Month: October 2010

Big Picture and Staff Training


Closely-held entrepreneurial companies always have some flair of secrecy.  The Owners' lives are intertwined with the businesses and because of that they apply personal privacy rights to everything, including the company's commercial and organizational matters.  This frequently leads to "need-to-know-only" modus operandi when dealing with employees. 

CFOs, Controllers, Directors of Finance are expected to act in the same secretive manner.  And I am not talking about non-disclosure of commercial secrets, compensation details, or owners withholdings – these matters are confidential by definition.  I am talking about organizational structure, commercial partnerships, new financial relationships, transactional details, new venture plans, etc.

The owners who insist on such covertness make a mistake of disregarding the natural human instinct of their employees to fill in the blanks.  In the absence of actual information they will cook up their own assumptions about concealed matters. 

You wouldn't believe what kind of wild baseless fantasies I sometimes uncover: non-existing silent partners, astronomical sales volumes, mythical lines of side business.  In one of my previous employments people even assumed that I was a member of the owner's family on account of my loyalty and strict work ethics. 

That's just laughable, but there are far more serious impacts of secretiveness: people don't understand the mission of the organization, the commercial scope, the structure, the value chain.  Most importantly, they cannot grasp their own place and relevance in the system.       

The unfortunate effect of this disconnect is mechanistic disinterested performance instead of meaningful work.  On one hand, the bosses insist that their employees are kept in the dark, and on the other hand, they would like to see high efficiency and productivity – impossible to coexist.

I have managed to convince most of bosses that while keeping the actual confidential information secret, it is absolutely crucial to provide my subordinates with the Big Picture and their place in it.  I consider this to be the most important step in staff training and development.  You will be wasting your time trying to teach your employees how to apply their expertise and education to the tasks you need them to perform if they don't know why these tasks are important for the company's, and consequently, their own prosperity.

When explaining their role and place in the Big Picture, I frequently tell the employees that the company doesn't employ them to pay salaries.  It is actually other way around: if the company could operate without the employees jobs done, we would gladly do so and save the money we pay as compensation . But it is crucial for the company that the jobs are done well and that is why the employees are retained and paid.  You will be surprised: it is not as clear to most people as you could expect.

He Looks Like an Accountant…


I was on a train a few weeks ago next to a woman reading a mystery novel.  Involuntarily I've glanced at the page and my trained eye spotted the word "accountant."  I couldn't help myself and read a couple of sentences: "Detective Jones came out of his office.  He looked like an accountant. He asked me…."

The "accountant look" has become a social and cultural cliche long time ago.  So, what do people have in mind when they say that?  They mean Charles Grodin in "Dave" and Barry Kivel in "Bound."  They mean Will Ferrell in "Stranger than Fiction" and Gene Wilder in "The Producers," etc.  The numbers of cinematic portrayals available as references is not that large, but the principle idea is clear: they mean, bland, boring, meek. 

7078-4456
And yes, it is unlikely for an accountant to have a blue mohawk or to strut around in red patent leather boots with 4" heels.  An accountant is not expected to stand out even if he is clad in a $3,000 Italian suit. 

But, let me tell you, very-very frequently that nondescript appearance is just a cover.  Like Superman under his Clark Kent persona, an accountant may be hiding a secret identity, an ambition far beyond his outer image.

Charles Grodin's character cracks Presidential budget's problems overnight.  Shelly in "Bound" steals $2 million from Mafia in attempt to incite his boss's beautiful wife to run away with him.  Harold Crick (Will Ferrell) abandons his regimented life as an IRS agent to become a singer.  Both Gene Wilder in "The Producers" and Jack Lemmon in the "Apartment" get the Girl.

Let's push the movies aside for a second.  In real life the accounting profession is responsible for some fascinating alumni: J.P. Morgan, John Grisham, Bob Newhart, Thomas Pickard, Kenny G. (well, maybe we should keep that one in secret).

The front page of this blog  Raison d'etre expresses my firm believe that CFOs and Controllers regardless of their appearances are the cerebral force behind adventurous entrepreneurs.  It's just that our daredevil streaks are tamed by critical reasoning.

Let's come back to the movie references.  Standards for women are different: here we have Cher in "Moonstruck" and Kirstie Alley in "Look Who's Talking" series.

