CEO – The Frustrated CFO

CFO Folklore: Delusional Self-Involvement of Business Owners

As my readers know, years ago I've made a career choice of avoiding large corporations and their tall organizational structures. I prefer small and mid-size companies allowing opportunities of direct interactions with business owners – the very people responsible for recognizing one's efforts and allotting rewards. It's not for sissies, of course, because in this environment you cannot hide your incompetence or laziness in a mass of indistinguishable drones – you and your work are on the spot and in full view all the time.

Even for a highly skilled professional with a strong work ethic it's not easy to be constantly exposed to this very special breed of people - the entrepreneurial bosses, who, God bless them, unwittingly provide me with endless writing material. I guess it will be several years into my retirement (assuming I will live that long) before the urges to highlight this or that aspect of their psychology and behavior will ceise.

It's uncanny how many common characteristics are shared by private business owners. For example, all of them operate under the same delusion that employees care (or should care) about their companies just as much and exactly in the same way as they themselves do. It's especially amazing to me because most of them are pretty levelheaded and highly functional people, yet they insist on this deranged assumption that doesn't fit into any rational frame of thought.

For a business owner his company is his life's endeavor, his singular purpose, his channel of expression and fulfillment, his source of pride and wealth, his outlet of personal freedom. The owner/CEO's opinion overrides everybody else's; he is the only one with a full authority to direct the company's development in any direction (to a success or to a downfall); ultimately he holds all employment strings in his hands; he can say or do whatever he wants (within the limits of the law, of course); nobody watches his time, assesses his performance, addresses his shortcomings.

On the other hand, for an employee, no matter how dedicated, loyal, hard-working, conscientious, and highly positioned, a job is just a job – a line on a resume. It cannot possibly be anything else, because there is no such a thing as a job security anymore, no matter where you work. If the current employment ends, there most likely will be another one after. Nowadays, probably shifting down, but maybe shifting up - who knows? There must be something, or there will be oblivion. For many of us, a job is just a source of sustenance, not the means of self-satisfaction. And when it comes to personal freedom… I already wrote about it four years ago (Bill of Rights in Small-Business Environment ).

Clearly owners and their employees are conditioned to look at the business from different platforms. It is preposterous to assume equal attitudes from unequal parties. Yet, the faulty presumption persists and is manifested by various business owners quite frequently. I'm sure many of you have experienced it first-hand.

On the rare occasions, when opportunities to be frank present themselves, I try to explain to CEOs that their employees have their own individual life agendas: what's good for you, your business, and your pocket, Mr. Boss, is not necessarily all that important to them. Sometimes I even draw Maslow's Hierarchy of Needs: you see, I say, you cannot expect them to be proud of working in your wonderful growing company if they cannot make ends meet and feel overworked.

Agh, it's no use! Just the other week I was discussing (via email) with one of my clients, whose company made the 2013 Inc. 5000 list of the fastest growing companies in the nation, whether I should enter them into consideration this year as well. It's my assessment that the negative outcome (everyone was complaining about the endless solicitation calls from various service companies) outweighed the pleasurable, yet hard to measure, positive impact of the resulted publicity. He had no rebuttal to that particular argument. Instead, he replied to me with the following:

"The ranking is something about which we can all be proud, and which thereby directly affects the morale of our staff, who both see results of their hard work translated into an accolade and have the pleasure of working for a company that has been honored. I know I bathed in the warm glow of the company's recognition."

Of course he did! It's his company. He is rightfully entitled to tell about it every single person he meets. But can you believe the gall? They "have the pleasure…"! Seriously? Even the ones with $40K salaries and one-week-a-year vacations? Uh-uh, Mr. Boss, the pleasure is all yours.

“Passive-Aggressive” CFO

One of my former CEO’s contacted me after reading my post on Bill of Rights in Small Business Environment (who knew they would be looking?). He’s been in business for 27 years with many employees passing through. Listening to his opinion on the Freedom of Speech, I came to realize that his point of view might be typical for a lot of business owners and should be shared here.

According to him, employees, including his current CFO, choose not to voice their opinions as a manifestation of a passive-aggressive attitude. In reality, he says, he would not mind listening to what they have to say on variety of business issues.

My first impulse was to laugh. I used to work for this person and, to put it mildly, he is not the friendliest of bosses. My policy, nevertheless, was always to express my judgement on all professional issues. This, I must say, received mixed reaction, depending on whether my opinion was in agreement with his or not. It was fortunate that our commercial views were nearly identical and we rarely had disagreements. However, on those occasions when my opinion differed, what I got back was the cold silent stare that could have discouraged someone less straightforward.

