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Posts Tagged ‘key performance indicators’

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

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

Financial Reporting, Coaching, & Supporting the Team…

August 9th, 2013 Comments off

After taking a few days off this last week and having some time to think over a few of the companies I’ve worked with, it occurred to me that there is a distinct difference between many of the finance colleagues I have worked with and the approach they bring to their position. For some, and without trying to hyper analyze how their childhood is affecting their work approach, it seems that the process of reporting the monthly results & highlighting the deficiencies of others is something they enjoy a bit. What has puzzled me about these individuals is that they are also part of the same team and should assume a more vested interest in partnering with each area to ensure that their colleagues have the proper tools and information they need to succeed and deliver the expected results. It’s really a matter of balancing the needs of consistent financial reporting, enforcing accountability across the organization, and partnering with each area to ensure that you’re giving them the support they need.

For myself and my work with Cylance, there is a huge correlation between the Services business I reported on and partnered with at MGE. At MGE, we had over 150 field engineers and reported on almost 340,000 labor hours annually. While a mature organization, there was still the need to develop and refine our ability to accurately report on that portion of our business and have the information to make business decisions that would help us continually improve our performance. It’s no different here, except that we are a 1-year old start-up that has a smaller staff. We have incredible talent who bring a wealth of experience from some of the top companies in the security space, but as a start-up, it takes time to deploy the necessary tools and provide them all the necessary information. While it took a bit of time, we do have that information and are constantly using it to measure the business and make informed decisions.

Managing the Finance side of the organization, it’s not just my responsibility to throw a set of numbers on the table at the close of each month, but to partner with our Services team and ensure they have the proper reporting and can focus their efforts on customers and project management. I want to provide them the information so they can audit and tell me the system isn’t properly reporting…or it is and they can adjust their business as necessary. It’s not just hindsight reporting, it’s about a complete performance picture:

  • What is the current utilization rate and what are the trends you’re seeing over time?
  • What is the estimated proforma utilization based on the bookings pipeline being reported?
  • What is the current hourly cost rate and how do the actual results compare to the Plan?
  • Is the existing skillset of the staff aligned with the bookings that are being recorded?
  • What is the average billing rate and how does that compare to the Plan?
  • What is the cadence of new bookings and project kickoffs relative to available staffing levels?

In the end, the responsibility of Finance should be much more than publishing revenue or margin results. It should be an ongoing partnership with the areas that significantly influence the results and helping them optimize those results. When it comes to working within a start-up, we are all vested parties and need to drive towards the best result possible.

Thanks for reading…

Jeffrey Ishmael

Is Corporate Influence Impacting Your Brand Performance…?

May 17th, 2013 Comments off

In my last blog entry I provided an overview of all the areas that could potentially impact the value and performance of the company or brand that you are responsible for. Essentially, are you squandering brand value through your own actions, or conversely, are you having to work through parent company influencers that are impacting your results?

At DC in particular, I was hired one month on the heels of a new President, who in his words, “was not brought in because things were going well”. Very true words, and in the beginning, we were given all the corporate support we needed to make the necessary changes. Gradually, as we continued to improve our results, we began to see an increasing restriction in our available resources. Not because our results were deteriorating, but out of support for the other brands who were not performing as well and the need to post a strong consolidated result. The availability of resources started to become scarcer as we consolidated locations and became an embedded brand at a corporate level as opposed to our previous situation of operating as an independent brand…down to a geographic level.

Now to be clear, the issue wasn’t fiscal accountability at a corporate level, but the frustration in the inability to deliver the value that we knew we were capable of. A level of performance that would not have been at “any cost”, but a level of performance that would have easily been achievable while still showing improved financial results, a methodical leveraging of our expense base, and an investment in headcount that would have supported the necessary growth initiatives.

