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Posts Tagged ‘corporate performance’

Questions From Colleagues & Preserving Sanity…

April 24th, 2017 Comments off

It’s always interesting to me how cycling manages to work its way into professional conversations, even with a population of folks that don’t participate in the sport with any frequency, if at all. However, there’s a certain curiosity to people when they learn that you are actually spending 350-400 miles a week “on that little seat”. Most often they say nothing, might make a passing comment, or sometimes ask how the training is going with an obvious sincerity.

I’ve always talked about how strong a correlation there is between the disciplines I practice in my personal life and those I practice in my professional life. Very seldom are the two very far apart from one another. However, I was asked a very interesting question by one of my prior colleagues at Cylance. Knowing how much I ride, and that my training rides usually started at 5.30a, I was asked “if the effort required for those hours and rides were worth it and did it provide some balance to the turmoil of life at a start-up?” It was a great question and one that I had discussed with folks on my direct team, as well as friends and vendors.

Simply answered…YES. It really is too easy to get caught up…or I should say buried in the weeds and lose your perspectives when the pressure is high, there is change coming at you from every direction, and there is usually a loosely defined direction that is dependent on tracking against a business that is difficult to predict. You can really get caught in an escalating pace of analysis paralysis. Analysis that has you running every possible scenario, discussing every possible outcome with trusted folks on your team, balancing the hourly or daily interruptions that occur “because you need to be in this meeting…” while never really reaching conclusion or final decision. I learned very early on during my time working in equity research to quickly synthesize information, inquire with a few trusted colleagues, and make the necessary decision…and move on. Not all decisions can be made in that manner, but the vast majority can. Exceptions occur when they are going to have a material and lasting impact on the P&L….hiring, capital expenditures, etc.

When those decisions tend to be more prolonged I always found that my time on the bike, in the early morning hours, would give me the opportunity to weigh the alternatives and think about my decision without the inevitable interruptions that come in the office. When you have hours on the bike you sometimes you pass a certain business, recall a pertinent conversation, or simply realize a new idea that would have never materialized in the office. When you are on the bike, and in the dark, the only thing out there is your commitment to achieve specific performance objectives on the bike…and the thoughts of what you need to accomplish in the office. As I mentioned above, those two are seldom far apart. One moment your making sure you are tracking against the wattage number your supposed to maintain for the 40-minute block you’re in the middle of…and the next minute your thinking about the utilization rate that was just reported by Services, what effect that is going to have on their margins for the Quarter, and recalling the last Quarters activities and the contributions to the performance of that group. Was there a specific project where billing was delayed…was it not properly quoted at the beginning? How are the two large Product opportunities progressing with only two weeks left in the Quarter…and there hasn’t been an update in the most recent few days. These are the things going through your mind in the predawn hours of that ride…

Sometimes those hours in the saddle can be with a key member of the team that might be struggling with a certain decision. Very early on our CEO was faced with making a decision to fully replace the first generation Sales team and basically start from scratch. He and I had know each other for years before he made the commitment to start Cylance so bikes were nothing foreign to the two of us. If we got out on the bikes it was never predicated on having a meeting or certain discussion…but only to get out for a training ride. Inevitably it usually went in the direction of business, as it had that day. There was a long discussion about the challenges and potential risk of making the change, but in the end he knew the decision that had to be made…it was only the process of rolling along at 20mph discussing the subject that made it a bit of a therapy session.

That’s exactly what cycling is for me relative to my chosen profession…it’s part therapy, part challenges, part perspectives, part bonding with friends…and one more way for me to quantify & measure my efforts. The conversation I’ve had with colleagues is not about the specific activity of cycling, but to choose any activity that can give you a similar parallel with your activities at work, provide those perspectives, and allow you to avoid getting so embedded in the weeds that you are unable to make effective decisions that are in the best interest of the company, your team, and the objectives that everyone is working towards. Whether it’s running, rock climbing, cross country skiing, or swimming….what’s that activity that is going to keep you healthy, your brain engaged, and sharp for the next stretch of hurdles that you face at the office?

Thanks for reading…

Jeffrey Ishmael

Do You Stay On The Gas With “Unlimited” Resources…?

March 20th, 2017 Comments off

     It’s been just over four months since I made the jump to start a self-imposed sabbatical to “recharge” and look to define the next chapter after 4.5 years in a hyper growth start-up. In essence, it was 4.5 years training at a redline pace that ultimately demanded a level of moderation, but at a pace that wasn’t mine to control. But what does a hyper-driven and intensely competitive individual do to “recharge” the batteries and spend some much deserved down time do? Well of course you decide to set your sights on doing one of the longest paved climbs in the world, as well as deciding on racing two of the most notable Classic races in Europe that will have no less than a combined 100 kilometers of cobbles between the two events. Those are natural next steps in getting some rest…right?