But I didn’t laugh, because I wanted to know more about the reasons he has classified his new CFO as passive-aggressive. So, I asked more questions. Actually, this was not the first time I asked these questions. Over the years more than a few senior execs have used that term to describe some of their employees to me. It always puzzled me how these business people recognized a behavioral (i.e. psychological) trait.

Let me tell you, most of the time, including in case of the CFO in question, it amounts to “sulking.” Instead of speaking out, the employee shows a “bad temper”: he is morose, with disappointment and annoyance written all over his face. In other words, unreleased frustration (my favorite subject), jumps from inside onto his face. And yes, that can be classified as a passive expression of aggression.

Yet, at the same time the CFO still works hard, diligently performing all his duties and making sure that the business continues to survive and prosper. And that’s actually the opposite of passivity.

Sulking on its own is not a sufficient symptom to diagnose someone as passive-aggressive. There are far more significant and damaging, especially in business environment, manifestations: procrastination, obstructionism, chronic tardiness, tendency to blame others for one’s own failures, making excuses for non-performance, deliberate creation of chaotic situations.

If you keep catching your employee shuffling papers on his desk every time you walk by, or even if he appears to be busy but never delivers any results; when a deadline of a project gets pushed further and further back, then you may have a passive-aggressive person in front of you.

However, if the employee does his best, but looks upset, maybe you should just let him exercise his constitutional freedom to speak his mind.

The Late Robb Stark, CEO of House Stark

Let me say first that I mourn the death of Robb and Catelyn Stark just like the rest of the Game of Thrones fandom. Yet, the sadness doesn't cloud my judgement; it doesn't prevent me from fully grasping the ironclad logic of good storytelling. I am fully aware that the tragic events of the Red Wedding were not written for the sake of shock and gore. They were consequences of the characters' actions and motivations, consistent with the specific circumstances and forces at play. They had a lot to do with matters of executive responsibility, obligations of power, burdens of leadership, i.e. with the "weight of the crown." As the Bard said, "Uneasy lies the head that wears a crown." (Henry IV, Part 2, Act 3, scene 1, 31).

To those who read CFO Techniques I would like to offer my apologies for using the analogy from The King's Speech here again. It's just that the Brits, who's been living under monarchy for over 1500 years, understand this royal-duty business better than anybody. (Also, they seem to speak the same language as the Seven Kingdoms' folks.) So, in the movie, Prince Albert (Colin Firth) tells King George V (Michael Gambon), "Father, we are not a family, we are a firm." And the king replies, "We are the oldest, most successful corporation in the world and sitting on thrones is our business."

Yes, ruling a nation is a family business, and that makes a king the Chief Executive Officer of his land and his people. And in this position, just as it is in any company, he is responsible for

strategic development – expansion, contraction, restructuring, hostile takeovers,
foreign policies – establishing or severing connections with external parties, forming partnerships and alliances,
tactical decisions – laws, decrees, rules, governing appointments, organizational infrastructure,
fiscal adequacy – financing day-to-day operations and all those strategic moves,
economic balance – most important for prevention of revolts, backstabbing moves of dissatisfied courtiers, and the fleeting of labor,
human relations – the adoration and support of one's subjects doesn't hurt.

In fact, in George R. R. Martin's world, a king's enterprising is very entrepreneurial, very hands-on. Nothing like the make-believe leadership we see in the dangerously large governing bodies of contemporary conglomerates/countries. In the Seven Kingdoms, a true leader cannot be a mere token sitting on a throne (in King's Landing they have Joffrey for that, while Tywin rules). A ruler's job requires a lot of personal involvement and micromanagement: from weaving intricate intrigues to beheading those you condemned; from charging in front of your troops to skinning a damn large deer – the one with the executive power cannot avoid rolling up the sleeves and getting his/her hands dirty.

Most importantly, the king must take personal responsibility for doing the right thing by his nation. He'd better have his priorities straight: the crown is so heavy because the burden of authority calls for selflessness and sacrifices. Those few business owners that earned my personal respect over the years concentrated all their efforts on the prosperity and success of their companies. They were acutely aware that business is nothing if not a continuous struggle for survival.

