you are truly working with a global entity with a complex design, manufacture, and distribution model, a half-ass piece meal approach isn’t going to work, nor will it give you the long-term sustainable advantage needed to get to the next level. If you want to create a truly competitive advantage then the effort needs to reach across the entire organization.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Book Review: Competing On Analytics

October 28th, 2009 Comments off

            The schedule has been a bit rough lately but I’ve finally managed to finish reading one of the book choices that I picked up almost 6-months ago. The book, “Competing On Analytics”, is one of the many offerings from the Harvard Business School Press and is written by Thomas Davenport and Jeanne Harris. This book is also a great complement to my views of the CFO being the Master of Measurement within the organization.  For any senior Finance manager, being a valuable partner in the operation goes far beyond closing the month and generating the latest set of financials for everyone to review and see where results are with respect to the Budget. You must add value beyond a system generated report….

 competing-on-analytics

            That’s where this book is a fantastic illustration of the approach and areas that need to be focused on for superior results. In the book, the authors discuss the different elements of the approach, as well as the ingredients necessary to be successful in this approach. Particularly;

Ø  Using Analytics to build a distinctive capability

Ø  Defining the key attributes of analytical companies and competitors

Ø  Customer and Supplier applications

Ø  Transforming the ability to compete on Analytics into a lasting competitive advantage

 

            These are only a few of the areas covered within the book. However, one of the mantras that I have taken to the companies that I have worked with is the last one noted above: Transforming environments in a way that the improved results are sustainable and result in long-term advantage. There is nothing won in using the band-aid approach, making quick changes that can’t be sustained, for only short-term bottom line results. Eventually the short-sightedness of this approach will be known and the shallowness of your skills becomes apparent.

 

            The approach discussed in the book is also not for everyone. You obviously need to have a curiosity about the results, a desire to know what is driving the results of your company, and how you can further exploit that information for improved results. The approach of Analytics is not about going in and making wholesale expense cuts or reducing headcount. While these may ultimately be a possible action, it’s only after the appropriate data has been collected, reviewed, verified, and ultimately tabled for an educated business decision. Again, it all comes down to creating long-term and sustainable changes in the business and strengthening market position.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Ken Tudhope: CFO or Controller…?

October 20th, 2009 Comments off

     It’s a topic that has been widely covered lately, but Ken weighs in with his views on the differences between a Controller and a CFO…..

As a networker and recruiter of senior finance and accounting talent, I often meet CFOs who truly fit the bill, but oftentimes I meet folks with a CFO title in a Controller job.  Some people have such a hard time breaking into the CFO ranks, while others have no problem at all.  I’ve often wondered what separates a good CFO from the others working in the finance and accounting function, and I’ve identified 5 factors I believe which clearly define the CFO position:

 

·         CFOs are more outward facing than any other position in finance and accounting.  The outside world is more dynamic and risky, and the CFO position requires maturity, real technical knowledge, and good relationships developed over a career.  The outward-facing relationships include investors, bankers, regulators, clients, vendors, accountants, industry contacts, etc.  Many people know that I am passionate about networking and relationships.  Many of these outward-facing relationships are developed deeply through networking.   If you are a CFO in a middle-market company but it’s actually the CEO who “owns” these relationships, you are acting like a controller.

 

·         CFOs are more forward looking than any other position in finance and accounting.  Whereas a Controller spends much of their time looking backward while closing the books or determining how to record an entry according to GAAP, CFOs spend relatively more of their time on hiring, developing their people, budgeting, planning and most importantly, on strategy.  These are clearly things that impact the future.  Listen to a good public company conference call and you will see how much time is spent on how current information will impact the future.  Networking also comes in here as well, as what is more forward looking than building a relationship? 

 

·         CFOs are more expansive in their thinking.  I recently had a conversation where a hiring CEO was describing what he wanted in a CFO.  The CEO said, “I want them to take the cost out of the cost structure!”  I thought to myself that, for a good CFO, this isn’t really a huge requirement.  And while a good CFO needs to do that, the great ones will also be thinking about how to expand the business.  Cost-cutting opportunities are finite; expansion is limitless.  This is why good CFOs are constantly thinking about M&A opportunities.  Have you ever heard of a Controller proposing a merger or acquisition?  Real CFOs influence strategy.  Real CFOs sell!

