Financial Competence for Directors and Executives

I was recently speaking to some executives on the importance of Finance at executive level and realised that despite knowing the basic financials, there were challenges they faced in interpreting the Financials.

This article is about spotting the right Financial Indicators in order to build Financial competence. I list 6 Key factors which Directors and Executives MUST understand in order to improve their Financial competence.

1) Know your Financials

You MUST know your Financials properly. It is very easy to simply look at profits and believe that the Company is performing above or below targets. As a former Group Finance and Commercial Director, I found that business unit heads had their main focus on ensuring that they have landed on money making contracts. They would deliver their results with quality but missed out on knowing their Division’s Financials.  Without knowing financials, you will struggle to understand how you could improve your Division’s overall performance. You must Understand Profit and Loss, Cash flow statements and Balance sheet thoroughly.

2) Finance and Strategy Linked

When you have  a strategy in place, the linkage between your Strategy and Financials is crucial. If you have goals and objectives in place, Executives must connect these to the financials with ease. The business rules are changing. Any single shift from strategy can be detrimental to the success of your organisation. With the changing trends and external factors such as exchange and  interest rates, your company must be ahead of the curve by tweaking strategy as often as you believe necessary.

3) Policies

Companies don’t realise the importance of having Financial Conditions Policies,  setting criteria in advance. List out your priorities and get your financial controller/ director to help craft a criteria based Policy. This will include the salient issues which, when covered will give executives the much needed comfort. These Policies don’t need to be five pages long. A one or two page richly crafted Policy would be sufficient, if prepared carefully.

4) Monitoring Mechanisms

Develop a Financial oversight mechanism interpreting the Policy implemented as described above. This means that you would have a system based approach. If there is sound reasonable interpretation of Policy, through a simple report interpreting the actions as per Policy, it would add value. The Policy will be able to reveal the strategy connectivity as well as any matters believed to be important. The interpretation has to be narrative explaining reasons as to why there were any deviations and the root cause of variances. This way, Directors and Executives would be able to focus on core matters of importance.

5) Training and Development

Build your knowledge by attending Finance related Courses. We have developed award winning Toolkits for Finance for Directors and Executives which have proven to add value. If you could gain more in depth knowledge through attending a course or learning in house with Toolkits which have the quality, you will build your financial competence within a few months. Our in-house workshops for organisations have proven to increase profits and cash flows.

6) Have a Financial Coach

Despite the above, many organisations still struggle to understand Financials. A financial coach would add value by looking at issues from a fresh perspective. But you must be careful when selecting a coach. The reason is that you will need someone who is qualified and experienced. There are many who claim they have the expertise but don’t deliver. The best are the ones whom you can test without signing any long term contracts. During an initial coaching session with my clients, I understand the client’s needs before proceeding.

In summary, Financial information is crucial and must be understood by Directors and Executives. I have seen many directors simply lost when it comes to contributing in a board meeting due to lack of Financial Know how. The above points will improve their understanding and build the much needed confidence to contribute effectively resulting in higher cash and profits.

Vijay Mistri©

Rentadirector

 

Unnatural Control – The Importance of diversity in operational control for small and mid-sized businesses

The division of control for larger companies is well defined; they have multiple executive employees, many times they have an independent board of directors, they may also have shareholders who represent a modicum of control within the organisation.  This division of control provides a system of built-in checks and balances that mitigates operational, financial, and infrastructure risks within the organisation while also providing the type of differentiation from a decision-making standpoint that fosters innovation and growth within the organisation.

While it is an imperfect system of management, there are significant benefits to this type of diversity as it relates to the internal controls within an organisation.  Without these controls larger organisations would be subject to the decisions and management of a singular individual and group of similar-minded individuals.  Not only does this increase the operational risks associated with that company, it also decreases the attractiveness of that company to investors, consumers, strategic partners, and lending institutions.  When one defined management structure is in full control of the company the reality of the situation is that eventually that group or individual will be wrong.  With that understanding it is much less likely that another entity will want to have a vested interest in the organisation.

