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Sharing and Managing Data

June 7, 2015 //
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The Wall Street Journal recently ran an article titled “Data is the new Middle Manager”. The theme is that many small startups are making all their data (sales, expenses, research, etc.) available to everyone in their organizations. The idea is that the people who need to make real time decisions should have all the data they need without having to go through upper management or requesting some special report, etc. Using desktop dashboards and cloud computing is making all this possible. The end result, many firms find, is better and faster decisions backed up by firm facts.

As with many things in my business career, I have been on both sides of the issue of who has access to what data.

In my old private company Donn, the founder and owner was very secretive about data. This is not unusual in private firms. Often only the Sales Managers were allowed to see product line and customer profitability, not the whole sales staff. And access to total earnings and the balance sheet, which showed Shareholders Equity or Net Worth, were restricted to only a handful of financial people, the owners and a couple longtime, trusted executives. Data was so restricted at Donn that when I first showed up as an external auditor, all the members of the Donn audit had to sign a confidentiality and nondisclosure agreement.

When Donn was acquired by the very public USG Corporation, there was a lot more data sharing among the troops. But USG had a typical big corporation management structure and hierarchy with layers of managers who each were granted access to only certain data. And in those early days, data was buried on a main frame computer which was slow to access and allowed for a lot of controlled distribution of data or, even worse, printed reports.

Our new USG subsidiary, of which I was the CFO, started to change that by using PCs and, at the time, a new consolidation and reporting package, called Hyperion. My whole, small staff could view and work on information and reports right at their desks, without generating a special data request of USG’s central computer group. Today all of USG and most other large firms use this type of PC accessible software. And, yes, you get faster, and usually better, decisions out of less staff. It is available, however,  only to the professional financial staffers, not everyone in the entire company.

But are there any downsides to all this sharing of data? Of course there are! A subject that I have dealt with and written about quite a bit is Fraud in organizations. Fraud can occur for a lot of reasons but often involves lack of control. Lack of control can be in procedures, supervision or misusing or manipulating data. So you still need to have supervision of your employees and a method to track who is accessing what data and why.

And just because you can access all your firm’s data does not mean you should or need to to perform your job. Curiosity about peer’s salary or expenses or benefits can lead to trouble at a minimum and, at the worst, to an incentive for Fraud.

After being on both the very, very private company world of data and the increasing public, sharing world, I vote for more access and sharing of data. Everything in our world of business and life moves at almost warp speed and so should data in an organization. But remember you still need to do that often boring and sometimes tedious job of supervising and managing your employees to minimize your exposure to potential employee fraud.

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Real Customer Service

May 3, 2015 //
1

We were back in Ohio unexpectedly for several weeks this winter. My wife, Tricia’s, 91 year old mother was placed in Hospice care and passed away at home. We were able to drive in from Chicago and spent a lot of time with all of Tricia’s family, which was good, even under the sad circumstances,

While in Ohio, we experienced two exceptional examples of what I call Real Customer Service. Nowadays most of us complain about how impersonal and regimented customer service has become. You used to talk directly to people in a store or service business. Now you are forced to deal with a Customer Call Center which can be half way around the world. Often these Call Centers do a very good job but sometimes they do not. Then you need to recall knowing that you will never get the same person again and you will have to start your story all over from the beginning. Sometimes this can take three or more calls. And, of course, with each call, you need to deal, once again, with the firm’s automated answering service that really does not seem to want you to find their living Customer Service people!

Sorry for that personal outburst, usually I limit those to stories about Human Resources or outside Advisors. Back to Ohio.

We always stay at a Hampton Hotel (owned by Hilton) in Fairlawn, Ohio, close to where all the relatives live. Over the years, we have gotten to know a number of the people who work there in our quarterly visits. This time, all the employees quickly figured out this was not our normal visit, but was much more difficult. We kept extending our stay, coming and going at odd hours and sleeping at strange times, etc. When Tricia’s mother passed away, the Hampton staff did the following: 1. all the employees including the housekeepers signed a condolence card 2. they bought a small bouquet of flowers and a teddy bear and 3. a young intern hand drew a beautiful rose. Exceptional, and very unexpected, but most appreciated. I wrote a thank you letter to the Hampton Manager.

