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Archive for March, 2013

Are You Part Of The Solution or Part Of The 62% Non-Operators?

March 28th, 2013 Comments off

If you have read my blog over the years, you know how much I have advocated the involvement of CFO’s in the day-to-day operations of a company. Maybe not necessarily leading the charge with the assumed role of COO or VP of Operations, but collaborative involvement with other members of the Executive team who oversee this area. When it comes to developing the budgets and forecasts of a company, it needs to be more than just a spreadsheet exercise. It needs to be based on a solid knowledge of the flow of resources through a company and what levers can be pulled to improve the operating results of the company.

This is why I was a bit surprised by a recent poll posted on CFO.com, which perceived most CFO’s to be poor operators and having very little involvement in that area of their company. A surprisingly high 62% were only “somewhat involved” or “had little or no involvement”. Regardless of whether you are overseeing a services-based firm and your operations involve labor productivity metrics & similar KPI’s, or you’re part of a manufacturing entity with a dynamic flow of resources, it’s your obligation as a CFO to be involved and have an intimate knowledge. If you have a COO or VP of Operations on your team, it’s your obligation to work EXTREMELY closely with that individual and not only ensure they have every level of support they need to perform to plan, but they are transparent in their results with you so that you can accurately forecast the results of the business.

With the companies that I have worked with, it has not been the home run sales contracts that have typically allowed me to report stellar annual results, but more the sustainable changes in operations that have led to an improved bottom line. Those changes will obviously be different for every company, but it’s diving in and analyzing all of the individual contributors and how they can be improved. If you’ve assumed the CFO role within your company, you are not in a position where you can just sit back and wait for the results to post. You have a team that you should be working with, supporting, and identifying the areas that can be improved, thus influencing the bottom line. If you’re part of that 62%, expect an eventual lesson in Darwinism and don’t be surprised if you’re no longer part of the herd.

Thanks for reading…

Jeffrey Ishmael

When Careers & Lifestyles Fail To Diverge…

March 22nd, 2013 Comments off

No big messages here this morning, only a little break from the usual Finance-laden topics and a self-reflection on career. Everyone I talk with seems to strive for that balance between their career and their personal life. Much of this has to do with the lifestyle they lead outside of the office. In my case, I’ve been fortunate enough to be involved with a number of companies that were actually lifestyle drive companies. DC Shoes, O’Neill Wetsuits, and GT Bicycles to name a few.  What was different about those companies is that emphasis was on Lifestyle as opposed to running the business and having the lifestyle be a fantastic complement to the results being achieved. I’ve been fortunate enough to develop a career that seems to aligned with the lifestyle that I lead outside the office….Cycling.

Huge difference you say? How can you even begin to compare Cycling with the CFO roles that you have held? That’s all finance-related, accounting driven, with some boring operational elements mix in…right? Pretty much the case with my cycling. If you take my approach to cycling, it typically is not about getting out for a little ride on the weekends and enjoying the sunshine. It’s a nice derivative, but it’s not the goal. My goal has always been the pursuit of relentless progression and seeing improvements in my performance. There’s a “P&L” to manage when it comes to my cycling. There’s “inputs” and “market conditions” that will affect my performance and I need to take those into consideration when preparing for a ride or analyzing the results.

Revenue. My revenue equivalent is my wattage number. This is the power that I am able to generate during a training ride or race. There’s no altering this number…you either deliver or you don’t. Ever since I was introduced to my first power meter 5 or 6 years ago I’ve been hooked on the data it provides and putting my efforts into perspective. Just like revenues, not all power figures are created equal. There’s the sub-measurements that include power:weight ratios, average wattages, normalized wattages, and your breakouts at specific time increments. All monitored over time and taking into account key events. Sound familiar?

Cost of Goods.  As I monitor my cost of goods with my P&L at work, I have to monitor my “inputs” in the same way. The obvious, and primary input, is nutrition. Are you “building your product” with B-grade quality and not eating appropriately or are you using good quality so as to avoid issues down the line? Have you made adjustments to your positioning? Have you completed the necessary pre-race preparations? If you have a crappy Quarter of results due to mismanagement of your inputs you can’t get that Quarter back…it’s gone. As in business, you need to maintain your momentum and capitalize on the results.

Operating Expenses. There are countless other “expenses” that need to be managed if your to achieve the results that you want. In my case, since I’m obviously not a full-time athlete, I need to deliver on the expected results in the office. There’s no compromising this. That’s why I’m up at 4a for my trainer workouts so I can still be in the office by 7.15a. Sleep…another expense that needs to be managed, which perhaps is also an input. There’s give and take…I’m up at 4a…but lights out by 9p and with as little deviation as possible.

