"Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples."
George Burns
1896 – 1996
The Frustrated CFO's Comment: At this point, the best my generation can do is to look for humor in our situation.
Category: Peers
You Are the Most Knowledgeable CFO EVER… How sad!
Let me explain to the handful of readers who actually noticed my absence from these virtual pages that this is what it takes for a small business to close a $20 million three-year capital financing deal with a global bank (such as Citi): You basically have to put your entire fucking life on hold.
That is, of course, if you are someone like me - a CFO who rolls up her sleeves and plunges herself into the nitty-gritty of negotiating every single definition, every single term, every single condition, and every single covenant of the Term Sheet and then the Credit Agreement in a pursuit of getting the best deal possible; someone who has the grasp of a fox terrier, who can shove pushy bankers and lawyers right back where they belong, who is not afraid of the ambiguous formulations, obscure terminology, and legal jargon.
But that's it, isn't it? In order to be able to get exactly what you need out of any deal that involves money-holders and their supporting infrastructures you need to know your business better than anyone else and their business better than they do. You need to speak their language and your comprehension of it must be more nuanced than theirs. It's nothing short of a battle for the business survival, and if you don't prevail you and those who rely on you lose. It's like in Game of Thrones: Tyrion's Champion, Prince Oberyn, mortally forfeits the battle to The Mountain, and that spells really bad news for Tywin Lannister's youngest son.
The problem is that most corporate financial executives don't see it that way: just like many other salaried employees, they don't care to know anything beyond bare necessities and they don't feel fiscally responsible for their companies' wellbeing. Hence, the low levels of professional awareness and circumvention of sophisticated issues is observed in most CFOs and Controllers today. And it ends up costing employers a pretty penny in unnecessary legal, accounting, and consulting fees.
Hey, you don't have to take my word for it. By the way, all numbers below are real and quotes are taken verbatim from various communications.
Let's see. When the bankers presented us with the Term Sheet back in March, I did not get either our corporate attorneys nor independent CPAs involved at all. The bank's credit risk group and I spent two months going back and force, until I got the document into an acceptable shape (estimated savings on legal and financial consulting fees - $50K). As a part of the Term Sheet, I insisted on the bank's due diligence and legal expenses (changeable to us) being capped (estimated savings – $35K).
The Citibank people, stuffed to the gills with data and reports I've provided to them during this process, kept telling the other members of my Board of Directors things like, "Oh, that Marina, she is amazing! She is the best! She is so tough!" They would write emails like: "Thanks, Marina. This is very helpful, plus your expertise is tremendous!" As if I was performing some magic tricks – I was just doing my job… thoroughly. When the Term Sheet was signed and sent to the bank my future relationship manager asked me in confidence (referring to the owners), "Do they understand that the only reason they are getting this deal is you?" Hmm…
After successful due diligence and final approvals from the bank's Credit Committee, the Agreement package (186 pages of documents) was emailed to me by Citi's lawyers. The lead attorney asked me in the cover email to provide him with the contact info of my legal representation, so that lawyers could start dealing with each other directly. I was like, "Fuck, no!"
You see, as soon as you officially appoint a lawyer as your representative, the other side is not allowed to discuss anything directly with you. Here's what happens: Let's say the bankers propose an additional clause or some adjustment; they call their lawyer; their lawyer contacts my lawyer; my lawyer, who doesn't know much about the intricacies of my business and is not allowed to make any decisions on his own, delivers the request to me. And then in the opposite direction: I formulate my response; now I have to explain to my lawyer all details in a digestible format so that he can deliver them to his legal counterpart; the latter than communicates them to the bank.
Are you counting the connections? We are talking quadruple billable hours on both sides! And it's like that for every single issue and point. I'm not doing that! I say, "Excuse me, sir, but for now you will be talking directly to me – at least until all business and financial kinks of these documents are ironed out. Okay?"
Professionally lawyers are just as obnoxious as doctors – they think that their diplomas make them better than other people (yet, they discuss economic matters with me as if they too had a PhD in the subject and an MBA). So, at first the bank's attorney bristles, but, as I start beating him up on one point after another, he gets quite tamed and develops respect. He actually says, "I hold you in high esteem," which is very nice, because the majority of these assholes don't ever want to admit that you are their equal (estimated legal fees savings – $30K).
