Posts Tagged ‘Finance Director’

2009 what a year that was!

Tuesday, January 19th, 2010

2009 was the most interesting and challenging year I have experienced.  Of course the events started towards the end of 2008 with the collapse of Northern rock in the UK and Lehman Brothers in the US. 

Paralysis in business decision making set in immediately.   We were trapped in a lift, the cable had snapped, we had no idea how many floors we had to drop.   The now infamous Sequoia presentation “RIP: Good Times” circulated from business leader to business leader urging cost cutting as quickly as possible.  Several clients asked us whether they should withdraw funds from traditional UK banks!

With the arrival of the New Year business leaders finally blinked, shook their heads and awoke from the bad dream, only to find it was real.  They acted quickly and with depth.   Almost without exception our clients made cuts to the workforce. 

Then something quite remarkable happened.  Businesses and their workforces united in their battle.  The workforce worked with managers, taking pay cuts (pay freezes if they were lucky), pension holidays, benefits cuts, reduced working days.  There was no large scale industrial action, no tales of unrest or poor morale.  Employees up and down the country were sophisticated enough to know that this was a genuine crisis requiring radical action.  I have not experienced this degree of co-operation and understanding before.  I believe history will show this to be a key foundation stone of the recovery.  It is vital that business owners and managers recognise this contribution when the good times return. 

The early summer months were odd.  A number of companies collapsed, their businesses had not deteriorated any further, it’s just that their balance sheets finally gave out.  Bank lending and venture funding had all but dried up.  Many companies had balance-sheets in December that could only fuel six months of loss making.  Were we heading for a second dip?  My fear was compounded by the slowest August in terms of activity.  We were almost continental.

We unexpectedly found our feet in September.  Perhaps it was simply the backlog of deferred August decisions, perhaps it was confidence garnered from corporate acquisition activity (Kraft’s first bid for Cadbury’s) or it was the boost from the FTSE breaking the 5000 barrier. It was a very patchy recovery though, many of our clients experienced no uplift in orders.  Our US clients also experienced a lift, but it was very regional and sector specific, but recovery seemed to be sparking into life on the West coast.

The momentum from September didn’t really build, but the economy didn’t fall back either.  The first nine months of the year had separated the strong from the weak – you had taken the action you needed to or it was already too late.  Now there is the grind to eventual recovery, but when?

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Role of the Finance Director Part III: The Glue

Tuesday, October 6th, 2009

Previous Installment Part II: Painting the Picture

So far we have ascertained that our FD needs to be able to put the people, systems and processes in place to generate the appropriate level of financial information.  We have also discussed the communication and style qualities required.  However these are all very passive, non operational roles. 

An FD should be able to take the information about the business and use it to affect change within the organisation, questioning the conventional wisdom.  The FD needs to be the ‘critical friend’ of all areas of the business.  Asking every manager to look at the cost benefit equation of every area of expenditure or investment.  The trick for an excellent FD is how to do this without interrupting business and without affecting the ability of the company to execute.  Again communication is a key factor, the FD needs to be able to frame why he/she is questioning the expenditure or investment in the bigger picture of the budget or plan. 

The role of the FD is to bring the various elements of the business back to the central plan, but also have the ability to see when the assumptions underlying the plan have changed and be able to model the new scenarios and to change the financial priorities.

In the most successful businesses that I have worked with there has been a healthy tension between the key business functions.  Sales and marketing need to be pushing the boundaries, service or product delivery need to be pushing the boundaries.  Finance needs to be the flexible glue that holds these functions together and prevents them from fracturing.

This is often the most controversial role of the FD.  It is easy to get this part of the role wrong, to stray outside of the FD’s remit for situations to become political.  I believe that this is the last piece of the puzzle.  Dependent upon the situation of the company, the FD must earn the right to challenge the other areas of the business by delivering excellence in the first two parts of the FD role.

Mike O’Connell, CEO, Isosceles Finance

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Would now be a good time to collaborate?

Tuesday, September 8th, 2009

It takes a brave management team to actively seek out potentially competitor companies and strike up a relationship.  However the results can be surprisingly positive, we have noticed an increasing trend in collaboration amongst our clients over the last 6 months.

