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In Pursuit of “Relentless Progression”…

June 11th, 2012 Comments off

     One of the more interesting aspects of working in a senior Finance role is the opportunity to delve into all operational areas of the company since it’s the sum of the parts that ultimately contribute to achieving revenue and income goals.  In my continued pursuit of improving financial and operational performance, I’m constantly reading and talking with my peers. One of my recent “reads” (code for cd books for my commute…) was the full unabridged version of the Steve Jobs biography.  One word…Fantastic. While the book certainly brought to light the extreme abrasiveness of Jobs, it also highlighted his extremely detailed and disciplined approach to business. There is no way that this biography can be legitimately summarized in a single blog entry, which is why I’ll likely be back to visit this book in future postings.

     It’s easy enough to focus on some of the more obvious elements that drove Jobs in his daily regiment such as the relentless focus on continual product innovation and the pursuit of simplification. Ultimately, these two traits resulted in the development of advanced, superior, and elegant products. However, it’s the elements of personnel and departmental management that struck the most significant chord with me.

     While my own teams are no stranger to accountability, Jobs took this word to an entirely new level. Jobs was beyond militant in his assertion of responsibility and accountability….in fact, relentless. Jobs set the goals, defined the teams, and drove the teams like a mule train. If you were on Jobs’ team and were not delivering on his extreme expectations then you were likely out. Jobs was clear about the end goal and the date that goal was to be delivered. Ambiguity was not a word in his vocabulary or execution.

     It’s known that one of my favorite phrases at the office is Relentless Progression (RP). After finishing Job’s biography, I feel as though he was operating at RP x 10. Jobs drove his extreme version of Relentless Progression by employing only the highest level of talent. Jobs was not an individual who hired B-talent. Apple was not built on anything less than hiring A-talent….at least as long as Steve Jobs was in control. In fact, the discipline displayed by Jobs extended beyond Apple to every other project he worked on, employees he hired, as well as the vendors he chose to collaborate with.

     The question here is what choices are you making daily in your operational execution? Are you making the right hires that will ultimately deliver your expected revenue and income levels? Are you making the right vendor selections that will deliver on your product, quality, and delivery needs? It’s that pursuit of Relentless Progress that keeps me motivated…

Thanks for reading…

Jeffrey Ishmael

Book Review: Great By Choice by Jim Collins

May 20th, 2012 Comments off

            Of the many aspects I enjoy about this blog is the opportunity to pass along recommendations about books or magazine articles that I come across. One of the books that I recently finished is Great By Choice by Jim Collins. This book comes on the heels of two other highly recognized books by Jim Collins, Good To Great and Built To Last. In his latest release, Collins extols the merits of proper planning and takes the position that with the proper amount of planning, companies can indeed map the proper path to greatness and achieve shareholder returns that are far above both market returns and/or segment returns.

            However, let’s be careful not to interpret that this book simply implies that any company, through some rudimentary planning, can become the master of their own destiny. The messages in this book are much more definitive and also take the time to dissect a number of industries, particularly the airline industry.  The time frame that the book also takes in analyzing its selection of companies and industries also spans a 3-decade window. A time frame in which there is plenty of time to witness consolidations, mishaps, bankruptcies, as well as opportunistic changes in long-term trends.

            With respect to the airline industry, there are few industries that have been subjected to the number of disruptions that this industry has. Overall, this industry has been subjected to some of the harshest disruptors any industry can experience;

-Repeated fuel shocks, Deregulation, Labor Strikes, Air Traffic Controller Strikes, Fare Wars, Massive CapEx investment, Sept-11 attacks, and recessions.

In consideration to these elements, Collins takes a very methodical walk through the elements that allow companies to move beyond average or subpar performance to greatness. In an overview of his concepts, he discusses;

-Thriving in uncertainty

-10xers

-20-Mile March

-Bullets vs Cannonballs

-Return on Luck

There are certainly more, but Collins takes a deep dive into the planning process undertaken by companies and that the preparation undertaken is to not only capitalize on new opportunities, but to mitigate the risk of “bad luck events”.  Collins emphasizes the point that there is no company that is immune to a bad luck event, but it’s the planning that minimizes the impact of the event. Conversely, it’s the quality of planning that allows a company to fully capitalize on a good luck event. There is also extensive discussion regarding the view that planning is not an overnight concept, but a more enduring “20-mile march”.  A planning process that is more longer term in nature.

