Category: Nature of the Job

CFO Folklore: Defensiveness and Excuses


Coyote-Canis-Latrans-Puppy-28811856-0 It's funny how we, humans, manage to degenerate powerful natural instincts into regressive psychological traits. Look at that little coyote pup.  Something has attracted his attention.  He is in full alert, assessing the situation, deciding if its dangerous; ready to fight or flight – a perfect display of a healthy defense mechanism crucial for survival.  

People are granted the same insitincts.  Of course, those of us living in "civilized" conditions are rarely presented with real danger.  On the other hand, mentally we are constantly put to test.  The instincts are pushed into psyche, and there, they deteriorate into Freudian ego defense mechanisms, which can get neurotic and pathological.

CFOs and Controllers deal with defensiveness and rationalization (aka making excuses) all the time.  People become defensive at the slightest hint of criticsm, which frequently exists only in their imagination.  They don't understand that instead of helping them to survive, this degenerated mechanism makes them more vulnerable by exposing their insecuruty, fearfulness and anxiety.

A few years back I had an employee who was the best expert of trade finance documentation I've ever met.  At the same time, he was an incredibly difficult person.  Eventually I found out that this guy had a misfortune of being raised by an extremely critical adoptive father.  As unlikely as it sounds, in the early 80s, just 20 years old, he got hitched to a woman who hated everything about him.   As the result, he developed a severe case of defensiveness. 

Just invinting him to my office to discuss a business issue was enough to put him into a state.  Walking into my door, he already looked like an angry animal forced into a corner and ready to bite.  It would usually take me at least ten minutes of casual small talk to bring him back into normality, before I could address the matter at hand.

Of course, on few occasions I needed to point out a mistake or an inaccuracy.  What a nightmare! He wouldn't let you finish the first sentence: "I am swamped!  You gave me too much work!  It is impossible to deal with that bank!  I will not let you blame me for this!  " he would shriek, even though it was never about the blame.  His desire to shield himself from the imaginary threat was so strong – like a child, he would cover his eyes with his hand, avoiding your eyes.  He looked helpless, pitiful, and guilty.  Most importantly, the problems remained unresolved.  It was really painful.

Here is my advice: don't get defensive when you are criticised, justly or unjustly.  Listen.  Think.  Evaluate.  Maybe you will hear some constructive insights.  Maybe you could have done something differently and achieve better results.  Recognizing that will give you an opportunity to (1) disarm your opponent by owning up to your mistake and (2) find ways to avoid this situation in the future.  At the very least, you will save yourself from an emotional sparring match that cannot resolve anything.  Trust me.  I've been there – on both sides.

Am I Cursed?


Well, it's definitely feels like I am. Throughout my entire career, every time I start a new job or a long-term consulting project, no matter how exciting and successful the business seems, it takes me under 4 weeks (sometimes less than 2) to uncover hidden losses, cash flow deficiencies, operational problems, strategic mistakes, distortion of accounting principles and policy violations. There has not been a single exception to this rule.

Of course, I devoted my career to dealing with privately-held small and mid-size companies. Frequently their CEOs are entrepreneurs with limited understanding of corporate governance, let alone the makeups of quality accounting and finance functions. These companies develop in a haphazard manner and the staff is usually composed of people who are eager and hardworking, but not necessarily highly qualified. The conceptual thinking, I am always so keen on finding, is rarely present.

I've been studying my current client for exactly three weeks now. Oh boy! The company is a wholesaler, but the operating software they bought for a lot of money was created for manufacturers, and it's so rigid, it will require major re-programming to adapt it to their needs. The principle feature of this type of businesses – the lot-driven operations that require lot-specific data tracking and analysis, cannot be accommodated by the software and, therefore, needs to be performed at a great time-cost in Excel. The chart of accounts is completely screwed up and there is no hope to adjust it properly since they already started making entries. There is an endless duplication (and triplication, and quadruplication) of data in different files kept on their local drives by individual employees… And so on and so forth. They don't even have a backup system in place, let alone business intelligence.