Because we kept extending our Ohio stay, we ran out of things. Clothes were sent to the Hampton cleaners. And I had only packed ten days worth of my daily medicines and we were still not sure how long we would stay. First, I call my drug insurance company’s Call Center and am told by the automated person that all the computers are down. Thanks. Caremark/CVS is my drug provider, so I decide to be bold and drive to a nearby CVS drug store to see what I can do. My expectations are low. A young pharmacist takes an interest in my story, and for the next 24 hours deals with the Caremark computer and my own doctor to get me a month’s supply of my medicines. And all the time she kept me updated me by phone as to the status. Again exceptional, unexpected and most appreciated. I wrote a thank you to the CVS drugstore manager.

Now sometimes, as I said, the Call Center person does a great job. But part of the problem is the detached, impersonal nature of much which claims to be Customer Service. Our instantly connected internet world will never return to the days of one on one, face to face Customer Service. But when you get it and it works so well, you realize what Real Customer Service should be like.

The Business Zoo update. With the help of our computer expert, friend Heidi, we are working on formatting the completed and edited book for both Amazon paperback and Kindle eBooks. So hopefully the book will be available shortly. Thanks to all the friends and readers who keep asking about the status.

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Boards involvement in hiring CFOs

April 15, 2015 //
1

The Wall Street Journal has a weekly half page devoted to my former professional as a CFO. In a recent edition, they highlighted a new trend of corporate Board of Directors getting actively involved in their firm’s search and hiring of a new Chief Financial Officer. The reasons cited included the increased importance of the CFO role in everything from regulations such as Sarbanes-Oxley reporting, to  strategy and deal-making. A final reason was that former CFO’s are increasing looked upon as candidates to become a firm’s CEO.

My reaction to all this? Well, it’s about time! Time that CFO’s are getting the respect so many deserve, as they are often quiet and low key, yet are often the second most critical person in a public company. But more importantly, it’s about time that Boards of Directors are actually acknowledging this and getting involved in this hiring activity.

Historically, in many old line firms, the path to CFO was internally determined. Often it was a matter of paying your dues and moving up through various financial roles in treasury or controllership. If a business and its industry remained stagnant over the 20 plus year period it took to groom a CFO, that was a fine strategy. But businesses and their industries are not stagnant. Competition changes, mergers occur and technologies leap ahead. So the perfect internally- grown candidate of the past may not be best suited for a new environment.

The second way CFOs, and most other internal Officers were chosen, was solely by the Chairman or CEO. This was usually decided by the CEO alone who then informed the Board of his choice. The Board then dutifully elected the person to be CFO. Perhaps the Board knew a little about the person from HR succession charts but the Board rarely got involved in the selection or even with a token interview. This, in my mind, is wrong.

All public corporate Officers, including CFOs, are legally “elected by and serve at the pleasure of the Board”. Directors need to perform some due diligence on this critical personnel task. To do this properly, Boards need to spent time, not just in Board meetings or group dinners, with the senior officers. In fact, I would suggest that most of the countless, large, quarterly Board dinners I ever attended were worthless. Private one-on-one dinners between the various Directors and members of senior management would be invaluable to both parties. This would also allow the Board to have a much better of idea of who they were electing to be the next CFO or CEO. And if the current CEO objects because he or she is paranoid of what a Board member could learn in private from one of his team, then the Board better look very hard at that CEO!

Directors of large public company Boards are paid over $200,000 a year. Many of the problems Directors encounter when senior officers, like CFOs or CEOs, either abruptly resign or are fired for cause could be eliminated if they spent more time upfront getting to know these key people. So, Directors, get involved in hiring new, CFOs and, in some cases, other corporate officers. But also spend some quality time with the senior officers you have in place; it will be well worth your while.