            It’s difficult to give this book the credit it deserves in a short overview, but it’s certainly a worthwhile read. As I’ve often gone back and reviewed some of Collins’ previous books, I suspect that this one will also stand the necessary scrutiny years from now.

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

Discipline #7 – CFO as the Champion of Change

August 26th, 2009 Comments off

            After covering the first six chapters of Jeremy Hope’s book, Reinventing the CFO, it’s time for the last chapter. As I previously mentioned, this is one of the books that you can continue referring back to for those subtle reminders since I believe his book somewhat transcends whatever “technical” changes may be happening on the Accounting and Finance front. In Hope’s final chapter he discusses the CFO as a Champion of Change.  This is probably the only point in the book where I tend to stray a bit from Hope’s view and believe the role of the CFO should extend further than what Hope suggests.

            Hope’s seventh chapter starts out “The role of transforming the finance operation…” and he then further discusses in detail the case for transforming finance. However, as we continue to see the role of the CFO expand and the CFO is expected to drive the financial results of the organization, it’s necessary for the CFO to be the Champion of Change, in partnership with a CEO or President, for the entire organization. Merely driving change in finance may result in improved reporting, clarity in results, or the establishment of standards, but change needs to be driven throughout the organization to achieve improved financial performance. This is also one of the most difficult challenges for the CFO since it will likely involve modifications, or sometimes entire shifts, in the company culture.

            Hope itemizes a list of suggested action items he believes will support the CFO in this mission:

§  Make a compelling case for change

§  Set some directional goals and get started

§  Gain the support of key people

§  Involve operating people in the change process

§  Avoid more complexity

§  Show some early wins

§  Be patient but maintain the momentum

            The other obvious point is the extent to which the CFO will drive change across the entire organization will depend on the size of the organization. You’re going to be much more hands on with a smaller entity, perhaps < $250 million, than in a larger, perhaps globally diverse operating entity. While I was involved in the planning, and directed significant changes during my time w/ MGE, those accomplishments were primarily focused within our North American operations. No doubt they were coordinated with our HQ in France, the efforts typically did not extend to our LAM or EMEA partners. Those changes, however, crossed over to R&D, Purchasing, Services, and deep within the Finance department. We made incredible changes over the 4-years and it meant maintaining effective communications with each one of those areas, having clear goals, communicating the progress of those goals, and knowing that we had completion windows that extended over Quarters, not weeks.

            For a smaller organization that has been set in its ways for many years, the change comes with more resistance and a slower rate. There needs to be a sensitivity to the change you are trying to implement and it’s likely that your need to communicate in such an environment may need to be more extensive. Many of my peers have commented in their blogs and twitter recently about the changing face of the CFO and this is one area that will demand that change. Change is the biggest challenge for the CFO, and without the proper approach and sensitivity, could result in a CFO starting their next search. You are the Champion of Change, but it’s your approach that will determine your success.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Revisiting some of those favorite reads . . . .

August 20th, 2009 Comments off

     Found myself wrapping up the day, but not having the necessary amout of time to dive into drafting a full blog posting. I also couldn’t bring myself to spend a significant amount of time on the computer, which seems to have been a non-stop activity. It’s also nice to pull up half a section of couch, kick-up the feet, and enjoy some hardcopy reading.

     Two of my favorite reads are the Harvard Business Review and Strategy+Business. One of the articles that I’ve archived and like to review occassionally is an article titled “The Cat That Came Back” by Gary Neilson and Bruce Pasternack.  The article profiles the corporate reorganization of Caterpillar. Although the company was a $30 Billion entity, it’s a great lesson in how quickly a larger organization can effect change, and ultimately see the benefits of that change in the bottom line results.

The Cat That Came Back

    Hopefully you enjoy the read as much and as often as I have.

Thanks for reading. . . .

Jeffrey Ishmael

Discipline #6: CFO as the Regulator of Risk

August 14th, 2009 Comments off

     In my last segment on Jeremy Hope’s book, “Reinventing the CFO”, I covered Discipline #5, or the CFO as the Master of Measurement. I had mentioned that this was one of my favorite sections of the book, and the one area I so rigorously incorporate into my day-to-day operations. Not only in a financial perspective, but in an operational perspective. Without measurement, there is no assessing the progress the company is making, not to mention the accountability that measurement can bring into the development of management goals.