Finally, I was satisfied with the contract and introduced my attorney into the mix. He literally had ten comments on the legalese and after that the process turned into technical preparation of documents between the two legal firms.
Total closing fees savings upon signing: $115,000.
I am his client, so my attorney feels free to make a frank comment: "I have to say, you are the most knowledgeable CFO I've ever met, and I'm not even talking about your understanding of the contracts. It's everything. Most of the time I talk to your peers and they are like… I'm sorry… They don't know shit."
On the day the deal was closed one of the shareholders wrote to me: "…Your performance transcended what could reasonably have been expected from a typical CFO."
Well, that' nice, isn't it? Except that all these praise-singers probably think that I'm flattered by their compliments (as if I live for their approval). But I am embarrassed: I keep thinking how all those ignorant CFOs and Controllers taint the image of my profession. And everybody thinks that you are just like the rest of them until you prove otherwise.
People say to me, "What difference did it make for you personally? Did you get a deal-completion bonus?" And some ask, "Why try so hard? You don't even care about 'business' things as much as you do about art!"
They are absolutely correct: Yes, some music passage, or a scene in a play, or an image, or a hand-written poem will make me cry; yet, most people with whom I work can't even imagine tears in my eyes. And no, I didn't get an extra bonus. And I don't consider this my personal vocation. But the circumstances of my life made this into my paying occupation and I have to measure myself by my own standards: as long as I must waste a huge chunk of my life on making other people rich, I'd better do it to the best of my abilities. Why other CFOs don't feel like that? Well, everyone probably has her own story, but mostly it's that plunging-quality-of-everything effect I like to write about so much. It's pervasive.
What’s Up with the Weather Talks?
A knack for making small talk is a valuable social skill. Only when we speak to people who are close to us (family, friends, coworkers), or completely transient (sales people, customer service reps), we can direct a conversation straight to the subject matter. And it's not a simple following the polite protocol either: The opening banter became a custom pretty much in all cultures because it is natural for most humans.
Barely a handful of people have absolutely no psychological barriers regarding social interactions and feel comfortable in any environment. The rest of us can always use some warming-up, some beating-around-the-bush. It is necessary for all parties involved because it lets us step over the initial awkwardness. While it helps a lot in private communications, in business it's simply mandatory.
One must always keep in mind, though, that the diapason of topics acceptable for small talk is not that broad. And it varies depending on your audience. The idea is that it should be something trivial enough for the person on the other side of the conversation to find an easy response. That is why, sports in general and football in particular is the natural choice for the heterosexual-male crowd: they are on common ground there, even if they root for different teams. Female execs, such as myself, have no choice but to familiarize themselves with the subject of football in order to keep up with their male peers.
Do you remember Mike Nichols's The Birdcage? The hilarious small-talk lesson aka "How about those Dolphins?" moment? When prepping his partner (Nathan Lane) for the meeting with an ultra-conservative right-wing politician, the South Beach cabaret owner (Robin Williams) goes straight to the subject of Miami Dolphins – the most natural ground-softening topic for a white male chauvinist. Conversely, when you talk with a homosexual men, you will be better off discussing Broadway's latest Tennessee Williams starring Zachary Quinto.
The pervasive demands of political correctness made the small-talk "safety" into a concern. Many topics of common interest for the majority of people are considered absolute taboos – politics and religion are the first on the list. Some issues, while not completely prohibited, are still qualified as "dangerous territory." Nowadays, people rarely ask the kids-and-family questions – they fear the possibility of opening a can of worms: divorces, adoptions, sexual orientation, stands on the women's choice, population issues, autism, etc.
Entertainment used to be a relatively safe harbor, especially television. But there is too much of it now: some programs cater to millions, while others are intended for relatively small audiences. It's never guaranteed that you will find mutual cultural interests with some new business acquaintance. So, many people avoid it.
Yet, the WEATHER is somehow still the first thing that pops out of everyone's mouth – on the phone, when shaking hands in the meetings, after ordering food at business lunches, and around the proverbial water cooler. People still think that because we are all exposed to atmospheric conditions it's an easy topic.
Well, I think it stopped being a "safe" topic long time ago.
