Category: Bosses

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


 

Segmental Profitability

© Copyright 2011 E and D CC, Inc.

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.

Queen's Herald

The Queen's Herald

In Defense of Business Owners: Scope of Responsibility


Many of my fellow small business CFOs and Controllers mistake my singling out a BOSS as one of the main frustration triggers for an ardent enmity towards business owners.  The truth is quite opposite.  As the matter of fact, most of the time I find myself on the same side as my boss; shoulder to shoulder, fighting the daily war of commercial survival. 

Yes, it’s tough to deal with their complex of unlimited powers.  At the same time, I always say that business owners create our jobs and that alone merits respect.  I also never imply that all CFOs and Controllers are made equal.  I’ve met plenty of inadequate, limited, lazy and dangerously indifferent financial execs who damaged the companies they were supposed to guard.  In due time I’ll write about them as well.

But we interact with out bosses more than anybody else and that’s why they are prominently featured in my posts.  Being a CFO or a Controller makes it inevitable that everything a CEO does or doesn’t do becomes a concern and frequently a touchy subject. 

And one of the touchiest subjects is the Scope of Responsibility.  I cannot even count how many CFOs and Controllers have complained to me over the years about perceived imbalance between their scope of responsibility and that of their bosses.  

This disconcert derives from two sources.  First of all, it’s the much-discussed here overwhelming multitasking of the senior financial management.
Secondly, it’s the confusion about what exactly the Scope of Responsibility is.  Even though the position’s breadth of influence on the business is important, it is not just the number of tasks and duties you perform.   The key factor is the depth of the impact executive decisions make on the company’s future.  

The way I always looked at it is as follows.  If you are fortunate to work for a brilliant entrepreneur who, given sufficient time and support, is capable of generating ideas that will ensure your company’s prosperity and growth, that should be his ONLY task.  I consider it my job then to take away from him all functions I can handle myself in order to free him for what he does best.  I don’t let bankers or vendors bother him; I don’t allow him to fiddle with numbers; I don’t ask him to learn the operational system.  As the matter of fact, I prefer them not even know Excel.  All I want them to do is to create business strategies, network, establish new commercial relationships.

Let me leave you with this simile of sorts.  Radiohead’s frontman Thom Yorke cannot read sheet music (neither does Sir Paul McCartney, by the way).  His musically educated multi-instrumentalist  band-mate Johnny Greenwood have been deliberately resisting for 25 years now to teach Thom any musical grammar out of fear that it may diminish Yorke’s creativity.  That’s a great executive support strategy.

And let me tell you: I’ve been to multiple Radiohead concerts through the years and I wouldn’t change anything about Thom Yorke. Nothing at all.


 
  

 

 

 

   

Do Yourself a Favor and Buy Your Boss Some Ginkgo


BooksI am currently reading Jennifer Egan's A Visit from the Goon Squad.  Excellent book.  It's categorized by booksellers as a novel, but it is essentially a collection of stories stringed together by each character's connection to the book's most realized protagonist – the music-industry executive, Bennie Salazar.  I love that kind of staff.  Yet, it's not the author's writing skills that make this book important to me, it's the vivid emotional familiarity of people and situations.  Good writers manage to reach their audience in that way: you read a dialogue or an internal monologue and your heart aches with the painful recognition.

Let's leave the introspective explorations for some other discussion, though.  In light of this post's title I want to describe one particular scene in the book that seems to be taken straight out of my own experience with many a boss.

Bennie Salazar, the President of the record label he founded some years ago, is in his car with his right-hand and catch-all Sasha.  They just listened to the new material of one of the company's signed acts.  Sasha rules the two punk sisters unlistenable.  Bennie woefully wonders, what happened in the two years since he'd signed them on.  Sasha reminds him that it has been five, not two years.  She even gives him a precise time reference: she went to the contract signing straight from Windows on the World, i.e. when the Twin Towers were still intact.

