Monthly Archives: October 2013

Three Ways to Keep Your Head Above Water

When was the last time you felt overwhelmed? We all have those days, weeks, or even longer seasons of life when we struggle to “keep our heads above water.” Having worked in public accounting, I am all too familiar with the tax time “busy seasons” when the work is piled up high.

During those times on the job or in other areas of life, we can either give in to feelings of stress and exhaustion, or we can intentionally conquer the workload with a plan of action. Here are three tips that can help:

      • Survey the Landscape — I once had a mentor tell me that he sometimes heard the criticism early in his career that he needed to more capably “see the bigger picture.” Over time he came to understand how to keep his communications with senior executives at a “high level” and focus on the larger strategic purpose rather than getting lost in the details. Whether you are a line employee, a middle manager, or the CEO, it is critical to understand the purpose behind what you are doing and how it fits into the larger context of the organization. If you don’t have bigger goals in mind than simply accomplishing the multitude of tasks in front of you, your work can be drudgery and you will find yourself burned out.
      • Determine Your Priorities — Once you understand the strategic purpose, you can translate this “bigger picture” understanding into a defined set of priorities for your day, week, month, and so forth. Your priorities will change depending on the needs of the organization. A finance professional might be inundated with day-to-day transactional details during a few months of the business’ busy season, and during slower months the focus might shift to careful cash flow management and longer-term strategic initiatives. Be clear on your priorities, and don’t get overwhelmed by trying to tackle everything of lesser importance at once when more pressing concerns loom large. 
      • Tackle the Details One at a Time — We might like to fancy ourselves to be great multitaskers who can jump from one project to another like honeybees in a clover field. However, staying focused on one detail at a time can lead to traction and momentum. Think of the difference in how you feel when you start ten projects and complete zero, versus seeing two significant tasks through to completion. Knock off your to-do items in bite-sized pieces.

I recently saw the effectiveness of this approach when I was working on a small piece of a larger project with my wife. We “surveyed” what was before us and decided how much of the project we wanted to “bite off” at that particular sitting. If we started to lose focus or feel overwhelmed with the details, we reminded each other that we would systematically handle one detail at a time until we saw the objective through to completion. That simple plan made the difference between frustration and giving up, versus the eventual satisfaction we felt in completing our task.

Manage Risks with Preventive, Detective, and Corrective Controls

Is it better to sell a prevention or a cure? From a marketing standpoint, there is likely more money to be made selling cures. People would rather not attend to the many risks in their lives that may not materialize — after all, where does one begin? — but once a contingency does manifest itself, the same people are willing to pay great sums for cures.

The world of a finance professional is different. Some of our core functions include thinking, planning, and communicating about risk. We do not have the luxury of taking a “wait and see” approach toward managing risk. We have to be proactive about foreseeing risks and planning accordingly. We think in terms of broad categories, such as regulatory and legal compliance risks, IT-related risks, political risks, market risks, credit risks, and more.

Finance professionals measure the extent of our organizations’ exposure to risks and help guide senior management in assessing the best way to effectively expose our organizations to risk and at the same time manage risks. After all, if an organization is not taking risks, it might as well shut down because it cannot grow or produce a return on investment.

Part of an auditor’s evaluation of an organization is in terms of internal controls, how they are documented, how they are communicated, how employees are trained in them, and so forth. Controls are designed to prevent fraud and material misstatements of financial results, as well as to ensure effectiveness in carrying out management’s objectives.

Here are three types of controls to consider in your organization:

  1. Preventive — Some of the best controls prevent fraud, theft, misstatements, or ineffective organizational functioning. For example, we saw in a previous post the effectiveness of segregation of duties to prevent fraud. Preventive controls can be as simple as locks and access codes to sensitive areas of a building or passwords for confidential information.
  2. Detective — A security camera is a good example of a detective control. A store manager who notices a pattern of a cash drawer coming up short when attended by a particular clerk can easily look at video of the clerk’s actions throughout the day to detect potential theft. An access log and an alert system can quickly detect and notify management of attempts by employees or outsiders to access unauthorized information or parts of a building.
  3. Corrective — Coupled with preventive and detective controls, corrective controls help mitigate damage once a risk has materialized. An organization can document its policies and procedures, enforcing them by means of warnings and employee termination when appropriate. When managers wisely back up data they can restore a functioning system in the event of a crash. If a disaster strikes, business recovery can take place when an effective continuity and disaster management plan is in place and followed.