Capital Expenditures.  Let’s not go there. Carbon is not cheap, but it’s a consideration to the results. As in business, if you’re not prepared to make the necessary equipment investment, then you’re not going to achieve optimal results. At the level I’m trying to race at, you can improve your wattage figures, but without the right equipment, you’re simply not going to win or have a top result for the day.

Net Profit. What was my actual wattage achieved? In consideration to my forecast, the “market conditions”, and my “inputs”, did I achieve the expected outcome? Last night I did a time trial at the Great Park here in Irvine. My previous wattage PR for the course was 309w. I was looking to improve this by 1% to 312w. At the end of the day I missed it by 1% and achieved only 306w. However, I also set a new time PR by 1% due to adjustments I had made in my fit and maintaining more discipline on positioning during the race. At the end of the “Quarter”, I hit my “Net Profit” figures, albeit with some consideration in the mix getting there.

When you boil it all down, the elements of my lifestyle outside of work really aren’t all that different from what I do in the office. I’m fortunate enough to love the career I’ve fallen into, which shadows the lifestyle I lead out of the office. While I look at my cycling as my “out of office therapy”, it’s only an additional reinforcement of the disciplines of striving for continual performance improvements.

Thanks for reading…

Jeffrey Ishmael

The CFO Is Not A Scorekeeper…

March 19th, 2013 Comments off

I was reading a recent blog post by Cindy Kraft, who is one of the leading CFO coaches out there and is very active in helping CFO’s manage their careers and improve their online profiles. One of the comments that had been posted to her blog defined the role of the CFO as that of the “corporate scorekeeper”. Cindy had not suggested this was the role of the CFO, and I know from following her over the years, that she does not share that view of the role of CFO. Personally, I can’t think of a bigger disservice to an organization than just assuming the role of a scorekeeper. This is essentially a non-value add position that leads to the role being an expense, and not an investment as I have always promoted.

So what is the role of the CFO? That’s not entirely an easy question to answer and will depend on the type of organization that you have been hired into. In general, you are assuming the role as the primary strategic partner for the CEO and essentially quantify the anticipated results of the strategies he has mapped out with the rest of the Executive team. You are responsible for the broader back office operations and ensuring that the plan to monetize those strategies becomes a reality. You are responsible for identifying, and mitigating, any of the operational risks that might potentially derail that plan. You are responsible for working closely with your Sales teams, Product teams, and other key functional areas in the execution of the plan and making sure they have the proper resources to deliver, as well as instilling the proper level of accountability. You are responsible for distributing the appropriate levels of information to the Executive team so that they can make informed decisions and fine tune their activities to deliver on the plan.

Scorekeeper? Hardly. The role of scorekeeper is to sit in the booth, or in this case an office, and regurgitate system generated reports and add some token level of commentary. The role of the scorekeeper is ensuring that the debits and credits are properly recorded so the auditors are happy in the end. There is no lever pulling, no collaboration with other departments, nor is there any type of influence on the operational aspects of the business. This couldn’t be farther from the CFO role. The scorekeeper is the necessary expense you have to have to conduct the game. The CFO is an investment that is made with the expectation of receiving a return for that investment…bottom line.

The expectation that I have always placed on myself, and promised to any company I have worked with, is that I will deliver a significant return on the investment made in me. We’re not talking about a 20% or 30% ROI, but a multiple of what my total compensation package is for a company. That return will also come in number of different manners. From a topline perspective it will mean working closely with the Sales department to improve the actual sales figures, as well as the processes that drive the revenue engine. Additional ROI is achieved through tight management of the entire costing structure. Whether labor efficiencies, raw material inputs, quality, or inventory management, these are all key elements that have to be actively managed…not just recorded and reported. Further return is achieved in the ongoing management of operating expenses. Here there is a need to determine the proper balance to support the expectations of the Executive team and executing on the strategic plan. This will involve benchmarking to internal history, peers in the industry, as well as ensuring that existing partners are still representing the best interests of the company.

So you still believe the CFO is the scorekeeper of the company? You might want to rethink that position…

Thanks for reading…

Jeffrey Ishmael

Are You Incessantly Busy or On A Defined Path…?

March 8th, 2013 Comments off

Regardless of whether you are working corporate environment or a smaller start-up, it’s sometimes easy to lose sight of what you’re actually working towards. The fortunate position of working with a private company is that you’re not slaving to, and managing towards, previously disclosed public guidance for revenues and earnings. Rather, you’re committed to delivering on the longer term commitments made to your shareholders and financial backers. Generally, if a deliverable has a slight calendar shift it’s not going to result in dire quarterly consequences. However, if you were to come in on any morning and pause for a moment, would you be able to review what your top deliverables are for the Quarter? What the game changing tasks are that are going to move your company forward?

