Category Archives: Decision Making and Analysis

How an Accountant can Add Value Beyond Number Crunching

Recently I was describing the job of an accountant to a friend. I explained that many people view accountants as “bean counters” or “number crunchers.” Tracking transactions and reporting on a company’s financial condition are certainly important aspects of an accountant’s job. However, accountants have many more opportunities to add value.

To illustrate, consider a situation involving a hypothetical Acme Co. transacting business with Supplier Co.:

  • Supplier Co. typically purchases any raw materials needed to fulfill orders and then converts them into finished goods. However, due to unique economic factors, Acme agrees to pay for raw materials to be delivered to Supplier. In essence, Acme’s payment (though not directly to Supplier but to a company that supplies Supplier) functions as a type of “deposit” or “prepayment.” Acme fronts some of the expense of the goods prior to taking ownership of them.
  • In turn, Supplier is to convert the raw materials into finished goods and deliver them to Acme.
  • As part of the arrangement, Supplier has agreed to reduce its selling price per unit (which originally included the cost of the raw materials) in order to compensate for Acme having paid for the materials up front.
  • Suppose that Supplier encounters problems producing the finished goods. Perhaps some of the raw materials were defective or wasted. For whatever reason, Supplier delivers fewer units than Acme’s original order. 
  • This presents several challenges for Acme. First, Acme must determine how much it recouped of the cost of raw materials and how much it expended but did not recoup due to the shortage. Second, Acme must clearly detail to Supplier how the shortfall of units delivered hindered Acme from recovering its costs for the raw materials. If Acme paid for enough raw materials to produce 1,000 widgets but only 800 were delivered, Acme missed out on recovering 200 widgets worth of costs.

Enter the accounting and finance group. By staying alert to the ramifications of the short shipment — i.e., the failure to recover the cost of the raw materials that were paid to produce 1,000 rather than 800 widgets — the accountants can prepare analysis to detail the effects of the shortfall. The accountants can also work to negotiate with Supplier to provide a credit on a future order or to send payment to help Acme recover the shortfall.

Assuming Supplier values Acme’s ongoing business and wants to avoid legal problems, a clear and detailed analysis by Acme’s finance and accounting group could help Acme recover the “lost” funds.

I was once involved in a circumstance very similar to this. It was very rewarding to see the fruit of my efforts when the business I worked for received a payment from its supplier due to the shortage of units shipped.

Note that I would advise, whenever possible, avoiding prepayments and deposits or paying for supplies up front. However, sometimes these commercial arrangements are difficult to avoid depending on the nature of the industry and a host of other factors. When a company gets into a situation like Acme’s, the accountants need to exercise “situational awareness” and understand the ramifications for the business. The accountants can create value by driving the process of analyzing the shortfall and helping to negotiate for recouping funds from the supplier.

Recovering funds that rightfully belong to the business and avoiding wasteful spending can add value in much the same way as making sales and bringing in revenue for the business. This goes beyond traditional “bookkeeping” or financial analysis and reporting. The key is to exercise good stewardship and fulfill fiduciary obligations by treating the business’ money as if it were your own.

13 Ways to be Mentally Strong

What are your mental strengths and weaknesses? Below is a good list to thoughtfully ponder as you critically assess yourself.

Avoid the following habits of thought and behavior:

1) Wasting time feeling sorry for yourself.
2) Giving away your power.
3) Shying away from change.
4) Wasting energy on things you can’t control.
5) Worrying about pleasing others.
6) Fearing taking calculated risks.
7) Dwelling on the past.
8) Making the same mistakes over and over again.
9) Resenting other people’s success.
10) Giving up after failure.
11) Fearing alone time.
12) Feeling the world owes you anything.
13) Expecting immediate results.

Courtesy of Amy Morin.

Four Pitfalls to Avoid in Decision Making

I first encountered Chip and Dan Heath’s writings when I listened to the audio book of Made to Stick several years ago. I was fascinated by their insights regarding influence and persuasiveness summarized by the SUCCES acronym: Simplicity, Unexpectedness, Concreteness, Credibility, Emotions, and Stories.