Think in terms of preventing, detecting, and correcting risks of fraud, theft, ineffectiveness, and breakdown. The world is full of risks, and problems tend to strike suddenly and unexpectedly. Cures are great, but if you rely on finding a solution once a risk has already materialized, you might find that your lack of planning has made the risk unmanageable.

Eight Steps for Leading Change

John P. Kotter of Harvard Business School has written extensively on change in articles and books, including Leading Change (Harvard Business School Press, 1996) and The Heart of Change (Harvard Business School Press, 2002).

In Leading Change, Kotter lists eight reasons why organizations can fail in their transformation efforts (pp. 4-14):

  1. “Allowing too much complacency.”
  2. “Failing to create a sufficiently powerful guiding coalition.”
  3. “Underestimating the power of vision.”
  4. “Undercommunicating the vision by a factor of 10 (or 100 or even 1,000).”
  5. “Permitting obstacles to block the vision.”
  6. “Failing to create short-term wins.”
  7. “Declaring victory too soon.”
  8. “Neglecting to anchor changes firmly in the corporate culture.”

According to The Heart of Change (pp. 2-3), making big leaps forward (rather than mere continual and gradual improvement) is essential. In addition, changes must focus primarily on behavior, with strategy, systems, and culture secondary. Change is about influencing feelings more than providing analysis to impact thoughts. Corresponding to the eight categories of failure, here are the eight key steps for creating effective change (pp. 3-6):

  1. Create a sense of urgency, which “gets people off the couch, out of a bunker, and ready to move” (p 3).
  2. Put together a qualified and effective guiding team.
  3. Create a vision and set of strategies.
  4. Communicate “simple, heartfelt messages sent through many unclogged channels” (p. 4).
  5. Provide empowerment, not by “handing out” power, but by removing obstacles.
  6. Create short-term wins to produce momentum. Otherwise, “the cynics and skeptics can sink any effort” (p. 5).
  7. Don’t try to do too much at once, but don’t lose momentum by letting up and quitting too soon.
  8. Behave consistently to create a culture that helps change stick.

As opposed to the pattern of “Analysis-Think-Change,” much more frequently the progression is “See-Feel-Change” (The Heart of Change, p. 11).

In conclusion, Jack Welch once reportedly said, “You’ve got to talk about change every second of the day” (p. 14). The world is constantly changing, and one can either choose to effectively lead the process of change or let change sneak up by surprise.

For a Successful Career be Aggressive from Day One and Don’t Let Age Hold You Back

What are the keys to success for a finance professional?

Can one expect to achieve success at a certain age or by reaching a set number of years of experience? Given that some professionals achieve more by age 30 than others achieve by age 50, the clear answer is no. There must be something more to the equation than simply putting in long, hard hours of work, year after year. Without traction and forward momentum, professionals can “spin their wheels” rapidly while staying in the same place.

Ben Mulling is a good example of a finance professional who took on significant responsibility relatively early in his career. As a Certified Management Accountant (CMA), Certified Public Accountant (CPA), and Certified Information Technology Professional (CITP), he became CFO of TENTE Casters Inc. at age 28.

Forbes ran an interview with Ben in which he revealed some of the keys to his success. Here is a summary:

  • “Soft skills” such as communication, as well as leadership (i.e., taking initiative), are rare yet critical distinguishing factors for young finance professionals.
  • Problem-solving ability, i.e., knowing how to solve a problem without a how-to guide nearby, is a technical skill set that finance professionals need to develop.
  • Continuing education is key for professional development, even for those with many years of experience. Finance professionals need to constantly push themselves and learn new things.
  • Professional certification, such as the CMA credential, is helpful and important in developing skills and advancing one’s professional career.
  • Get involved with the profession by joining professional organizations. This helps build your network and develop leadership and team building skills: “The constant refinement of skills – communication, leadership and teamwork – is key to career development.”
  • Think through your personal branding, and protect your brand. For example, be careful about what you do online that prospective employers can see.
  • Explore different opportunities, such as tax, cost accounting, IT-related work, and so forth, so that you can specialize in an area that interests you.
  • Get involved in seminar and other learning activities to build your skills, meet people, and development your ability to communicate.

And here’s a final gem to tuck away: “In the end, strong communication and leadership skills will set apart a senior accountant from a CFO and a good candidate from a great candidate.”