I’ve always made some pretty strong comparisons between the training for my cycling and the disciplines that have to be practiced in a Corporate environment. While some may balk at the comparison, it comes down to managing the resources you have available, using those resources in an effective manner, while accomplishing the goals or commitments you’ve made to yourself…or others. Let’s look at the very macro comparison of the resources available at a Corporate level versus Personal level. At the Corporate level, imagine having complete open access to the checking account of your favorite VC and being able to deploy those resources in any way you could to your business…ANY way. You can spend anything from $1 million…to $100 million…or more if you felt you needed it. Let’s say you settled on the amount and burned through that spend. What have you been able to accomplish with the deployment of those resources in the end? Have you built a healthy business that has a strong foundation for future growth and have you been able to establish a strong pattern of increasing performance metrics that strike the right balance between aggressive growth, establishing a healthy corporate environment, while positioning the company to deliver on your commitments? General questions, but you get the point.

Let’s talk about the Personal side though. I find myself on sabbatical and all of the sudden I basically have an “open checking account” for training time and can do whatever I want. I can train for 10 hours per week, 20 hours per week…or even 40. However, as with a Corporate environment, there is the same consideration to resources and a healthy foundation as there is for an athlete training for an event. It has to be methodical, planned, sustainable, with appropriate periods of reflection and a tempering of the pace. The attached picture is the actual chart of my training since November and the progressive peaks and subsequent tapering as I move towards my goal of leaving for Europe next week. In the chart the magenta line is the shorter term acute training load while the blue line is the longer term chronic load, which indicates a core fitness base. The yellow line is the fatigue line and the more it dips, the higher the fatigue and time and indication of need to rest. Think of the magenta line as the 200-day moving average for a stock…you can see spikes above the norm, but ultimately it’s going to come back down before hopefully making the next run up. It’s the same concept here. You can see where I’ve had the spikes, but ultimately, you taper down before making the next training push. It’s about finding the right balance, creating a healthy foundation, and continually pushing forward.

Just like the Personal level, there is an equal penalty for “overtraining” at the Corporate level. At the personal level, overtraining can lead to becoming ill, an inability to achieve peak performance, and an extended recovery time to get back to a healthy state of training. In the Corporate environment, the equivalent of “overtraining” is essentially excessive spend, excessive hiring, and a deterioration in the performance metrics of the company. At that point, there’s no choice but to move into a period of recovery to get back to a higher level of performance.

Over the last four month I’ve managed to put in over 9,200 kilometers in the saddle, climb in excess of 300,000 feet, and during that time burn almost 210,000 calories on the bike to achieve that. Again…that’s just in the last four months. Putting 210,000 calories in perspective with some of my favorite foods…

  • Roughly 2,100 packets of energy gel…
  • 131 pounds of pasta…
  • Roughly 1,750 Chobani yogurt cups
  • 1,500 cans of that nectar of the gods…Coca Cola

You get the idea…it’s all about the long game and establishing a strategic and achievable result. Imaging trying to cram all the stats above into a shorter window…say even two months. The likelihood is that you don’t have the proper foundation in place, will overtrain yourself, you’ll likely get sick…and ultimately your fall back weeks or a month…or in the case of a Corporate scenario…potentially losing Quarters due to overtraining.

Happy training my friends…

Jeff

Not All Levels Of Transparency Are Created Equal…

March 13th, 2017 Comments off

Transparency

Over time it’s always interesting to see how individuals and organizations define and operate under varying levels of “transparency”. These insights may take weeks to play out or may ultimately take years. While I will agree out of the gate that there should be varying levels, depending on the sensitivity of the underlying data, an extremely high percentage of transparency should exist within an organization to build trust with internal and external customers, as well as investors and other key constituents. In summary, Transparency should be defined as…

a :  free from pretense or deceit : 

b :  easily detected or seen through : 

c :  readily understood

d :  characterized by visibility or accessibility of information especially concerning business practices

As mentioned, there are always certain types of information that need to be contained to a small group depending on the level of sensitivity, but 98% of discussions should be open and collaborative with the broader team. Are you planning a reduction in force that may cross over multiple departments…then yes, that is going to require an incredibly amount of sensitivity and confined to a small group in the planning of the event. Releasing this information to the broader group would result in a paralyzing decrease in productivity across the teams and produce undue anxiety for those that aren’t affected. Absolutely painful, but these are actions that need to be controlled with military precision.

Are you doing an IPO? The group in the know on this activity obviously widens as it becomes necessary to involve more people in the process as you continue to bolster internal functions, coordinate functional area contributions to the drafting of an S-1 and the characterization of the business, working with investors, bankers, and legal partners. A large group…absolutely, but still a relatively combined group of folks. Will there be leaks in this pool and others find out…absolutely. But again, not necessarily doing regular updates out to the broader organization and discussing in an open environment in a regular cadence.

I’m really not a fan or subscriber of playing semantics with certain topics. The allowance of “access” or inclusion in a meeting or systems is also not equal to transparency. It’s just exactly that…access or inclusion. You may be given access to a courtroom to view a criminal case, but that doesn’t mean that you’re given access to all the details of the files held by the defense and prosecution, but you have “access”. In a corporate environment, that absence of financial information, historical activities, investor information, or operational performance will simply result in the failure of a team to succeed…period.

When it comes to strategic planning, hiring, geographic expansion, financial performance, facilities expansion, or other operational initiatives, there’s no reason not to be working in a fully transparent manner to build trust and effective collaboration across the teams. It’s not about spinning the information or results to create a sense of vagueness of lack of definition for the team, or withhold information that creates a hurdle in allowing the team to make a fully informed decision. Ultimately, as reflected in the definition above, any level of deceit will always be discovered and the subsequent erosion of trust can seldom be recovered.