The Heath brothers also authored Decisive: How to Make Better Choices in Life and Work in which they lay out four principles with the WRAP acronym for avoiding pitfalls in decision making:

  1. Widen your options. This helps avoid the pitfall of “narrow framing.” It is all too easy to engage in the fallacy of “either/or” rather than recognizing a variety of potential approaches. Usually there are more than one or two choices. Rather than framing a decision as yes or no, either/or, consider small experiments and in-between steps to open a range of options. This reminds us of the insight from Getting to Yes regarding creatively inventing options that can satisfy all parties in a negotiation. Also, creativity and options can give you walkaway power to help you avoid bad situations and ripoffs.
  2. Reality test your assumptions. This helps to avoid the pitfall of “confirmation bias.” Rather than only seeking information that serves your preconceived notions, step back for a dose of reality. Make sure that you consider various scenarios, pros and cons, and sources of evidence. Even (and especially) if the evidence points away from your initial assumptions and inclinations, carefully evaluate and revisit your decision process.
  3. Attain some distance. Don’t let irrational feelings and short-term thinking lead you toward a wrong decision. You have to know yourself and understand your tendencies and weaknesses. Perhaps you are impulsive. On the opposite end of the spectrum, perhaps you suffer from fear or analysis paralysis. The Heath brothers recommend stepping back and asking yourself, “What would I tell my best friend to do in this situation?” I like to seek out counsel from others who are more experienced, or if I don’t have that luxury for some reason, I try to analyze what advice a “wise” person might give me.
  4. Prepare to be wrong. This helps to avoid the mental and emotional pitfall of overconfidence. Sure, we all want to be right. We want to “believe in ourselves.” However, if we’re honest, we have to admit that our decisions don’t always turn out like we were expecting. The authors suggest developing a “tripwire” that would trigger the decision-maker to reassess the decision and make appropriate adjustments. Actively evaluate decisions, make changes, and learn from mistakes.

Decision making can stretch us to our mental and emotional limits at times, but understanding the pitfalls and applying the Heath’s sound advice can make the process more smooth and enjoyable.

Five Ways to Develop Business “Street Smarts”

Are “book smarts” or “street smarts” more important? Although there is a place for both, we can tend to err on one side or the other. Young professionals with high GPAs tend to be noted for their “book smarts.” Several years into their careers they discover the necessity of developing “street smarts” that some of their peers might have come by more naturally.

Early in my career I tended to trust people and share a lot about myself. Perhaps, I reasoned, if everyone laid all their cards on the table, it would be easy to figure out how to create win-wins.

Do you notice any problems with this approach?

For example, in one of my early jobs I played a team-based game of business strategy that involved negotiation, sharing information, and trading. Much to my unpleasant surprise, I learned that not everyone shared my approach of making helpful information readily available. (Imagine that!) I learned that, although win-wins are often needed in order for people to advance, ultimately people are more interested in their own success than in mine.

Gratefully, getting a dose of reality can shake deluded idealism from a person fairly quickly.

Over time I learned that some of my assumptions, behaviors, and habits were flawed or at least needed tempered with a dose of realism. There is a place for being savvy or “street smart” — for example, “knowing how to close a sale, when to walk away from a deal, when to remain silent, and how to select winners as employees or colleagues.”

Whether street smarts are skills or attitudes, learned or inborn traits, a financial professional who aspires to a position of organizational leadership should seek and develop these attributes.

Here are five categories of street smarts drawn from Dr. Tony Alessandra:

  • Heightened awareness – Understand your surroundings and don’t allow yourself to be blindsided. Military and law enforcement personnel utilize a “color code of mental awareness” that ranges from “condition white” (total oblivion) to “condition red” (all-out fight). In the context of business, finance professionals do well to routinely maintain “condition yellow” (comfortably alert to one’s surroundings). To put it simply, don’t be paranoid but do watch your back and maintain situational awareness.
  • Confidence – I wrote previously about the importance of confidence, the role of preparedness in boosting confidence, and seven ways to develop confidence.
  • Healthy skepticism – Take measures such as getting your agreements in writing so that people don’t take advantage of you. I wrote previously about professional skepticism, which is an officially recognized and required mindset within the audit profession.
  • Resourcefulness – Be quick, persistent, prepared, flexible, adaptable, and connected.
  • Risk-taking – Choose when to accept, avoid, reduce, or share risks. Don’t let fear hold you back, but learn from you mistakes.