What is Your Employee Retention Strategy?

Any accountant will tell you that employee costs are some of the most significant routine expenditures that companies make. Payroll has a big impact on cash flow and the bottom line, but so do employer payroll taxes, state unemployment insurance, workers compensation insurance, retirement and health benefits, vacation, and so forth.

Although it costs a lot to hire and retain employees, don’t underestimate the costs when they leave. Either existing employees have to pick up the slack, which can cause stress and resentment when not accompanied by a pay increase (as is often the case), or new employees have to be hired and trained. This takes time, interrupts progress, and in the process of training, a new employee can make mistakes that cost the company money.

Talent is a key constraint for a growing business. Companies cannot grow without the right people on the team. A senior management team that is serious about growth and strategy makes sure to effectively manage the risk of employee turnover. When management has a well-defined vision for company growth and can articulate the potential long-term upside that employees have in the business — coupled with nearer-term incentives — the organization can be positioned well to attract and retain good talent.

Last year the Journal of Accountancy provided a summary of a WorldatWork survey. Among other findings, 65% of respondents said senior managers were concerned about retention. Even as opinions of the economy continue to be mixed, it seems that employees have felt more confident exploring options for “greener pastures” in the marketplace.

The survey found that employees leave for more money, better promotional opportunities, more equitable pay in line with market rates and in recognition of personal contributions, less stressful workloads, more work-life balance, better leadership, and more training and development opportunities.

The strategies employers use are not surprising when one considers the basic desires of workers, namely money and freedom: “Companies that have retention programs tend to keep key talent by offering above-average pay and benefits such as flexible scheduling, the survey showed.” Also, the survey showed that managers are careful to communicate future opportunities with key employees.

In short, senior management can either define and implement an effective retention strategy, or it can let others in the marketplace demonstrate a superior ability to hire away good talent. Some very effective methods of retention can be low-cost, such as giving employees a sense of empowerment and ownership. Rather than just paying more money, partner with employees in tangible ways to help them advance with the business and make progress with their career goals.

In addition, while employees will always want more money, there might be ways to implement flexible scheduling to help them feel like they have more freedom and ownership of their work and schedule. Rather than micro-managing their work and schedule with an iron fist, treat them like grownups and expect them to act as such; the results can be remarkable.

Four Key Standards for Ethical Finance Professionals

What do you think of when you hear the name Enron? How about Madoff? Other names and examples could be multiplied of infamously unethical businesses and individuals.

Finance and accounting professionals all aspire to avoid white collar prison, of course. At the same time, we hear stories and read numerous case studies and articles about those who play fast and loose with laws and regulations, thereby landing themselves in jail. Clearly, it is not enough to simply hope to avoid prison; an ethical professional must resolve beforehand to follow the highest standards of integrity, especially when times of testing come in the “real world.”

One key aspect of being in a profession is conducting oneself according to standards of professional practice. Doctors, lawyers, professional engineers, architects, and various other professionals are expected to master a body of knowledge, obtain experience and certifications, and pledge to perform their work with the highest level of integrity and competence.

The Institute of Management Accountants (IMA) is a highly regarded organization for accountants and finance professionals. Although the CPA designation is the most sought after credential within the accounting profession, the IMA’s Certified Management Accountant (CMA) designation is also well respected.

The IMA has the following four standards to which the organization holds CMAs accountable, and these are highly relevant and worthwhile for all accountants and finance professionals to consider:

  • Competence – The IMA’s standard emphasizes continual professional development, legal and regulatory compliance, effective decision support recommendations, and clarity in communicating limitations in performing work.
  • Confidentiality – The standard requires confidentiality except when disclosure is authorized or required, communication and monitoring of confidentiality standards, and refraining from using confidential information for unethical or illegal purposes.
  • Integrity – CMAs and other accounting/finance professionals should proactively avoid actual or apparent conflicts of interest, should avoid activities that would compromise ethical conduct, and should do nothing to discredit the profession.
  • Credibility – The IMA requires members to communicate fairly and objectively, disclose relevant information (i.e., information that could influence intended users’ understanding and decision-making), and disclose areas of deficiency or noncompliance with laws and policies.

Professional ethics has been and will continue to be a growing area of importance for finance and accounting professionals. We will explore this topic in more depth in future installments.