This is not a topic that should require extensive discussion…it comes down to just recognizing the DNA of an individual or organization. For a team, and ultimately an organization to succeed, there needs to an environment free of pretense and deceit, an environment that is easily translated and readily understood, and is characterized by high visibility & accessibility of information concerning the vast majority of business results and practices. It’s an insightful walk to observe how different people and organizations promote these conditions, but in the end, it’s critical for the success of the team, company, and ultimately promoting a healthy environment of trust and collaboration.

Thanks for reading and sharing in my walk…

Jeffrey Ishmael

Preserving Culture & Success In a Hyper Growth Environment…

February 22nd, 2017 Comments off

After my departure from Cylance, one of the biggest topics that I’ve been asked about, and given extensive consideration to, has been that of culture and how you preserve the success factors that were part of the early stages. Cylance was started with some key cultural goals in mind, which were primarily based on the disdain and avoidance of silos and politics. We had all experienced it at larger companies. The early efforts and decisions were all focused on the building of a product that would change an industry…nothing else mattered and everyone was committed to that vision.

As we had shared with investors, analysts, and media, it took us the better part of 3 years to reach 115 employees. There was a focus on our burn and regulating our spend in a prudent…and almost surgical manner. It then took another year to grow our employee base to 450. Even this number, while certainly aggressive, did not give us an undue amount of concern. Yes, we did tap the brakes a few times to make sure our billings were continuing to trend as they were…multiples above our original plan. However, as I’ve discussed in prior posts, we were also focused on making sure the underlying metrics of billings and revenues per employee were also continuing to trend upward, as well as ensuring that our cash burn was in the confines of the original plan. Some might take the view that a tripling our headcount was an unhealthy growth, but we were cognizant of the number increase and actively discussing the potential risks with our key investors. We wanted to learn from their other portfolio companies and couldn’t afford the distraction of having to correct course under the trajectory we were on.

Let’s take that tripling of headcount and why that wasn’t necessarily an unhealthy number. When you look at the hiring of 335 over the course of a year that equates to 6.5 people per week that are hired in across every functional area…Sales, Marketing, Engineering, Research, etc. While the new hires might be coming in with some of the “corporate baggage” from the larger companies, there was a significantly larger number of incumbents that are able to offset that influence, properly onboard the new employees, and successfully indoctrinate them into the culture that had been the foundation of our success. Even in the latter part of the year, when you’re bringing in the other 165 hires, you still have a fairly large & established group that can help in the absorption and molding of new employees. Will you make some mistakes in hiring? Absolutely. But you also need to take the necessary steps to course correct early on. I also believe, but wasn’t successful in enforcing, was the need to have hiring managers outline the roles & responsibilities for their newly requested hires, which would later play into assessing the quality of their delivery, and ultimately, qualifying their work relative to bonus payouts. This was an extreme challenge as we were also confronted with a trajectory that was multiples of our original plan, which meant that we also were having to manage headcount growth that was nowhere near the original plan, or the first revision…or the second or third revisions. You get the picture…hyper growth demands quick reaction.

The biggest question though is where does the process actually break? What is the percentage of “tenured” incumbents that need to be present relative to hyper hiring…and is this even a valid statistic? This becomes the key question when you find yourself in a Quarter where headcount grows by 50% and there is a push to increase an incremental 30% the following Quarter…or effectively doubling your headcount growth in two Quarters. When you start hiring at the rate of not 6.5 new hires per week, but 18 per week…and then mix new hires with an equally new group of individuals who have not fully adopted the success elements of the existing culture. New hires, who when combined with undefined roles & responsibilities and a lack of guidance, are treading water at best and not sure how to direct their efforts in the rapidly expanding environment they just got tossed into. Combine the cultural challenge with the financial challenge where the majority of the cash flow is affected by headcount and how the Company is then performing relative to the billings and revenues per employee…and the cash burn metrics that have been committed to the Board. It’s all about keeping an engineered and discipline approach, but balanced with the unplanned needs of the business. There is no textbook approach in hyper growth and you can’t look to your past experiences to guide you through this scenario because in all likelihood…you haven’t been there. Ultimately, the success will be predicated on keeping successful communications going with the team, healthy collaborations, and knowing the pulse of the business…PERIOD. In the absence of these your destined for performance mediocrity, or worse yet, course corrections that will affect morale and momentum.

Thanks for reading…

Jeffrey Ishmael

You Didn’t Have To Provide A Plan To The Board?