Learn the theories. Develop “book smarts.” But never underestimate the importance of lessons from the “school of hard knocks.” Develop discernment and become increasingly savvy by carefully analyzing your experiences for lessons learned.

Seven Practical Ways to Gain Confidence

I wrote previously that a finance professional should always be confident. This is certainly enhanced when you are prepared. I had a few job interviews early in my career for which I was not adequately prepared, and this showed in my level of confidence. I did not get a second interview in those scenarios.

My success has always been enhanced when I have been confident. Here are seven insights drawn from Kent Sayre about increasing your confidence:

  • “What’s the worst thing that can happen?” Step back from your stressful situation and have a dose of reality. Compared to what you might gain if you successfully navigate through a stressful situation, the worst case scenario might not be so bad after all. Do your very best, and if you can’t control a particular variable, there is no sense stressing about it.
  • Vividly (i.e., using the five senses) imagine yourself achieving success in doing something for the first time. Consider a past situation in which you were successful, and relate your new experience to your past success.
  • Copy a confident person. Talk with confident people and be around them. Try to carry yourself in the same way.
  • Consider what you would be thinking, saying, and doing “as-if” you were confident. Act confident, and develop these patterns of thinking, speaking, and acting into habits.
  • Maintain a proper perspective. Ponder how important the situation you are facing will be to you when you are on your deathbed. You may not worry so much when you consider the big picture and understand that your current situation isn’t as important, long-term, as it presently seems to be.
  • You will fail to achieve anything 100% of the times that you don’t try. Believe that you can get help from others, and then ask. This might or might not work, but you won’t know unless you try.
  • Your internal voice might nag you with negative thoughts and feelings. Think of this voice as a clown’s voice or Mickey Mouse’s voice. Laugh at it, move on, and conquer your fears.

I especially appreciated the tip about considering best and worst case scenarios. Sometimes we can stress over vague fears and lose our confidence. If we can quantify what we are concerned about, we can find ways to accept, avoid, reduce, or share risks. If we are unable to quantify our fears, we have no need to be afraid. Instead, we can focus on the positive benefits from success and leave behind vague, general dread.

The Importance of Emotional Intelligence

How can you relate to people whose backgrounds and motivations are different from your own? How can you creatively tap into and channel others’ motivations for recognition and accomplishments beyond paying them more money? As a finance professional, should you primarily focus on numbers or people? How can you develop a reputation for being approachable and collaborative?

Developing emotional intelligence can help us become mentally active to recognize, analyze, understand, and manage intense feelings — whether our own (intrapersonal) feelings or the feelings of those around us (interpersonal).

Social and leadership skills can be developed over time, and they tend to become more important as a finance professional moves to higher levels within an organization. Technical skills and cognitive ability are vital, but don’t neglect emotional intelligence. Customers, employees, coworkers, and investors are among the groups with whom aspiring CFOs must learn to build relationships, channel motivation, manage conflicts, and develop win-win solutions.

I recently completed a Continuing Professional Education (CPE) self-study course on the difference between IQ and EQ (Emotional Quotient). The course helped me understand basic concepts and models of emotional intelligence.

Here is an outline of fifteen components of EQ organized under five major categories:

Intrapersonal Skills:

1) Self regard
2) Emotional self awareness
3) Assertiveness
4) Independence
5) Self actualization

Interpersonal Skills:

6) Empathy
7) Social responsibility
8) Interpersonal relationships

Stress Management:

9) Stress tolerance
10) Impulse control


11) Reality testing
12) Flexibility
13) Problem solving

General Mood:

14) Optimism
15) Happiness

Daniel Goleman, author of Working with Emotional Intelligence, divides EQ between personal and social competencies:


  • Self awareness – emotional awareness, accurate self-assessment, and self-confidence
  • Self regulation – self control, trustworthiness, conscientiousness, adaptability, and innovation
  • Self motivation – achievement drive, commitment, initiative, and optimism


  • Social awareness – empathy, service orientation, developing others, leveraging diversity, and political awareness
  • Social skills – influence, communication, leadership, change, conflict management, building bonds, collaboration and cooperation, and team capabilities