It's September 28th in NYC (it's in the NORTH-east, in case you didn't know), yet it's 74 fucking degrees outside! The forecast indicates that it will be 79 on Wednesday and 80 on Thursday! And it's not like the air is summary. No, it's the unbarricaded UV rays – so hot, they fry the Earth. (And the fucking UN's environmental commission just published a report yesterday saying how it's now scientifically proven that humans are responsible for "at least" 50% of the global warming!) I am unpleasantly aware of this sun while walking down Broadway in the Financial District. Yet, the guy walking right in front of me turns to his girl and says, "What a gorgeous day!" Are you kidding me? I want to kick him; I want to swing my handbag real hard and land it on his head! No sir, it's not a safe topic for me.
But there is more: Nowadays, it seems to me that everyone is desperately clutching to conversations about the weather out of fear that they may betray their dissatisfaction with Life; not just to the others, but to themselves. Moreover, they rather blame the weather for the way they feel than face the truth. I came to this realization when I noticed that people started resorting to the "weather talks" even when there is no need for any ice-breaking.
At work I'm constantly exposed to people: they call, I call; I have internal and external meetings, lunches, dinners; people keep their office doors opened and you cannot help but overhear their conversations. And it's all day long: "How's the weather over there?" and "It's very cloudy today, but they promise a lot of sunshine tomorrow!" or "Aw, the mornings are getting chillier – I will have to get my coats out." Why the fuck everyone wants it to be warm and sunny all the time? Because that's going to make them feel better? We are supposed to have four seasons!
If you are as bitchy as I am, you can try to see what happens when you stall the weather talk and get real for a hot second. In the middle of a wonderfully gloomy day, after an unpleasant marketing meeting, one exec deliberately crossed the hall from her office to mine only to say, "Oh, my God! This weather really brings me down!" My response was: "Yes, life is depressing, and sunny days are scary to me." She acted literally like a fish out of the water – her mouth silently opened and then closed; she turned on her hills and swam away. Hopefully she will think about it before blabbering about weather next time, but I'm not holding my breath.
2013 Audit Season: Joke #3
A bank's field examiner (read my previous
joke if you don't know who that is) comes to review books and records of a company in the NYC's Financial District.
The company leases space in one of those pre-furnished/pre-wired office suites setups with reception services, heavy-duty business equipment, and highly presentable conference rooms shared by various renters.
(Educational Side Note:
It's a very profitable business. I believe Regus, headquartered in Luxembourg,
is the largest player in the world. Started only in 1989, today it has presence
in 99 countries, operating over 1400 centers. During my career I have dealt with Regus in Amsterdam, London, Moscow, Frankfurt, and New York.)
Those who have never been in such places don't realize that owners try very hard to maximize the rentable footage and fit into the space as many offices as they can without violating occupancy regulations. There could be, like, 120 companies, some of them consisting of a single employee, on one floor. And, therefore, during business hours it never feels empty or quiet. People are coming, going, walking by. The noise level is much higher than in a conventional business space: at any given moment one can hear at least three phone conversations and virtually participate in two neighboring meetings – one with a real estate attorney and another with an advertisement outfit specializing in cosmetics. It's pretty much your garden-variety beehive that sometimes gives an impression of being even more populous than it actually is.
One of the specific aspects of the office suites is the absence of companies' signs and name plaques – just the numbers on the doors. Yet, if you give the name of the company you are visiting to the doormen, they will direct you to the right floor. There, receptionists will not act surprise when you ask for a particular person and will call him or her up right away. (I mean, there is a reason why these businesses are doing
well.)
This is how the field examiner found her way to the company's CFO, with whom she was in contact after the assignment was scheduled. The auditor was set up in a separate room next to the CFO's office. Most of the electronic communications and data exchanges transpired between the two of them. The supporting documentation was provided by the CFO's staff. But in the hallways, reception areas, at the coffee station in the kitchen, through the open doors of multiple offices – everywhere the visiting woman saw, to put it mildly, quite a few people.
Please keep in mind, this is a little story about a person of numbers. Moreover, one of the key requirements of qualified auditors is their ability to gage the validity of the data in front of them. The examiners cannot possibly look at every recorded transaction – they make representative selections for documentary proofs; they construct trends; they look at schedules and statements; and they must apply analytical scrutiny and critical thinking to every number to make sure that it makes sense in the context of the examination's scope.
