Tag: Bosses

Overhead! – Every CEO’s First Response to Subpar Performance Results


Profit DropOf course, it would be obnoxious to generalize my observations to include the entire class of business owners and chief executives (maybe they are not all the same), but every single CEO, with whom I've ever dealt, displayed the same behavioral pattern at the first sound of "bad news."

It's one of the most unpleasant experiences many financial professionals go through from time to time. The fiscal period (month, quarter, year) is closed and you look at the bottom line that is way below the company's target, or worse – the numbers are in red. You cannot help feeling singly responsible, simply because you are the first person to stare in the face of this unfortunate reality.

Yet, while it's true that a holistic CFO, the rightful member of an executive team, shares the P&L responsibility with the rest of the decision-making crew, unless she uses extravagantly expensive capital resources, her direct responsibility for the poor performance is highly unlikely. In fact, she probably anticipated this outcome and was doing everything in her power to prevent it: fought for better informed procurement decisions, higher efficiency, sensible distribution methodology, more selective sales, and so on.

Nevertheless, here are the results. The gross profit is too low, eaten away by sub-par sales. Some of new products couldn't make any money at all due to the lack of marketing and distribution efforts. There is a delinquent debt write-off on an account blessed by the boss for open terms. All these operational losses that you tried so hard to thwart.

And now it's time to present the results to the CEO. Frustrated by the company's poor performance, worrying about the impact the loss may have on the cash-flow, formulating the bullshit you will have to feed to the bankers to spin the disappointing news, you go through the established reporting protocol, whatever it is in you company: KPI tables, graphic dashboards, formal financial statements. As I said, in my experience the delivery of the news causes the same reaction: "We have to reduce our OVERHEAD!!!"

Overhead? We've kept our general and administrative expenses (G&A) stable for years! While we doubled our volume (triple, quadruple – whatever is your case), we managed to do so with a mere 10% increase in non-operating expenses. It's the gross margin we should be discussing. Alas, your reasonable arguments will break against the wall of stubborn conviction that overhead is the source of all evil.

Afterwards, the useless exercise of scrutinizing every single category of G&A will commence. You will have very expensive meetings with highly paid executive staff, including yourself, devoting their valuable time to discussions of $5,000 monthly Federal Express charges and $500 spent on various subscriptions. While you do that, another transaction bound to lose $250,000 will materialize, and then another, and another…

Why does it always happen like this? The answer is simple: only a handful of people are capable of facing their own failures without flinching away. It is very difficult for chief execs , who are frequently involved in operational management, sales, and business development, to admit that they don't really handle their side of the business too well. So, instead of dissecting the real causes, they jump on something they rarely control. And it's really funny, because a significant portion of the overhead is created by them. You know – travel, dinners, drinks, limos, perks, etc.

Scenes from a Business Lunch, or the Obnoxious Rudeness of Business Owners


Restaurant-TableSpeaking of lunches (and I swear this is my last holiday post of the year)…

Because there are so many corporate holiday events in December, many business people from all over the country and overseas come to New York City during the month.  Customers, suppliers, vendors, associates, partners, and other relations visit their customers, clients, etc.  So, on top of the parties, you've got lunches with out-of-towners. This is a perfect opportunity to observe the business-owners' behavior in a "casual" group setting (as opposed to conference rooms and other natural habitats).

For many visitors this is also a good occasion for combining business and pleasure (after all, NYC is still #6 most favored tourist city in the world and #1 nation-wide) and quite a few bring their spouses along.  Some are actually in business with their spouses.

At the most recent lunch outing of this kind my guests were a manufacturing business owner by himself, another business owner with a wife, an alpha-female head of a consulting group, and a husband and wife attorneys sharing a corporate legal practice. Fun bunch!  Don't worry kids, it's only going to get worse!

The manufacturer asked for a coke and downed it really fast; then had it refilled several times throughout the meal.  This, naturally, resulted in a fast accumulation of a lot of gas in his stomach, which he unceremoniously belched out every 10 minutes, or so.  It was obviously a habitual occurrence, because he did not even bother to apologize.  It's amazing, how we learned to hide our emotions in "business" situations – everyone pretended not to notice it, even though once in a while one could catch a hint of a smirk or disgust (depending on the personality) playing on the lips of other guests.