So, what about Robb Stark? How did he do as a CEO? Not very well, I'm afraid. He was like one of those young rich boys, who inherited his father's business too early due to an untimely death – full of great potential, brilliant ideas, and… illusions. The childish sense of invincibility has not yet evaporated from his body. He thought he could break and rebuild the word any way he wanted. And so, he went and violated the millenia-old custom of building political alliances through marriages: he broke off his engagement with Lord Walder Frey's daughter. His Love was above any rules. How beautiful!

How cheeky and irresponsible! It was an unforgivable insult to House Frey. It was disrespectful to the memory of his father who made an arrangement and himself inherited Catelyn as a bride after his older brother's death. And, as far as the well-being of his land, his subjects, and his mission are concerned, it was plain reckless. In the business environment, this would be the equivalent of breaking contractual obligations with your commercial partners or violating the terms of your financing agreements. Actions of this kind result in companies loosing their reputation, market share, procurement resources, creditability, funding, and eventually going bankrupt, i.e. die.

As many young entrepreneurs, Robb Stark was a person of extremes: he was quick to break rules practically written in stone, yet many of his actions were marred by poor, hesitant decision-making. Whether due to inexperience or a lack of talent for long-term strategic thinking (his military campaign proved him to be a good tactician), he was never quite sure what was the right thing to do. It's bizarre, really: sometimes he neither followed the solid logic presented to him by his advisers, nor did he go with his own gut. The foolish execution of Lord Rickard Karstark, which resulted in a loss of a huge chunk of allied troops is an obvious example.

I've been forever writing and talking about psycho-profiling as a key management skill. One simply cannot succeed without it. Robb's inability to read people and their motivations might be the main reason for his downfall. What made him think that old Lord Frey will forgive the insult and tolerate Robb's wife being shoved into his face in his own home? How could he forget that you cannot trust anybody and must always be on alert for betrayal? If we think rationally about it, the probability of retaliation was very high.

In contrast, there is a reason why a few smart people reluctantly realize that Tyrion Lannister is King's Landing's only hope. Not only that he is sharp, brave, incisive, and fair, but he also understands that if one wants that family business of ruling kingdoms to be successful, he must be ready to forsake a thing or two, including personal happiness.

It's great to find out that I'm not the only one who saw the parallels between the demise of Robb Stark and the small-business leadership. The article below was prompted by TypePad as a related post.

Cutthroat Leadership Lessons from Game of Thrones

CFO Folklore: Mortal Kombat – CEO vs. Outlook, FIGHT!

I am the biggest advocate of an entrepreneurial CEO's freedom from any administrative, technological, and infrastructural minutiae. They must not busy themselves with making their own reports or calculations in Excel, devising organizational routines, catering to bankers' demands, nurturing relationships with customers, etc. They have functional executives and senior management for that – CFOs, COOs, CIOs, Controllers, Sales VPs, etc.

An effectual CEO should be focused almost exclusively on the strategic development of the business and the tactical decisions pertaining to the company's survival and prosperity. Therefore, he may be, but doesn't need to be an Excel pro, an IT geek (unless, of course, that's the business), a bullshitting ace, or a financing maverick. He must be a visionary – that's all. I stated my position on this issue multiple times and dedicated an entire post to the defense of CEO's limited scope of responsibilities. I even wrote about it in CFO Techniques.

I have to say, though, when it comes to technology, for most CEOs outside of the high-tech industry, it's not even the result of division of labor -there's some sort of a pervasive impairment. Most business owners I know personally or have heard about from other people are not very technologically advanced, to put it mildly.

There are CEOs who call for help every time they need to insert a column in a table; are incapable of logging onto a network; and wouldn't touch scanners even if they stand right on their desks. And that's Ok. As I said, they don't have to trouble their valuable heads with these things as long as they attend to their primary job and manage to be brilliant at it.

However, we do live in the second decade of the 21st century and some level of sophistication in the ways of contemporary communication is simply required. It has nothing to do with being a small business owner, a big-time CEO, or The President. This is one area of technological advancement, where everyone at a certain point had to overcome their innate resistance to novelties and get on with the program. Radio, telegraph, telephone, video transmission, cellular connection, etc. – they have simply become mundane tools of every-day existence.

Nowadays, using electronics as a means of organizing your life and exchanging information is as elementary as turning the pages of an old-fashioned desktop calendar. And if you don't know how to do it, it makes you look silly and inadequate; it's simply unbecoming for a business leader.

I currently have a client who comes to the office on Saturdays and Sundays because he cannot follow instructions on how to access his business emails remotely or push them through his iPhone. His partners, employees, and commercial associates laugh about it behind his back. It's likely that these inadequacies have an impact on their overall attitudes towards this business owner.