January 20th, 2017 Comments off

BUDGETOne of the benefits and enjoyments I get from updating my blog are the questions that I typically received from people asking for certain clarifications. This comes as no surprise since the original intent of my blog was to bring a little more transparency into how the Finance department operates relative to every other functional area in the company and what might be driving the actions or decisions of the Finance department.
With that said, I received a follow-up yesterday on the update I wrote on planning within a hyper growth environment. One of the main messages in yesterday’s post was that you really can’t plan, or at least effectively, in a hyper growth environment. With that message I was asked how the Board would accept that an operating plan wouldn’t be presented to them for the year. I have to say I was a bit amused at the question, but completely understood why it was asked. Not to mention, the Board would never allow such a hall pass from any team. There is ALWAYS an operating plan that is highly thought out, detail oriented, and usually has a number of additional scenarios that will convey what the impacts will be to cash and profitability if targets are missed or exceeded. For ballpark references, you might have the base scenario, as well as a +20% and a (20%) view. For a more mature company these ranges will obviously be tightened up when you have a higher degree of predicability and more history to base the plan off of. When you’re really just a handful of Quarters into a trajectory, which you are anticipating to double, and the trajectory starts looking like a 6-8x, then you have an entirely different beast to deal with.
So how do you plan for such a scenario? Again, as I mentioned yesterday, you really don’t “plan” for it, but you react to it and adjust the allocation of resources to support that new growth trajectory. As with any business, you have key indicators you look to gauge the health of the business and whether you are tracking to achieve the commitment made to the Board. The elements below are certainly not all inclusive, but are merely a sampling of the items that could be watched when encounter a growth rate that is entirely unplanned.
Billings & Revenues: While this is the key driver on which all spending decisions are made, the total number is not the overriding driver. There’s further review that should be done on the quality of that revenue, what the concentration is, and whether there are any key areas that are potentially missing against Plan. In the case of Cylance, we were constantly watching what our price per endpoint (PPN) was at every level. What that PPN was at a macro level, a channel level, a vertical level, as well as what they were for the duration of a deal. Looking to this number would indicate what the true health of the business was. Was there a single customer that accounted for a disproportionate share of the Quarter business, which in turn, might prompt a tapping of the brakes to ensure that hiring and spend weren’t getting ahead of themselves relative to the Plan and a normalized trajectory. Prudence should always reign supreme.
Gross Margin. Definitely a key indicator, but it also depends on what the structure of the billings are and how the terms being written may be influencing GAAP-based reporting. For a situation where multi-year deals are being done, it might be best to look at early results on a non-GAAP basis if a disproportionate amount of the activity is headed for the balance sheet as deferred income.
Headcount. For me, this was one of the key indicators as it related to our burn and this is certainly not just a single macro number, but a more complex element to dive into. First, what is the overall cost per head and what is the trend line on that figure? Are you’re costs per head staying constant or are you seeing an increase in that number, which might be tied to incentive plans that aren’t aligned with results, increasing benefit costs, or all of the above? Second, what are the average billings and revenues per employee? While the overall headcount might be increasing, this number should also be increasing with the results that are being achieved in excess of plan. It’s not a problem increasing headcount over the Plan, so long are you are seeing the achievement or increase in this planned metric. Third, what is the distribution of the headcount by functional area? Did the original Plan call for 12% within the Marketing area and now the revised number puts Marketing at 18% of the headcount? Is there a disproportionate growth in any one area because that functional area has successfully lobbied for additional staff that is not consistent with industry norms?
Facilities. This area is obviously heavily influenced by the increased headcount that is occurring to accommodate the unplanned growth. If historically Rent expense has been 2% of your operating expenses then this is the approximate metric that needs to be followed in order to stay consistent with the Plan. If you’re exceeding Plan and need more staff then this number, while increasing on a constant dollar basis, should still remain at approximately 2%. As an example, you’re planning a $25M year, which would allow for approximately $500k in rent expense. If the new trajectory is now $100M, then theoretically you would have $2M to spend on rent to accommodate the additional headcount needed to support that growth. Ideally you also start achieving economies of scale where you can actually see that number go down as a percentage of spend. If you fail to miss you billings number, hire all the folks, commit to even more rent expense…then you’re going to find yourself in a bit of bind. It’s akin to “I’m going to get a big raise next year so I’m going to buy my second home and a new car for my wife and I…”. And when it doesn’t happen?
Systems. This is another area that needs to be heavily strategized and managed in a hyper growth environment. There will be unplanned upgrades that will necessitate spending in the $500k-$1M range that, while necessary for growth, were previously balked at due to their cost and the original trajectory you thought you would be on. You might have thought you had another year…or two…to bring them online, but now seeing a 6x freight train coming at you there is no other choice than to starting throwing a ton more coal on that fire and get up to speed.
Culture. We’ll discuss this in another post…or posts.
This barely scratches the surface of “planning” in a hyper growth environment. It’s more about regulating the health of the patient, making sure the vital signs are remaining healthy, keeping your finger on the pulse and knowing how to respond. It’s the doctor that has decades of experience, treats every patient the same, only to realize he has misdiagnosed the patient and either administered the wrong medications…or too many. It’s about collaborating with the broader team in making key assessments, discussing with the team their needs, and ensuring that the resources (MONEY) are properly allocated and within the range of the original Plan that was discussed.
Thanks for reading…