What are signs of a high EQ for a financial professional to recognize and develop? The course suggests several:

  • Express feelings with three-word sentences beginning with “I feel …”
  • Do not disguise thoughts as feeling by using “I feel …”
  • Do not be afraid to express feelings
  • Do not be dominated by negative emotions
  • Effectively read non-verbal communications
  • Let feelings lead to healthy choices and happiness
  • Balance feelings with reason, logic, and reality
  • Act out of desire, not duty, guilt, force, or obligation
  • Be independent, self-reliant, and morally autonomous

Among negative behaviors to avoid, the course lists blaming others rather than taking responsibility for one’s feelings, analyzing others when they express their feelings, trying to make others feel guilty, lying about feelings (or exaggerating/minimizing them), letting things build up, reacting strongly to minor issues, being unforgiving, acting on feelings rather than talking about them, and playing games and being evasive rather than direct.

Assess yourself based on the following questions that apply Goleman’s model from Working with Emotional Intelligence:

  • Do you understand both your strengths and your weaknesses?
  • Can you be depended on to take care of every detail?
  • Are you comfortable with change and open to novel ideas?
  • Are you motivated by the satisfaction of meeting your own standards of excellence?
  • Do you stay optimistic when things go wrong?
  • Can you see things from another person’s point of view and sense what matters most to him or her?
  • Do you let clients’ needs determine how you serve them?
  • Do you enjoy helping colleagues develop their skills?
  • Can you read office politics accurately?
  • Are you able to find “win-win” solutions in negotiations and conflicts?
  • Are you the kind of person other people want on a team?
  • Are you usually persuasive?

In summary, to develop EQ, the course suggests knowing your own emotions, motivating yourself, recognizing emotions in others, managing your emotions, and effectively handling relationships.

Four Ways to be a Principled Negotiator (Part 2 of 3)

We previously saw that principled negotiation differs from positional bargaining by separating people from issues and by focusing on interests rather than positions.

The third step in principled negotiation is to be creative and invent various options that could satisfy the interests of both sides. As a very simple example, recently I had two projects to complete — painting the walls of a room and thoroughly cleaning a floor that would later be painted. My wife asked which one I planned to complete first, and I told her the cleaning. She knew I would likely use a vacuum, which could potentially wake up the baby. When she calmly mentioned this, I knew we both had an interest in letting our baby take her nap, and I quickly invented the solution of painting while the baby slept — leaving the floor cleaning for later.

Negotiators lack creativity when they exercise premature judgment, try to find a single answer, assume that the pie is fixed (so the bigger one person’s piece is, the smaller the other’s piece), and “thinking that ‘solving their problem is their problem'” (p. 57). Instead, step back and use your imagination, try to broaden options, make the pie bigger rather than focusing on a “fixed-sum” game, and appeal to both sides’ interests.

To generate options, brainstorming is often quite effective and the authors describe potential rules and methods to use in the process, such as the no-criticism rule that encourages building upon participants’ openness and creativity.

A Key Gem to tuck away regarding creatively inventing options: “In almost every case, your satisfaction depends to a degree on making the other side sufficiently content with an agreement to want to live up to it” (p. 72).

The fourth and final step is to emphasize objective criteria in the negotiation. Basing the outcome of a negotiation on who has the stronger will is often costly in terms of time and relationship strain, and it cannot be expected to lead to a wise agreement. In contrast, objective criteria which is independent from the will of the parties involved can enhance the efficiency of the negotiation, lead to a wise agreement, and preserve the ongoing relationship between the counterparts.

Rather than yielding to pressure and threats, a principled negotiator bargains based on principle and reason. The objective standard should be legitimate and practical. One might think of the example of a dispute between young children over how to split a piece of pie. The time-tested solution is simple: One cuts, the other chooses.

In advocating objective criteria, one must avoid the subtle pitfall of using criteria solely to bolster one’s own position. Be truly flexible and open to reason and principle, even if the objective criteria differs from the standard you had initially proposed or works against the position you had originally sought to advocate. Negotiating on objective criteria provides a position of power because right makes might.