For example, it is expected of an auditor, who already studied a company's Profit & Loss statement, to understand the physical reality of annual rent expense of $85,000 (especially in NYC's Financial District) and annual payroll of $1 million. Call me crazy,
but I don't think one needs to have a business degree and a CPA to interpret these numbers. I mean, any logical person can effortlessly come to the correct conclusion, right? One can only hope.
The field work was going very smoothly; the company's finance and accounting staff was well prepared and accommodating; the books were clean and the paper trail was flawlessly coherent. Yet, at the very end, when the auditor was reviewing prior exams'
statistical questionnaires to see if anything required an update, all of a sudden she hit a stumbling block…
She walks over to the CFO with the papers in her hand, looking genuinely puzzled. She points out to a section in the questionnaire, "It says here that the total number of
employees is 10." Now, it's CFO's turn to be baffled as she doesn't understand
why this is so surprising, "Yes, that's correct. Ten total."
The field examiner looks into the CFO's face, still confused, "But I thought this whole floor was you…"
Sometimes You Get Lucky and See a Spark of Intelligence
I always complain about the general population's low level of intelligence heightened by inertia and group mentality. The gray matter deficit upsets me in its many manifestations: the music that tops the charts (Justin Bieber!), the books that become uber-bestsellers ("Fifty Shades of Grey," judging by the synopsis, didn't really stray too far from 1919 "The Sheik"), the movies that break box-office records ("Pirates of the Caribbean, part XX"), the TV shows that attract most viewers (American Idol – over 6 million watching every airing!), the celebrities who get the most hype (Angelina Jolie, who has not shown us a glimpse of decent acting since 2001 "Original Sin"), etc. Even dear to my heart nerdy world of independent filmmaking is degrading (more about this in another post). Some say, "Stop oppressing people with your judgements! Why do you care anyway?"
I'll tell you, why I care. Only a small group of people can construct their lives in isolation from the world. The rest of us are forced to interact with surrounding individuals, frequently in a very direct manner. The general population is where those unbearable customer service representatives come from, those waiters who screw up your orders, those cab drivers who don't know where to go, those doctors who throw random diagnosis at you and prescribe the most expensive procedures, and so on, and so forth.
Most importantly for the frustrated CFO, this murky pond spews out the job applicants as well as auditors, field examiners, bankers, investors, etc. – people that have an impact on our professional lives. Most are so dull and limited, dealing with them quickly turns an intelligent and composed CFO into the frustrated one.
Once in a blue moon, though, you may get lucky – the wave of professional activities may land on your shore someone with a spark of genuine intelligence in his or her eyes.
I have a client with a trade finance line provided by one of the major banks. Among lender's requirements are periodic field exams of the client's books and records. All banks conduct these reviews from time to time. That doesn't mean, however, that they employ departments full of highly-paid auditors. Instead, they outsource and make the clients bear the cost. There are large and small consulting companies and CPA firms that have built their practices specializing in this type of work.
I've helped this particular client to go through their first field exam. The examiner flew to New York from a medium-size firm in Chicago. My expectations were pessimistic (what else is new?): I was preparing myself for days of explanations about the nature of the business, the accounting principles and pronouncements that apply, the international trade conventions, etc.
But this guy was different. Five minutes after the introductions I knew this was a kindred spirit: someone who is not just smart, intellectually quick, logical, and absorbent, but also a person with the same high standards for the quality of work as I have; someone who doesn't allow garbage to come off his desk. Just like me, he has developed his own analytical tools and instruments that set him apart from everybody else.
Working with him was a gift, an unexpected pleasure. In 3.5 days we have completed the field exercise. Of course, both of us understood that such meeting of professional minds is quite rare, so we felt compelled to share our future aspirations. I genuinely hope that our paths cross again soon.
When he concluded his work and was ready to leave my client's office, I asked him how many other associates in his firm were as good as he was. He said, "Just one other guy." And here you have it, ladies and gentlemen, the real-life statistics on the proportion of professional intelligence in the general pool of employees: 2 to 58, or 3%.
The Frustrated CFO 