Taking these issues into consideration, small and medium-sized organisations must understand that the same benefits of diversity that benefit larger companies would also benefit smaller entities if they were implemented correctly.  In trying times, smaller organisations have much less room for error and are generally in a less-advantageous position to grow and develop; and in these times there may be problems that threaten the solvency and sustainability of the organisation.  In these times only depending on one set of views from the management team can be both dangerous and counterproductive.  While many organisations that are considered small or mid-sized have partners running the organisation (and are not under the management of a singular individual) they are being run by like-minded individuals who don’t have diverse views on running the organisation.  This article is directed at those organisations and its purpose is to discuss the advantages of implementing a diverse management infrastructure more similar to larger corporations than simply depending on the views of a single management body.

When we are discussing diversifying the management team we don’t necessarily mean developing a board of directors, because for small (closely-held) organisation a board of advisors can be just as effective.  In addition we are also not solely focusing on external management bodies as I have found that an internal management body that focuses on bringing diverse personnel together for the purpose of organisational decision-making also provides a major advantage.  Below I have specified some of the ways that privately held organisations can diversify their management infrastructure; and in coming articles we will review each of these in further detail.

1. An external board of advisors – Simply creating a board from some key executives, strategic alliances, industry experts (or professional experts), and possibly from customers or people who represent your customer base.
2. An internal management body – Taking division heads for key operational departments and bringing them together for the purpose of decision-making and operational direction.
3. Division of Executive Power – When the owner or the president of the company goes outside of the organisation to fill key operational positions (such as CEO, Vice-President of Marketing, Chief Informational Officer (depending on industry), Vice-President of Sales, etc.)
4. EquitySale(Strategic Partnership) – From this perspective I am generally referring to a Venture Capital or Private Equity situation.  When companies are entering a new stage of business and the current management team believes that they may not be equipped to handle the growth of the business, the ownership may decide to sell off some of the equity to one of these entities in exchange for cash and management direction.  In these instances the Venture Capital firm or the Private Equity firm will not only provide financial assistance, they will also provide organisational support by providing access to strategic alliances, potential customers, and most importantly they can appoint experts to the board and insert experts into the management team which can be extremely beneficial for management.

While these aren’t the only methods of diversifying the management or decision-making infrastructure they do provide examples of how a company can mitigate its operational risk by diversifying the method upon which they make decisions and take risks.

The benefits of this are many, but for this article we will only concentrate on three:

1.    Risk Management – The old saying goes “Never put all of your eggs in one basket”, well a company      should never let all its decision be made by one person. – As it relates to risk, being overly dependent on one entity (be it one person or a few people who have similar interests) is in a word – dangerous.  Even the most expert managers and owners make mistakes, and in times where each operational risk carries with it the sustainability of the organisation, it is not prudent for all decision making to be centralized in one entity.  Through proper diversification companies can benefit from multiple perspectives as it relates to running the company.  Be it financial decisions, strategic decisions, human resource decisions, or development decisions, the ability to have a multitude of informed people making those decisions is generally more advantageous.  Furthermore, if this is done properly and with full transparency then individual goals, interests, or wants shouldn’t put the company in a poor position. The fact is that everybody has independent interests and when those conflict with the interests of the company a singular management perspective can be extremely detrimental, where diversity can generally make sure that those independent interests don’t cause undue harm to the entire organisation.

2. Growth and Development – The easiest way for an organisation to grow is to take advantage of opportunities when they arise.  When you have a diverse management structure that values the ideas and thoughts of a multitude of individuals the company is in a much better position to find growth and development opportunities.  When a singular management vision is the only one that is adhered to then the company is at the mercy of that singular ideology; if it is too conservative or too aggressive the company is forced to deal with it.  The issue is that when that ideology is singular; that single-mindedness will undoubtedly miss opportunities.  When multiple people are tasked with making these decisions then they are going to be focused on finding these opportunities which (in basic math terms) means there will be more opportunities.  Furthermore, the diversity gives the company choices as to what direction to go into; which can be extremely beneficial.

3.  Access -  When a company has strong partners, or multiple decision makers, that company makes itself more attractive to those entities that are capable of drastically improving operations and selling opportunities.  When a company obtains venture partners who have well-respected industry contacts then they obtain access to strategic alliances, suppliers, logistical partners, and customers that they wouldn’t have had access to. When a company has strong sales or development partners, they can then make themselves more attractive to lending institutions or public relations entities that can help the company grow.  If the company chooses the right partners, they can have access that would simply be unobtainable if they didn’t have the diverse management structure.