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Learning while you Mentor

April 2, 2015 //
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A most unlikely source, the AARP Bulletin, gave me the inspiration for this blog. I say unlikely because it is not thought of as a traditional source of business wisdom. Retirement and aging wisdom, yes.

This article was titled “It’s never too late to learn” and dealt with a newer corporate trend of assigning younger people to help their older colleagues learn things. This is often called reverse mentoring and can range from explaining social media, such as how to use Twitter, to building better relationships with the incoming millennials and Gen Xers. As I read and thought about it, I realized that I have been informally involved in this process over the years with many of my younger mentees.

An overall concept, in which I strongly believe, is that Mentoring works best when both parities are, at least, benefiting from the process and, at best, when both parities are learning from each other. The benefit can be as simple as the the satisfaction or pride a mentor gets when the mentee gets a desired promotion. But the better benefit is when the mentor actually learns something themselves. It is not usually some technical thing, but rather some softer issue. Here are a few real life examples (without full names) that come to mind.

Y, a young, female, Hispanic manager in a large distribution firm from whom I learned what it’s like to be a double minority in a traditional old-line firm and how to deal with it.

M, a young, male business owner, who shares with me both the joys and frustrations of running his own small business. He has no college degree, yet over these last few years he has earned the equivalent of an MBA at the school of hard knocks.

J. a young, female founder of a service business, has such passion for her trade and personal drive to succeed that she could qualify to teach a graduate courses in Leadership or Entrepreneurship.

So if you have not tried mentoring, try it. And if you do mentor but feel your efforts have been mostly one sided, then try harder and learn to listen and learn from your mentee. It is not too late to learn something valuable and wonderful!

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The Value of International Work

March 12, 2015 //
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A lot gets written about the importance for young people in business to work or live abroad for a period of time. Years ago, an international assignment was very unusual and not often a good career move due to the uncertainty of what job might be available when you returned to the U.S. Companies often had trouble reintegrating an expatriate or recognizing the increased value of their employee. This was especially true in large firms with rigid job categories and inflexible pay scales. Fortunately this is changing.

Nowadays many of the young professional I advise are looking forward to and planning on an international assignment. This is very possible in the consulting field but also workable in many businesses. The timing can vary but it is often in your late twenties or early thirties after you have made several moves and/or promotions in the domestic business. I always strongly urge these “clients” of mine to push internally to get an international assignment. The young people I know used to lean to Western Europe but now the focus is on Australia or Asia.

Why is this international experience so important? I wrote earlier in my blogs about developing  “an International frame of mind”. This is much easier for many young people outside the U.S. Other countries study English for years and young people long to visit and be educated in our country. We are still a very U.S. centric focused country. But this is changing. And it better change as we are truly a global marketplace.

I was personally fortunate to spend a lot of my earlier years with Donn Corporation working with our businesses outside the U.S. I was often in both Canada and Europe six times in year and every few years in Asia. Many of the experiences I write about in The Business Zoo relate directly to these international involvements and the great people I was fortunate to get to know. Here are a couple examples and stories from the book.

Dining with Europeans. These are some of the most sophisticated people in the world. They have made the art of dining  an essential and integral aspect of both business and life. Much can be learned by mastering their skills.

Learning the nuance of language and words. From Donn’s European Controllers I learned that the word Yes means different things depending on your country and its culture. To the French, Yes meant I heard you and I will consider (not always do) what you said. To the Germans, it meant Yes, I will follow it in great detail and they would then ask a dozen questions to clarify what i meant. The Asian countries bring their own unique cultures to this.

So if you work for an organization where you can get International work, go for it. If you work for an organization that does not have the kind of International involvements that you want , find another organization!

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Investing in Apple and Products you Like

February 25, 2015 //
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The famous stock investor, Peter Lynch, said to “buy what you know”. The Wall Street Journal ran an interesting article about that with some of the pros and cons. The article was aimed more at consumer companies and their stock but it can relate to a broader range than that.