Very few companies are identical, few have the same technical strengths, the same scale and geography of operation.  Likewise rarely does one supplier have the perfect solution to its customer’s requirements.

Back in the  “good old days”  when credit was easy, collaboration was achieved in part through acquisition.  Now more imaginative means of achieving economies of scale and broadening product offering must be sought.

Collaboration at its simplest level may simply involve referring business in a different geography to another supplier or partnering with a services provider who can fill a skills gap in your own  offering.

In its more complex form collaboration may result in a full blown merger, where economies of scale can be achieved. We haven’t seen too many of these yet, but we expect to see more over the next 12 months.

We have certainly been encouraging our client base to accelerate their collaborative activities and to identify complementary product and service providers.   If nothing else it has increased our client’s market awareness.

Mike O’Connell, CEO, Isosceles Finance

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Role of the Finance Director Part II: Painting the Picture

Wednesday, August 12th, 2009

Previous Installment – Part I: Solid Foundations

Now that we have a solid foundation, the appropriate level of reporting and a team capable of providing this on a regular basis, let’s look at ‘painting the financial picture’.  (I could go on about controls, but to be honest any good financial controller ought to be able to put these in place.)

A balance sheet is a static picture at a point in time, it says neither that a company is doing well nor badly.  It simply says at the moment we could potentially liquidate all our assets and liabilities at book value for X. 

Even a profit and loss account for a single period does not provide enough information, about the performance of a company. 

Each piece of analysis is a paint colour and the job of the Finance Director (FD/ CFO)  is to take the colours and paint a picture of the overall performance of the company.  It does seem surprising that I am equating what is a mathematical output into terms that are artistic, but this is what the best FDs do.  This is especially true of smaller organisations where the company may be operating using incomplete data as to the state of the market and competition.

The painting of the picture through the presentation of numbers and the commentary are the primary communication methods used by the FD.  The ability to communicate is essential. 

Once again the degree of communication required can vary from industry to industry.  In creative industries the nature of the communication is vital – the executives of a company are often dealing with intangibles, they are in the business of communicating messages and ideas and this is how they would like to be communicated with.

Entrepreneurs often have very short attention spans they require the bare bones quickly and efficiently.  They don’t want to wade through pages of analysis nor do they necessarily want to have the numbers pitched with spin.  The ability to be able to answer a straight blunt question with a straight blunt answer is often the most important.

In a manufacturing environment the executives are used to wading through quite large amounts of analysis and variance.  These are generally highly analytical people. 

An FD needs to understand what the information and communication needs of his management team are and adapt his/her message accordingly.

Mike O’Connell, CEO, Isosceles Finance  providers of part-time FD and interim FD  (Financial Director/CFO) services

Next Instalment – Part III: The Glue

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Competition!

Tuesday, July 21st, 2009

It was sports day once again last week.  A lovely family day out, many well dressed parents glancing anxiously at a Blackberry, watch  or mobile.  Plainly not everyone took holiday that day!

This year we had a little more competition than normal, but everyone was a winner really.  We have probably raised two generations since the idea of competitive sport died back in primary schools.  The move seemed in part driven by philosophy and in part because a competitive sport involved more teacher hours outside the standard day.

It struck me that our modern society is possibly the most competitive it has ever been.  The two most popular programs on TV in recent times have been ‘Britain’s Got Talent’ and the ‘Apprentice’.  My son loves ‘Dragons Den’ and we have recently embarked on a new series of ‘Big Brother’.  It won’t be long before ‘X Factor’ or ‘Strictly Come Dancing’ return to our screen.  It’s far from a UK phenomena.

It strikes me that we love competition in football, business, entertainment.  We love the battle, the stories the winners and the losers.  The youngest in my house is quite capable of forming her own opinion as to the merits or otherwise of an act or idea and then extolling these virtues and selling the case of her favourite.

Once upon a time I would have frowned at my kids watching this kind of entertainment.  Dumbing down I would have called it, but I have changed my mind.  These skills are exactly the skills required to survive in the corporate or business life.  Make a choice and back it, have an opinion, pick the winner.

Mike O’Connell, CEO, Isosceles Finance

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