Tag: controller

CFO’s Performance Focus


I frequently talk about psychological trends and general attitude patterns in a broad sort of sense.  Yes, large groups of people share similar traits due to comparability of their backgrounds, environments, occupational qualifications, etc.  The very reason I write for the audience of financial professionals is because I believe that our experiences have common points and the topics would be understood and accepted; that our expert qualities unite us; that metaphorically speaking we all "have been in each other shoes."  I write about our bosses, small business owners, entrepreneurs as a group of people with very strong and easily recognizable idiosyncrasies.  But I never go too far with it.  I acknowledge and value individuality and uniqueness of each person and each situation.  That is why sometimes I describe experiences of specific people, including my own.

This separates me from organizational behaviorists, especially those who popularize their science for digestion by the masses.  In their zealous attempt to fit the entire universe into a simplistic, easily explainable system, they go as far as dividing everything and everyone into 3-4 categories.  And so, they manage to divide all possible motivations, intentions and impulses that guide employees' task performance focus, into just four categories (they even claim that it applies to "any given situation"):

(1) getting the job finished, which supposedly results in speeding up, being aggressive, and careless;

(2) getting the job right, which translates, according to this theory, into nearly OCD-ish fear of making a mistake and slows people down – they are just checking and re-checking everything over and over again;

Note that these two categories are placed on the opposite sides of the matrix.

(3) get along with people – I cannot offer any comments on this motivation nor its behavioral interpretations.  Honestly, I don't know what the hell is that all about;

(4) be appreciated – Ah, this one all executives understand very well, that's what we strive for.   But why is it associated with "being heard, being assertive, contribute to others;" moreover, why is it separated from 1 and/or 2?

This is laughable!  I don't know what kind of subject group the scientists studied to draw these conclusions.   Maybe these are just empirical deductions.  Then, how many personal observations were accumulated to form these opinions?  One thing I can say for sure  – they are definitely not based on hard-working financial professionals like us – CFOs, Controllers, VPs of small and mid-size businesses. There is no possibility for us of separating "getting it done" and "getting it right."  You don't become a CFO by accomplishing either one or another. 

And it has nothing to do with the time frame, as some suggest.  Other humans maybe can switch between the two, depending on how much time they have on their hands.  Us?  We live under constant pressure to get everything done yesterday and there is no room for errors.  Of course, the good news is that if you are for real, if your expertise is not phony, if you got where you are through hard work and exceptional abilities, you cannot do it any other way.  Your qualities and professionalism carry you through and that how you get to be appreciated.  All at the same time!        

CFO Folklore: Segmental Performance Analysis


SegRep #1 Regardless of whether your company is large or small, rich in cash or eke out its survival on a tight cash flow, operate with the most sophisticated custom-designed ERP fitted with Cognos or makes do with QuickBooks/Excel combo, if I ask you to pinpoint the exact segments where you lose or make money, most likely the answer is too broad, or intuitive, or incorrect.

Based on my experience, segmental performance is one of the most deficient areas of business analysis.  Ok, the larger are probably doing better than the small ones.  The latter, unfortunately, are clueless 99% of the time.

Then again, what is your segment?  Do we need the Large Hadron Collider to break the business matter into invisible particles?  Of course not, but a sensible breakdown can give an invaluable insight and bring about organizational changes.  And let me clarify that when I talk about "performance," I don't mean revenues, which are easy to track, I am talking about EBITDA – my favorite indicator.     

Familiar to everyone example – CBS Corporation.  Its portfolio consists of 23 separate brands (subsidiaries), including CBS Television, CBS News, CW, Showtime, Simon & Schuster, etc.  Of course, there are separate P&L's for each of these sub-entities. I am positive, Showtime Networks knows who does better Showtime or The Movie Channel.  I am pretty sure they are aware of how much "Dexter," or "Nurse Jackie" contribute to the bottom line.  Moreover, thanks to digital counting of viewers tuned in, they know for a fact how much Gross Revenue each episode generates.  As I said, that's easy – they know how much they get paid for each subscriber.  (Side Note: it's just as easy for the network television, where the revenue is calculated based on the commercial time).

But do they know how much profit (or loss) they make from each episode?  ALL costs allocated, including CBS Corporation CEO's salary?  What, it is not required by financial statements?  We are not talking about  them.  We are talking about magerial understanding of the business.  Is it important?  It's fundamentally important.  Each episode is written by different writers, directed by different directors, some use more effects and extras than others, etc., etc.  This is BUSINESS INTELLIGENCE and those are factors impacting this particular business.   

Here is promised CFO Folklore.  At some point in my career, I accepted a position in a company with national exposure – 14 operational facilities in different states.  They needed me because they couldn't understand why they experienced cash flow shoratges.  The first thing I did was the profitability analysis for each of the locations.  I uncovered that 9 out of 14, have been consistently loosing money for the past 18 months.  

There are, however, inherent difficulties that prevent most financial executives with limited human resources from undertaking this exercise.  First of all, it is not easy to properly define your segments.  It is pretty much a game of optimization between the level of details you would like to have and the resouces you need to achieve it.  The most intense part of the analysis, however, is the selection of proper principles of allocation for all shared costs and the allocation process itself.     

The spreadsheet image is courtersy of E&D CC, Inc.  If you are looking for help with segmental analysis, I recommend  contacting E&D CC – they specialize in assessing reporting needs and designing specific analytical tools related to profitability and costs, as well as budgetary, treasury, viability, forecasting and planning instruments: mzosya.edcc@gmai.com  

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!   

The Infinite Wisdom of Trey Parker and Matt Stone


ImagesI have two confessions to make.