[Side note: This reminds me of another experience in my arsenal of wonderful memories.  Early in my career I worked for a company, whose owner, in my mind, will forever carry a title of The Farting Boss.  He was middle-aged, but had a younger second wife and wanted to loose weight by drinking glass after glass of Slim Fast.  This made him very gassy.  The man mastered the skill of silent farting, but the smell was literally unbearable.  Imagine my situation – we sat in the same room.  Good times!]

The lady consultant first tried her sales pitch on every guest around the table, but quickly lost her enthusiasm, when she realized that nobody is interested in her services, except for me.  Since my company already had a contract with her, she did not see a reason to waste anymore time on us and turned her attention to the Blackberry, answering emails between bites and white-wine sips.

The married businessman first attacked his wife in a very loud whisper (it could be heard even at the neighboring tables) for wearing shoes with heels.  This apparently slowed down his purposefully brisk gait that went well, I am sure, with his aggressive mannerisms.  After the woman's eyes welled up with tears he abandoned her to fight it back on her own and observed the rest of the battlefield in front of him.  Dismissing the burping guy and all females as inferior creatures, he concentrated his self-affirmation efforts on the attorney sitting across the table from him.

They went at each other like two roosters in a Filipino cockpit.  "Have you read this?"  "Do you know that guy?"  "I bought Apple at $25 and just sold it at $375." "I am keeping mine – it will be $500 a share in a year."  "I closed that famous private equity deal this year." "I brought this much venture capital to my business."  "I am opening new factory in China."  "We have a law office in Hong Kong!"

God!  I contemplated the scene thinking, "The things we must tolerate to earn a living!"    

Is Rupert Murdoch Really Responsible?


ImagesI get CNN's Breaking News emails.  I got one last week during Rupert Murdoch's questioning by the British Parliament's committee regarding the phone-hacking scandal that stems from News of the World and threatens to overtake the entire News Corp.  The email was dedicated specifically to his statement that he did not consider himself "ultimately responsible for the fiasco," and that these were misdeeds of the people he trusted.  In other words, he is blameless because he did not give direct orders and it was all his employees' fault.

Indeed, unlike Bernie Madoff he did not personally masterminded to rip off thousands of people; he did not instruct anyone to tap private phones and  bribe police officials.  For all we know he had no clue who poor Milly Dowler was until inquiries began.  News Corporation holdings include over 100 newspapers, magazines and TV stations.  He cannot possibly keep track of every single report they publish. 

He could not recognize (or so he says) most of the names of people working for him.  Also not surprising – News Corporation employs over 51,000 people worldwide.  We cannot expect him to know every single one of them.  I myself always argue that the Boss should deal only with the uppermost echelon of management. 

Yet, he does know Rebekah Brooks very well.  She's been making his scandalous rags Sun and News of the World profitable for nearly half of her life, climbing up the ranks with his personal support.  She knew how to deliver what was needed and he liked it.  In 1994, at 26, she hired techies to secretly wire the entire hotel suite for the interview with Princess Diana's beau.  And that was just a start.  Everything she did was ruthless, unsavory and amoral and Rupert Murdoch was promoting her for it. 

I wonder what kind of conversations this boss and this top exec had? 

RM: "Great job, great job, just watch yourself, don't get caught." 

RB: "I do what I can to please you, sir.  And don't worry – everything is under control, I hold them all by their balls."

RM: "That's my girl! Here's £3.5 million bonus.  Just don't tell anyone."

And that's makes him personally responsible.  He knowingly hand-picked this woman to be one of his top executives.  Journalism has seized to be an honorable profession long time ago, but Ms. Brooks' tactics go beyond levels of immorality we've learned to accept.  What kind of organizational environment he expected her to cultivate?  He knew exactly what he was doing, and I hope the British law enforcement will see it that way as well.

The reason this case is a good topic of discussion here is that business owners frequently display deliberate negligence in their executive staffing and still don't feel responsible for their employees actions. 

I know a national law firm specializing in consumer debt collections.  Most of the cases come in a wholesale form: debt-owners, such as credit card issuers and mortgage companies, outsource collection of delinquent balances to such attorneys.  This is very different from the regular law work when a counselor is face-to-face with his client.  This is bulk work – individual attorneys never meet the plaintiffs.  And that gives the principal partner the freedom to save on the quality of attorneys he hires.  He gets them straight out of fourth-tier law schools for salaries of office workers, he does not train them, he throws them into regional offices and lets them "swim or sink."  Meanwhile, thousands of cases get no attention and pass the statute of limitation.

There is no question in my mind that this is a violation of fiduciary duty to the firm's clients.  So, did Rupert Murdoch violated his fiduciary duties to the public by keeping Rebekah Brooks and letting her to do "her thing"?


CFO Folklore: When Your Boss’s Secretary Becomes His Girlfriend


Here is a sensitive and complex topic – it involves people's personal lives and therefore should not be anybody else's business.  Yet it affects our work environment and impacts employees morale.  Always!  There are no exceptions.  

It is not a rare occurrence either.  In the past I had a boss who was seduced by his secretary and ended up leaving his family.  In another company I had to fire a general manger to avoid a possibility of sexual harassment law suit, while the company's owner was on his second marriage to a woman who was his former secretary.  And the list of stories I've heard from my colleagues, associates, subordinates and just friends is endless.

The nature of the boss/secretary professional relationship by itself has a somewhat intimate connotation.   They are near each other in the office space.  All day long the secretary attends to the boss's needs, frequently takes care of his personal matters, stays by his side when he works late.  Add to that the fact that most secretaries nowadays are younger women, as the class of "career personal assistant" is disappearing.   Plus, there is the appeal of power and a possibility of material benefits.  All this together creates an undeniably fruitful environment for trysts.  Hell, we have wonderful independent movies about it.



      

Unfortunately, it is not as much fun when you actually have to work with this in your face.

I frequently repeat in these posts that private businesses are absolute monarchies.  Historically, every single Royal figure had his or hers favorite,  i.e. an "intimate companion of a ruler," or, as OED defines it "one who stands unduly high in the favour of a prince."  The contemporary "rulers" are just upholding this "fine" historical tradition.

The key here is the unduly power bestowed on the favorite.  Again, I don't care about people's personal lives.  I really don't!  Moreover, if favorites were working ten times harder and their attitudes were twenty times nicer, I would consider that an improvement. 

However, that is not what usually happens.  In reality boss's secretarial lover stops working altogether.  I witnessed a hiring of an "assistant to personal assistant" to patch the hole in the workflow.  They become arrogant and acquire nasty disposition towards other people in the office.  Frequently they get promoted to managerial jobs they are not qualified to perform with salaries they didn't deserve.

In a small business, even with 500 employees, that's hard to hide.  Well, as a CFO or a Controller, you have your own powers and you don't really need to bother yourself with this unless she starts infringing on your scope of command (sadly, that happens too).  And yet your position exposes you to the unfairness of the situation in the most explicit way: you are the one who has to sign off her 50% raise; you are the one who has to approve her 12 weeks a year vacation time; those are your direct reports that get mistreated by her.  

Talking about terrible frustration!   

Warning: “Horrible Bosses”!


ANISTON-HORRIBLE-BOSSES A quick warning to my readers, dealing with difficult bosses on daily basis as a part of their job descriptions:  You will not be able to relate to the protagonists of "Horrible Bosses."

It  is not a comedic representation of the workplace environment, which I always welcome when it's done well.  It's a physical farce of the "Hangover" kind.  It has nothing to do with the reality of professional life.  As the matter of fact, it did not need to be about work at all.  The preposterous premise that three men, who know each other (!), abhor their bosses to the point that they (all three of them at the same time!) decide to commit murders, cancels any possibility of intellectual thinking behind the story (what story?!).  The people depicted in the movie – both bosses and employees could have been anybody.  This could be about husbands vs. wives (or other way around), students vs. teachers, athletes vs. coaches – you get it, right?  And everyone acts like a clown.  I wouldn't mind the shenanigans if the heroes had any recognizable characterizations.  Do you know anybody who would agree to drink a full glass of Scotch in his boss's office at 8:15 AM?

It's just so sad that it always happens like that in Hollywood.  First someone has a commercial success with a certain concept – vampires, zombies, ordinary people getting themselves into rediculously farcical situations, etc.  Then bunch of unoriginal "filmmakers" follow suit – concept remains the same, but characters and circumstances change slightly.  AND NOBODY CARES ABOUT THE STORY!  It's all tricks and gimmicks.

How unfortunate that fantastic Kevin Spacey, whom I deeply respect and who gave me two of my top twenty theatrical experiences (in "The Iceman Cometh" and "A Moon for Misbegotten") has agreed to make this.  I know he needs money for all the great artistic endeavors he champions, like TriggerStreet and The Old Vic, but still.  You want to see him play a really scary boss, get Swimming with Sharks (1994) from Netflix.

Just watch the two videos below for comparison.