One fund manager in the article realized that his teenage daughter loved a retail jewelry company. Before he could invest, the company filed for bankruptcy and closed all their stores due to on-line competitors. Moral: be very cautious when investing in any teenagers’ fascination of the moment.

Another investor found a number of West Elm and Williams Sonoma catalogs and boxes that his wife had ordered being delivered to his new house. He bought the stock which proved to be a timely investment over the last couple of years. Moral: wives know things their husbands do not!

This brings me to my wife, Tricia. She has her own investment account. When we meet with our financial advisor all of her stocks are up from when she bought them. My stocks are, well, varied might be a good word.

But it may be useful to look into this in a little more detail and see what and why Tricia invests in various companies.

Tricia bought the stock where her brother works, Honeywell, a few years ago and it has more than doubled! But J.C. Penny, where her sister worked, went south when the guy from Apple joined and tried to change the place. (To be fair, her sister retired about then and Tricia told me to sell but I was slow!)

Her stocks also include retailers that she buys from like Under Armour, Urban Outfitters and William Sonoma, mentioned above. All have made money. She also owns two restaurant groups that we and our friends frequent, Panera Bread and Blooming Brands which owns Outback, Bonefish and Flemings . These have also at least doubled in value.

But her investment grand slam was buying Apple stock. She insisted on this after first buying an early G4 laptop for herself on Valentine’s Day in 2002. At the time, everyone, from our financial advisor, to our Banker,  to me strongly suggested she Not buy this small, second level company. Well, you know the rest. Moral: for business and life stories listen to me, for stocks ask my wife.

The overall message here is that I have learned that buying what you know or what you like can be a great strategy or, better yet, a great part of your overall investment strategy. I have also been around long enough to add that Buying things is often the easy and fun part. Selling things and knowing when to sell is a lot harder to do. This is true of stocks, companies or even collectibles. So, like with most things in life or business, think about it before you do it!

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Women on Boards of Directors

February 15, 2015 //
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A recent study of women directors on Standard and Poors 1500 company boards was done for the Wall Street Journal by governance researchers at MSCI Inc. Today, women make up about 16% of all these directors which is a slight improvement from 2009 when women were 12.5% of these directors.  Of the 67 firms that have a female CEO, like IBM, General Motors or PepsiCo, those Boards often have three or more women. Remember that most Boards average 8 to 12 directors. So, some slow progress is being made.

My last two public company Boards each had one female director at the time and currently have three women out of a total of 21 positions. These companies and their competitors in the construction and chemical industries are historically under represented by women versus many of the more consumer related firms.

But enough of the statistics, let’s get to the main point. What was my experience with women directors? In a word or two, they were better than many of their male counterparts. Let me list some reasons why.

1. Women directors view their position on corporate Boards as more of an honor and thus take it more serious. This may be because they have fewer opportunities or because they have to really work hard to land the role versus many of the “old boy” overlapping Board networks which still exist. The women directors are usually younger and are on fewer Boards than many of their male counterparts. We once had a male Director resign because he “accidentally” joined a direct competitor’s Board! I doubt that happens much with female Directors.

2. The women directors came better prepared to Board meetings. All companies send the bulk of their meeting documents ahead. Some of our male directors did not even bother to bring these materials probably because they had not read some or all of it and had made no notes. The women directors brought the materials and you could tell they had read them and had made notes.

3. The women directors stayed focused on the matters at hand. Sometime Board meetings, especially unexpected ones by phone can take a long time and it is hard to manage directors when you can’t see them. On these phone meetings, I have had male directors fall asleep and snore, go to a nearby bathroom without closing a door or have a lengthy discussion with their wife about what sandwich they will make them for lunch. Female directors really behave much better as a group!

