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| Volume 8, Issue 10 |
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In This Issue:
 An anatomy of a CFO's agony
Talking to the Board: Risk & reward
Who needs a COO?
Sloppier spreadsheets: How bad can they get?
 10 actions to ride out a recession
What’s your software worth?
Increasing liability risks threaten growth and trouble Boards
Are you carbon beta rated?
Leading live and in person
 Reaching consensus: Delivering bad news…the good way
 Innovation 2008: Is the tide turning?
 6 signs you don't care about workers
Making remote check deposit real
Credit cards replace small business loans
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An anatomy of a CFO's agony
How a make-the-numbers mandate, threats from his bosses, and accounting skullduggery nearly destroyed him. Relentless, exhausting pressure to hit numbers.
Knowing you'll be fired, and likely ruined, if they're missed. Resorting to accounting shenanigans to make ends meet. Feeling trapped by blackball threats. The pain experienced from such circumstances generally stays out of sight, but it all came out in a recent CFO.com interview with a one-time finance chief at a company that had just
gone public. He spoke about his ordeal, though, only on condition of anonymity, for both himself and his former employer. To be sure, some of the discomfort was self-inflicted. The CFO — let's call him John Doe — ultimately pleaded guilty in federal court to accounting fraud. He also settled Securities and Exchange Commission
fraud and insider trading charges, albeit without admitting or denying guilt. In the interview Doe did not comment on those proceedings, other than to note that he "got in trouble." But from his point of view, his actions were the result of extreme pressure from his superiors at the company, one of whom was convicted of fraud in a trial,
while another pled guilty. (Although those events took place years ago, sentences still have not been handed down.) For Doe, the emotions surrounding the matter are still raw. While he said he somehow emerged into a new career as a private-company CFO, he said too that thinking about the episode still upsets him. Yet he pressed on
with the seemingly cathartic telling. Doe had been controller of a company that owned several subsidiaries. When a plan was hatched to take one of them public, he was offered the CFO seat. He figured it was a fantastic opportunity. Here is Doe's version of what happened, in his own words...
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Talking to the Board: Risk & reward
A CFO's interactions with a company's directors can be a career maker or breaker.
Among the multitudes of things a CFO can do to enhance — or detract from — his or her career, where does the quality of interaction with the board of directors rank? Very high, according to people who should know best: those who have served as both finance chiefs and board members. In fact, it may be that nothing is more important, except
making sure the numbers are right. Charles Noski has seen it all, from his tenures as CFO at Hughes Electronics, AT&T, and Northrop Grumman to his current memberships on four big corporations' boards, including audit committee chairs at both Microsoft and Morgan Stanley. "I can't imagine a CFO being successful and not being well regarded by
the board," Noski told CFO.com. "If at any point in time the board doesn't feel the CFO is forthcoming and above board, he or she probably will leave the company." Keith Hall, a former CFO of Lending Tree, who has served on seven boards (three currently),
puts board communications "among the top two or three things" that can help or hurt a CFO's career. "If the CFO goes out of his way to speak to...
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Who needs a COO?
When Starbucks announced on Tuesday that it was eliminating its chief operating officer position, it became the latest member of an ever-growing club. And as COOs slowly fade from the C-suite, CFOs are stepping in to fill the gap, assuming more responsibility for areas that redound to the bottom line.
CFOs are gaining a higher profile in their organization as a result, along with, apparently, more compensation. But the downside is more pressure — more hours in the day required to accomplish more tasks, and more blame when profits fail to meet expectations or just fail altogether."Over time, it's become more critical for
organizations to have financial input on business decision-making," says Tom Kolder, president of recruiting firm Crist|Kolder Associates, which specializes in C-suite searches. "They need to have a finance leader who is more than just a scorekeeper; who is a key partner to the CEO."But as CFOs take on more intensive business activities
like operations or strategy," adds Kolder, "they become more culpable if things go wrong. You're no longer in a support function; you're on the front lines, accountable for the good and bad." According to Crist|Kolder's latest Volatility Report on the
movement of CEOs, COOs, and CFOs at top U.S. public companies, issued late last year, the prevalence of COOs is headed...