Cher+Moonstruck

 

11ihj8ykeaxoxay 

So, it is Ok for a female accountant to be attractive.  Well, maybe the fact that it is more difficult to stick an accounting label on women is the reason why they don't rise to the positions of the perceived "highest level of success" as frequently as men do.  According to CFO.com, Women CFOs Holding Steady: to be exact, steadily under 9% among both Fortune 500 companies and mid-cap 1500.  You see, they don't "look like accountants."

All I can say is that every time I am in the General Admission pit at a rock concert, the young people around me don't believe that I am a CFO. 


Job Search: Is Industry Experience Really Relevant?


All of us have encountered this many times over – you read a job posting for a CFO or Controller position (this is particularly true about recruitment agencies' ads) and the responsibilities list is a perfect match to your experience: you've done budgeting, forecasting, treasury management, BOD reporting; you've designed KPI's and dashboards; you've managed and trained staff, etc…  Then, you get to the end and among mandatory qualifications you see: real estate experience (or broker/dealer, or manufacturing, or consumer products… whatever) "is a must."

Why?  Do hiring execs and managers think that there are some cult secrets separating one industry's accounting and finance from another?  That you can only absorb them through exclusive involvement with that industry's firms? That no one with  deep knowledge of fundamental principles of finance, GAAP, taxation etc. can adapt them to a new industry and quickly digest the technical specifics? 

And wouldn't they be more interested in hiring someone sophisticated enough to be willing and capable of diversifying their experience?  Do they really think that someone who knows Revenue Recognition Cycle in Technology will not be able to dissect standards for the same task in Financial Services? 

I can go on forever with these questions, but I guess you get my point: I don't think that industry experience is relevant for REAL CFO's and Controllers – those who possess broad and deep knowledge of accounting and finance, not just few repetitious tricks they have learned without understanding the underlying principles behind them.

Let me give you a simple analogy.  Multi-lingual children exposed to different languages through their residence, parental ethnicity, foreign nannies, etc. are known to add more and more languages to their arsenal with a greater success than their peers.  The reason is that their anatomical speech instruments become very flexible and can adapt to any new challenges.

The same is true about the professional expertise of those financial execs who were exposed throughout their career to a variety of industrial and organizational specifics.  They usually have deeper understanding of business, sharper commercial acumen and ability to adapt them to any new circumstances.

In yet another excerpt from Marc Cenedella's TheLadders book (Sell Yourself Short), he condecsends that recruiters are now more open to industry crossovers, but that you will have to accept lower salaries and positions. 

First of all, the supposed "openness" is a lie: the job listings are full of specific industry requirements.  Secondly, don't let statements like that lower your self-esteem: if you are capable to cross over without difficulties, it's your asset, not a shortcoming.

Let's not forget that the system of double-bookkeeping (still the foundation of all accounting the last time I checked) was created by the XIV century Venetian sea merchants and first outlined in proper structural manner by Benedetto Cotrugli around 1450 as a chapter in his "Of Trading and the Perfect Trader."  Subsequently, Lucas Bartolomes Pacioli devoted 36 chapters to the subject in his monumental tretese on mathematics.  

These were Renaissance men who also wrote on architecture, medicine, law, art, religion and broad business issues.  It is unfortunate that the employers of today have devolved to preferring the narrow specialization instead.


   

Time Organization as Anti-Frustration Tool


Business strategy, financial plans, cash flow projections – obvious tasks in any CFO or Controller's routine.  These functions are integral parts of our job descriptions and inability to perform them would simply disqualify us as senior financial professionals.  No matter how sophisticated, at the end of the day they have to do with allocating limited resources over specified periods of time. 

Well, what about our very own personal intellectual resources? Are all of us capable to allocate them in an efficient manner?

Practically every single employer (in subconscious recognition of the responsibilities scroll's heftiness) feels obligated to mention multi-tasking, work-under-pressure, and tight-deadlines in their job ads for financial execs.  And yet, nobody ever asks during interviews about the candidates' actual time-management skills. 

It is very flattering to our professional class that bosses simply assume their present and future CFO's and Controllers to have their own self-organizing tools, but the sad truth is very few of them do.  They consistently spend long hours on a single task, while the day runs away from them leaving huge volume of unattended work behind, which over time may pile up into a mountain.  And it applies to other execs as well, but I don't care about their well-being in the context of this blog. 

