NSS Workshop Series for CEOs and Business Owners

How to Build and Retain Value for Your Company in a Slow Recovery!

Wednesday, Sept 28 2011 | 7:30am-9:30am

Host Place: NENS, New England Networking Solutions, 1 Presidential Way, Suite 104 B, Woburn, MA 01801

Click here to register!

Moderator: Carol Kunik, Vistage Expert

Speakers:

• Dan Adams, NENS
• Ron Adams, Capstone Partners, LLC
• Beth Arnold, Foley Hoag, LLP
• Ben Weller, Next Stage Solutions, Inc.
• Steve Wishner, Corporate Director and Managing Director of Exigent

Host: NENS, New England Networking Solutions,  1 Presidential Way, Suite 104B, Woburn, MA 01801

Sponsor: Next Stage Solutions, Inc.

Value Creation Topics:

• The Role your Company Culture plays
• Identify Your Value Drivers
• Balance Variable and Fixed Costs
• Leverage Technology for Scalability
• Continuous Improvement Methodologies
• Leverage IP for new Revenue streams
• Assess Competitive Risk

Join our Panel of Experts in an interactive discussion how to build and retain value creation in uncertain times.  What is value creation and why should you care?  Value creation is achieved by positively affecting the valuation of your business and is an ongoing process.

Many CEOs are so busy right now working in the business, that they lose sight of the longer term goals. The workshop intends to lead you back to a longer term view focusing on value creation inside and outside your business. Our panel of experts will propose ways to maximize the impact value drivers can have in realizing success.

The uncertain economy demands disruptive innovation, yet that implies risk that is harder to achieve. Agility is more important than ever, you want to be a speedboat rather than an ocean liner.  We will discuss how to incorporate hidden values into your strategy and how to attain value short-term and for the future health of your company. Value creation starts at inception and gets more complex with maturity.

Who should attend?

Exclusively for CEOs, Presidents, Founders, Board Members and Investors.

On May 11, 2011, NSS held a CEO Workshop concerning Budgeting and Forecasting.  The group discussed the different measurement criteria, value drivers and how to lead an ongoing budget process within your business. Flexible budgets, annual budgets and rolling forecasts were compared.  Here are two articles you may want to read that are relevant to this topic.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710 for a consultation.

1. Let It Roll: Why more companies are abandoning budgets in favor of rolling forecasts by Russ Bangham of CFO Magazine, May 2011
2. Use a Rolling Forecast to Spot Trends by Harvard Business School Working Knowledge, March 13, 2006

Budgets and Forecasts represent two parts of a business management continuous improvement process. A successful enterprise must first have a clear understanding of its strategic plan. In fact Budgets and Forecasts are the financial GPS tools that carry strategy through to implementation.

How do you communicate and manage the goals for your team?

The workshop posed the following questions to our CEO participants;

• Do you see a budget as a Strategic or a Tactical tool?
• How can your budget reflect your strategy?
• Do you see your budget as more of a tactical tool, i.e. the performance yardstick for annual goals and compensation plans?
• Is the budget made up of strictly financial metrics?
• Where do you capture operational goals and performance measurement metrics?
• Is your budget implementation process a reflection of your company’s culture or is it a process within itself?
• Do you recognize your business and industry drivers within your budget?
• Does your budget have an expiration date, or do you keep it alive through continuous improvement forecasting?

Ben Weller, BD & CFO for Next Stage Solutions compiled the following check list as a hand out:

The measure of how you execute strategy is captured in the topic of Budget. But different areas of your business require different measurement criteria.

Budgets can refer to:

• Marketing Strategies
• Sales Plans
• Operational performance
• Human Resource development
• Capital Investment
• Financing Strategy
• Ownership Return

And can take on many measurement dimensions

• Fiscal
• Continuous Improvement goals
• Key Performance indicators
• Strategic Planning Milestones
• Benchmarked Metrics
• Customer Satisfaction

Budget Implementations can take on the personality of the organization

• Size of Company and distribution of authority
• Top Down versus bottom up management style
• Fiscal Micro management vs  Strategical Macro management
• Cash Flow is Primary Focus
• Performance vs External Expectations is a Priority

And all methods and uses need to focus on Business Drivers

• Variable Sales and Cost (Marginal Profitability)
• Fixed Costs
• Project Costs (New Product Introduction)
• Occupancy Costs
• Variable Energy Costs
• Headcount
• Average Selling Prices (Competitive Positioning)
• Efficiency (Labor and Machine Operations)
• Productivity