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Sloppier spreadsheets: How bad can they get?
Readers weigh in again on Excel sins and solutions. Tips include totaling at the top, while traps like poor version control can even threaten to force restatements.
In June, CFO.com followed its popular article Spreadsheet "Worst Practices" with a collection of reader feedback we called Sloppy Spreadsheets: Readers Speak Up. That second column, with annotations by our original writers, drew almost as much interest. Today we offer another sequel based on reader response, in the form of tips that you
have developed for spreadsheet readers, and traps that continue to trip up even savvy users. As before, our spreadsheet sages from Babson College comment on these reader reactions, with thoughts that can enhance some of the tips, and can render some of the traps avoidable. The experts are accounting professor Janice Bell, who holds the
Weiner Family Term Chair at Babson, and Richard Block, an adjunct professor of management accounting, who also is a CFO Leadership partner at Tatum LLC...
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10 actions to ride out a recession
As dramatic changes in financial and energy markets work their way through the economy, senior leaders face difficult choices in confronting higher expenses and news of a global downturn.
In a study by Forum Corporation, a Boston based advisory firm, identified 10 actions that successful leaders can take in three areas during economic downturns to settle the organization, keep it headed in the right direction, and emerge on top. “Past recessions hold some lessons and some of the actions are unique to tough economic
conditions, while others are simply good management practices that take on added importance in a down economy,” says Ed Boswell, CEO of The Forum Corp. The most common remedy for surviving a recession is to cut cost without fostering negative consequences. In its point-of-view paper titled “Leading during a recession” Forum
says some of the primary concerns for companies are getting workers energized despite looming economic threats and discouraging defensive internal politics. Yet another major challenge is how one can lead now, so that the organization emerges from the downturn poised for success.” Past recessions have taught leaders to narrow the focus.
[Forum claims its research on past recessions confirms that businesses that move quickly to reduce costs and control spending weather a downturn more effectively. Forum maintains its research has discovered that leaders in highly profitable growth organizations often suggest focusing on the critical few priorities. In a research
report titled “One Size Doesn’t Fit All,” published in 2006, Forum asserts that trimming costs is important, but selecting what to cut is critical. “Some businesses cut voraciously, only to realize months later they have cut the very capability
required to sell and deliver their business,” according to the report.
The 10 recommended actions: Financials...]
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What’s your software worth?
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Do Intangibles Matter? [Find out how large, medium and small sized businesses are monetizing Intellectual Property today...]
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Executives today are faced with the difficult challenge of continually improving the business value of the unit or company they are managing.
The challenge is daunting given the competitive environment faced by firms. Cost pressures are relentless. Oil prices are at record highs. New competitors from emerging economies are continually driving costs downward in both manufacturing and services. Customers’ needs are changing rapidly across generations and across markets.
The notion of risk has been redefined and taken on increased importance since the financial crisis that started in late 2007. The ensuing credit crunch has not only served to bring back a much needed dose of sobriety in many businesses but has also highlighted the importance of creating value. Physical assets such as plants and
machinery have long been seen as cornerstones of value creation. As the global economy migrates from an agricultural and manufacturing base to a services-based knowledge economy, the value of intangible assets is rising. A firm such as IBM earns more than $2 billion annually from licensing its patents. Nearly 40 percent of the market
capitalization of a company like Coca-Cola is estimated to derive from its brand value. Thus, firms in recent years have started giving greater thought to managing the value of their brand and intellectual property. There is a need to pay more attention to another important type of intangible assets—the organization’s software assets...
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Increasing liability risks threaten growth and trouble Boards
A study conducted by Lloyds, a London based insurance market, reveals that board members are increasingly concerned about the increasing number of corporate litigation cases facing the boards and the escalating cost in mitigating such risks.