But I am particularly annoyed with those CEOs who are not able to utilize Outlook beyond the most primitive actions of receiving and sending emails. I mean, for businesses operating in the PC environment, the program has become one of the most vital cross-functional tools since 1997!

I am currently exposed to one of these. At this point I've already resigned myself to the sad fact that she will never learn how to accept or reject meeting invitations. I wouldn't even dream of her creating one herself. She will never get rid of her humongous appointment book, which, due to its instrumental limitations, is incapable of reminding her of important events or tasks at hand. However, emails are her life, she lives and breathes them. Wouldn't she treat them with proper care? Guess again.

The other day she comes over to my office and asks if I still have "that email about…" (the subject matter is irrelevant). Of course, I do. She is standing right next to me looking at my screen, prepared to read the email with me when I find it. I switch to Outlook, which is opened, as always, on the Inbox. There are maybe 10 emails there, which arrived in the last 30 minutes. "Where are all the emails?!" she is utterly surprised, "I keep all important emails. I've got hundreds of them." "So do I," I reply, "But not in the Inbox, of course." I slide to my Navigation Pane, go straight to one of my 30 subject folders.

She is not stupid and she is a pretty good CEO. She understands the importance of time-saving tools. But she is too proud. She will not ask me or any of her employees how to do it. And so, she continues searching through hundreds of messages in her Inbox.

The Second Quarter Financial Results, or They Always Kill the Messengers

Believe it or not, but we've already passed the mid-point of 2012. While the foretold Armageddon is not upon us just yet (most likely due to the inaccuracy of our calendar), the immediate future of many CFOs can be predicted with a confident certainty: the second quarter financial results will be due in a couple of weeks.

Let's face it, this was not an easy fiscal period. Whether large or small, businesses were affected by the volatility of the international markets, the slowdown of commercial demand, plunges in both commodities' prices and consumer confidence. Even the bigwigs at Goldman Sachs and JP Morgan, the conjurors of "facts" that prevent trading markets from falling apart, had to admit today that "the recovery slowed in the second quarter" and downgrade their projections.

What recovery, you clowns? Anyway, those of us running actual businesses know: the quarter was mostly downsloping, choppy, and unhealthy. This will translate into smaller revenues, narrower profit margins, and, for many, losses.

The Frustrated CFO always feels doubly agitated about subpar performance results (obviously, antsy enough to talk about herself in the third person). On a big-scale, as a small-business crusader, I am worried that with every difficult fiscal quarter the possibility of our economy getting back on the right track, with entrepreneurship reclaiming its rightful status as a backbone of capitalism, becomes less and less real.

And then there is an apprehension of inevitable consequences for all financial chiefs of privately-held companies (myself including), who cannot avoid playing the part of the bad-news heralds.

Regardless of the nature and the size of a company, the main recipients of its performance results are owners/investors. For public companies these are millions of faceless institutional and individual stock-market gamblers. The publication of financial information by these companies is mandated by law and governed by SEC.

When the picture is bleak, the Boards of Directors, terrified by the possibility of a sell-off and devalue of the stock (first and foremost, their own holdings), frequently spring into action to show the world that they are "doing something about it." This usually amounts to moving the pawns on the corporate chessboard: we regularly hear about dismissals of CEOs and COOs perceived to be responsible for the failures. At the same time, unless they are caught together with their auditors cooking the books, the big-time CFOs are rarely publicly flogged.

Private businesses operate in an entirely different universe. Here, people responsible for financial reporting, CFOs and Controllers, daily face their owners/investors. The entire chain of delivering the message is reduced to a single step. Here you are with your perfectly accurate, yet unpleasant, reports and there, on the other side of the table, or on the other end of an email link, are the owners/executives.

And, even though everyone in the room understands that you cannot possibly be singly responsible for the business's poor performance; that it is a result of many contributing factors; that the CEO herself disregarded your loud warnings and fucked up several crucial deals – the bosses invariably follow their first impulse to lash out against somebody. At that initial moment of disappointment, there is no better a scapegoat than you, the news-bearer. As if on cue, the bosses turn into cranky babies and throw pointless tantrums. The funniest thing that ever happened to me was when the President wanted to see the general ledger details and "check the numbers."

Eventually, of course, they come down, and become reasonable. If you've earned their respect and got their ear, they would listen to your analysis and accept your improvements proposals. The thing is, though, we are human too and no matter how well we hold it together, the hurt of that initial heraldic punishments stays with us.

The Queen's Herald

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