Category: Dealing with People

New CFO, Same Staff: Inheritance Problems


Ok, let's leave our bosses alone for the time being.  Let's talk about us as bosses.  In our multi-functional lives as CFOs and Controllers we frequently end up with more direct reports than CEOs/owners.  There are accounting managers, finance directors, budget and analysis groups leaders, PR, AP, AR, IT, and so on.

Let's say you are making a career move and just accepted a position with XYZ, Inc., replacing a departing CFO.  In a dreamy corporate fairy tale you should be able to do what our newly elected presidents do – form your own cabinet and move in with your faithful acolytes. In real life… you inherit somebody else's staff.  Moreover, you have to quickly immerse and keep the business going.

The subsequent events can play themselves out in three possible scenarios:

1.  Without giving the existing operations a real dissection under a microscope, you simply learn how everything functioned under your predecessor, decide not to change anything even if you find the old ways inadequate or wrong, and continue in the same fashion.  The effect: good for the staff – no changes, no new things to learn, no old habits to break; bad for the company, your employers and ultimately yourself – inheriting diseases without attempting to treat them will assure your failure.

2.  If you are a responsible and knowledgeable person with an impressive background and enthusiasm for your new job, you will study all aspects of functions under your control, diligently, but without prejudice; find errors, shortcomings and blind spots; apply your expertise, and develop improvements and innovations plan.  And then you will face incredible resistance from your inherited staff.  It is very natural: humans are resentful of changes.  They will give you very hard time, no help and mountains of frustrations.  Just because you are great at finance and accounting, it does not mean that you are good at managing and educating people.  If you don't have patience and sufficient skills to overcome the resistance in a positive way, you will end up firing a third of the stuff and another third will leave on their own.  The rest will stay, but you will never gain their trust and support.  The worst part – by replacing former employees with new ones, you will loose the continuity of the departmental knowledge.  

3.  Under the best case scenario, your professional and managerial skills are equal.  While you sifting through processes, functions, policies and procedures, you must study the people.  What motivates them? Do they know their jobs well? Are their duties properly matched with their abilities?  Psycho-profiling is one of the most important managerial skills.  Try to discern the personality traits of your employees.  The personnel strategy should be part of your improvement plan.  Find people who are interested in positive progress, explain to them how the new developments will benefit them, show them the big picture (for more on this subject see my post Big Picture and Staff Training) and make them your agents of change.  Then you can claim the successful transition.    

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.

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.


Valuable Advice by HR Capitalist


I highly recommend this yesterday's post from HR Capitalist.  His behavioral insights are applicable to everyone in a senior management position, including all CFOs, Controllers and other financial professionals.

Leadership Means You Cut Out the Negative Body Language… 

Further Scientific Evidence of the Entrepreneurial Bug


Over a month ago, in my post Your Boss: Value & Madness of an Entrepreneur I wrote about quirkiness and impatience of people who have brilliance to come up with original start-up ideas and guts to build a company from scratch – people who provide us, CFO's and Controllers, with new job opportunities beyond "Big Business." 

I also discussed how their peculiar and difficult qualities are the main source of our frustrations.  I called the sum of these character traits the Entrepreneurial Bug.

As if to support my point of view, September 18th issue of New York Times featured this article in their Business Day section – Just Manic Enough: Seeking Perfect Entrepreneurs by David Segal.  I highly recommend that everyone interested in the subject of entrepreneurship, start-ups and venture capital investment should read it. 

Of course, my own primary interest was the excursion into psychology of the indicators so characteristic of our bosses difficult behavior.  Needless to say, the article confirms that not every subject is afflicted with the entire spectrum of symptoms and displays them with the same intensity.  Nevertheless, the author clearly states that only "a thin line separates" an entrepreneur from a psychiatric candidate with a hypomanic syndrome.

One of the article's subjects, Seth Priebatsch, echoes my post from 08/19/2010, when he "describes anything that distracts him… even for minutes, as 'evil.'"  No surprise here – I've heard this before many-many times from various CEO's.  The difficulties of working with people like that on daily basis, especially for CFO's and Controllers, whose job is to keep businesses in order and under control, is basically one of the main themes of this blog.

Mr. Segal goes out of his way explaining that the degree of craziness is what matters: some Venture Capital firms give personality tests to their prospects in order to determine if they are not completely bonkers.  But I couldn't help myself thinking that these tests may be also designed to weed out people who are not crazy enough to be satisfactory material for future transition from idea generators into screw tighteners.

Strangely enough, the New York Times' confirmation that my extrapolation of personal experience dealing with business owners to the rest of the entrepreneurial world is completely justified, did not bring any intellectual satisfaction.  It's kind of discouraging that if you choose to build your career in dynamic growing businesses, you will always have to deal with bosses who cannot help themselves not to be assholes.