     However, there is no more an important role for the CFO than as a Regulator of Risk. Assuming the role of “Regulator” needs to be more than ensuring your producing financial reporting that is compliant with GAAP or that you’ve taken the time to meet with your Sales group to ensure that there is legitimacy to a recently submitted Forecast. If this is the extent of your risk regulation activities then you’re doing nothing more than assuming the role of a Controller or Auditor. In Hope’s book he identifies key areas in the management of risk and uncertainty:

 

         Set the highest standards of ethical reporting and behavior

         Regularly review the key pressure points for excessive risk taking

         Manage risk across the whole organization

         Approach uncertainty with an open mind

         Provide effective feedback controls

 

     Regardless of the size of organization I have been involved with, I’ve always made it my business to be hands-on in the areas where I perceived a material level of risk with the company. Whether this was in the area of A/R for key accounts and the application of credit insurance, management of our IP asset base, order backlog & our outstanding P.O. commitments, legitimacy of an aggressive sales forecast, or any H.R. related issues, I was involved. It doesn’t mean that I was necessarily setting policy or managing the day-to-day in these specific areas, but I did have an understanding of what was happening in these areas and the concerns of the Managers responsible. It also doesn’t mean that we never encountered hiccups in these areas either. However, the flow of information was consistent enough that when it hit the radar we were able to act pretty quickly to mitigate the negative impact to the company.

     This is a great area of Hope’s book and it should be clear to anyone responsible for managing risk that it can’t be covered in a single chapter. But Hope brings up some great points for review. As I’ve heard discussed in the circles of Law Enforcement, the CFO “should respond to the spirit of the law rather than just the letter of the law. Governance and risk management are about more than checking off the boxes.” He also discusses the need to “be uncompromising about ethical behavior. Be the guardian of ethical standards and the last line of defense against unethical reporting.” 

     I do like these points, but again, these tend to be reactionary as opposed to preventative. Prior to my CFO roles, I was fortunate enough to work under some great CFO’s who mentored and included me in their daily regimen. They were all forward looking and instilled the need to look ahead and be wary of that which would derail the ability to meet your results; anything that would have a material impact on the financial results. Trust in nothing and always have your contingencies in place. It’s the approach that I’ve continued to incorporate in my day-to-day routine and in the development of longer term financial plans. As a “Regulator of Risk” you need to ensure that you’ve done more than just make sure your insurance policies are current. Have you done what you need to protect and ensure your results?

 

Thanks for reading . . . . 

Jeffrey Ishmael

Discipline #5: CFO as the Master of Measurement

July 13th, 2009 Comments off

            In the last segment on “Reinventing the CFO”, I covered the CFO role as the Warrior of Waste.  The 5th  discipline in Jeremy Hope’s book is CFO; Master of Measurement. This is perhaps one of my favorite sections of the book, and the one area I so rigorously incorporate into my day-to-day operations. Not only in a financial perspective, but in an operational perspective. Without measurement, there is no assessing the progress the company is making, not to mention the accountability that measurement can bring into the development of management goals.  The latter being one of the more important areas, which ultimately will drive the operational results.

 

     In Jeremy Hope’s book, he notes that the CFO has a key role to play in changing the measurement culture.”  Hope suggests that in order to efficiently fill the role of Master of Measurement, the CFO needs to:

  • Measure to learn and improve
  • Choose the right measures
  • See measurement as patterns, trends, and abnormalities
  • Provide external reality checks
  • Use a range of measures to inform a dialogue about management performance

 However, before any senior Finance manager can start implementing new methods of measurement, the source data needs to be thoroughly understood and its accuracy confirmed. Depending on the size of the project, this might take weeks, or it could very well take multiple quarters if the data sources is a new one and needs to be implemented throughout the organization.  I would cite a new labor reporting platform for North America as a perfect example of a new data source contributing to a new source of labor productivity measurements.