What Profiles of budget design fit with various industries

• Software
• Life Science
• Medical Device
• Manufacturing
• Food Production
• Professional Services

What are the various focuses of forecasting and where do they apply

• Traditional Rolling 12 Month forecast
• Sales Driven Top down vs trend based
• Cash Flow vs P&L
• Analysis vs Plan
• Current State vs Future State (This involves lean accounting and is a whole other topic)

If you are interested in this topic and would like to explore rolling forecasts further for your business, NSS provided a customized one-day workshop.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710

Laurie Taylor joined the NSS team recently.  He has over 20 years of experience and has worked with multiple start-up as Controller. We are delighted to have him on board.

Most Satisfying: In your CONTROLLER work you have done in the past, what is the most satisfying feedback you got from the CEO?

Nineteen out of twenty client companies have offered me a full time position during the engagement.

Most Inventive: Given that as CONTROLLER we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

I began a two person project to determine why a major bank’s ATM conversion had an out of balance total of $19M after the merger of the two banking systems.   The bank booked a 200k reserve to cover this reconciliation exposure.  I requested a Bank Tiger team to assist my current consulting team and at the end of the project we had completely reconciled the account and were only unable to account for $9k in bank funds.  We also discovered a major systems glitch that was the result of the systems merger and trained the banking staff to recognize the problem and how to correct the system if it occurred again.

Most Positive: CONTROLLER’s have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was assigned a project to take over for a Director of Finance at a specialized moving van company.  I first determined that there was a massive amount of misspending going on and no one was managing the AR accounts.  In 6 weeks we were able to make enough corrections that company was stable enough for sale to a much better funded and staffed regional carrier.  The sale of this business unit saved 250 staff member’s jobs as a result of the merger instead of a company closure due to prior management neglect.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Why of Work: How Great Leaders Build Abundant Organizations That Win by
David Ulrich and Wendy Ulrich

Funniest Fact: Tell us something funny about you.

I am crazy about WWII aircraft that have massively supercharged engines that “go fast, stay low, and turn left!” also known as the National Championship Air Races held each fall in Reno, NV.  The only rules are that these planes must have a prop and straight wings.

Mark Ott joined Next Stage Solutions this Spring.  Read on to see what Mark has been up to – he has a great story to tell!

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

The most satisfying feedback I received is when the CEO told me that he knew he could spend a considerable amount of time out of the office (with customers, investors, board members, press, etc.) knowing that everything back at headquarters was being looked after with me looking after things.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

When we moved a company from California to Massachusetts, I had to build a complete infrastructure pretty much from the ground up.  This included the recruitment/interviewing and engagement/hiring of new corporate attorneys, external auditors, Accounting Manager, Office Manager, and Human Resources Manager as well as establishing new banking relationships and corporate insurance programs.  All of this had to be done in a matter of three months.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

When I was European Controller for a large networking company, I had eight country controllers reporting to me.  Some of the countries (like the UK and Germany) were larger contributors to the results of the overall operation than others (like Spain and Sweden).  In that environment the controllers for the larger countries tended to be more influential in group decisions and the controllers for the smaller countries would sit back and complain that their needs were always overlooked because of their size.  This ultimately led to a team that did not work very well together and this was reinforced by pre-existing cultural differences.  One of the things I did to turn this around was to solicit ideas from the controllers concerning topics to be covered in an upcoming quarterly staff meeting.  When the time for the meeting came, I appointed the controller who suggested the topic as the leader of the discussion leader and subsequent action items.  This forced the smaller countries to play a much more active role in the group in identifying their issues and forced the larger countries to sit up and listen and help find solutions as they were cast in more of a “follower” role.  Following this pattern in subsequent staff meeting resulted in a much more cohesive pan-European staff.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

“Leadership in the Era of Economic Uncertainty:  The New Rules for Getting the Right Things Done in Difficult Times” by Ram Charan, McGraw-Hill.

Funniest Fact: Tell us something funny about you.

My fraternity brothers used to call me “Howard”, which is my middle name.  They thought that it was an “amusing” middle name, so they thought they could get me going if they kept calling me by that name.  It worked for a while but the nickname stuck throughout college and they will even use it today in those rare occasions when we get together.