So when you consider these examples along the fact that women are smarter than men and are more social than men and live longer, they should be on more Boards of Directors! Seriously, they should-but corporate america, like the rest of the world often takes a lot of time to change. I also believe that some men are aware of all the strengths that women can bring to leadership roles but are Afraid to give them the opportunity. And, as we have mentioned before on this blog, fear is not good in Board rooms or in The Business Zoo!

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Banks, Culture and Federal Regulators

February 8, 2015 //
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The Wall Street Journal just had an article about how the federal regulators are trying to figure out if the Banking industry has some inherent flaws that somehow tie to a Bank’s culture. The regulators are worried that the specific crimes or security violations we read about are not just isolated examples, but relate to deeper issues in the Banks. But the regulators are having trouble figuring out how to define each Bank’s “culture”. Even the Banks themselves are hiring legions of Consultants to help them define their own culture. One well known Bank created a “happy to grumpy” ratio of their employees as one way to measure culture.

Well, if they had only asked certain retired Chief Financial Officers, like me, who had worked with Banks, they could have learned a few things in a hurry. The reason I chose “retired” CFOs is that they can be more honest now than when they worked for companies who needed the Banks to survive or grow.

Wall Street Bankers are certainly a unique breed. In my book, The Business Zoo, I have a lot of stories that relate to Bankers and their culture. A few of these are as follows:

“It’s only Business, not Personal.” This means a Banker can lie to you, but because it’s about business, he is not a bad person. Heh.

“I would sell my mother for an eight of a point!” This means that in a large deal, even a very small extra fee or interest charge, is worth doing almost any unthinkable thing to achieve. This can include breaking laws or client confidentiality or whatever. That quote is word for word from a senior U.S. banker.

“Dining with Wolves, Rats and other adversaries”.  Does this one really need more of an explanation? Let me just say I admire and respect wolves.

Bankers also have the same trait that relates to many Consultants. They believe they are smarter or better than the rest of the world. Even in my youth in public accounting, at the now defunct Arthur Andersen & Co., we were taught this. It becomes part of the ‘Culture” that these firms use to distinguish themselves from others. But it can also lead to trouble.

But the most fascinating aspect of this WSJ article was how both Bankers and their Regulators are apparently having trouble identifying Culture and are even hiring outside consultants (often with their own problems) to help!

So here are a couple of tips about Culture from my final chapter in The Business Zoo. 

Culture and Leadership are the flip side of each other. Study the Bank’s past and current leaders and you will learn about the firm’s culture as well. The good, the bad and the ugly.

Culture, as defined in the Royal British Columbia Museum, is a complex system of tools, language, arts and beliefs that help humans survive. To determine any organizations’s culture you must spent time studying their systems, procedure, policies, whether written and unwritten, or formal or, more importantly, informal. To study and define a bank’s Culture, Regulators will need to invest a lot of time and hard work.

Or you could hire a few retired CFOs who have spent decades around Banks!

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The Housing Pendulum Swings Again!

February 3, 2015 //
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One of my favorite bosses, Tony, always said that most things in the world swing back and forth like a pendulum. In society and in business, we see this all the time. This is easy to see in commodities like corn or soybeans. We go from a shortage and high prices one year to everyone planting these same crops with a market glut and low prices resulting the next year. We love the free and easy flow of information on the Internet till we want to restrict it because it can invade our privacy or use our information for someone else’s commercial gain. Prices, regulations, even emotions, often swing like a pendulum.

With the start of a New Year and our economy generally improving, I wanted to talk about the Housing Pendulum which usually swings on a decade long cycle. I know you are thinking, wait a minute, we are barely out of our worst housing, construction downturn since the Great Depression! We can’t be getting into trouble again with Housing! Let’s look at a couple things going on right now.