“Among the companies surveyed, almost seven in ten have faced lawsuits in the past three years and 38 percent have seen some increase in the number of cases brought against them during this period,” Richard Ward, CEO Lloyds told CE Online. The study done in
conjunction with the Economist Intelligence Unit - a global research and advisory firm on business intelligence based in London - entitled “Directors in the dock – is business facing a liability crisis?” brings forth the dangers of inefficient handling of corporate litigation cases, which could eventually jeopardize the company prospects
by wasting the scarce resources. The report, based on interviews with 180 board level executives reveals that one in five companies have faced lawsuits targeted at individual directors or officers, including non-executive directors with employees and customers being the most likely source. Alongside employees, the regulatory
authorities also are increasingly becoming the source of lawsuits, says the report. “About 15 percent of companies seeing lawsuits brought by regulatory authorities is indicative of a change in the laws of the U.S. and the U.K. Besides, there’s a prominent shift in the attitude of the enforcement authorities, which are now
increasingly willing to initiate criminal proceedings against companies and its directors,” laments Ward. “No matter what their size, location or industry, all businesses are facing increasing liability risks [in the following specific area's...]
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Are you carbon beta rated?
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Consumers and the aviation industry will take it on the chin while environmental groups and rent-seeking companies that form a classic Baptist and Bootleggers coalition stand to gain big time.
American business executives are increasingly resigned to the fact that carbon controls are coming. Some 17 bills for cap-and-trade schemes to limit greenhouse gas emissions from fossil fuel energy sources are floating through the halls of Congress. Both Republican and Democratic Party presidential candidates favor limits on
greenhouse gas emissions. Limiting carbon dioxide will have far-reaching effects on every business in America, ranging from energy production, transportation, food and beverages to retail. Right now, Congressional committees are meeting to pick which industries and companies will be winners and which losers in the great carbon
rationing brawl. Executives who know this are likely to be winners; those who are oblivious or think it doesn’t concern them are going to be losers...
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Leading live and in person
Brian Halla, chief executive of National Semiconductor Corp., speaks from the heart. At a management meeting during June this year [2008] he opened his talk with an attention-grabber, asking: "Do you want to know what keeps me up at night?" He spoke with passion, without a script or visuals.
Mr. Halla shared his concerns about these uncertain economic times and the need for the managers to seize near-term opportunities and focus on growth. He was modeling the kind of commitment he wants from everyone. Jonathan Schwartz, chief executive of Sun Microsystems, is a featured speaker at the meeting his company holds for new directors
each quarter. At these meetings he shares deeply-felt personal stories about how he deals with the challenges he wants each audience to address. To demonstrate his belief in transparency, he speaks for 20 minutes and reserves the last 40 minutes for a candid question-and-answer session. These chief executives are leading live and in
person. Though new technologies have made it possible for executives to communicate instantly with the entire workforce, the most effective way to express their personal passion for their message is by interacting with employees face-to-face. Verizon chief executive Ivan Seidenberg had been holding quarterly meetings with employees via
webcasts for six years and via the internal network for the previous eight years. Beginning this year he has been hosting webcasts before a live audience of 300 employees and inviting them to ask questions. Mr. Seidenberg feeds off of the energy the live audience generates and the webcast audience reacts to the event's dynamics.
[Seven Steps To Take How can you rally employees behind your change initiatives more quickly and effectively? What should you do to lead live and in person? Here are seven steps to take...]
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Reaching consensus: Delivering bad news...the good way
Deborah Zarsky is a principal with Consensus. Consensus is a negotiation and conflict resolution firm offering consulting, training and development, and
international peace building services to private and public sector clients throughout the world.
Due to the economy and recent cutbacks, I won't be able to promote Chris, one of my best team members, as planned. I'm not only worried she’ll get angry when I break the bad news, but I'm also concerned she might quit upon hearing it (before I have the
chance to promote her next year). Any advice? Being the bearer of bad news is neither fun nor easy. However, the words, tone, and medium we use to communicate bad news can have a profound effect on the way the information is received. They can make the
difference between peaceful acceptance and indignation. While many are inclined to work up to the matter at hand by engaging in small talk and beating around the bush, you will probably have more success by being direct (although not harsh) right from
the start. You want to avoid your employee feeling tricked and caught off guard—one minute thinking everything is wonderful, the next being shocked with disappointment. Ease her into the conversation by alerting her that bad news is to follow: "I have
some disappointing news to share with you." Once you have prepared her, you should proceed by sharing three pieces of information. The first is...