Think Twice Before Mixing Personal Relationships With Business

Have you ever tried to mix personal family or friendship relationships with business? How did it work for you? Some people function very well in a context of mixing work with friendship or family life. Others struggle with many inherent pitfalls. Whether you choose to rush in or avoid these arrangements, it is wise to be prepared. More than likely, even if it’s not of your own making, you will someday be in a position to deal with a scenario that involves the mixing of personal with business relationships.

In my experience as a finance professional I have seen business situations in which the participants’ actions were heavily impacted by relationships with family or friends who were involved. Even the savviest businessperson can struggle to make decisions at “arm’s length” when the personal relationship is clearly not arm’s length.

Personal finance guru Dave Ramsey advises, “I do a lot of business with friends. But I make sure that the specific requirements of our relationship are laid out very clearly, in writing.” In addition, “Just be straightforward, and make sure the rules are understood by everyone involved. Then, when you have to enforce the rules, do it gently but firmly.”

Of course, the tendency when working with friends or family members is to avoid solidifying details or getting anything in writing, let alone seeking legal counsel. After all, this can wrongly be perceived as demonstrating a lack of trust.

In reality, the best way to preserve relationships is to manage expectations. Talk through the relevant deal points, and solidify your agreements in writing. No exceptions really means no exceptions: Get your agreements in writing, even (or perhaps, especially) when dealing with family or friends.

Blogger Ron Edmondson provided some cautions on working with friends, including risks for both the organization and the relationship between friends: “The bottom line is that doing the best thing for the organization often involves making hard decisions. Leaders should not be held back because of the level of difficulty.”

Doing business with disinterested third parties is more straightforward in some respects because both parties are clear that the relationship is business, not personal. Attorney and CPA Mark Kohler recommends a simple test to determine whether to enter a business relationship: “Bottom line: if you feel you can’t ask for thorough documentation, or could never sue or send a nasty letter to the person you are going to be in business with, this is probably a project you should walk away from to hang on to the relationship.”

Rob Weinberg gives insight on his approach: “So if I’m doing business with a friend I find it’s critical to insist at the outset that the friendship is the priority. If there’s ever a question of the business tainting the friendship, we both agree to walk away from the business relationship. Furthermore, any indication of uncertainty at the outset eliminates the possibility of our working together.”

Harrison Barnes provides perspective on why organizations do not allow managers to hire their friends or relatives: “Reducing corruption and increasing efficiency are the primary reasons many organizations have anti-nepotism policies. Corruption has always been a concern in this realm. If individuals who are friends or relatives work together, organizations fear that these individuals may collaborate to advance their own interests rather than the interests of the organization.”

In future installments we will look at how finance professionals can position themselves to help navigate their businesses through tricky scenarios, and one of these would be a personal-turned-business relationship that goes awry.

See the Big Picture to Position Yourself as CFO Material

The Journal of Accountancy ran a rather thorough article detailing skill sets, thought processes, and behavior patterns that are helpful toward achieving the CFO role. Although perhaps dated in some respects, the article has a number of worthwhile insights, and here is a summary:

  • Priority #1 for an aspiring CFO is understanding strategy. See the “big picture” of how the organization creates value in the marketplace.
  • The CFO is the CEO’s right hand. If you aspire to this role, make sure the CEO knows it. Demonstrate that you can think like a member of the board of directors and that you take seriously what the board thinks, just as the CEO does.
  • Go beyond numbers and accounting. In addition to technical acumen, develop “soft” and “people” skills.
  • “Look for what the market wants rather than what you want.”
  • “Focus on the job content and reporting relationship.” Don’t worry too much about your title as you develop your career, strengthen your skill sets, and work on achieving your goals.
  • Have a positive attitude, ask questions, and demonstrate willingness to get involved with other teams in the organization.
  • The CFO must understand operations and technology. This is a persistent theme throughout much of the literature on the topic of CFO skill sets.
  • Decision-making and CPA or MBA skill sets are advantageous for differentiating your candidacy for the CFO role, possibly even more so than specific industry experience. That said, breaking into a new industry requires lots of time and hard work.
  • Getting some corporate treasury or controller experience is important, as opposed to exclusively focusing on public accounting. However, working in public accounting for awhile can strengthen accounting and regulatory compliance skill sets.
  • “Organizations typically want to hire a CFO who’s been a CFO.” Therefore, an aspiring CFO must develop a strategy for effective positioning as CFO material.
  • Do research on an organization before interviewing, determine the company’s needs, and based on what you learn, put together a proposal demonstrating your ability to be on senior management’s problem-solver team.
  • Be a self-starter, and study your organization, industry, competition, and benchmarks.
  • Be a team and consensus builder who can operate cross-functionally.
  • Seek out opportunities to broaden your horizons and skill sets by taking initiative and participating in various types of roles and projects in your organization.
  • Maintain your reputation and integrity. You must be loyal and trustworthy.
  • “Self-confidence is persuasive to your superiors.”