Jeffrey Ishmael

Employees, Facilities, & Systems In A Hyper Growth Environment…

January 19th, 2017 Comments off

IMG_0219     I’m really enjoying the conversations that I’m having with prospective new teams, as well as the vendors that I partnered with during the hyper growth phases at Cylance. The most predominant question is “how did you guys plan that out and accommodate the growth you did?”. Really, the level of success we achieved was not planned, at least not in the timeline that it was achieved in. From the outset, we had “modest” growth that still had us doubling our billings on an annual basis. We knew early on that we were going to have a relatively aggressive trajectory, but certainly not the hyper growth we were confronted with. While it has its blessings, it also tables an entirely unique set of challenges. Challenges on finding that appropriate balance in planning out employee growth, facility growth, as well as the systems you want to put in place…all with a focus on prudent spend knowing that the wrong decisions will result in unnecessary cash burn.
Employees. While we were extremely surgical in the original hiring, there were also unplanned surprises that increased our headcount, and thus our burn. Take for example the assumptions about our product and what we were anticipating relative to the ongoing support of our customers. Early on, the assumption was that our product would be entirely turnkey, that any deployments would be extremely rapid, and that the product would be easily integrated into any customers native environment. Well…not so fast. We quickly determined that we would indeed need a more robust customer support team, and one that was going to be more than just a few people. It was not a difficult decision to make as we knew this was the best decision for the customer and the best decision in support of our product and future success. We just needed to ensure that we moderated our spend in other others to accommodate the unplanned spend. As with some of our other spend, these were not black & white spreadsheet decisions and we worked through all the shades of grey as a team. Also early on we were aggressive in the buildout of our Sales Engineering team. This team was the technical complement to our Sales team and would be responsible for any pre-sale technical questions, proof of concepts, deployment issues, etc. As we started to close more business it was determined we needed a dedicated team just to handle the proof of concepts with prospective customers. Again, not in the plan, additional headcount, and thus, an increase in our cash burn. More conversation that thad to be addressed by the broader team and ensure that the metrics that we were operating under continued increasing in the face of rapid employee growth.
Facilities. When you start out in a living room on fold up tables you tend to maintain that same prudence planning and moving into new locations. We had early support for an investor with some temporary space. Following that, it was then a big commitment for us to assume a five year lease on a 12k square foot space when we still had barely secured our first Services customer. Even more surprising was outgrowing that space in less than two years. The other three years? We had always negotiated great leases so we had no problems maintaining cash flow neutrality when we subleased that space and moved into a new 16k square foot space, but with the opportunity to expand to additional floors within the same building. Imagine our surprise when we realized that in less than a year we were going to be out of space due to a dramatic increase in bookings after we signed the lease. We then renewed our relationship with The Irvine Company to lease additional space in an adjacent building and could easily expand to additional floors. As with our earlier leases, we always ensured we had negotiated leases that we could sublease if necessary if there were any unplanned corrections to the business that had us with excess capacity. However, it wasn’t excess capacity that was the issue, but a lack of. As I had successfully worked with other companies in a campus type environment, we started leasing vacant space in adjoining buildings to accommodate the rapid growth. There was little cap ex for buildout and we had exceptional flexibility. Even as we started to occupy a significant amount of space in prominent high rise buildings adjacent to the airport, while also securing prominent building top signage, we were able to keep our facility expense to less than two percent of our total operating expenses. Building top signage on two buildings that would essentially create the Cylance corridor near the airport.
Systems. As I was handed a laptop with Quickbooks on my first day i knew that this would not be our platform moving forward and quickly looked at what we might deploy that would carry us out over the next 2-3 years…or more. It was determined that Netsuite would be the platform and we could add additional modules as we grew and our needs changed. Whether commissions, deferred revenue, fixed assets, or multi-currency, Netsuite provided an economical platform that was widely adopted and could scale. I had just completed an SAP implementation and it was clear that we didn’t need to go in the direction of Oracle or SAP, both from a complexity, as well as a cost perspective. There were also some other great platforms that we had looked at early on. As an example, we had looked at Domo as a candidate for our dashboard platform. However, at a full implementation cost approaching six figures it just didn’t make sense early on as we had very little to report on in a pre-revenue capacity. A great platform, but not for the nominal amount of financial data we were compiling. Fast forward to a year of accumulated product bookings, pipeline data, channel data, etc. and we were properly positioned to take advantage of it, which we did. As we also started to push towards employee growth of almost 500 we knew that the HR & Payroll module in Netsuite was not going to be robust enough for what we needed and determined that Workday would be the appropriate platform as the company started scaling towards a headcount in the thousands. A year prior and headcount of barely 120 there was certainly no reason to spend high six figures to license and implement Workday. However, a year later and employee count approaching 500 it became a much easier discussion to have.
So how do you plan for employees, facilities, and systems in a hyper growth trajectory? You really don’t. There is no Board meeting that your going to roll into and legitimately say your going to go from $10M to $100M in the next year…not unless you’re going to sedate them and move quickly through that slide. However, you do put the systems and decisions in place that will give you the most flexibility to continue altering your course without having to look back with the realization that you’ve incurred a significant amount of sunk costs that really didn’t deliver any value or provide you with future flexibility. Decisions have to be made in tandem with the broader team, the key vendors that you’ve established relationships with, as well as the input of the Board and key advisors. It’s a heck of a ride and one your not going to be discussing in B-schoool…although look for a Cylance case study in the future!
Thanks for reading…
Jeffrey Ishmael

Hyper Growth…Do You Know Your Company CTL Level?