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Innovation 2008: Is the tide turning?
[PDF] Measuring Innovation 2008: Squandered Opportunities
A companion report to Innovation 2008: Is the Tide Turning?, which summarizes the findings of BCG’s fifth annual survey on corporate innovation, Measuring Innovation 2008: Squandered Opportunities focuses on how companies attempt to measure innovation.
View PDF
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Innovation 2008: Is the Tide Turning? details the findings of BCG's fifth annual survey on corporate innovation.
Innovation, our latest survey on the topic reveals, is highly valued by most companies, and most organizations continue to spend aggressively to pursue it. But few companies are satisfied with the return on that spending. And there are signs that this dissatisfaction, which has been rising for the past several years, may be
starting to cause executives to rethink their priorities. The potential significance of this is huge. This report addresses these and many other issues central to corporate innovation. The report’s key findings include the following:...
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6 signs you don't care about workers
It has become a sad cliché: "Our People are our Greatest Asset."
That hackneyed phrase doesn't mean anything in particular, so it's an easy bit of boilerplate to stamp on hallway posters and marketing brochures. When certain employers do elevate their talent-retention and team-welfare initiatives to the level of strategic priority, it's obvious. Google (BusinessWeek.com, 10/25/07) (GOOG) is a
hot stock, but it's even hotter as a desirable workplace because of the attention paid to hiring and keeping the best folks on board. When companies talk about valuing talent but don't put that talk into action, it shows. As a business leader, there are
easy ways to gauge whether the happy talk about employees has a basis in reality. Here are our Top Six not-walking-the-walk red flags...
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Making remote check deposit real
The technology to deposit checks remotely is here. Small banks gain convenience—and a way to compete with their larger counterparts.
For Alise Sims, controller at All Crane Rental of Georgia the daily dash to the bank to deposit checks from customers represented a big interruption in her workday: Fighting traffic to the bank branch, itemizing the deposit slips, and waiting in line for a teller cost her an hour of lost productivity. One bank even required its business customers to wait for a special teller—even when other tellers were available. "That was very frustrating," says Sims. But when All Crane's current bank, Atlanta-based Georgian Bank, began offering a "remote deposit" service in 2005, Sims was spared those daily drives. Now she just inserts the checks mailed from companies renting All Crane's heavy construction equipment into a device the size of a brick. The device scans each check and records the deposits within seconds, leaving Sims with more time for her other duties. "I feel like I have more control now," she says. Georgian Bank is one of a growing number of institutions offering customers the ability to deposit checks from the comfort of their home or office. According to Harland Financial Solutions, a supplier of bank technology, one-third of banks now offer the service or are evaluating it, and Harland expects many of the remaining banks to convert in coming years. Remote deposit is "on par with ATM adoption back in the '70s," says Bill Zayas, a senior vice-president at the Lake Mary (Fla.)-based company...
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Credit cards replace small business loans
As commercial loans become harder to find, small business owners give in to aggressive credit card marketers and get slammed with 30% interest rates.
As commercial loans become harder to find, small business owners give in to aggressive credit card marketers and get slammed with 30% interest rates. The 30% interest rate on their small business credit card shocked James and Heather Hills enough to stop using it entirely in April. The couple had turned to credit cards in early 2006 to get
their Elgin (Ill.) startup, mhn Internet Marketing and PR, off the ground, after three loan officers told them that they wouldn't qualify for a bank loan without capital equipment to put up as collateral. So the Hills, who have no outside employees, took out a $50,000 home equity line of credit and two personally guaranteed small business
credit cards. They had a handle on their debt until a partner abandoned a planned joint venture in March 2007 and the Hills were left with almost $10,000 for the project on their Advanta card...[While data on small business borrowing is scattered, indications show that entrepreneurs are increasingly relying on credit cards to
finance their businesses, especially early-stage companies. The percentage of firms using credit cards has jumped from 16% in 1993 to...]
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