A Key Gem to tuck away regarding the difference between standards in positional and principled negotiation: “In positional bargaining, negotiators spend much of the time defending their positions and attacking the other side’s. People using objective criteria tend to use time more efficiently talking about possible standards and solutions” (p. 83).

We have seen that principled negotiation rests on four key ideas:

  • Separate people from problems
  • Focus on interests rather than positions
  • Invent options for mutual gain
  • Insist on using objective criteria

In the final installment of this review we will look at ways to deal with challenging negotiation situations.

Poetry and Art for the CFO: Twelve Elements

Are you left or right brained? Analytical or emotional? A number cruncher or a poet?

Although it might run counter to our initial assumptions, CFOs are expected to go “beyond the numbers” and manage key aspects of the business as a whole. We have seen the importance of understanding technology and operations, among other factors not directly related to number crunching.

Very critical is the CFO’s role in dealing effectively with people and relationships. A CFO needs to be approachable. To become CFO material, a finance professional needs to develop habits of ambiguity tolerance, composure, empathy, energy, humility, and confidence.

On that note, the international accounting and finance firm Deloitte has published a poetic and artistic description of the CFO’s twelve elements, which encapsulates the expansive requirements and responsibilities of the CFO’s job:

“As CFOs grow in stature and importance, they keep coming back to the same issues that form their agenda. The elements of the CFO Agenda represent a powerful framework for one of the toughest jobs on earth. Year after year, quarter after quarter, they endure.”

Here are the twelve elements and my summation of the messages:

  • Truth – Be real. Know the true story and tell it.
  • Growth – Plant and water. Make choices and commitments to move plans forward.
  • Relationships – Work together. Manage relationships up and down, inside and out.
  • Decisions – Root your insights in numbers. Don’t manage solely based on your gut.
  • Capital – Manage business investments. Determine timing, amounts, and allocations.
  • Disruption – Be discerning as technologies, industries, and markets constantly change.
  • Crisis – Manage risks. Be ready to respond to various sorts of threats.
  • Infrastructure – Be an enabler. Invest in tech, talent, systems, and solutions.
  • Transactions – Research deals with the right criteria, calmly, thoroughly, and rationally.
  • Transitions – Change is constant. Build your skills and reputation in the midst of it.
  • The Street – Have give and take on forecasts. Be vigilant to represent the company well.
  • Me – Provide solutions. Navigate through complexity to make things happen.

Don’t take my word for it. Take a look at the presentation for yourself. Reflect on the messages. Do you agree or disagree with each of the elements and how they’re presented? How can you apply these insights in your work as you develop your career?

Excuse Me, but Your Preparedness is Showing

What better way is there to build your confidence and increase your odds of success than by being prepared?

I took piano lessons when I was younger, and my teacher could usually tell how much I had practiced during the previous week simply by observing my progress (or lack thereof). My preparedness showed clearly through my performance and confidence.

Whether your task is a job interview, a negotiation, a job switch, or anything else that’s new or involves uncertainty; you can prepare by thinking through your scenario in advance.

For example, if you are preparing to negotiate, you need to be armed with the facts of the situation and demonstrate a thorough, confident, and conversant command of every relevant factor. You need to be able to immediately spot and correct errors of fact or perception before the conversation starts to be built upon faulty foundations.

Consider laying out various scenarios within the realm of reasonableness — from best case for you to best case for the other side. If you can demonstrate a command of the facts, you can be more confident and prepared for the tricks that the other side might throw at you.

Take some time beforehand and discipline yourself to think through what you might face:

  • What might the other side say?
  • What will their talking points be?
  • How will they try to divert the discussion from a focus on your legitimate interests?
  • What is their best alternative to a negotiated agreement (BATNA)?
  • What illusions might they have that you can dispel such that they view the situation more realistically?
  • How will they respond to your talking points?
  • What is your end game, and what happens if you cannot get them to play ball?

Work through a systematic process of thoroughly considering these and other related questions. You will no doubt encounter surprises in any new or uncertain situation, and you might have to scrap all your plans in the midst of the process. The point of preparation is to start off with the confidence you need to carry you through the twists and turns, ups and downs.