Stay tuned for our next team member’s story!

IBM just published an extensive and insightful study about the global chief financial officer.  The 2010 IBM Global CFO Study reveals the importance of the CFO role today and how a financial advisor must be broader and more strategic. It surveyed 1900+ CFOs worldwide from a cross section of enterprise sizes.

Today’s CFO must bring a broad understanding for a business, more than ever.  Figure 1 shows the significant changes over the last 5 years on the importance of five company-wide activities. Notice the largest changes are around managing and mitigating risk (93% increase) and integrating information across the enterprise at 109% increase.

Figure 1

The study defines the CFOs into four groups:

1. Value Integrators
2. Disciplined Operators
3. Constrained Advisors
4. Scorekeepers

It evaluates the effectiveness of all four in multiple subject matters and shows the gap or discrepancy between the different styles.  For simplicity, we compare the two opposites, that of the Value Integrator and the Scorekeeper.   The Scorekeeper is defined as a CFO focusing primarily on financial reporting, compliance and accounting with some budgeting and forecasting.

The Value Integrator is viewed as a CFO who continuously improves the finance efficiency and provides broad business insights to the business.  They use technology to achieve greater data accuracy and develop better analytical tools for forecasting and scenario planning. Value Integrators understand the importance of managing enterprise risk and opportunities.  This study points out that Value Integrators consistently outperform the other 3 groups and have provided significant security to businesses in this recent downturn.

Figure 2 shows the 5-year effect most significantly around EBITDA, where the difference is more than 20X. Value Integrators also outperform on the REVENUE and ROIC side, with 49% and 30%, respectively.  These numbers are indeed noteworthy, the differences are truly impressive.

Figure 2

Multiple financial measures in this study are evaluated (see figure 3) and most impressively, Value Integrators achieved sustainability within their companies despite the economic recession.  The study also evaluates enterprise-focused effectiveness and how expectations versus executions show a widening gap. One of the larger gaps (34%) is integration of information across enterprises.  Today’s CFO must integrate information to understand which metrics are important and how often: weekly, daily or realtime.  Proactive CEOs demand proactive data support from their financial team.

Figure 3

The two key capabilities associated with the outperformance of the Value Integrator are:

1. Finance  efficiency – provides business-relevant information and strong analytics based on good data
2. Business Insight – enterprise focused  and risk-based decision making support in a timely manner

Figure 4 shows how Value Integrators outperformed on all aspects of CFO responsibilities.  Using Scorekeepers as the baseline, it is hard to avoid noticing the alarming difference between Scorekeepers and Value Integrators. Very importantly, combining the skill set of finance and enterprise knowledge has a multiplier effect and separates the Value Integrator by a large margin. Finance and risk are embedded in the company.  Risk management and opportunities are in fact a big focus for a forward looking CFO. The support and overall contributions from a CFO to an enterprise are becoming increasingly strategic.

Figure 4

Clearly CFOs need to master and control all tactical aspects of finance.  Historic data provides you with a historical view.  A current view is represented by financial dashboards important to all decision-making.  The forward looking view is vitally important for ongoing sustainability and growth of a business.  Only with the understanding and support of all three can the CFO be truly pro-active in the decision-making process, scenario planning, forecasting and risk management and mitigation.  The new, strategic CFO must possess the expertise and skill set in support of the CEO (figure 5).

Figure 5

The strong emphasis on tactical finance for the past 10 years is partly due to Sarbanes-Oxley.  CFOs have continuously been transaction driven leaving a significant gap between actual and aspiration (see figure 6).  CFOs continue to spend half their time around transactional processing.  NSS thinks that the future mix should be:

40% Decision-support
30% Transactional
30% Control

Today’s economic landscape demands increased worldliness, intellect and knowledge from CEOs and CFOs. This combination gives the CFO more enterprise wide responsibilities as a trusted business partner who understands finance, connects the dots, brings micro- and macroeconomic knowledge and is market and industry savvy.

Figure 6

NSS is interested in your feedback and in how you have navigated through this recession.  The 2010 IBM Global CFO Study shows powerful statistics in support of a Value Integrator as a CFO and why it is so important to drive your business in that direction.  Give us a call to discuss further in how we may support you and your business with our value driven strategic CFO focus and strong ROI.

Rudi Scheiber-Kurtz, CEO
Next Stage Solutions, Inc.
The GPS of Finance