At the front end of each Quarter that is exactly the drill that I go through in determining what the company and the staff need from me every Quarter. It has nothing to do with processing A/P, processing payroll every two weeks, or even providing oversight on the Forecast process, but the key foundational or strategic items that our business will need to thrive down the line. For me, those key items have been the implementation of CRM platforms, financial reporting platforms, labor utilization forecasting, and the establishment of internal operations that will ultimately support our Sales & Development team. While not necessarily financial or accounting in nature, they are the core foundation of what will allow our company to prosper, and in the end, will also have a drastic impact on our current and future cash flows. There’s nothing more critical.

Like today, you tend to have those moments where you’re getting nickeled and dimed with tons of smaller items. Smaller items, that while tedious, are necessary to moving the company another step forward. It’s at that point that all you need to do is run a quick check on how you’re progressing against those quarterly goals and if you’re tracking to deliver. While every day is an important day in the life of a start-up, taking a day to address the general minutia shouldn’t derail your ability to deliver on what is promised for the Quarter (oh that nasty “promise” word again…). Ultimately, you just need to be able to come in each morning and run that quick assessment on how you’re tracking. In the end, you can be incredibly busy on a daily basis, but at the end of the Quarter, are you going to be happy with what you’ve delivered and have you put your company in a stronger position?

Thanks for reading…

Jeffrey Ishmael

There Is No Immunity From Accountability…

March 1st, 2013 Comments off

Idealistic and possible or just a pipe dream? I’ve never started off one of my blog entries with a question, but I started thinking about this statement while out on one of my training rides. I started thinking about some of the past companies I had worked with and some of my “peers” that were responsible for specific divisions or line offerings, who Quarter after Quarter, continued to report results that were not only below an original Budget, but below what they had previously made a commitment to achieve. Not at just a revenue level, but at every level of the P&L. Dare I say “promised” to deliver? Ultimately, what led to the continued support of these individuals was either their relationship with a key executive, or in other cases, a lack of motivation and performance by their Director to make the necessary change. Without an inherent drive for results and improved performance there emerged a tolerance for mediocrity, which ultimately, affected the overall performance of the company.

Don’t get me wrong, it would be a pretty challenging situation to have a company full of relentless Type-A, performance driven individuals. There does need to be a balance in the composition of the staff, but there are also key positions, that in the absence of delivering on key initiatives have much broader implications to the performance of the company.

Whenever I have made a hire that comes from my direct network it’s a direct reflection on not only my responsibility as part of the executive team, but also a reflection on my reputation should that person not work out. Unfortunately for that person, they’ll actually have an even higher level of accountability to perform as I don’t want to have to walk out a hire that I was responsible for. I know it will happen eventually, but I’d like to delay that situation as long as possible. Regardless of whether they are part of my network, or I’ve grown up with them, or ride with them, they need to deliver on the roles and responsibilities for the position that they are being hired into. Without their delivery, they risk impacting the results of the company. There’s obviously an inherent responsibility on my part to ensure their skills are a match for the position, they possess the appropriate motivation, and if there are any deficiencies discovered in certain areas, it’s my responsibility to develop a development plan.

Moving forward, what happens when a hire is made and you’ve realized that the either the skills have been misrepresented or they are simply lacking the proper motivation to deliver what is expected. Very simply, it’s time to make a change before more resources are squandered and you’ve potentially jeopardized timelines or the commitment you’ve made to others. The situation is seldom black & white and easily interpreted. Is it a smaller start-up, as I’m currently working, or a multi-divisional corporation, as I’ve experienced in the past.

In the case of the start-up, there is little room to hide. There are no firewalls. Your deficiencies will quickly be seen if you fail to deliver. Make no mistake about it. You better be taking an honest look in the mirror before committing to a start-up.

A larger company? There’s certainly plenty of room to hide and work under the radar. In fact, if you’re a “friend of” someone, you can usually exploit that situation to do only what is needed to get by and likely sustain a stellar level of mediocrity. The other damage done here is that the skills shortfall is recognized sooner by surrounding colleagues and usually results in a lack of peripheral support in accomplishing departmental goals, which then further erodes morale. More often than not it either isn’t addressed or can take years to play out before a new catalyst is present to make the necessary changes.

I can only hope that in the future that I would promote an environment that allows a colleague to speak openly with me if one of my hires or a recommended candidate was not performing. My responsibility is to delivering the results that I have promised and not to create a de facto subsidy for colleagues who don’t have the skills or motivation to find a job on their own. I want to hire motivated, resourceful and performance driven individuals. What about you? Are you promoting immunity from accountability?

Thanks for reading…

Jeffrey Ishmael