 

·         CFOs are experts on the Balance Sheet.  The Income Statement is simple; the Balance Sheet is complex.  The Income Statement takes the short view; the Balance Sheet takes the long view.  The Income Statement looks backward; the balance sheet will impact the future.  More than any other position in Finance and Accounting, the CFO is the expert on the Balance Sheet. 

 

·         A good CFO is also a good networker.  I have interacted with hundreds of CFOs and I have determined that good CFOs are good networkers because most of the responsibilities and activities mentioned above require great relationships inside and outside the company.   Good networking is a requirement to excel as a CFO, much more so than any other position in finance and accounting. 

 

If you are one of the many people who aspire to be a CFO, I recommend that you ponder what it is you will need to do differently not only to break into the CFO ranks, but also how you can excel there. 

 

Ken Tudhope

Project Pro Search

ktudhope@projectprosearch.com

Core Competencies vs. Key Inputs: Manage your risk….

October 19th, 2009 Comments off

            Last week I had the opportunity to attend a panel discussion on growth strategies in the current economy. The panel was comprised of key executives from US Bank, Mission Hospital, Apria Healthcare, and Toyota. All on the panel discussed what they had done over the last 12-18 months to reduce operating expenses, improve working capital positions, or in the case of Mission Hospital, revise their M&A strategy in the acquisition of a local hospital. One interesting point that was tabled by a few on the panel was the general point of reducing expenses or portions of their operations that were not a “core competency”. However, I’m not so sure companies really give the appropriate consideration to assessing “core competencies” and the contributions that certain portions of the operation contribute if not viewed as a core competency.

 

            One specific example I have in mind was part of a preliminary restructuring effort that was put into play when I was working with MGE. There was a very heavy initiative by our global management team to further improve our EBIT results. This was in preparation for a final valuation tied to the purchase of the last outstanding portion of our company. We were being tasked with reducing our operating expenses and eliminating those that were not part of our core competency, which was viewed as the manufacture and service of UPS systems. For all intensive purposes, we primarily handled final assembly and testing of those systems.  At the time, our company owned & operated a transformer manufacturing facility only a few miles away.  It was determined that this was something that was not part of our core competency, was product that could be outsourced, and should be sold. If you are familiar with a UPS system, you then know how critical a component a transformer is.  Regardless, after identifying the buyer and going through all the valuation and due diligence steps, the operation was sold.

 

            Fast forward 2 years.  As part of a North America EBIT development plan, there were 5-key areas that we decided to focus on to not only improve an already admirable EBIT result, but to identify areas of risk to our EBIT. One of those was the sourcing and purchasing of transformers. It was confirmed by outside consultants, and in agreement with earlier objections to sell the operation, that there was significant single source risk with transformers, and if our one supplier source were to have any type of disruption in delivery, would immediately impact our results. If this one small company had a fire, decided to engage a new larger customer, or perhaps drop our company, that it would significantly affect our ability to deliver on orders that we already had in place. Further, it was determined that the window to bring a new manufacturer online could be as much as 6-12 months.

 

            Ultimately, the debate is not about simply identifying your core competency and focusing on just that. It’s about appropriately identifying the key / critical input and making sure that in your decision-making you are not eliminating a portion of your operation that will put the company at risk. While it might seem that the concept of core competency is pretty black & white, you can’t overlook the necessary considerations to key inputs and their effect on executing your core competency. Do you have the appropriate contingencies in place to ensure your mitigating any revenue risk? More importantly, have you taken the time to really identify what your critical inputs are and that you have supplier contingencies?

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Ken Tudhope notes: Techno-Networking….

October 15th, 2009 Comments off

     If you have kids, you know what MySpace.com is all about.  It’s the cyber-place where the teenagers go to flirt, be creative, gossip, and even be a little (or a lot) rebellious.  As parents, we often look to see what our kids have on their MySpace.com page and after we assure ourselves that our child hasn’t posted anything too embarrassing or inappropriate, we breathe easy again.  We tend to forget, however, what kind of crazy pre-cyber things we did when we were teenagers! 