 

Simply stated, diversity has its drawbacks; decision-making is a slower process; there will be conflicts, and there is the potential that the system of checks and balances will mean that some lucrative opportunities are missed.  However, this type of set-up also insulates companies against many of the risks that have destroyed small and mid-sized companies over the last three years.  There is a reason why even the most respected leaders (the Buffets, the Gates, the Bransons) have a team of advisors; because not doing this leaves the fate of companies in the hands of an individual; and eventually leads to failure.

By – Vijay Mistri: Assists and advises CEO’s, Directors, Executives, Entrepreneurs and professionals, achieve standards of excellence on the four core pillars- Strategy, Risk, Finance and Best practice in order to build stronger brands and increase performance and efficiency. www.rentadirector.com  email:vijay@rentadirector.com

 

Sustainability Secret – What Company Directors and Executives Miss Out

We are faced with some of the most difficult times in the corporate world which has led to some of the  biggest failures.

My main purpose for this blog is to reveal what I consider to be the missing ingredient for many organisations. This is simple yet powerful. It can be achieved with ease yet business people don’t make the relevant changes to drive their organisations back on track.

Sometime ago, I was Chairing a hospital board on a Governance facilitation and the first thing I learnt was that the directors present didn’t understand the processes thoroughly. Sadly discussions were not well coordinated and were short sighted. We have witnessed a big name, Kodak filing bankruptcy.

This article is applicable to all small, medium and large organisations. What I would like to reveal can change the face of how you operate. I list the 4 fundamental know how which all directors and executives must have.

1) Strategy-

Many directors do not have a full grip of strategy. If at any time, you feel isolated as a director from a company or you feel your points do not sound valid to the rest,  you have not coordinated and linked long term with short term goals. You have not been part of the team managing  to permeate the message to the managers who in turn would be able to empower the rest of the team. But what actually do I mean by, understanding the strategy fully? There is a whole list of what you need to do, but I will give you two important points. Have a brief or summary of the strategy which you have gone through FULLY at least 7 times in a span of 3 weeks . Take out time and understand the strategy completely page by page. Make notes and refer to the detailed strategy. Within 6 months, you must master your detailed strategy. If you can at the very least do these two things, you are on the path of achieving progress for your organisation. Finally, make a list of relevant questions leading to new thinking as you will start picking these very easily. These may be for Management(or for the board depending on the size and complexity) but are important starting steps.

So what happens if you don’t have a strategy? Well, you need to learn the full process and functions, mapping your existing resources with care and construct a future based plan. ( You could use a consultant to help).

The whole idea is for you to forge ahead with your resources acting as drivers.

2) Risk Management-

Risk management is crucial to your overall processes. There can be internal risks such as staff utility, machinery and infrastructure issues, succession planning, failure in execution as well as a myriad of  activity challenges leading to adverse performance shifts.  External risks can be strenuous. Regulatory changes, currency and commodity price change risks, political commonly impact an organisations overall performance.

A few years ago, a client of mine was facing a high cost exposure as operations were decentralised with varied locations. Rentals were high and coordination and communication was a big problem. We laid out a 10 year plan to centralise in one location and noted that benefits outweighed costs in the future. Unit executives were called in and I lead the discussion on what the overall benefits would be. I also discussed a few challenges and how we would be able to overcome these as a group. The level of energy went from low to high as executives saw that no one would step on each other’s toes. Rather, there would be synergy and bigger incentives both personal as well as for the company. The result was that the operations went on to improve and increase significantly.

It is extremely important for boards to explore all aspects of risk . This can be done using either a risk committee or a risk expert or officer, again depending on the size of the organisation. Risks can either be qualitative or quantitative. A point to note, is that discussions of material substance needs board attention and intervention. They have to discuss all points impacting any management decision and collectively support a motion which is meaningful as well as exhausting all alternates and Plan B’s. Learning everything you can relating to executive risk management for your organisation will enable you to switch into a better connectivity and linkage with long term.

