Archive for November, 2009

Achieving Your Annual Goal with Base Hits….

November 11th, 2009 Comments off

     It seems that the more that I work with Managers in the different functional areas of a company, I have seen a particular theme in the approach to planning annual revenue and profitability targets.  The majority of the “players” are looking to have a new product or sales initiative to be their “home run” for the year.  With this approach, there is a significant level of risk in relying on a single initiative to achieve the annual plan.  Once that “home run” becomes a single or double, or perhaps a strike-out, you’re left scrambling in the last few innings of the year to come up alternatives, which will usually be a poor band-aid to the original plan.


     Rather than the “home run” approach, I have looked to securing “base hits” throughout the year and providing consistent and incremental successes to achieving the annual plan.  While I’m not really a baseball fan, it seems like the most appropriate analogy. While not glamorous in it’s approach, it’s a prudent approach to hitting your annual plan without carrying too high a level of risk for the company or your personal reputation.


     In one of the previous companies I worked with, you could take the view that for every additional $200k that could be dropped to the bottom line that EBIT could be increased by 100bp.  This essentially became my goal.  Not a single $200k improvement, nor was it a $2 million improvement, but multiple “base hits” of $200k.  I started scrubbing every element of our annual operating budget, both from a manufacturing perspective as well as a base cost perspective.


  1. Employee Procurement fees.  During one year we had nearly $500k in related expenses, primarily driven by individual managers being allowed to use external recruiters at their discretion.  The entire process was diverted back to H.R. where they centralized the process and control of expenses.


  1. Facility fees.  As we looked at what was happening in the local real estate market we believed that there was an opportunity to negotiate an early lease renewal with the property owner.  Knowing there were a few elements we could use in our favor, we negotiated a new 5-yr contract at a reduced rate with some additional incentives.

  1. Overtime expense.  This was another area that had no significant control.  Once we starting tracking O/T statistics and publishing our “Top-10” list of departments with the highest levels there was a “peer effect” that came into play and levels soon came down.

  1. Labor productivity.  About 30% of our annual operating budget was attributed to Field Services.  Through extensive work we had identified what the hourly cost rate was under the current productivity levels.  At that point, we simply identified blocks of hours that would equate to a $200k decrease in expenses and fall to the bottom line.

     None of these approaches were terribly glamorous, but they were highly effective and when taken in their cumulative effect, ended up increasing our EBIT performance.  Since we were not a company that was fortunate enough to be in a high-growth and high-margin industry, we had to look to improving our internal performance and ensuring that our resources were used in the most efficient manner.


     Another project that I had worked on extensively with our corporate offices in France was to improve the performance of a particular business segment. In the early stages of identifying what our approach would be I drafted a proposal that I referred to as “Project Galibier”.  For those who know me personally, I am a committed and aggressively competitive person on the bike.  For me, I particularly like the challenge of the high mountains as you can see immediately who has been training….or who hasn’t.  If you’re not a Tour de France fan, there is a legendary climb of the Tour called the Col du Galibier.  It’s a 30km climb that reaches a summit of about 8,700 feet.  For an ascent of this nature, it’s not about who set’s a fast tempo and rides away in the early stage.  It’s about pacing yourself on the climb, knowing the goal, and the resources it takes to get their first (wattage regulation, hydration, breathing, etc…).


     For this reason, I chose the Galibier for my project name.  It was a turnaround plan aimed at taking methodical steps and understanding what the end result was.  It was not about speed and disruption of resources, but about collaboration, teamwork, and to understand what the end goal was.  We were not in a sprint but in a race of endurance for a longer term payoff.


     I have found that taking this approach at both a top line corporate view, as well as a business unit view, has provided me a good platform for increasing performance and profitability.  I will always welcome the Sales group coming to the table with their next “home run” and how fantastic it’s going to be, but I certainly don’t want that to be the basis for my annual operating plan.  I would rather take a more prudent approach and incorporate a risk-reduced portion of it and be pleasantly surprised.  Obviously this approach won’t work if you’re talking about committing to a “home run” project that involves a multi-year approach with capital expenditures and significant increases in headcount. 


     This is where solid relationships with the other functional areas are key so that you can collaboratively decide what the contingency plans are if you only end up achieving anything less than a home run…which you can likely count on.


     While it’s certainly not the most glamorous way to achieve your annual results, I’ll stick with the “base hits” any quarter of the year.


Thanks for reading…..


Jeffrey Ishmael

Ken Tudhope: Think Globally!!!