Housing Prices. We were just in Naples, FL. for a visit. Remember in the early 2000s when resort and second home places like Florida, Las Vegas, and Arizona had prices jump 10-20% a year. And then they fell 50% or more a couple years later. In our downtown Naples area, the same condos went from under $1 million to $1.6 million. Then they fell to under $1 million after the 2007 Housing Bubble and stayed there for a few years. Now these condos that sold two years ago for $1.1 million and last year for $1.3 million are going for $1.5 million. And there is a growing shortage of inventory to buy. The City of Naples just issued the most tear down permits in its history as the old, small, outdated cottages are being replaced with new, trendier ones twice as big that fill up every inch of the lot or of two or three lots. The pricing on the new ones begin around $2 million. Is this just true of fancy resorts and second home places, you may be thinking?

My wife and I just listed and sold our downtown Chicago condo in ONE DAY and for the FULL price! Go figure. This is still less likely outside of retirement resorts but it is happening for the first time again.

Government Assistance to Housing.  A recent Wall Street Journal article talked about how the two government agencies that buy mortgages, Freddie Mac and Fannie Mae, just issued new, relaxed mortgage standards. They will now allow as little as a 3% downpayment on a mortgage especially from low income people who have trouble coming up with a larger downpayment. These are the same two agencies that were partially blamed for the last housing crisis, for helping to bundle and sell high risk mortgages. And the same two agencies, that some in Congress and government suggested, should be disbanded. It is wonderful to want to help people struggling to buy a house and especially a first house. But the last time around, this group that struggled to buy a house with little of their own money, were the ones that defaulted or walked away from their mortgages. And it will happen again. And our government is helping.

So to some it may seem too early to worry about the Housing market tanking again. But to this old, long time building material guy, it seems like the Housing Pendulum is starting its swing. The last time it almost bankrupted Wall Street and our overall economy. Consider yourself warned!

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Microsoft and Minecraft, A Culture Clash

January 6, 2015 //
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My 14 year old grandson with his younger sister were in Chicago this fall for a visit. He and I went to lunch for his favorite food, snow crab legs, while my wife, Tricia, took the grand daughter shopping on Michigan Avenue.

While watching my grandson devour his second order of snow crab legs, I am trying to engage him in a conversation. Conversations with teenagers are always a challenge.  I cover one of his favorite topics, the latest super hero movies-is the new Thor (God of Thunder or something) movie the second one in the series? No, Grandpa Brad, he politely says, it is the third. Who would know? Are D.C. and Marvel movies and super heroes the same group? No, again. I should have known since decades ago, I read comic books!

I decide to try to teach him something about business using one of his other favorite subjects, Minecraft. For those of you not familiar with Minecraft, it is described, on the source of all wisdom, Wikipedia, as a sandbox indie game involving building structures in a 3D generated world. Like most video games it involves exploring, acquiring resources, combat and survival. Which really does sound like business or The Business Zoo! Any parent or grandparent with a teenage boy especially knows about Minecraft. It actually seems more civilized and almost educational compared to most video games which focus on zombies or flying birds attacking hungry pigs. It was originally developed by a Swede called “Notch” and has a cult like following.

The week before my grandson arrived in Chicago, Microsoft, the software giant of Bill Gates, agreed to buy Minecraft for a couple billion dollars. “Notch” will not be part of the new business but will walk away with a lot of marbles and a lot of swedish krona.

I, sadly, tell my grandson to enjoy Minecraft now because it will either become boring to its fans or it will disappear once Microsoft gets their hands on it. Why he asks me? I tell him the sad corporate truth. Big, sleepy giant firms like Microsoft love to buy smaller, trendy niche companies like Minecraft but they almost always destroy the unique Culture and Leadership the smaller company had. The big firms can not help themselves. They want to make the new, smaller firm just like them and by doing so they ruin it. Microsoft has been around almost 40 years and they believe they are much smarter than the people at 4 year old Minecraft. As I have written before, within three years of a takeover like this, two thirds of all the senior and upper level people at the acquired firm, Minecraft, will be gone. With the founder leaving here it will even be accelerated.  Sorry, grandson, that’s the way business and deals work.

My grandson shrugs and he goes back to explaining to me the difference between the Justice League (D.C. Comics) and The Avengers (Marvel Comics).

Happy New Year to all!

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