But most remarkably, NOBODY (not the co-owners who buy and sell the product internationally for years now, not the logistics managers, not the internal accountants, nor independent auditors) understands the principles of Incoterms. As the result, the revenue, costs, and inventory recognition is royally fucked up. I restated their 9-months 2011 results to proper values and found… you got it – losses!

Sometimes, it makes me wonder, what would happen if I got a chance to dissect a huge belly of some public mammoth. Would the same rotten bullshit pour out of them? The fact that big-time public companies constantly underperform and require bailouts makes me kind of suspicious.

The truth is I don't believe that I am cursed. I think that the majority of companies manage for some time to ride on the wave of a particular product/service demand, or some market twist, or accidental economic development, or novel idea. Yet, they are drowning in small and large errors affecting every facet of their existence. And when the shit hits the fan in the form of financial or operational problems, their chances for survival are minimal because there is no quality back-office structure to sustain them. Moreover, frequently they don't even see it coming, because they operate blindly in the absence of informational support.

The problems may come to light before the downfall if a perfectionist like me appears on the horizon. Such a person may be either hired as a permanent employee, or come along as a part of a consulting team (an option frequently unaffordable for small and midsize companies). So, this client of mine got lucky – one way or another I will correct all their problems. Others out there… it's scary to think about them. Is it surprising that with this poor quality of back office, lack of informational reporting, and all the errors they commit along the way, the companies are going out of business left and right, and the economy has gone to shitters?

I do have a solution that can help many of the companies precariously hanging on the verge of extinction due to the deficiencies in their policies, procedures, controls, and reporting functions – an affordable and easily accessible electronic consulting solution that covers all these areas of expertise and puts a multitude of tools at the fingertips of executives and financial professionals. Let's hope that I will be able to attract investors to back my ideas and bring this revolutionary development to the millions of small and mid-size companies.

Quote of the Week: “What Do You Do?”


ROY BLOUNT "If you were a member of Jesse James's band and people asked you what you were, you wouldn't say, 'Well, I'm a desperado.'  You'd say something like, 'I work in banks,' or 'I've done some railroad work.'  It took me a long time just to say 'I am a writer.' It's really embarrassing."

                                Roy Blount, Jr.

The Frustrated CFO comment:

The reason I think this quote belongs in this blog is not because I consider myself a writer.  No.  I find that it is just as difficult for financial executives of small companies to explain who they are, as it is for gangsters or for writers.  The general public is not very educated about organizational structures.  They associate the title of a CFO with sinister characters of newspaper articles targeting troubled public companies.   If you say, "I am a CFO," the next question is usually about the name of the company.  It's like they expect a household name in return.  People don't realize that there are millions of companies in this country.  And even less people understand the essence of the Controller's position.  So, when the new manicurist (plumber, mover, mechanic, taxi driver, etc.) asks the obligatory question, "What do you do?" many of us resort to answers like "Corporate finance," or something of the sort, in order to avoid additional explanations.  Who cares if the person you are talking to assumes right away that you work on Wall Street?  

Bean Counters vs Breadwinners


I hope my fellow CFOs and Controllers don't mind my calling us "bean counters."  After all, I am one of them and, hence, it's Ok.  It's like with all derogatory terminology – if you belong to the group, you are allowed to use it.  And if that name-calling has upset you, beware – this is just a beginning.

The truth is, many of my peers are just that – the bean counters limited to their narrowly defined tasks, thus contributing to the frequently observed conflict between finance and accounting on one side and the revenue generators on the other.  Both sides have to tolerate each other, but it is a precarious armistice. 

CFOs and Controllers think that sales and operational people don't work too hard, while getting high performance-based compensation.  They are loud and overconfident, while not necessarily well educated and intellectual.  They are never in the office, taking long lunches with customers and prospects.  When they are in the office, they are on the phone most of the time.  They take paid trips to foreign lands and get car allowances for their domestic travels.  They jeopardize the company's well-being with their grandiose "strategic" deals that end up losing money.  Most importantly, they wouldn't be able to do anything without our funding their transactions, controlling their profits, calculating their commissions and reporting their results.