 

     The technical name for MySpace.com, Facebook.com, and other similar sites is “social networking”.  Networking!  Now you know why I’m writing about MySpace.com.  Don’t worry, I’m not going to ask you to create a MySpace page, but I am going to encourage you to embrace emerging technology tools as you build your network of connections. 


     For me personally, I really like LinkedIn.com.  First, you can find people when they move, even people with whom you haven’t been in contact for several years.  For example, I searched on LinkedIn for the company “SMC Networks”, and to my pleasant surprise I found many of the people I worked with at SMC in the late 90’s.  With most of us having gone in different directions over the years, it was remarkable to me that I could connect with them with just a few clicks!  Second, and even more remarkable, you can be introduced to people you’ve never met through your LinkedIn contacts.  Type in the name of someone you’d like to meet and you’ll find out who you know that knows that person you want to meet.  A very powerful tool when used properly.  To connect with me on LinkedIn go to http://www.linkedin.com/in/kentudhope


     In addition to LinkedIn there is Plaxo, a service which will send an e-mail periodically asking people in your database (e.g., Outlook, Act!) to update their contact information:  a recent job change, a company change, a move, new address and the like.  Another very powerful tool is ConstantContact.com which helps with letters, announcements, etc.   A very simple way to stay in touch with your contacts is to utilize an online directory provided by various networking organizations – FEI has one for its members.


     If I can help you learn about these powerful networking tools, or if you need a quick tutoring session, please give me a call.  Maybe someday you’ll introduce a new networking idea to me!

 

Ken Tudhope

Project Pro Search

ktudhope@projectprosearch.com

 

 

Creating & Communicating a Financial Mission….

October 13th, 2009 Comments off

            Yesterday I was speaking with some peers that work in the same industry that Osiris is in and we touched on the topic of the difficulty of developing and communicating a financial vision & strategy for a company where this element was noticeably absent, or weak. Part of the concern was that their organization had a deep-rooted history of success, but in the more recent Quarters, was not performing to historical standards and the company really needed to implement more in-depth reporting to support a new level of decision making in the organization. How do you implement such a critical new element in the face of strong personalities and individuals who are not accustomed to being second guessed?

            Great question….and not to mention, quite the dilemma. For whatever reason, I’ve become the go-to guy for these projects in previous organizations, and the reason for which I was brought into my current company. As was discussed yesterday, there are the strict standards that have to be communicated in the reporting of a company’s financials, however, there are multitudes of gray when communicating with the different functional areas when qualifying the results or developing the Budget for the coming season.  Every company is going to have their “Rock Stars” within each of the function areas. Whether this is Sales, Marketing, Engineering, or R&D, it’s imperative to know what motivates and drives each one of these respective groups. It’s important to know if they really understand how their areas impact the financial results of the company. It’s absolutely imperative that they are engaged in a collaborative way to share information, to educate them about how their actions affect the financial results, as well as understanding what they need to accomplish their departmental goals.

 

Ø  Have they previously worked in a very narrow scope / silo-type organization without any accountability?

Ø  Has there previously been a collaborative approach in the development and sharing of company financial information?

Ø  Are the employees clear about what the financial goals are for the organization? Is there a financial mission that has been communicated?

Ø  Are there metrics in place so that employees can see the progress being made and that their efforts to partner with Finance are producing results?

Ø  Is your approach to working with other departments viewed as a burden with more work to prepare or are you viewed as a support structure providing a valuable resource?

Ø  Are you capable of developing a level of reporting and metrics that will satisfy the reporting needs of the company?

 

            The considerations are endless, but it all comes down to the basic element of communication and knowing how to adjust your message and mission to the different functional areas that you need to deal with.  There’s also the need to know that there is an acceptable pace of change and that change is not going to happen overnight. However, the change does need to happen and it needs to be tracked to ensure that forward progress is being achieved. You also need to ask yourself if you have the experience and skillset to quickly assess the environment and needs of the company in the development of the mission. For a company that has a multitude of  “Rock Stars”, the need to establish credibility is critical and must happen quickly.  No doubt a challenge, but always a worthwhile challenge to take on….

