Business – Page 17 – The Frustrated CFO

Newsflash: Even NBC’s Economy Watch Finally (Somewhat) Wakes Up

Wow! Like a fucking parrot I have been repeating the same thing for years now. But it's okay, I can do it again:

People (not just the economists and market analysts, EVERYONE!), stop applying old concepts to current economic situation! This was not a recession and we are not experiencing recovery! This is our new reality. Get used to it!

Look at the graph above. That historical +15.6% gain after severe recessions of the past – it's never going to happen again. Moreover, even the 1.7% reptilian movement upward, we supposedly experience right now, seems to me miraculous. And it is definitely not assured – we may start rolling down at any given moment.

The picture is so undeniably obvious, even the politically-controlled outlets, such as NBCNews.com, have no choice but to talk about it. They are the ones, who published this morning the Credit Suisse's chart above in their Economy Watch blog's post cautiously named "Economy may be permanently stuck in slow-growth mode." The more appropriate title would be "Economy May Be Permanently Stuck." Period.

The article is basically a compilation of data and quotes obtained from various resources, including a number of "prominent economists" and the Federal Reserve Chairman Ben Bernake. The blogger, John Schoen doesn't express his own opinion or adds any commentary. Nevertheless, the piece as a whole leaves an impression that all cited contributors and the policy-makers are also stuck in a perpetual state of having no clue, of not knowing what to do.

This doesn't surprise me at all. These people have been in denial far too long, but they cannot hide from reality anymore. And now fear seizes their beings, because they start realizing that it's only going to get worse. It's beyond depressing, it's funereal.

Invariably, one particular tidbit of information puts me into a vile mood, whenever it catches my eye. In this assortment of bad news Mr. Shoen mentions in passing that 70% of US economic activity comes from consumers. To me this is a reminder of terrifying fact that our country predominately retails (largely imported goods) and creates services for end users instead of producing industrial products for domestic commercial market or export.

And it's astonishing that not a single of the quoted "dignitaries," not even for shits and giggles, raises a voice of reason and demands that the politicians stop sticking crutches into the armpits of clay giants and let them fall; that the Feds stop buying long-term bonds with our social security contributions; that the Supreme Justices stop passing laws guaranteeing highest ever compensations for CEOs of health-management companies. Is Lynn Tilton and I are the only people who understand that only by supporting smaller privately-held DOMESTIC businesses we may be able to revive the economy? That if "the powers that be" don't start this process right away, the country will become more and more restless?

The Clueless Boss of a Frustrated Downshifter

The economy and the resulting miserable state of the job market forced many financial executives to downshift, i.e. take jobs way below their levels of expertise, authority, and adequate compensation. It's been almost a year since I wrote about the heartbreaking reality of first finding such a position and then accepting it for the sake of having food on the table and keeping the roof over your family's head. Yet, the painful topic is still relevant.

But let's look a little further. We have an opportunity to examine an interesting situation brought to my attention by an actual downshifter – a former CFO of a, now defunct, $500-million-dollar firm. After a year of a futile job-hunting he accepted, at 50% of his former compensation, a Controller's position in a young and small ($30 million) company, ran by two owners – a female CEO and her partner with a COO title.

How many times did I write about accidental bosses? And here we go again: this business has started because the two partners got lucky. They were in the right place at the right time with extensive connections and sufficient funding at hand. Neither of them actually needed it to survive, but the opportunity were too exciting to pass up.

Guess what? The CEO never led a company before. She never even worked in a commercial enterprise. Her partner has an MBA from an Ivy League school, but he only worked overseas. Neither have the chops to make good executives, yet both have undeniable talents and a lot of enthusiasm. She is a sales ace and the toughest negotiator you can find. He is incredibly detailed-oriented.

Not only that they managed to get the company off the ground eight years ago, they kept it growing with minimal labor resources, including a single bookkeeper. Hiring a senior financial person was definitely not among their priorities. Until… Some people are just born lucky. An even bigger opportunity presented itself. To implement it they needed more capital. The dogged COO wore down one of the major banks into providing them with a substantial trade finance line. Among bank's mandates was hiring a proper Controller.

Enter our former CFO.

Because both execs are not very clear on the leadership functions, the division of responsibilities is blurred. The COO was in charge of the Controller's hiring. The CEO never even saw the candidate's resume or salary history. When COO decided that this is their guy, the CEO was called in for a minute to shake the future Controller's hand.

Yet, once our downshifter started working there, he realized that the woman's word was the final authority on pretty much all other issues. Now, because she lacks corporate experience, she is not capable of assessing the Controller's performance. In her mind, any other accountant would provide the same input as this guy, who managed in the first three months to correct more procedural, systematic, recording, and administrative errors than he did in 25 years before this job. Moreover, he contributes into the company's strategic decisions. All that for a price of a low-brow peripheral Controller. The CEO has no clue that what she's got was a gift; that she got very lucky again and obtained an Hermes bag for the price of a Coach.