On the other hand,  VP of Sales and COOs think that they are the moving gears of the company.  They despise the bean counters for stifling their "important" deals with "useless" profitability criteria, for knowing how much money they make and for suspecting that there is nothing behind the confident appearance – just the rolodex and lots of air.  Most importantly, they feel that their unique ability to bring business is not respected enough.  Money is not everything, you know.      

The fact is, however, that a sales (or procurement, or operations, or trading,) ace does possess a truly unique ability to generate revenue with skills that frequently have nothing to do with education, professionalism, or intellectual expertise.  There is a reason you don't need a college degree to obtain trading, brokerage, insurance, or real estate licenses.  You definitely don't need an MBA to become a VP of Sales.  These jobs require intuitive abilities and social skills of a very special sort.  Trust me, not too many people are born with those talents.   The real great ones are quite rare. 

It must be said that I am one of the few CFOs who always support the people responsible for bringing business to the company, even if they don't like me.   Many of my colleagues forget that all our functions are secondary and subservient.  Everything that we do either facilitates the breadwinners' success (and failure) or reports it.  That's all. 

Without them I wouldn't have my job.   They are the ones responsible for generating enough dough to cover my salary, benefits and bonuses.  And if I could do what they can, I would have. 


Writing Angry Letters Is Therapeutic, Sending Them Out Is Foolish


I remember reading Dale Carnegie's How to Win Friends and Influence People when I was about sixteen years old.  Early in the book, he talks about dangers of criticism and gives examples of written but unsent letters: by Abraham Lincoln, Theodore Roosevelt, Mark Twain.  It made a great impression on me.  I cannot avoid being critical entirely – the tongue is difficult to control.  However, I made a rule of letting stinging letters to stew for 2 days.  Then I re-read them.  If I still think it necessary, I send the letter.  90% of the time it doesn't get sent.

This is a recurring topic for management training gurus, self-help writers and bloggers.  They say,"Write an angry letter, if it makes you feel better, just don't send it." Unfortunately, no matter how many times people hear that advice, they write and send flaring mail, causing commercial and social damage.  If the problem was not persistent, there wouldn't be any demand for products I have described in the Cautionary Tale About Artificial Intelligence Progress.

As CFOs and Controllers, we deal with a lot of irking and ireful people.  With my firm believe in therapeutic qualities of writing, I always advise to let the paper or the monitor to bear your negative emotions.  As supervisors we also have to manage the anger of our subordinates.  How do we prevent hostile writing from going out?

In the times of hand-written letters, it took longer to complete them.  Plus, you had to stuff, seal, stamp and post the envelope.  By the time you were done, you might have changed your mind about the whole thing.   Dictating a letter worked even better.  Saying the angry words out loud had a potential of making you sound ridiculous even to yourself,  leave alone those girls in the typing pools.

Emails made us more vulnerable to our impulsiveness.  In the beginning, at least the ISPs were slow enough for you to recall the unwanted message.  Nowadays, soft keyboard, easy mouse, and fast internet create a volatile combination.

Here are few preventive measures I can recommend:

1.  Always leave "To", "Cc" and "Bcc" fields of the email header blank until you are absolutely positive you need to send it.

2. Re-read your letter at least three times right away and then yet another time later.

3. I have previously described my habit of putting stick-ons, stating "Please re-read all your emails before sending them out," on the sides of employees' monitors.  If you know that you suffer from the short writing fuse, then stick one on your own monitor as well.

4.  Whether for my electronic or conventional mail, the 2 days stewing rule works very well.  You should try it too.

5.  The Frustrated CFO actually offers a healthy alternative allowing you to go a step further than just writing your message.  Sharing your stories here lets you spill your frustration onto the virtual page and actually send it.  Not to the object of your anger, but to me – an understanding and compassionate reader.