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Woodruff-Sawyer Board Panel: Conclusion

October 7th, 2009 Comments off

            In my conclusion of summarizing the Woodruff-Sawyer panel discussion on Board of Directors seat appointments, the final discussion point of the panel addressed the three key areas of Board consideration. These areas included Board dynamics, the management process & interaction with the Board, as well as the levels of protection afforded to Board members in carrying out their respective duties.  As discussed in my previous post, Bruce Lachenauer of Spencer Stuart had commented that it can be as difficult to remove yourself from the Board as it is getting the position in the first place. With this consideration in mind, great care must be taken by the candidate in assessing their offer.

 

            The panel spent good time discussing the considerations of Board dynamics. Some of the points that they touched on included;

Ø  Knowing what the views/perceptions are by Sr. Staff of the Board.

Ø  How the actions between Board members would be characterized.

Ø  What is the level of interaction between the Board and management?

Ø  What role does the Board play in corporate risk management?

Ø  What involvement does the Board have in the development of corporate strategy?

            Folino also commented that potential Board members should also be afforded the opportunity to engage and interview company executives in order to gain the appropriate insights on management styles, identify any concerns about corporate structure, or any other challenges a new Board member might have to deal with.   Additional considerations, outside of the management and member dynamics, might include;

Ø  Knowing the selection & interview process for new Board members.

Ø  Knowing the timing, frequency, and average agenda for meetings.

Ø  The nature of your ideal involvement with the Board.

Ø  Structure of Board meetings and conference calls.

Ø  Travel considerations for Board meetings and impact on current schedule.

           

            The final portion of the conversation touched on the compensation levels afforded to Board members, which will obviously vary according to the complexity and size of the organization. While Lachenauer commented that the average retainer is up over 50%, the level of compensation is still not commensurate with the level of work and risk for Board members, which has increases substantially in recent years. While there is typically a cash retainer, this is not the only level of compensation.  Lachenauer cited that the average cash retainer is approximately $75k. There is also typically an equity element, which is usually in the form of RSU’s. The level granted will also vary according to the size of the organization and will usually be higher for the smaller entities.

 

            I know as I start down this path to secure a Board position, which I am targeting for inside of the next 12-18 months, this was a very informative panel discussion to attend. For my colleagues out there who have experience sitting on a Board, I’d also welcome the feedback and know how your experiences compare to what I’ve outlined over the last few days.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Woodruff-Sawyer Board Panel: Part II

October 6th, 2009 Comments off

            Last week I gave an overview of the Woodruff-Sawyer panel discussion that I attended, which focused on the process of Board of Directors seat selection and the considerations to pursuing such a position.  I had previously left off at the considerations and value of sitting on the Board for an external organization.  As Bruce Lachenauer had discussed during the panel, sitting on the Board for an outside organization brings great perspectives to the company you work for if you are functional executive. However, in consideration to this pursuit, there are a number of considerations.

Ø  If you are seriously looking at such an endeavor, it’s ideal to start front-loading that effort with your existing company, President, or legal counsel to ensure there won’t be any issues with such an engagement.

Ø  Typically, any external Board appointments need to be run through your internal Board, regardless if you are a sitting member or not.

Ø  Preliminary support from your President or CEO is crucial in such an effort. 

            Paul Folino, Chairman of Emulex Corporation, also discussed the merits of sitting on a Non-Profit Board. Folino felt that this was a great way to get the feet wet with Board participation, while also giving something back to the community. However, as Folino cautioned, “don’t expect that the work load of a Non-Profit will be less than that of a standard corporate Board”.  This was also endorsed by one of the members of the audience, who also had extensive Non-Profit Board participation.

 

            With regards to the selection process, Lachenauer did not feel that a separate resume was warranted for the process. In his view, he has to do as much, if not more, due diligence for Board selections than a standard executive search. If the resume is more an overview of candidate’s background then it will lack the details that are often the important selling points in presenting a candidate for consideration. The accomplishments are critical and will need to be shared, and therefore, should not be excluded from the resume. Further comments by Lachenauer included:

Ø  The selection process is intended to find a candidate that will be entering into a long-term relationship & participation on the Board. As difficult as the interview process can be, it’s just as difficult to leave the Board, which puts a heavier emphasis on the long-term views.

Ø  Board members are not going to find you…you need to find them. 