November 6th, 2009 Comments off

            Based upon the title, I’ll bet most of the readers of this blog are thinking of far off places.  I’m thinking of Orange County.  I’m thinking about hiring finance and accounting professionals in Orange County. If you are hiring Finance and Accounting professionals in Orange County you’d better be thinking Globally.  The reason is that there simply aren’t enough graduates in the business programs in the US to fill the demand.  If you want to have an excellent department, you will need to hire non-US born professionals.

            I recently read a book entitled, “The Next 100 Years,” in it, the author predicts that one of the biggest threats to productivity in the US will be population decline.  We don’t have to wait 100 years; did you know that 75% of all members of the AICPA are forecasted to retire between now and 2020?  To make matters worse, the Accounting Professors are aging faster than the Accountants!  Even today we can’t train enough Accountants to keep up with demand.  The capacity of the accounting programs will be impacted as these professors retire.

            Every year I speak at the local universities and when I go there I find the students more and more international.  These are the students at UCI, Cal State, UCLA, etc.  At the local chapter of the Institute of Management Accountants Chapter in Orange County we recruited two top accounting students from CSU Fullerton to help with our meeting and we got one from China and one from Indonesia.  Great people!  Really sharp!  Very international!  In my recruiting firm we are so convinced that much of the best talent in the future will be from outside the US we starting a networking group called International Professionals in Finance and Accounting (IPFA).  We have to build relationships and learn to evaluate candidates that are very different than those that grew up in the USA.  When we get past the cultural differences, we find very well trained professionals who are hungry and willing to work for reasonable compensation.

            I think the hiring managers have the same challenge.  You will need to get used to diversity.  Be more flexible.  Read about cultures.  Travel.  We recently challenged one of our clients to consider an international candidate who is excellent but would require sponsorship of an H-1 Visa.  It was their first time.  The application was successful (the candidate paid the legal and filing fees) and the client could not be happier!  Think Globally!


Ken Tudhope

Project Pro Search

What’s Your Corporate Contribution – Expense or Accretive Asset?

November 4th, 2009 Comments off

     Over the years as I have looked to add members to my team, or helped them develop their own careers, there has always been one question I have asked regarding a new hire – What will be the value you will create for the organization?  Or conversely, if you’re an existing employee – What value are you currently creating for the organization?


     The view that I have always taken is that headcount needs to be increased in the same manner that you are making an investment in a new product line, additional inventory, or a new ERP system.  The investment needs to have a calculated ROI and the impact to the bottom line assessed.  If I’m being told that a number of new hires are not going to support an additional increase in sales or be associated with a specific project aimed at operating efficiencies, then I would need to question the true need.  This was the question that I would pose to all managers within the organization throughout the year.


     For any mid or senior level Finance position, the investment in a new hire is absolutely huge. Between the time spent recruiting, potential recruiter fees, salaries, additional benefits, and the short-term investment to bring that person up to speed, the investment is significant. The expectation for any position is not to just cover the expenses, but to realize a return that is a multiple of that investment. What will I do for the organization to help them achieve a multiple of their investment in me?


     As Finance professionals we have an obligation to not only generate timely and accurate reporting that will enable good decision making, but to identify areas within the operation that can be improved so as to increase revenues, margins, or result in a decreased expense structure. The same holds true of your staff, including cost accountants, A/P and Credit personnel, or your IT staff.  All have their specific expertise that should enable them to identify inefficiencies within their functional area.


     For myself, it’s been important to be able to assemble a list of accomplishments that I could look back on and know exactly the value that I created for the organization.  


New reporting structures:  New reporting is of no value unless the information is going to be used in a way that will effect change to the structure and the way resources are allocated. For one company I was a primary driver in developing a new reporting structure for the Service part of the organization to track labor productivity and hourly cost rates. As a result of this new reporting, labor productivity increased by 19%, which resulting in effective savings of $2.6 million and decreased hourly cost rates.


Review of existing processes & structures:  Another project I worked on as the lead Finance agent, which involved 40% of our corporate headcount, was aimed at increasing our EBIT performance. I participated in five different teams representing key functions within the company. After a 9-month effort we achieved $2.3m in EBIT improvements in a single quarter and rolled those same efforts into our budget the following year resulting in an EBIT improvement of almost 300bp.


Product performance reporting:  Developing and implementing a brand performance scoring system that enabled the company to identify their low performers, which would allow the company to target merchandising resources and target improvements in working capital ranging from $4 – $10 million.


So the question we need to ask ourselves –


What value am I creating for the organization?


Thanks for reading . . . .


Jeffrey Ishmael

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