December 22nd, 2016 Comments off

ctl-chartFor my friends and colleagues that know me, they know that I am fiercely driven both in the office…and on the bike. While I’ve tempered the shoulder and elbow bumping criterium racing these days in favor of career preservation, there is no decreased focus in the pursuit of achieving the best results I can on the bike. In fact, it was a laser focus and a very defined training plan that allowed me to achieve a 2014 title win for the SoCal Time Trial Series, which covered more than a dozen races. Some would think that this is a futile pursuit and an endeavor not worth the investment of time. However, I continue to realize the correlations between what happens on the bike and what happens in a corporate environment. It comes down to disciplines, awareness, proper planning, and executing on the strategy that you put in place. There’s no cutting corners, there’s no accidental or chance success…it’s about appropriate planning and execution. Period.

For me, getting out on a bike ride doesn’t mean just heading out for 3-5 hours, plugging in some music, and getting some good exercise. It’s about have a specific plan for that day. It’s about having specific time execution in specific power zones with specific cadence output…and REST in between those efforts. How does this even relate to corporate execution? We don’t go into the office and hope that the Quarter comes together in the last 5-10 days…although we all know this seems to be the case in just about every industry. HOWEVER, we do head into the Quarter with a blueprint that is typically part of a larger annual plan, that has Quarterly quotas, quotas that are supported by the necessary Sales headcount, as well as a host of other preplanned Marketing and operational support elements. While I commit to a daily training plan and see the immediate measurements of that output, that same realization doesn’t happen in a corporate environment. We continue to put in the “training” on a daily basis, but sometimes the runway to actually see the benefit might take a few months…or possibly a few Quarters on a more significant deal. It’s about having a plan and executing against it. A plan that is achievable. You break that plan down into its core elements and you execute against it. Period.

How does this all relate to hyper growth and corporate performance? Very simply…it’s the ability to maintain a sustainable pace that doesn’t overheat the engine, doesn’t waste resources in an inefficient way, and will allow the individuals, and ultimately the team, to cross the finish line…together. In cycling and the tracking of fitness, there are two lines that are followed during the course of executing a training plan…the CTL and ATL lines. The CTL line, or Chronic Training Load, measures your cumulative output of a trailing 28-day period. The ATL line, or Acute Training Load, measures the short term extreme spikes in training that indication your ability, or inability, to continue putting in sustained efforts. Think of the CTL line as a 200-day moving average for a company stock. You don’t want wild fluctuations in this line, and when there are, it typically isn’t healthy. You may have shorter term efforts that bring your CTL line up…but the ATL line realizes an extreme divergence away from the CTL and starts to indicate potential exhaustion and the need to rest. It’s the same concept at a corporate level, but drawn out over multiple Quarters than multiple weeks. Just like the cyclist, employees can put in a hell of an effort, but continued redlining will lead to that overextended ATL line, an unhealthy and unsustainable spike in the CTL, and eventually a condition of overtraining where either the team gets sick or rest is mandatory.

Knowing how to pace yourself and your team is critical to maintaining a path and a cadence that can continue driving a level of hyper growth. It’s taken multiple lessons for me to learn from others that it’s necessary to know and understand all the inputs that help maintain the pace. I don’t know how many times I was told to slow down and get some rest in the training by my coach. REST?!?!? Are you joking?!?!? “I’m feeling great and I don’t need to rest…”. Follow that with either getting sick or starting to see a drop in the performance level. “What do you mean rest…this isn’t the first time I’ve ridden a bike and I’ll know when I need to rest.” is what I might convey to my coach dismissing his feedback and experiences. I’ve since come to appreciate his valuable feedback and it was his feedback that was a major factor in securing a regional title.

Coming back to a corporate environment and the link to cycling…it’s all about the plan and managing all the necessary inputs to achieve that plan.

Revenue.    Corporate…what’s the Quarterly and Annual Plan? Cycling…what are the major event goals and the power level necessary to achieve the result?
Cost of Goods.    Corporate…what are all the elements necessary to produce? Cycling…what are the dietary needs to stay properly fueled, recover, and continue building on the achieved results?
Operating Expenses.    Corporate…what is the necessary cost structure to support the Plan & the resources available to achieve the plan? Cycling…what is the cost of nutritional supplements, tires, tubes, equipment, travel, etc.?
Net Income.    Corporate…with consideration to all the inputs, is the company achieving it’s planned result? Cycling…are you making progress towards achieving the wattage goals and distance goals? If not, is there a tweak to the inputs that can be made that may result in the same outcome?
It might be a bit simplistic of an analogy, but you can see the correlation between the two. While some might see my quantitative view on cycling as a bit unfortunate, it’s what makes me tick and it’s what I love about my career. For the same reason that I can’t just show up in the office and put in 8-9 hours and collect a check…nor can I get on my bike and just go for a ride…at least not with any frequency. I’m completely driven by performance and performance doesn’t happen without a strict plan in place, a set of metrics to track the plan, and the commitment to deliver. Period. In a situation of hyper growth, you need to be keenly aware of the elements and their impact on, and contribution to, delivering performance. You also need to realize that an excessive use of resources, which may ultimately be waste, will not necessarily deliver the desired results. There is no set formula…but it’s all about having the experience to know how to balance the inputs, drive a sustainable cadence, and deliver on what you promise. Changes to the plan? They happen, but don’t introduce a new race to the calendar next week, load up at the buffet with a ton of carbs, and hope that is going to get you through with a successful result…