This is a long list, and it’s only a summary of some of the many points within the article. These ideas can help an aspiring CFO understand how to become positioned for the role through undertaking career development initiatives.

Create a Company Dashboard

How can a finance professional provide timely and relevant information for business decision makers? In a previous post we looked at some steps for creating a company wiki for organization-wide knowledge sharing. Another routine and systematic tool for business information sharing is a dashboard. The CPA Journal recently ran an article about Developing Dashboards for Performance Management, and here are some highlights from the article:

  • Dashboards focus on goals. Managers have the responsibility to achieve business objectives, and they can make the best decisions when they have concise, periodic updates about defined organizational metrics.
  • Dashboards provide a quick visual glimpse into key performance metrics. The authors suggest having four to seven metrics on the dashboard to avoid information overload.
  • Dashboards can highlight financial as well as non-financial elements of business performance. The balanced scorecard approach, for example, assesses a company on the dimensions of financial, customer, internal processes, and learning and growth.
  • Dashboards should be user-oriented. Will the dashboard be used for reporting strategic, analytical, or operational information? This depends on the needs of the users. Also, the design and formatting should be tailored based on the type of user.
  • In choosing a dashboard technology platform, consider that ERP systems such as SAP and Oracle have built-in reporting and analysis modules. Alternatively, data can be drawn from databases into Excel to develop dashboards that can automatically refresh periodically. Excel dashboards can be developed from scratch, templates can be purchased, or skilled consultants can develop dashboards. 
  • The dashboard development process includes defining the objective and the metrics, seeking user input, building and testing the initial dashboard, publishing the dashboard, and monitoring its use.
  • Dashboard design elements can highlight important information, communicate information concisely, and engage users. The concept of “gestalt” can help balance various design elements to tie together the “big picture” with the details of the dashboard.

Dashboard development is a good skill for finance professionals to add to the professional toolkit. In addition to developing dashboards to share and analyze key performance indicators, a trusted go-to finance professional can provide decision support to help senior management use broad sources of information, including dashboard metrics, to steer the company in the right direction.

Lessons from a CFO: Operations, Technology, and Innovation

With the rise of technology and the rapid pace of change in the world, the role of the CFO is clearly being transformed. The traditional “sweet spots” for top finance executives are broadening beyond accounting and finance toward operations, technology, and innovation.

Lon Searle, CFO of YESCO which makes custom electric signs, provided some glimpses into his role in a recently published Forbes interview. Here is a summary of some of his points:

  • CFOs are becoming more focused on operations and supporting every department of the organization through financial analysis: “In manufacturing, the CFO has to get out on the shop floor and understand the operations and the product the company is making; he or she has to move the ball down the field in a way that provides value to the company.”
  • Understanding and working with information technology is an important part of the CFO’s role: “The CFO position is gaining a systems focus – it works with IT and financial analysis that can help every department.”
  • CFOs can serve as coaches for the finance staff as well as other functions in the organization: “I help train the financial staff, train the sales staff to lease to our customers, and even train our franchisees to help with financial decisions and funding decisions.”
  • Understanding international business is increasingly important for CFOs: “I also get involved in global shipping and interactions – getting letters of credit for our customers to ship products all over the world and deciding whether to hedge the currency risk in transactions. We’re a global company but not that large, so to be involved in that is surprising to me, given my career path. But it’s really a global economy now, and almost any CFO should be involved in those decisions and that research. It’s interesting and challenging, too.”
  • CFOs can help drive innovation in the organization: “CFOs can be a driving influence, spreading ideas throughout the company, helping employees cross-fertilize and see things from a different perspective. It’s a great position to be in. It’s unfortunate that some financial officers just see themselves as keepers of the books and not champions of innovation.”

Operations, technology, and innovation are broad categories for a financial professional to have on the radar, in addition to developing coaching skills and international acumen. The path toward the CFO role includes gaining professional knowledge and experience in these areas. These are helpful ideas to consider in mapping out a career development plan.