Oh my God!  Did that ring a huge bell in my head?  Situations like this occurred with uncanny regularity throughout my entire career, no matter who the boss was.  We could be in the meeting with some bankers, for example, pitching the expansion of credit lines, and I would show a chart explaining how the company has been adding $40 million to its volume annually for the past five years.  Afterwards, the boss would ask me, if those numbers were true.  Are you fucking kidding me?  You've only seen the chart like a million times.  

And then there are endlessly repetitive requests: Could you send me that report for May (just sent it two days ago, but he doesn't recall)?  What was the bottom line in that forecast you compiled (what did you do with your copy of it)?  Let's finalize that new venture prospectus, okay ("we" did day before yesterday – it's on your desk)?  And so on and so forth.       

Sometimes it seems that the stress of running their own businesses causes these people to experience some form of amnesia or the early onset of Alzheimer's.  But that's not it, because their brains appear to be functioning just fine otherwise.  The fact that this memory issue is such a frequent occurrence among the entrepreneurs of various cultural and social backgrounds, operating in different industries, seems to indicate a psychological rather than physiological phenomenon.

It's my opinion that, when it comes to the retention of any type of information, these people have a luxury of allowing their brains to be extremely selective.  It's not like they make a deliberately verbalized decision, "I choose not to remember this."  But somewhere, deep in their subconsciousness, the opportunity to rely on various subordinates as human data-banks renders the memorization of routine data redundant.  It doesn't matter to them that this makes them look somewhat slow.  The value of your time wasted on verbally repeating and emailing the same things over and over again matters even less.

It's possible that the general improvement of memory functions attributed to Ginkgo can lower this mental resistance to absorbing information.  It may force certain tidbits to stick inside automatically.  Hey, if you are desperate enough, why not try it?  Just put it on his desk when nobody is looking and see what happens.  

An Aggravated Case of “The Servant of Two Masters”, or Working for a Married Couple


250px-Lucille_Ball_and_Desi_ArnazThey say (oh, those mysterious "they" of English language conventions – they do talk a lot), that there is nothing more expensive than a free advice.  I believe so too.  It's impossible to provide good advices without looking into particularities of each case, and nobody would do that for free.  That's why within these free-for-all posts I usually go with sharing of knowledge; if it's appropriate – with suggestions; and only if a statement can be safely generalized, I call it an advice. 

With that in mind, I am confidently offering the following as a friendly advice: never say that you "wrote the book on" whatever it is you think you know through and through.  It's never true.  None of these proverbial books of expert knowledge are ever finished.  Just when you think that you can close it and send it to the printers, there is a need to insert a new blank page and relate a freshly unique, never before experienced tale. 

One of such areas of expertise for me deals with typical characteristics and behavioral quirks of the entrepreneurial executives - those to whom I simply refer as "bosses."  My career allowed me to observe many of them in different situations – as my employers, clients, business and social relations, even charity connections.  I honestly thought that, based on this experience, I can predict the behavioral patterns of most business owners, including those sharing power and governance as partners. 

Alas, my anthropological study of bosses did have a gaping hole, which I would have never discovered if my life didn't expose me to peculiar antics of a married couple as business partners.  As it turned out, all regular characteristics of executive co-existence described in my previous post  "The Servant of Two Masters" still apply, but with some very specific aggravating additions. 

No matter how hard they try to keep it professional, they can never completely eliminate marital undertones.  While they usually manage to control the urges of affection, it becomes more difficult for them to rise above the intimate knowledge of each others' weaknesses when conflicts flare up.  I am not necessarily talking about full-blown battles of Lucy-and-Desi magnitude with hammer injuries.  But take my word for it – witnessing spousal tiffs and spats cause extreme discomfort; to the point that members of the executive board wish they were Hogwarts graduates with apparition licenses.  You just want to disappear.