Thanks for reading…

Jeffrey Ishmael

Exceptional Value Is In The Sum Of The Parts…

December 2nd, 2016 Comments off

The original goal when I started my blog was to bring an insight into financial strategies and operational disciplines that often drive the actions of the Finance team and why they often wanted to be involved in so many other parts of the organization. More involvement than just reporting what was happening in the other functional areas we work with. Quite simply, exceptional value is almost always created and driven by the entire sum of the parts and not just the actions of a single individual, department, product concept, or operating division. It’s all about the sum of the parts…the team that has been assembled to execute on a commitment made to the Board, Executive team…or a commitment to employees.
My point of view isn’t just based on a single company or a single experience of corporate success, but the pattern I’ve seen played out over a number of companies. Whether it’s been most recently at Cylance, strong financial and brand performance at DC Shoes, or aggressive EBIT initiatives during my time with a division of Schneider Electric, the exceptional results could not have been accomplished without the strength and commitment of a competent team. It always started with defining the mission and breaking down that mission into a set of directives that would shared across the functional areas. It was NEVER about closed door initiatives, secret meetings, or selective transparency on key topics. It has to be about clear communication, transparency, and honesty with the team on the direction that everyone is moving and the expected outcome. Measured, achievable, and sustainable changes to the business. There’s no room for short term thinking or decision making that alienates key team members.
In the case of MGE UPS Systems (Schneider Electric division), we were moving into some key periods for the company and were starting to see compression in our margins, our operating metrics, and ultimately the results we were reporting to corporate in France. All this while we were seeing massive fluctuations in just about all of our raw material prices, which at that time were primarily copper, lead, and steel. As a larger Executive team, and under the direction of our Chairman, we identified approximately 15-20 initiatives that ranged from increasing Services utilization rates, to improving battery pricing, to improving revenues in underperforming segments, as well as headcount related metrics and expenses. Additional initiatives included balance sheet management for the improvement of A/P terms, improving DSO metrics, and bad debt expense. None of these in any sense were a smoking gun, but as a collective and through the commitments of all the teams involved, we’d be able to make some very material improvements to our EBIT results. This overall initiative spanned the course of approximately 9-months and we met on a monthly basis, with our Chairman in attendance, and reviewed the progress being made on all initiatives. The reviews were not done on a 1:1 basis, but as a collective in a larger conference room. It was the purest form of group accountability. While a significant grind during that period, it was amazing to see that the team not only achieved the originally targeted results, but exceeded the commitment made. Still an amazing accomplishment by that team in what was a very mature / static company that was not experiencing anything close to hyper growth. It was about absolute efficiency in execution.
Fast forward to DC Shoes and this was about a huge amount of uncertainty. I walked into a situation where there was a heavily entrenched culture that was operating under the Quiksilver corporate umbrella, but operating completely independently and in a different location than the rest of the organization. A truly independent team and company. The goal going in was to partner with the new President for DC, as well as the likely relocation of the company to Quik HQ since the DC lease was expiring. At this time, barring some selective improvements, DC was a high performing brand, had tremendous additional potential, and was highly accretive to the overall corporate results. Corporate results that were driven primarily by the Quiksilver brand, DC Shoes, Quiksilver Retail, Roxy, as well as a host of smaller brands. DC’s continued results were so strong that it was a near impossibility to sell the brand due to the deleveraging it would create in the corporate P&L for what would remain and the subsequent results that would be reported moving forward. There was also the development of a full 5-yr Plan that had the DC brand growing to almost $500M, which in the few years after the brand was moved to HQ, would have exceeded the market cap of the entire company. The unfortunate part for DC is that while the brand was performing exceptionally well and aggressively growing market share, the sum of the corporate parts were anything but a synchronized and collaborative team. There was infighting between brands, selective support from corporate oversight teams, key executives making decisions they weren’t qualified to make for other brands, and ultimately, a complete scarcity of financial resources after extended periods of poor spending decisions and declining results. We know the unfortunate position that Quiksilver found itself in.
Cylance…a completely clean slate. No baggage. A complete blue ocean scenario to chart a path as a team and to start executing. We had a CEO & Founder who had an incredible security vision after decades of being told it wasn’t possible. We had a Chief Scientist that is probably one of the most brilliant folks that could have been chosen to head up our Research team. We had a CTO that was a CISO for a top telecom and moved his family from Australia for the crazy dream. An SVP of Product that was laser focused on building out the entire product team, while also building the product! We had a CMO that had a strong pedigree in security and did whatever it took to get the Cylance name out there…and in brilliant fashion. An SVP of Business Development that delivered on whatever was asked…including the collaborative and successful closing of the Dell OEM agreement. We had a VP of Professional Services that started generating revenue in our first Quarter. We had a VP of Legal that kept us out of the courtroom and played a key role in our corporate foundation. We had an SVP of Global Sales that partnered with everyone on the team to deliver the first $1M order…$10M order…crazy sales growth every Quarter, domestic team expansion, and international expansion. We finally got our first CPO that in just one short year oversaw employee growth of over 500 employees. I can’t imagine Cylance experiencing the level of success we did without the team and their amazing contributions. I can’t imagine that the team would have been able to share in the extreme success we did absent any of these individuals. Would there have been success, absolutely…but at what moderated level? Truly exceptional team results…and in the case of Cylance, exceptional value was in the sum of the parts.
Thanks for reading…
Jeffrey Ishmael

When Processes & Systems Are Put To The Test…

January 21st, 2015 Comments off

Part of the enjoyment that I get from working at a “start-up” is that we essentially have a blank canvas on which to build the company, configure our systems, and define processes. Processes that are both needed, as well as in the best interests of the company. Essentially the establishment of a back office configuration that will support increasing growth as opposed to legacy decisions that are still carried out within a larger enterprise that are simply no longer adding any value.