First of all, I have been a fan of Trey Parker and Matt Stone since the premier of the first episode of South Park on August 13, 1997 – nearly 14 years ago.  I love everything they've ever written themselves (note to those who don't know: they did not write BASEketball, which I hated) and my feelings for them were only further solidified in Eugene O'Neill Theater two weeks ago, when they nearly killed me with The Book of Mormon.

I count them among a small number of the most brilliant people in entertainment and consider their satiric abilities unmatchable.  But it's not just that.  They are incredibly sharp intellectuals, which, in my book, is probably the biggest compliment.  They just get shit like only very few people do.  And don't get me started on the courage – these two do not bow their heads in front of anybody: whoever deserves it, gets it.  It's really breathtaking.

The second thing I have to admit is that I am sick and tired of people still (for nearly three years now) asking me the same questions about the Global Financial Crisis (aka Credit Crunch).  Just the other week someone wanted "to pick my brain" about it again.  So, I started explaining (again!), trying to make it simple, but still using unavoidable terminology so familiar to my fellow CFOs and Controllers, but apparently still a foreign language for the laymen: federal reserve rates, sub-prime lending, securitization, predatory lending, blah, blah, blah… I am looking into the man's eyes and see no understanding of what all of this has to do with his pension fund.  Why am I doing this? 

And then… Eureka!  "Margaritaville!!!"  In the aftermath of The Book of Mormon, I re-watched a few of my favorite South Park episodes, including the blessed Episode 3 of Season 13 (2009), Margaritaville.  The boys did it better than all analysts on screen or in print (of course!), but more importantly, they made it comprehensible like nobody else can.  As always, they managed to marry their uncanny perceptive powers with the  signature concise delivery, which resulted in the most  brilliant analysis and summation of the bizarre economic situation. 

So, please people, don't ask me anymore about this.  Click on the video below and you can have a four-minute taste of the Misters Parker and Stone's genius, and then go to THIS LINK and enjoy the full episode, so generously provided for your viewing by SouthParkStudios.com.  

And if you still don't get it, then, pretty please with the sugar on top, don't talk to me anymore – I don't have time for your lame asses. 

 

CFO Folklore: Dealing with F@&ing Lawyers


Blog image As CFOs and controllers, we are constantly exposed to a variety of legal documents: security and financing agreements, leases, employment contracts, NDAs, new ventures formation, demand letters, term sheets, etc., etc.  And even though most of the financial professionals I know, including myself, are well-versed in these matters and can write a decent legal document themselves (hey, you cannot even get an MBA without taking Contractual Law), or at the very least can fully understand them, we are forced to deal with attorneys: a CEO feels more comfortable if he gets a bill. 

Hello!  This is business law.  We are not talking about defending anybody in court on murder or ponzi scheme charges, or suing somebody for fraud!  So, here is what usually happens.

Scenario 1:  I compose a document or construct an agreement outline addressing all necessary points, and send it to the corporate attorney.  He comes back with either, "This looks good," or he takes my points and, without changing anything, puts it into the format that he didn't even create himself – nowadays they all download templates from Blumberg's Law Products, which anyone can do.  A couple of weeks later I get a $2,000 bill.

Scenario 2: We receive a contract (let's say a Credit Line Agreement), I read it, make a long list of all the points that I believe need to be further negotiated with the bank, and send the contract with my list to the corporate attorney.  He comes back with, "I agree.  Let me know when it's ready for my final approval."  A couple of weeks later I get a $2,000 bill.

Ahhhhhh! 

Of course, there are special occasions when the intricacy of legalese needs to be explored and attorneys must be involved.  But, why the hell it's so intricate, anyway?  Doesn't it seem like a conspiracy to justify $450+/hour rates?  In organizational management we are always taught that some employees deliberately confuse their records to make themselves indispensable: nobody else can figure out what's going on.  Sounds familiar?

And the arrogance!  I can only think of one other profession that can compete with lawyers on the level of insolence – doctors.  They have no respect for anyone expect themselves.  Well, I am willing to forgive a cardiologist who has a courage to hold a human heart in his hands, or a neurosurgeon who may need to drill into my brain one day. 

But these legal MoFos?  The complex of knowledge I possess is far greater than that of any specialized attorney I know.  I ask, for example, if there are grounds for fiduciary violation in a case, and he ($550/hour) responds, "I have to look it up."  Yet, they dare to be condescending nevertheless!  Just last week a lawyer sent me a retainer agreement and wrote in the cover note, "It's a bit formal, but I hope you will understand it."  Are you fucking kidding me?!  I have four academic degrees and 20 years of executive experience (and he knows), and my own retainer agreement for consulting services, which I wrote myself, has more substance than your copied bullshit.

The worst thing about them, though, is that fucking professional camaraderie.  Try to talk to an attorney about a harm caused to you by another lawyer.  You think you are going to see fairness so wonderfully shown on "The Good Wife", or any other of those TV court dramas?  Nope!  They stop listening – THEY DON'T WANT TO HEAR ANYTHING ABOUT IT!  That's why ABA had to create grievance committees and appoint people who are obligated to review the complains, because otherwise there wouldn't be anybody you could tell about lawyers' violations.  Why do you think legal profession is not regulated by any government agency?  Because the legislature consists mostly of legal professionals.  They will never do anything against one another.

In "Philadelphia", just before dying, Tom Hanks (a gay attorney) tells Denzel Washington (another attorney who just won a discrimination case for him) an old joke: "What do you call a thousand lawyers chained together at the bottom of the ocean?  A good start."  They both like the joke.  Denzel's character even repeats it to someone else right away.  A very hopeful movie in many respects: the case is won, a formerly homophobic Mr. Washington's character finds in himself to defend a gay guy, AIDS-ridden Mr. Hank's character dies knowing he won, and his partner (played by Antonio Banderas) is somehow is not infected.  And the lawyers like the joke!!!  Very hopeful, very far from reality.