 

For one company I worked at, we had a field service organization that was comprised of 150 field engineers, generated almost 350k paid hours annually, and was responsible for approximately 30% of our revenues. Yet there was no reporting structure in place that reported our productivity levels, hourly cost rates, or the distribution of hours by activity. In an effort that spanned the better part of a year, we implemented a new payroll reporting process that had our engineers reporting their field hours by activity. We rolled this platform out by region, and as we did so, we reviewed the data monthly with our Regional Service Directors to confirm the information. Once we had consecutive quarters of data, we initiated the process of publishing the results and then implementing monthly & quarterly goals for labor productivity and specific improvement plans for non-productive areas where hours were lost.

 

It was not an easy process and it took an open and collaborative approach with the field organization since there was an inherent distrust of anything previously published and there was no confirmed data source that anyone trusted. As a result, we realized a full 10-point increase in productivity levels, which effectively meant the avoidance of hiring an additional 15 field service positions.

 

My reliance on implementing measurement tools is very high, but only those tools that I can trust, since ultimately, those tools will result in implementing levels of accountability for the team, as well as other levels of management in the organization. In the end, accuracy is key. While it’s quite easy to be excessive in assembling a toolbox of measurement tools, brevity is key so that you have the proper tools to drive increased performance with your staff, and ultimately for the organization. Do you have an effective set of tools and do you trust them?

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Discipline #4: CFO as a Warrior of Waste

June 17th, 2009 Comments off

            In the last segment on “Reinventing the CFO”, I covered the CFO role as the Architect of Adaptive Management.  The 4th discipline in Jeremy Hope’s book is CFO; Warrior of Waste. In this segment, Hope addresses that topic of deploying the economic resources of the firm and tabling the question of whether all those resources are creating the necessary return/value for the firm. He doesn’t so much address the absolute dollars that are being spent, so much as measuring the return on the resources deployed. One of the key quotes in the chapter, which summarizes the views of the 19th century Italian economist Vilfredo Pareto “economic results are directly proportionate to revenue, while costs are directly proportionate to transactions and activities.” In short, Pareto was the primary source behind the “80/20” rule that so many now enjoy referencing.

 

            The challenge, as discussed by Hope, and referencing the work of Peter Drucker, is identifying the specific costs that are deployed in support of the 20% that generate 80% of the results. While it might be possible for a moderate level of expenses, or projects, it’s just not feasible since a large percentage of a firm’s operating expenses go towards supporting the entire entity. Hope discusses some key points, which have been adopted by leading global organizations, which contribute to their position as market-leading brands.

  • Dismantle head office bureaucracy
  • Manage processes and flow rather than functions and activities
  • Manage fixed costs through directional goals and ratios than cost budgets
  • Make central services responsive to internal customers
  • Match capacity to current demand
  • Ensure that all projects are necessary and add value

I certainly can’t say that I’ve had success in achieving the first point above, since I have always been part of a larger finance consortium and not in the position to make that large an effect on a global organization. However, on the processes and flow, I have been able to realize some significant results through this discipline. I spent the better part of 9-months leading an EBIT-improvement project in which we placed a laser focus on key processes in the organization. Within 20-months, we moved from EBIT levels of approximately 8%, identifying processes to target, implementing changes, to achieved EBIT levels of 12%.  These were achieved not through headcount reductions, but through refining processes and the flow of resources through our firm.

 

In addressing the issue of matching capacity to current demand, I led the effort to implement a previously non-existent measuring of work hours related to field service personnel for the same company mentioned above. There was an implementation of a new web-based payroll system, new activity codes to track field activities, productivity classifications of those work codes, and the reporting of results by region. We were then able to effectively monitor hourly cost rates, ensure our billing rates were appropriate, and shift unused resources to territories that were encountering heavy service demands.

 

This section of Hope’s book is probably one of the more difficult to measure and put into play on a daily basis since it involves more than just a view of the P&L and making a judgment call that a “cost is too high”. It means really understanding how your firm operates and whether the resources you are approving are going to help you achieve your targeted financial results. It means that most evaluations will move beyond the typical “Invest in A, Sell at B price, and achieve X profit. It may very well mean that you need to develop and implement a new level of reporting to better understand the business in order to make the appropriate decisions.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Book Review: Lencioni’s Four Obsessions . . . .