This is a big problem. If your boss doesn't understand your value, she cannot appreciate your contribution. The fact that someone with lower qualifications and less experience would not be able to attend to the sophisticated tasks you accomplish remains unnoticed. As a result, you are helping to better the company without a chance for a fair reward.

What to do in this situation? You are not the type to brag every time you do something extraordinary. The first thought comes to mind is to re-introduce yourself. The guy who hired you didn't share your resume with his partner, so give her one together with your salary history. You can say, "I understand you've never had a chance to look at it before and I think it's not fair for either of us." I know some people will say it's tasteless, but the options here are limited.

Secondly, you must propose a proper evaluation system for all staff members. Because these people have no idea how to go about it, they will turn to you. This is your chance! Provide them with the format that allows employees to list their own accomplishments. Then, make sure that reviews are actually conducted.

Finally, if you don't get satisfactory acknowledgement anyway, start looking for another job. Maybe you will be luckier this time around. It's like I always say, employment at will works both ways: they can separate from you at any time, but so can you.

Quote of the Week: Women of Power as Mothers

"Do yourself a favor… don't have kids… Ruins you ambitions, keeps you from what you want in life… I'm not a good mother… Kids are like clients, they want all of you, all the time. Don't get me wrong. I love my son… Love's nothing, love's easy. They come out of you, you love them. What you do after – that's the hard part."

Patty Hewes (Glenn Close)

Damages, Season 1, episode 1

Written by Todd Kessler,

Glenn Kessler, Daniel Zelman

The Frustrated CFO's comments:

I watched this and thought, "Wow! This is hard core. You cannot dismiss the truth here." A couple of episodes later Patty ships her disobedient and rebellious son to a Reform Academy. He is snatched away kidnapping-style. She is all about efficiency and getting her way.

Can women have it all? No, they can't. Not, if they want a glorious career and "ideal" children. There is no such thing as an "ideal" child. They are humans, not dolls, and just as fallible as their parents. And the career? Please… there is always something.

What women can have are two zebras (if they are lucky!): white stripe is followed by the black one, and so on, and so forth. Ups and downs at work, good and bad times with kids – the hard life… and that's if no real tragedies happen.

Joke of the Week: The Linguistic Pitfalls of International Trade

Believe it or not, but a few of my readers actually complain that sometimes my posts are "too technical." I guess, they forget that, even though I manage to squeeze a ton of cultural references here, this is primarily a business blog and some of the topics will be amusing and/or relevant only to financial professionals, executive managers, and business owners.

Well, even though this may further aggravate the merriment seekers, I cannot pass on the opportunity to share the following 100% true episode that has occurred in one import/export company early last week. It's just so hilarious (at least to me)!

Here is the premise. English has become a common language of international business many years ago. Of course, there are other linguistic possibilities: if transacting parties are both Latin American, they will use Spanish; employees of a company in Shanghai will speak Mandarin to their counterparts in Guangdong region. But I guarantee that communications between, let's say, a Turkish manufacturer and a Dutch banker, or a Latvian banker and a Swiss financial broker, will be conducted in English.

Of course, a Korean supplier has no choice but to employ English to communicate her concerns about a Letter of Credit (LC) provided as a form of payment by an American importer. The document itself is prepared in English for crying out loud. Still, it's a foreign language – some linguistic pitfalls are unavoidable.

Those who work in international trade or read my book CFO Techniques know that LCs are very strict documents treated in a very literal manner by the banks responsible for making sure that a supplier gets paid only if and when it complies with conditions stipulated in the buyer's LC. For example, the shipping documents (most frequently these are Bills of Lading (BLs)) must be prepared in accordance with the importer's requirements.

Now, enter a young and anxious clerk at the Seoul office of the said Korean supplier. She is responsible for putting together all documents to be presented at the bank so that her employer can get paid $2,745,000 for 1500 mt of the product that just sailed away. She knows very well that the papers must be in full compliance with the LC. She is a novice and feels a lot of pressure to do it right. On top of that, it's all in English, and, even though she is pretty good with it, the stress makes her paranoid. Basically, she is a nervous wreck.

One thing in particular bothers her the most. So, she writes the following email to the customer's CFO:

"LC request is 'FREIGHT PAYABLE WITHING 7 DAYS OF SHIPMENT DATE' but the shipping line put on Bill of Lading 'FREIGHT PAYABLE WITHIN 7 DAYS OF SHIPPING DATE'. Please urgently ask the shipping agent to revise the BL."[sic]

The American CFO, who has dealt with the international trade issues for many years, had a good laugh reading it, thought that the girl needs some Xanax, and replied:

"Relax. The difference between the words 'SHIPMENT DATE' and 'SHIPPING DATE' will not be construed as discrepancy by ANY bank as these phrases mean EXACTLY THE SAME."

Hey, it's all good. At least she didn't have to gesture and guess.

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

Share this:

Share this:

Share this:

Share this:

Share this: