Tag: CFO

Job Search: CFO’s References Trap


I have no clue how those big-time CFOs, with seven-figure salaries, manage to get fired for screwing up and immediately land new jobs.  It's like, their skins are coated with teflon and nothing sticks.  And that's fine.  May be they deserve such recognition.   Most definitely, the companies who hire them deserve what they get.

Those CFOs and Controllers who toil in smaller companies, rarely get fired for poor performance.  If they are knowledgeable, diligent and hands-on, they don't screw up.   Yet, no matter how hard they work, they can loose their jobs.  The owner retires; or someone makes him an offer he cannot refuse; or, despite everyone's best efforts, the business goes under.  Very rarely one of us gets fed up with the abuse and quits on his own – I know a few  brave people.

Well, nobody waits for the unemployed small business CFO or Controller with a new position.  Nobody knows who he is.  There are nearly 6 million companies with less than 100 employees in this country.  Recruiters have never heard of them.  So, this erudite, experienced, smart and loyal professional is thrown into the grinding machine of job searching, where every CFO/Controller listing generates thousands of responses. 

It turns out, the trickiest part of the small business CFO's job search is the references list.  Of course, you've got your connections – bankers, auditors, attorneys.  There are former coworkers and subordinates who will be happy to speak about you.  You compiled a two-page long list of excellent professional references.  But… it fails. 

Why?  Because there are no "supervisors" on the list.  Well, technically, if you are a real CFO, no one supervises you.  The only person (sometimes, there are two)  between you and the higher powers of the Universe is the Owner/CEO.   And how many of them did you have in the past 15 years anyway? Two?  Three?

In some instances, they are still reachable and you have permission to use them as references.  However, most of the time…  Who are you going to use?  The one, who sold the company and went back to Thailand?  Or the guy who has  been hiding from creditors and changed all his contacts?

Now you have this prospective employer – another privately-held company.  You passed all interview levels, including the owner.  He seems to like what he is hearing from you very much.  At the end, he asks,"May I have your last boss's number?"  Didn't you just tell this guy that you were cheated out of your annual bonus at that job?

Here is my advice: 

  • ALWAYS expect that someone will want to speak with at least one of your old bosses. 
  • During the interview process, never reveal anything that may come back to haunt you. 
  • If your wonderful reference list is not enough, never show any resistance to providing the former bosses' contacts.  It's very suspicious and will end your chances right then and there. 
  • Give them whatever info you have. Who knows what's going to happen?

This is the best you can do. 

Your Boss: Value and Madness of an Entrepreneur


Many of my correspondents (CFO's, Controllers, Financial Directors) tell me that the biggest source of their stress and anxiety is the Boss.  I am sure we will be addressing this topic many times in different stories.  President, CEO, Owner, or whatever title they have chosen for themselves, more frequently then not, these entrepreneurs are the main reasons for our frustration.

Some of them are courageous and brilliant who actually foster and lead, others are batty and lucky who succeed in spite of themselves, and the others are lazy and disinterested who ruin everything even with our best efforts in place.  Regardless, they have few things in common. 

First of all, we can never forget that they are the ones creating jobs.  That's a tremendous achievement.  They've got to be madly brave to go out in the world and implement their ideas, sometimes against all odds.  If they succeed, they build companies that not only create products and services, but also employ people and pay them salaries.  They take insane risks and end up with entities that can afford to hire CFOs, Controllers, Financial Directors, i.e. us.  And even if the Bosses are not the founders, but heirs and the business just fell into their lap, until they destroy it, they are the employers and our salaries are coming out of their pockets.

Of course, as financial execs we kill ourselves in order to either facilitate their success and prosperity or stop them from  killing the business.  And even though we are concerned with our own material well-being just like anybody else, at the end of the day all of our efforts in a private company end up to be about guarding the owners' private purses.  That kind of a responsibility to a person in the office few steps down from your own brings the level of pressure to a completely different level.  It is not the same when your "owners" are some unknown masses of mutual fund investors.

But the most prominent common denominator of all small and mid-size CEOs is that they are all afflicted by the same disease – something I call an entrepreneurial bug. The business development machines in their heads run forward ahead of everything else.  They want everything to be done yesterday, and those who cannot make it happen or voice their concerns are considered to be obstacles on their way to success. 

Because it is up to us, CFOs and Controllers,  to make sure that the back office, the financing, the structures, the control procedures, etc. are on the par with new developments, we frequently find ourselves at odds with our Bosses.  We are called negative, uncooperative, difficult, etc. etc.  Nevertheless, we must be strong and do our jobs right, because if we fail to cover their fast running asses, everyone will get hurt, including the Bosses.

CFO’s Ode to Gross-Profit-Based Commissions


Commissions (in all possible forms, including percentage-base bonuses and even royalties) are curiously contradictory – they are revenue-driven expenses.  Unlike other costs in the value chain, they don’t precede, but follow commercial transactions of converting products and services into business returns.  These incentives are basically wages calculated as a percentage of one or another base.  And it is the selection of the base that, unfortunately, hurts most of the companies using this type of remuneration.

In many industries commissions are traditionally based on volume – sales, purchases, collections, etc.  Employing a system like that stimulates the race for big numbers – the more you sell (procure, collect), the higher are your commissions.  The sales force, or procurement team, runs down every single order without any concern for its contribution into the company’s bottom line.  Of course, returns, allowances, price discounts are all accounted for in the calculations, but otherwise volume-based payees don’t care whether the company looses or makes money on their deals.

This eats away profits of many organizations.  Even if a company consistently doing well, even if you have a system of pre-approving deals by projecting their profitability, there are always some transactions that will end up loosing money for one or another reason: the freight rates, for example, have a tendency of  suddenly going up all the time due to the spikes in oil prices.   Yet, the commissions on those sales will be paid anyway, further deteriorating the bottom line.

Of course, some good CFOs and controllers try to absorb the possibilities of losses into their calculations and fight for reduction of rates.  But the truth is that most of the time, especially in smaller businesses, the companies stick to industry standards and you need a revolution to change them.

The only way to avoid this multiplication of losses is switching your company to commissions paid based on the transactional gross profit.  The reason I use the term "transactional" here is because, unless you have one person receiving commissions for the entire volume, you will have to enter the world of segmenting your business into portions that correspond to all recipient's sectors: countries, regions, products, and even transactions.    

I will not deny the fact that it is a pain: there is a lot of work involved into all that, including the process of allocating shared expenses and overheads.  Moreover, I can guarantee you that your calculations will be severely scrutinized by all interested parties. 

Over the years of my career I was able to implement such systems in two companies.  The matters were further complicated by the fact that procurers and sales people cooperated on different transactions, in different combinations.  Can you imagine dividing all those shared credits?!  Both times I had a dedicated analyst assigned to the task and personally dealt with complaints from the traders.  But the benefits to the businesses were undeniable – no commissions were ever paid on loosing deals.   Think about it.        

Cautionary Tale About Artificial Intelligence Progress


Don't you worry, dear readers, I am not planning on retelling "The Terminator" plot.  As the matter of fact, the two technological developments I want to discuss are related to the CFOs' and Controllers' supervisory responsibilities.  On the surface (!), they seem to serve a good purpose and could be attractive solutions to some of our common problems.

Every exec with subordinates communicating with financial institutions, investors, key vendors and customers, is vulnerable to their emotional whims, diplomatic abilities and verbal skills.  This is especially true with out favorite mode of communication – emails, which remove the recipients' faces and voices thus making the expression of aggression easier.

I have a list of actual stories to be told about relationship damage caused by employees' spiteful writing.  And it is not like I don't employ prevention strategies.   I give training talks.  I impose a sense of supervision by requesting to be copied on all important communications.  I even write Post-Its and stick them on the worst offenders' monitors, "Please re-read ALL your emails three times before sending them out."  Still, once in a while something happens that requires damage control.

Lo and behold!  In NY Times Year in Ideas I read about ToneCheck – "an e-mail outbox filter that works as a sort of emotional spell-check, offers typists a chance to reconsider their words before" sending their missive.  I watch the cute animated video attached and my first reaction is like "Finally!!! Hooray!!!" 

Then I read further and I forget that I am a CFO with unruly subordinates who require monitoring.  I remember that I am a Person and that Freedom of Speech is an important issue for me.  Yeah, it's useful in the office environment, but this dangerous program has a capacity to be tuned to ANY CONTENT.  I imagine it being installed without my knowledge by my ISP and checking my personal emails for "inappropriate" content as defined by… whoever has the power to do so.  How do you feel about it now?

Here is another common problem and even scarier solution for it.  How many times we catch our employees attending to their personal business or even playing online games during working hours?  We wonder about the hours they waste the costs of it.  Frustrated, we think we should like to watch them.  So, here you go Computers That See You and Keep Watch Over You.  This "wonderful" program sees you and analyzes your facial expressions.  And it can be installed on your personal computer without your knowing it. 

You know what?  I don't want these "solutions." Not even in my office.  Let me work harder with my employees on their work attitude, verbal skills and aggression management.  If boycotting these products means that we can keep them away from invading our personal privacy, then be it.  I hope you click on the links, read about it and agree.    

It's like what Benjamin Franklin said,"Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety."

CFO Folklore: My “Favorite” Questions


Ah, the Holidays!  They put you in the mood for remembrance.  Families get together and stories of past times and lives start pouring out.  My grandfather was a brilliant man of the WWII generation.  He died when I was a baby.  Hence, I cannot remember this myself, but I've been told quite few times about his main pet peeve: he couldn't stand what he called "idiotic" questions.   Apparently, I've inherited this familial trait.

His being the times way before the political correctness permanently  stifled us, he had the luxury to call things as he saw them.  Nowadays, I use more neutral words.  I call them nonsensical questions.  I even trained myself to ignore stand alone occurrences.  However, there are two questions that pervade my professional life.  As all pet peeves do, they cause undue frustration.

The first question is consistently asked by my subordinates and peers.  You see, unless I attend to a confidential business matter, I always keep my office door opened.  I believe it is good for employees' morale to see a CFO working as hard as I do. 

So, these people see me all day long attending to my scheduled tasks, addressing issues, solving problems.  I am consumed by work.  Yet, EVERY TIME one of them needs me and comes to my door, they ask me THE SAME question, "Are you busy right now?"  In response I want to scream, "Of course, I am busy.  Can't you see?" 

It doesn't mean that I am not available to discuss their problem if it is of higher priority, or scheduling them for a later time slot if it can wait.  But why do they have to ask that question?  At staff meetings, I teach them to approach this situation in a more sensible manner: come, don't ask the damn question, instead state your issue and let me decide if it requires immediate attention.  Some learn, but the rest just cannot help themselves.

The second question is similar but essentially different in its nature.  It's usually asked by the boss.  And, as we already discussed, there is nothing you can do, but to bite your tongue.  He has something on his mind, so he comes to your office.  Here it comes, "What are you doing right now?" 

The involuntary first reaction is, "What do you think?  I am doing nothing.  Just sitting here enjoying myself."  But he does not imply you are not working.  This is how their minds work: whatever is on his mind is the most important thing to him right now and in his opinion should be to you as well (even though you don't even know yet what it is).  This attitude renders your current preoccupation irrelevant.  Now, it is up to you to navigate the situation properly into the safe harbor.  Over the years, I've developed an arsenal of methods.  I am sure you have too, but if you need my help, please, don't hesitate to email.