Erich Stolz

Building on a very successful International Management career in several corporations, Erich has concentrated on helping companies to provide the foundation to grow, turning around or restructure.  Read more...

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Tuesday
Dec162014

10 Questions a CFO should ask the Controller

10 Questions a CFO should ask the Controller

1. What are all the management judgments we are making as we prepare the financial statements?

Some numbers in the financial statements are facts. Others are opinions. Let’s figure out which are which.

2. How long does it take us to close the books?

 Why does it take us so long? What manual processes are involved, including rekeying data into our system? How can we improve these processes?

3. Do we have one integrated system for both our financial information and our operating metrics?

One great financial leader used to say there are facts, and there are true facts. If you have two or more reporting systems, you will spend unproductive time reconciling differences and untangling conflicting definitions. I’ve seen one company with four different definitions of revenue: non-GAAP revenue before credits, non-GAAP revenue net of credits, revenue for calculating sales compensation, and GAAP revenue. You need a single source of truth.

4. Why do we have so many reports?

In one example, a financial department distributed more than 100 periodic reports. Many of the people who had originally asked for these reports had moved on years before, and the accounting team had no idea who was reading them or whether they were still valuable. After th team moved the reports online, to be accessed by staff in a self-serve manner, it became clear which reports were being used and which were no longer valuable.

5. Show me everything we are doing in Excel. Why are we using Excel?

Excel is a brilliant invention, versatile and easy to use. It’s also hard for groups of people to use together, easy to make mistakes, hard to find mistakes and insecure. The best way to use Excel is for rapid prototyping of anything new. Once the process is stable for three months, it’s time to move to a collaborative, automated, secure enterprise system and off Excel.

6. Who has access to what functionality in the accounting system? How is this documented? Who approves changes?

A single administrator should control the system and make changes according to a documented approval process.

7. What is the volume of transactions in our department? How many invoices are there and how many vendor payments? How many lines items for each exist? How do we measure quality?

Use this information to plan staffing levels. Demonstrate improving efficiency and quality over time.

8. How many sales orders or invoices are cancelled and re-billed and what are the primary causes of such events? How many dollars are involved?

If it’s a large number or large dollar volume or both, it’s a sign of a badly designed system. Fix it.

9. How many manual journal entries are we making during the close process? 

What audit exceptions are our auditors finding? Determine the underlying root causes. Take corrective action.

10. Where should we invest our next dollar in the finance department?

Prioritize the problem areas and focus resources where they are most needed -- whether permanent staff, temporary staff, training, automation, integration or process redesign. Use the latest cloud technology tools to simplify, standardize, centralize and automate all processes.

I’m sure many of the CFOs reading this have their favorite questions to ask their controller. And many of the controllers reading this have an even better idea of what questions CFOs should ask.

Friday
Dec272013

stop selling - start helping or ... create moments that matter

Stop Selling - Start Helping

Or

Create Moments that Matter

 

Being involved in sales in some capacity or another for the past 20+ years – either directly or indirectly – my experience shows that one big aspect has always been surfaced more than any other: Not too many customers want to be “sold” anything. If you push a sale upon your prospective customers, your success ratio will most likely be very low. Even the best sales presentation will not give you the success you deserve or anticipate – unless you create moments that matter.

 

Many sales people are anxiously trying to show the customers their products and services by giving a great presentation all without thinking or analyzing of how these products or services can solve the customers’ problems. These sales people just hope that their products and services is exactly what the customer wants at that moment in time. This is what we would call “Show Up and Throw Up”. You make a great sales presentation and go home without any sales orders. How effective was your work?