One of my biggest complains about dealing with multiple owners always was that, unless you get them all in the same room, you must work with an assumption that what you explained to one is unknown to another.  You will need to repeat everything to each partner individually.  Well, don't assume that the situation is different just because the execs belong to the same household. It's even more unlikely that they will share your info at home.      

And then there are those very special casual dismissals husbands and wives reserve for each other – shrugging-offs and waving-offs, which are frequently more harmful to one's ego than verbalized insults.  The shit gets especially intense when the issues of personal value to the business or equitable compensation come up. 

All you can do is to pretend that you have gone momentarily blind, deaf, and inattentive – didn't see, hear, or notice anything.  More importantly, don't take sides: eventually your allegiance will be discussed at their kitchen table, or in bed, and both of them will hate you.

    

CFO Folklore: You Can’t Teach an “Old” Boss New Tricks


Sleeping-old-dog-thumb6130250It has nothing to do with age. Notice, I adorned OLD with quotation marks. It's rather related to obstinateness, which frequently becomes a distinct mark of business ownership.  Many CEOs deliberately focus themselves on certain  commanding tasks and stunt the expansion of their knowledge in any other areas.  For example, your CEO could be a 30-year-old venture capital hot shot, or a 55-year-old veteran entrepreneur; most likely both possess mere basic computer skills.

Of course, they love electronic chotchkies, especially those that bring their huge mailboxes wherever they go. Then again, it's mostly just reading and writing emails, but not necessarily organizing. Most of them can use Word and Excel. Some can even create their own documents, but formatting, formulas, data manipulation, graphs and somesuch fancies are usually beyond them. Leave alone PowerPoint, Visio, Publisher and so on. God forbid they need to look up a customer's contact information in your ERP system – brace yourself for barrage of slander against "your choice" of software.

Obviously, the founders of high-tech startups don't count – everything "computer" comes natural to them. But I had a CEO only a few years ago who called his secretary into the office every time he needed to insert a column in a chart.  And the funniest thing happens to these people every time you send them a spreadsheet set for printing on a legal-size paper. It's like a fucking stumbling block – they will spend at least 30 minutes trying to reset the printing area to fit the letter size before crying out for help.

For those employees who don't deal with execs on a regular basis this is somewhat perplexing, considering that most of entrepreneurs are quite capable, and sometimes even brilliant, people. But for those of us who daily interact with these semi-savants, the situation is absolutely clear. The limitations have nothing to do with their natural abilities. Their responsibilities lie in developing the business and creating jobs to fill them with people, who can produce pretty reports and fancy presentations. They don't need to occupy themselves with learning new tricks.

And that's absolutely fine. In fact, if I have to choose I'd prefer them perpetuating the business than learning how to create a pivot table. Yet, some situations are simply maddening.

I've been working on a fairly complicated customer-commitment program with one of my client's owner. Now, all steps developed and all kinks worked out, the project is supposed to culminate in an Agreement document.  I drafted the first version and sent it out in the Word format for the boss's review.  

An email comes back – no attachment.  Instead, in the body of the message, there are multiple paragraphs of my document copied and pasted in black followed by his version of the same paragraphs in blue.  The crazy thing is that on the first glance they look exactly the same, but somewhere in the middle there are several words altered.  And it's like a half of the document is there.  Basically, I have to visually compare both versions of each paragraph line by line to find the damn changes.

I was like, "What the fuck?!" and picked up the phone, "Adam, what are you doing?  It seems like you've adjusted only a handful of minor points, but it will take hours to fish them out.  Why didn't you make those adjustments directly in the document?"  He is perplexed (probably thinks that I've gone momentarily stupid),"How would you know what I've changed then?  You would have to comb through the entire document."  The truth dawned on me, "You've never used Track Changes or Compare Documents functions before?"  "I've never even heard of them."

Maybe I should've been ready for this after so many years of dealing with these people.  I was somewhat stunned, nevertheless, and, in stupor, offered a training session free of charge.  "Great," he said, "I am very excited.  I will let you know when."  

I am still waiting.