            As a response to a question regarding whether an individual should pursue a Board seat for a public or private company, Folino commented that “there should be no consideration to Public or Private, but that it should come down to your background and the experience that you will bring to the table”.  Tomorrow I’ll wrap up my notes on the panel discussion with an overview of the key areas to consider with respect to choosing a Board, the management of risk in such an appointment, and additional considerations before accepting an offer.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Ken Tudhope: Recent Finance Search Statistics….

October 5th, 2009 Comments off

            The pace of job offers in Q3-2009 for Finance and Accounting Executive positions in Orange County picked up nicely!  Our data show that 2 times as many jobs were accepted in Q3-2009 versus Q2-2009, and more than 2.5 times Q3-2008.  The running average for the duration of the job search is 7.1 months, but for those who accepted during Q3-2009 the average was 8.13 months and the mode was 12 months.  The hiring process time for successful searches is very consistent at 1.4 – 1.7 months.  Top sources for these positions remain: executive search, coworkers, classmates, and CPA firms; however, in Q3-2009 several executive positions were found through online job boards and even one via Craigslist!  Referrals of one sort or another represent approximately 60% of the job offers accepted during the past two years.  While the pace of accepted job offers is increased, it should be noted that 25% of these jobs are located in the Los Angeles region rather than Orange County, and it may be that the job searchers are opening up to longer commutes and relocation. 

pps

            My continued recommendation for job searchers  is to focus on specific job goals.  You must be memorable to the people with job opportunity referrals.  Job searchers think that “casting a wide net” will mitigate risk, but my research and experience show that it actually seems to have the exact opposite result.  If you are not “special” you are not remembered, and you may confuse those who can help you.  A more focused effort will undoubtedly bring you more success.

            And last but never least, having a good elevator speech is invaluable.  Be specific, be purposeful and be brief.  People want to hear specifically what expertise you bring and why, they don’t want your life story.  This is the best way for you to be noticed when there is a potential referral. 

Thanks for reading . . . .

 

Ken Tudhope

Project Pro Search

ktudhope@projectprosearch.com

If I Hear the Word “Twitter” One More Time…..

October 2nd, 2009 Comments off

            It’s pretty interesting the varied responses I get when a conversation turns to the topic of Twitter and my reference to someone I’m connected with.  Either there’s an affirmation of the value, or a complete disdain for the platform and the perception that it’s a complete waste of one’s time. I suppose, that just like any other online portal, or finance consideration for that matter, it’s all about how you utilize the resource. I know that for myself, while I might use Twitter on a moderate basis, I also know that I have virtually eliminated other sources of news and information. Whether that might be MSNBC.com, CFO.com, Cycling News, or VeloNews, I can get all the same updates through the folks I follow on Twitter. Now instead of multiple sources, I have a single source news feed.

            While it has taken some time to refine the group that I follow, I find a tremendous value in the information that I’ve plugged into.  There is also more consideration than just the standard news feeds I’m getting. There’s also the numerous blogs, primarily financial for me, that provide great additional insights over and above the news feeds. Specifically, some of the folks that I follow, include: @startupcfo , @CFOWise , @BenParamore , @CFOCoach , and @CFOServices . There’s also a great real-time networking element on the site that I believe is an extension to what you can accomplish via LinkedIn.

            Although additional effort might be needed to establish a quality network via Twitter, it’s a very real possibility. As examples, I’ve established a great group that includes:

Ø  Private Equity / VC players in Boston

Ø  CEO’s (multiple…) in Colorado

Ø  Numerous folks nationally who specialize in Interim CFO services.

Ø  CPA’s located nationally

Ø  Retail & Apparel industry news feeds

Ø  Experts on IFRS and other emerging accounting issues

Ø  Recruiters in multiple sectors

            These are also folks that I enjoy helping out as much as the value that they provide to me.  Although some of these same folks have also become connections on LinkedIn, I would not have established the regular dialogue or relationships were it not for the original contact through Twitter.

            It is a very interesting little beast, but Twitter is a fantastic resource for networking and I’ll continue to get a chuckle out of the folks that so quickly disregard it and the potential value it brings. Like everything, it takes time and effort to develop a new element to your networking strategy, but this is a very worthwhile tool to invest in.

Thanks for reading. . . .

Jeffrey Ishmael