 

Let me paint the picture from a different perspective:

Let’s say you have an ailment and you go to a Doctor who you have not met before. Prior to you describing your symptoms, pain and ailment, the Doctor takes one look at you and writes a prescription and tells you to take the prescribed medicine and you should be fine in a few days. At this stage, the Doctor has not asked you any questions about your health issues nor about your medical history, he has not conducted any tests, he has not taken your vital signs, nor has he any ideas or clues of your current situation. I think you would agree with me: You are risking your life by taking some medicine that could harm you and that Doctor could be the subject of a malpractice lawsuit. How successful will this Doctor be? Would you go back to this Doctor?

In fact, any other Doctor will want to listen to you and why you came to see him. He will ask a lot of questions about your family history and your current health situation. He will take your vital signs. Then, the Doctor will conduct a physical exam and continue to ask more questions. He may even recommend further tests. Only when the Doctor has zoomed in on the proper diagnosis and prognosis and knows with a high degree of certainty of what your  ailments are, will he prescribe a cure for you.

Every professional sales person should take the above stated scenario to heart. First you need to ask your customer some meaningful questions, gather all the facts first, do the research prior to presenting your products and services, and then and only then can you provide a solution that is meaningful. By pursuing this approach, you ultimately show your expertise and professionalism of how you can help. Furthermore, you have now also established a much closer relationship with the customer. You will also have earned a greater amount of respect for yourself. In my experience and opinion, this is a far better “rifle approach” instead of a “shot-gun approach”.

Summary: Don’t be so anxious to make a “sale”. Rather, focus on “helping the customer solving his/her problems”. Create moments that really matter to your customer!

Friday
Dec272013

Three Steps to a High-Performance Culture

Three Steps to a High-Performance Culture

Senior executives tend to think about corporate culture as a topic that’s hard to measure and hard to change. As a result, many choose not to invest in it despite all the evidence that, when skillfully managed, culture can be a powerful and enduring source of competitive advantage.

What does it take to get really great results? In the work described in Beyond Performance you will find a reliable formula which you can use to create a distinctive performance culture in your organization.

Step 1: Establish a common understanding of culture and metrics for it. Ask the top team of any company what their highest priority business goals are and you will likely hear answers like “increase market share by 10 percent” or “reduce costs by 15 percent.” Ask the same question about their highest priority cultural goals and you’re likely to hear a broad range of platitudes with few, if any, numbers. A recent research indicates that high-performing cultures are characterized by an ability to align (gain clarity on vision, strategy, and shared employee behaviors), execute (move in the agreed-upon direction with minimal friction), and renew (continuously improve at a pace that exceeds competitors) - three factors I also refer to as ‘organizational health.’ Companies that use this definition of culture to find the specifics that matter to them, and the right tools to measure those specifics, find that culture is no longer something that is hard to measure and manage just as rigorously as business performance.

Step 2: Focus on the few changes that matter most. I have found that it’s possible to meaningfully change no more than five aspects of an organization’s culture in a 12- to 18-month period. Concentrating on a short list has the additional value of forcing everyone to focus on the changes most important to reaching the desired end state. After 18 months, you will see that these cultural elements are sufficiently improved, and you can move on to creating a culture of innovation, people development, and customer focus for the next 18 months. Attempting to tackle all of these themes at once would likely fragment the effort and weakened its impact.

Step 3: Integrate culture change efforts with business improvement initiatives. Few employees have too little to do. This means that culture change efforts run as stand-alone programs typically are last on the list and rarely succeed. Successful efforts are fully integrated into the business initiatives you’re pursuing — easy once you’ve defined the culture effectively. For example, during the second 18 months of your cultural change program, you may want to include in your sales stimulation program some type of peer coaching from high performers across its organization, which will help to build a culture of developing people. In addition, you may want to make sure that the end-of-day team meetings for sales staff include not just numbers, but also stories of how individual reps had interacted with customers to build relationships, highlighting the goal of improving customer focus. The quality of coaching and customer focus is also incorporated into evaluations of regional managers, and sales force incentive payments are expanded to include assessments of these behaviors as well as financial results. Executed well, culture change programs using these three steps not only deliver better bottom-line results, but also provide a more fulfilling environment for employees. And for many executives, leading a successful culture-change program is the most rewarding work of their career, because doing so allows them to integrate the human factors that matter to everyone with business concerns.