To my fellow financial professionals in the small and mid-size companies, however,  I want to say three words: schedules, lists and schedules.  Yes, schedules two times – short-term and long-term.  I have briefly mentioned scheduling before in my post on prioritization (The Importance of Prioritization for CFOs and Controllers), but this topic is never exhausted. 

I want to emphasize that the value of time organization lies not only in the increased professional efficiency but, more importantly, in its ability to reduce job-related frustration and anxiety.  Schedules and lists create a framework for your multi-tasking and provide you with stability of a clear action plan.  They especially help those prone to experience anxiety about forgetting the "back burner" projects. 

Once the need for self-organizing tools is recognized, you will be capable to design your own.  And I believe that it is important for every CFO, Controller, etc. to develop their individual practical schedules and lists based on their actual business circumstances and preferences.

Just as a reference point let me share that, at the very minimum, I usually have the following lists: (1) functional breakdown of departments with tasks assigned to each group/person and their time frames;  (2) a list of mandatory daily functions; (3) a list of periodic reports with fixed dates, responsible parties and intended recipients (weekly, monthly, quarterly, annual); (4) a long-term list with projects that are not crucial to immediate commercial goals, but are necessary to bring the company to the next level, with tentative start dates.

Accordingly, at any given moment I have four schedules: (1) today's schedule, which I usually prepare previous night; (2) current and next weeks outlines; (3) current and next months highlights; (4) tentative 4-month plan.   

I would like to emphasize that FLEXIBILITY is a key: don't let yourself to be trapped into an obsessive rigidity.  Changes and diversions are to be expected and there is no reason to get worked up about them – after all, we live in a very fast-changing business world.

 


 

       

CFO Folklore: Frustrating and Demeaning Mistrust


The “Hands-Off Micromanagement” style  so prominent in many business owners— and defined in my September 21, 2010 post —has a lot of implications in daily lives of CFO’s and Controllers.  One of the most frustrating facets has to do with petty mistrust. 

I’ve got volumes of stories illustrating this particular trait of a CFO vs Owner relationship.  Here is a compiled rendition of a rather frequently recurring Tale of Mistrust from the CFO Folklore.

AlphaOmega Inc. is a treasury-intense company and its CFO devotes big chunk of his time managing it.  He personally decides on daily basis whether the company needs to borrow to cover operational deficit or invest the excess of available funds.  He is singly responsible for signing financial instruments, including multimillion-dollar letters of credits and commercial loans paid directly to suppliers.  He electronically hedges foreign currencies, sometimes  as much as $1 million per transaction.  His discounting customers’ trade documents  on London Forfeiting Market frequently reaches $20 million per tranche.

Carrying all these monetary responsibilities makes him especially meticulous about the separation of duties and internal controls.  None of the transactions he personally conducts are recorded by him.  He deliberately never cuts any checks.  He has a designated treasury operator setting up all the wire transfers.  The companies books and records are regularly audited by lenders.  And his quarterly and annual accounting audits are always clean and produce unqualified opinions.

And yet…  he has no authority to sign a $1 check or execute a $10 wire transfer release.  Only the Boss can do that. 

And this Boss is not available for you whenever you need him: the business frequently takes him abroad; May through September he is in his summer house; he has to spend holidays with his kids; and he has a girlfriend (you know, afternoon delight and all that). 

Moreover, he hates signing checks and keeps ignoring that thick folder the AP manager put into his in-box two days ago.  And every time the CFO sends a “pleeeease-release-wires” email, the Boss acts like he is asked to grant a personal favor.  And it is the CFO who has to deal with the frustration of vendors and suppliers waiting for their payments. 

The situation drives him crazy and causes perpetual frustration and anxiety.  Swallowing his pride and ignoring the insulting pettiness of such mistrust, the CFO addressed the issue many times, sticking strictly to the damage the situation causes the business.  He explained on numerous occasions that the way his internal controls are set up, it would require his entire stuff to be part of a scheme to steal even a dollar from the company.  He also explained that their treasury systems allow to set up limits of execution authority and that the Boss shouldn’t be bothered with $2,000 wire transfers.  

All falls on deaf ears.   So, the poor CFO still chases his boss somewhere in Hong Kong, begging him to release today’s wires before the banks’ cutoff time of 5 pm EST, which is 6 AM tomorrow over there.