For our brand team, we had complete transparency on our goals, our financial performance, and the mapping of what would get us to that point. So when the brand was denied the resources to perform, the entire team felt the same level of frustration, as well as sharing the common question of why there wasn’t the same level of fiscal accountability across all brands. It was pretty easy to see where there was a prevalence of “legacy” management and staffers across the other brands that held their positions as a result of their tenure with the company, as opposed to the value they actually delivered on a daily basis. It was necessary to accept that the environment we worked in was one of lifestyle, as opposed to the responsibility of driving corporate performance & drive shareholder value.

Conversely, if there was a common drive for performance, knowing that we all designed, developed, and sold a similar product, the allocation of resources should have been a very straightforward process.

  • We should have been looking at the growth rates across all brands, both at a realized level, as well as a forecasted level. We also would have been looking at the historical ability to deliver on previously committed results as opposed to who delivered the most favorable presentation.
  • We should have been looking at the allocation of operating expenses and whether each of the brands was achieving the necessary leverage in their forecasted results.
  • We should have been looking at headcount levels relative to our existing revenues, forecasted revenues, as well as the impact on forecasted OpEx. Would we be looking at an increased revenue per employee metric with the impact of new hires? We’d be looking at that metric across the brands on both a current and proforma basis.
  • We should have been looking at brand level inventory performance and whether we were showing an increased turn versus prior seasons. We should have been measured at a brand level on our performance with reserves, past season inventory, and not merely arbitrary opinions that inventory levels were too high because overall corporate inventory levels had become bloated.

In the end, it’s important to understand the environment that you are working in, or being forced to work in, and whether it fits your own approach and what motivates you. Regardless of whether you’re being forced into a position of compromising the performance of your brand, it’s still important to track what the capabilities are for the brand and to still strive for those levels, even if it is in the face of headwinds that are over and above the normal market, product, and customer challenges.

Thanks for reading…

Jeffrey Ishmael

San Diego FP&A Summit Follow-Up….

February 25th, 2010 Comments off

     In my prelude post yesterday, I gave a brief overview of my intended presentation for the San Diego FP&A Summit hosted by the IE Group ( www.theiegroup.com ), who is a global summit organizer. As expected, I had some great conversations with both attendees and presenters, as well has having the opportunity to meet up with colleagues I hadn’t seen in a while. Unfortunately I didn’t have the opportunity to stay for the entire event, but they clearly had a strong line-up of speakers, which also included Oakley, AMD, Juniper Networks, Disney, HSBC, and a host of others. Below is the full presentation I delivered today at the summit.

KPI Presenation – San Diego FP&A Summit

Thanks for reading . . . .

Jeffrey Ishmael

San Diego FP&A Summit – A Prelude….

February 24th, 2010 Comments off

            Tomorrow I’m being given the opportunity to speak at the San Diego FP&A Summit, which is sponsored by the IE Group ( www.theiegroup.com ). I was a bit hesitant in the beginning, but once I spoke with Richard Bracchi and realized the line-up he was putting together there was no way I could decline. We also started talking about what subject I might be tasked to speak on. It didn’t take long with I saw the topic of KPIs on the list. A subject that is near and dear to my professional heart! Besides, how in the heck do you drive improved performance without have metrics in place to measure all the triggers you need to pull?

            After the presentation tomorrow I’ll post my full presentation, but I had a great time assembling what I hope will be a valuable presentation for those in attendance. I get a sincere kick out of discussing this topic with my peers….

Ask most Finance professionals how they measure their business and they’ll cite our typical tools….

      Income Statement

      Cash Flow Statement

      Balance Sheet

       These are merely reporting mechanisms for the true tools that we use to measure our respective businesses.

 

       What are the KPIs that help you make your business decisions?

       How do you create value for the Company in the absence of such critical reporting?

       How do you price a Service Offering when you don’t know your costs?

       How do you formulate staffing decisions when you don’t know how hours are consumed?

       How do you drive improvements when you don’t even know where the waste is?

These are only some of the questions we’ll be addressing tomorrow….

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