 

Friday
Dec272013

A Winning Culture Keeps Score

A Winning Culture Keeps Score

People often think of corporate culture as “soft” because it involves squishy things like values and expectations. That’s true as far as it goes - but winning cultures have a hard, metrics-driven element as well. A culture that feels upbeat and positive but doesn’t contribute to profitable growth or beating the competition is destined for the dustbin.

In sports, everyone gets that and knows what winning looks like. It’s reflected in your score, plain and simple. Sure, you track other numbers—what you might think of as key performance indicators - such as on-base percentage. The Boston Red Sox, the 2013 world champs in baseball, are known for their sabermetrics. But nobody in the organization thinks those statistics are more important than outscoring opponents.

In many businesses, however, people have no clue what winning would mean. More profits? A higher stock price? How can I affect those? Maybe “winning” just means making my KPIs - or not getting laid off. Employees can’t get excited about winning, because they never know whether they’re winning or not. They need a score to tell them.

That’s what they get when they work for companies that practice open-book management. The trick is to focus everyone’s attention on a single key number - the one number that, if improved by a significant margin, will leave the business healthier and stronger at the end of the year. If that number is headed in the right direction, you’re ahead. If you hit an agreed-on target, you win.

For a small company, the key number might be something as simple as net profit. More often, it’s an easily understood indicator that contributes directly to the bottom line, such as an engineering firm’s billable hours or a hotel’s occupancy rate.

Larger companies usually expect each unit or function to come up with its own key number. When jet fuel was going through the roof a few years ago, the pilots at Southwest Airlines identified fuel usage as a key number. They learned to monitor it closely, and they came up with unique ways to help lower it.

But if different units’ KPIs aren’t closely connected, they may come into conflict with one another. At one mining company, production crews were measured on tons produced while maintenance was measured on maintenance costs. Production naturally worked the equipment hard, leading to breakdowns. Maintenance crews were slow to make repairs, lowering their own costs but hurting production. Eventually the company took an open-book approach, changing everyone’s key number to production profit, or production revenue (tons multiplied by price per ton) minus maintenance costs. Employees in these units not only found they could work together; they also got fired up about the improved financial performance they could generate.

What makes a number “key”?

You can’t pick just any old metric and call it a key number. A good one meets three conditions:

1.  It's directly connected to the financials. Improve the key number and you get better financial results.

2.  It's not imposed from on high. Open-book companies consult with managers, employee teams, and other stakeholders to develop their key numbers. They ask: What are the biggest challenges we face this year? What are the biggest opportunities? How can we make a sizable contribution? How can we best measure our contribution?

3. It's for now - not forever. Companies' situations change. Sometimes revenue growth is the top priority, other times profitability or cash flow. When a company makes progress on one objective or goal, it may want to set its sights on another or additional goals the following year.

Most open-book companies link progress on the key number to a bonus or some other incentive. Now everyone has a stake in winning - in making that number move. At a specialty manufacturer in New Jersey, managers and employees agreed that the key number was job margin dollars, meaning shipment revenue minus direct labor and direct materials. (Shop-floor employees in open-book companies learn to understand and use terms like that.) Managers and employees together set a target for improvement. When the company blew away the target in 2013, workers received a bonus of 10 weeks’ pay and the Company enjoyed its most profitable year ever. Things look even better for 2014.

Part of the power of open-book management lies in its simplicity -- deciding on and tracking that one key number. The process generates buy-in, because you’re asking people their views about what’s most important right now. And it helps them understand their own connections to the company’s financial results. Employees begin to think and behave like businesspeople with a vested interest in success -- not like hired hands.

 

Tuesday
Dec172013

inspiring  quote

If your actions inspire others to dream more, learn more, do more and become more, you are a leader.