However, until you’re tested, how do you know the decisions you’ve been making will be positively affirmed and be of value to the organization? From an operational point of view we’ve had a number of touch points that have tested our systems. Whether it’s been the growth of our employee base, the successful completion of our Series-B fundraising, or our accounting audit….we’ve had multiple opportunities to test our systems.

From an operational point of view, I’ve chose to run headcount in a VERY lean manner and instead invest in systems that would support the highest level of efficiency. I’m probably working with the smallest Finance & HR team that I’ve had at any company, yet we’ve continued to successfully respond to due diligence and audit requests that typically involve the generation of hundreds of supporting documents to validate what we are reporting. While tedious, we have the systems and processes in place to respond to these requests.

We’ve also had to strike a very fine balance between implementing system enhancements and the need to run the day-to-day operations. We could have easily put Commission and Deferred Revenue modules in place earlier, but with a focus on cash management and time resources, we’ve waited on multiple implementations until it was right for the business…not for what was convenient or bragging rights of extra system horsepower that ultimately sat idle in the garage.

The challenge we’ll continue to embrace moving forward is how lean we can continue to run while providing top tier business intelligence to the rest of the team and responding to the needs of our outside vendors and partners. While we might be currently smaller in revenues than most of the other companies I’ve worked with, our trajectory is on plan and we have a great operational foundation in place to support it. The satisfaction I get from testing our systems and processes isn’t much different than the Sales Director who gets that purchase order…it feels like a win. It’s great to be working with a team that’s always focused on the test and ensuring that daily efforts put us in the strongest position possible.

Thanks for reading…

Jeffrey Ishmael

The Value Of The CFO As An Operational Partner…

June 11th, 2014 Comments off

For those that have followed my posts over the years, I have always been a strong advocate of the CFO not just being the financial partner to other functional areas, but a true operational partner. It was great to see the recent article in CFO.com, “Double Duty”, outlining the trends of CFO’s assuming the role of COO.

http://ww2.cfo.com/leadership/2014/05/double-duty/

While some might view additional title as a bit of a “land grab”, it really comes down to the CFO’s desire to partner with the other stakeholders in the company and provide as many tools and insights, which are aimed at increasing the financial & operational performance of the company. One of the statistics mentioned in the article was the decline of the COO role at companies, which fell from 48% in 2000 to 35% in 2013. As one person interviewed mentioned, It was a layer of management that caused the CEO to be a step removed from the business at times”. While it will not always be the CFO that necessarily assumes the COO role, it will really depend on the type of company and the how specialized the underlying COO responsibilities are. However, as I have also mentioned in prior posts, it’s critical for the CFO to be involved in the daily operations of the company in order to quantify what the developments or strategy changes will mean to the Forecast and reported financial results. It’s about working with the broader team and ensuring that the deployment of resources are appropriate to support the mission at hand and that all areas are aligned in their execution. By being involved at the operational level it’s pretty easy to see where promises are being made to customers, timelines are being communicated, and expectations placed on internal resources, and if all the parties aren’t working together….then what that will mean to the actual achievement of the Forecast.

Whether my role has been at a mission critical IT infrastructure company, Retail and Apparel, or now Security, the focus has always been on ensuring that Finance is truly operating as a strategic business partner to the other functional areas. While there was always some level of resistance in the beginning, it ultimately developed into a great relationship and one that was valued on each side. In instances where that wasn’t the case, then it was usually due to underlying agendas and actions that weren’t ultimately in the best interest of the brand or company.

My involvement from an operational aspect has also been to achieve further clarity to all the inputs contributing to the achievement of the Forecast. The worst disservice a CFO can bring to an organization is to treat the forecasting process as simply a spreadsheet exercise driven by assumptions cells that are updated to provide the desired output and then push out the changes to the rest of the company. It’s about being involved and knowing if the assumptions are achievable, sustainable, and if not in the long-term, are there operational changes that can be made to ensure they are.

Part of the value I’ve always strived to bring to a company is the implementation of both financial and operational platforms that deliver sustainable results. Results that are not the product of short-term or one-time low quality deals or internal cuts, but platforms that create longer term relationships and financial results. In the end, happy customers that are properly supported by their chosen partner…us.

One of the closing points brought up in the article, and one I’ve also always tried to see realized, is the “CEO understands that the overall risk to the company will be diminished if the CFO has some direct involvement”. If you’re ultimately striving to operate in a “company first” environment, then it’s not just the CFO that can provide this value, but every member of the team.

Thanks for reading…

Jeffrey Ishmael