I have found that confidence grounded in reality helps me stay focused. It is so easy to get thrown off track when unpreparedness leads to confusion and lack of confidence. I have never been one to easily “fake it until I make it” since that often borders on unethical conduct (i.e., lying or acting confident even when incompetent) and can easily lead to loss of credibility when the “faking” is exposed.

I can convert the challenge of not being able to “fake it” very well into the advantage of disciplining myself to be better prepared. In this way I can demonstrate a more a thorough, confident, and conversant command of every relevant factor as compared to my counterparts. And I can spot and correct errors of fact and perception by having mastered the big picture and details through preparation.

This doesn’t all happen by default; it takes time, thought, and work.

As with the teacher at a piano lesson, your business colleagues and counterparts can tell how much you “practiced” or prepared by observing your confidence and performance. The better prepared you are, the better you will be perceived as ethical, competent, confident, and reliable.

Four Ways to be a Principled Negotiator (Part 1 of 3)

Negotiation tactics are often thought of like secret weapons. You want to keep your counterpart guessing, never divulge your bottom line, possibly find ways to intimidate your counterpart, and use the element of surprise. Under this paradigm, the less your counterpart knows about the books you’ve read and the conditioning you’ve undergone to enter the negotiation, the better.

There is an alternative approach: “Principled negotiation is an all-purpose strategy. Unlike almost all other strategies, if the other side learns this one, it does not become more difficult to use; it becomes easier. If they read this book, all the better” (p. xix).

Does this sound intriguing?

The quote comes from Roger Fisher, William Ury, and Bruce Patton, authors of Getting to Yes: Negotiating Agreement Without Giving In (Penguin Books, 1991, 2nd ed.). They describe their approach as principled negotiation, distinguishing it from positional bargaining in which the negotiator uses either a hard or soft stance.

To understand the approach and distinctions better, consider two elements of a negotiation: the substantive issue and the process. Each assertion you bring to the table and your demeanor throughout the process reinforces rules (often unspoken) about the process you are undertaking. You can take a hard or soft stance in advocating for your position, or you can step back and propose — explicitly or even implicitly — a principled approach.

Rather than deciding beforehand what position to take in order to best serve your interests — and then advocating for this position more or less robustly or timidly — you can negotiate on the merits of the situation. The authors boil down this principled approach to four points (pp. 10-11):

  1. People: “Separate the people from the problem.”
  2. Interests: “Focus on interests, not positions.”
  3. Options: “Generate a variety of possibilities before deciding what to do.”
  4. Criteria: “Insist that the result be based on some objective standard.”

The authors describe this approach as hard on the merits and issues but soft on the people and relationships.

The first step is to be sensitive and recognize the humanity of your counterpart. We don’t negotiate with machines or animals but with other humans who have real emotions, fears, values, beliefs, and elements of unpredictable behavior. We want to come through the negotiation having reached a wise agreement, as efficiently as possible, and with an ongoing relationship still intact. Rather than throwing around your weight by making personal attacks or appeasing your counterpart with substantive concessions, fundamentally deal with each issue on its merits. There will be no need for shouting, name-calling, or any other personal attacks; the hardness will be reserved for keeping the negotiation on a principled course.

A Key Gem to tuck away regarding the people aspect of negotiations: “The ability to see the situation as the other side sees it, as difficult as it may be, is one of the most important skills a negotiator can possess” (p. 23).

The second step is to be clear on the difference between interests and positions. The analogy that came to mind is a familiar marketing distinction between benefits and features. An average salesperson can talk all day about a product’s features. The remarkable salesperson can discern what benefits I’m looking for and show me exactly how the product will give me everything I need (and more). Rather than saying, “This has a nice touch screen,” the salesperson could say, “You can utilize the touchscreen to save time and spare yourself the frustration of pressing buttons and scrolling through menus.”

A negotiator who focuses on positions is like the salesperson who focuses on features. Instead, a negotiator does well to focus on underlying interests — i.e., the objectives to be achieved, which could be accomplished through a variety of means. A principled negotiator recognizes that features (positions) can vary as long as they provide ultimate benefits (i.e., preserve legitimate interests).

A Key Gem to tuck away regarding advocating for your interests in a negotiation: “It is your job to have the other side understand exactly how important and legitimate your interests are” (p. 50).

To Be Continued . . .