June 8th, 2009 Comments off

     Over the weekend I was able to finish up another one of Patrick Lencioni’s books, who also happens to be one of my favorite authors. The latest book I chose was “The Four Obsessions of an Extraordinary Executive”.  The premise of the book is the parallel profile of two classmates who subsequently started their own consulting firms after college and different levels of success both had achieved. The book detailed the different approaches that each CEO had taken in the management of their company, which ranged from the evaluation of M&A opportunities to the hiring of new talent within their respective firms. The story really started to evolve when one of the CEO’s stepped back from his standard involvement and allowed his staff the final decision making authority on a new HR candidate, Jamie Bender.

fourobsessions-full

      For those that have a true disdain for politics and less than forthright daily dealings, it’s very easy to despise Jamie Bender’s character. Not sure how often, but I lost count of how many times I wanted to have his character taken out. He was exactly the type of colleague I cannot tolerate working with.  However, without spoiling the end, I will say that his character “get’s his” in the end and there’s a conclusion that brings the story full-circle, when at times it seems to be going nowhere. In fact, when the book launches into a discussion of what exactly the four obsessions are it’s easy to reach the conclusion that the appropriate title might be The Four Obsessions of an Ordinary Executive.  Although I believe it was a worthwhile read, I have gotten more out of some of Lencioni’s other books such as Death by Meeting and Five Dysfunctions of a Team. Regardless of whether I enjoyed this as much as some of those mentioned reads, Patrick Lencioni is an author that is worth committing time to his books.

Thanks for reading. . . .

Jeffrey Ishmael

Discipline #3: CFO as the Architect of Adaptive Management

June 2nd, 2009 Comments off

            In the last segment on “Reinventing the CFO”, I covered the CFO role as the Analyst and Advisor, which mainly dealt with the CFO creating a high-performance team that uses the highest level of information available to support the executive team in their decision making efforts. In a slight continuation of this theme we move into the 3rd discipline for the CFO; Architect of Adaptive Management. In Jeremy Hope’s book he discusses the need for the CFO to move away from rigid reporting structures, static sources of information, and to begin adopting new approaches to viewing market information and to try and anticipate negative market forces.

 

            As an “Architect of Adaptive Management” there are 6-key points that Hope believes needs to be in place to effectively master this area. Specifically:

  • Design adaptive systems from the customer’s perspective
  • Manage through continuous planning cycles
  • Make rolling forecasts the primary management tool
  • Report key metrics daily and weekly
  • Enable fast access to resources
  • Focus accountability on the relative improvement of teams

 

            While these might seem pretty remedial in nature, my most recent experience has reminded me how much of a challenge these points can be if the systems in place will not effectively support the generation of these data points. Although the data available has supported basic budgeting and forecasting efforts, the data/systems are not robust enough to support the daily delivery of key metrics or provide fast access to accurate information. The information has to be continually reviewed to ensure consistency with prior reporting. The management of the information is a continual struggle, which is why we’re headed towards a Q4 system upgrade. With the above factors in mind, it makes it difficult to drive accountability when the reporting that is being distributed has an inherent level of doubt that takes 3-times as much work auditing than to actually prep and export.

 

            However, when the systems are trusted and the data has a history of accuracy and integrity, the impact on the team is immeasurable. Towards the end of my tenure with MGE we had a high volume of reporting being requested during our merger with APC. We were operating on an older AS-400 platform while our partners were operating on a new Oracle system. We had years of passing audits with PwC, Mazars, and Moss Adams without a qualified letter. All we heard from the other side were excuses on why data couldn’t be pulled. We were achieving above industry results in Sales and EBIT. Our partners were never quite sure of their results.

 

            Although I was only responsible for the North American operations prior to the merger, we enjoyed a very collaborative approach with our HQ staff in France.  Through an efficient management of data resources, as well as systems that supported our end strategies, we were able to effectively execute on Hope’s 6-points. While not always executed at a perfect level, they were nonetheless strived for and often executed well. Accountability was driven from the Boardroom to the customer’s site through our Field Engineers. It was balance and execution that I look back on and appreciate.  What was achieved at MGE keeps me motivated to achieve at the companies that I now call home and strive to deliver the same excellence.  A single summary page does not do justice to Hope’s view of the CFO as the Architect of Adaptive Management, which is why it’s highly recommended reading.

 

Thanks for reading . . . .

 

Jeffrey Ishmael