3) Finance:

If there is one area which all executives and directors MUST know is finance. After all, finance is the lifeblood of all organisations. Knowing financial statements, working capital movements, Key Performance indicators and what they mean for your organisation is crucial. Astra Zeneca in the UK announced about 7,300 job cuts globally due to patent expiry out of which 350 is from research and development. Whether this move is justifiable or not, I am unsure but it surely raises questions. Did the board and the executives not see this coming in their long term plan? Compare this with Apple which has competition from Sony, Motorola, Samsung and other companies who have similar products. Yet Apple dominates the mobile phone and tablet markets and build capacity instead of reducing capacity. I am aware that this may not be the right comparison but wish to make a point. Was there something different that Astra Zeneca could have done which would not result in job losses? I am sure if we ask their executives– what would you have differently if you could turn back the clock? they would have a whole load of missed out opportunities which may be right in front of their eyes.

The point I wish to make is to be bold enough to make the right decisions and be a driver towards company growth. This can come through having a thorough know how on your organisation’s financials.

4) Best Practice: 

At present there is big discussions on governance and how it impacts organisations. Companies are asked to be owner accountable and more focused and disciplined, owning up to failures. The key to good governance and best practice is to have a set of principles which are carefully set out with the company’s core purpose at its centre. The other key element is to ensure that Values are central. Ethics plays a key role and dynamic discussions are called for. It is not only about having a chairman or a lead director, but to have a group of individuals who are passionate to drive the organisation further through contributing and attending meetings. Some company cultures and behaviours need to change and this can only be done through engaged discussions and respect for all directors and executives. Information must be very clear and succinct and to the point. There has to be oversight mechanisms which are meant to improve measures and operations and not act as a  watchdog protocol. A winning company is one which has shareholders and stakeholders who trust the custodians of the organisation and who are confident and stand by the company’s good as well as challenging times. This can only happen is they have full faith in the organisation. This applies to smaller companies as well who can use similar practices to build upon their existing standards.

In summary the four areas which will drive company excellence is to have deeper insight, deeper understanding and clarity for directors and executives in Strategy, Risk, Executive Finance and Best practice. These four, if properly coordinated will drive your company to a stringer structured company.

Vijay Mistri assists Directors, Executives, CEO’s and professionals, sharpen their executive competence and have world class standards of excellence enabling them to build stronger companies, performance and brands.  He is the CEO and Founder of Rentadirector. www.rentadirector.com – email: vijay@rentadirector.com

 

RBS – Will this lead to further future failures?

RBS-  Will this lead to further future failures?

Phew!!! The trouble of Hester (CEO of RBS) earning a bonus is now over. It has been announced that he has declined the controversial bonus of £963,000 due to public pressure. The point is, is this really the substance behind what is going on in RBS?  The following points reveal what I believe to be a good governance structure.

First and foremost, it is the board who decided to appoint Hester. The problem is, I believe Taxpayers don’t even know the full background of who Hester is and yet a group of people decided to appoint Hester who they thought was the right candidate.. They only know that someone has been appointed to look after RBS affairs. The missing ingredient is whether the Board and Hester have established the root cause of its earlier failures and the true value pipeline. Where was the bank a year ago and what precise progress has been made?

Accountability:

 The key drivers are the board who collectively made a decision to appoint Hester. Whether in haste, I don’t know, but one thing that we need to bear in mind is to ask the following questions:

Did the board really engage themselves when appointing Hester or was it simply pressure to appoint someone as quickly as possible?

What criteria was used to appoint Hester? was he the only candidate they could pick for this position? If so, how many other candidates did they select?

The board may be experienced, but what culture and behaviours do they adopt? Did they fully consider diversity and take the broader dimension into account?

Is Hester passionate about driving the bank forward? And has he exceeded expectations and milestones?

Can any of RBS’s board member stand up and explain strategy with a thorough understanding?

The fact is not one of simply bonuses, but seeing the full picture. A simple declaration of a bonus amount is meaningless without a clear substantiation of why it is awarded in the first place. After all, best practice dictates transparency and independent judgement and the shareholders (who are mainly the public) need to be made aware as to why such a bonus is awarded. The public was not aware what drove the board to conclude awarding a bonus in the first place.

Now that Hester has declined the bonus, everything will be back to normal according to the public. But, will this mean, he is off the hook if something goes wrong in future? The whole issue is not only about bonus, but also  whether performance is as per target with a thorough risk audit conducted to ensure that no excessive leverage has been applied to meet targets. What happens to Hester’s Morale? is he strong enough , confident and passionate to bring the bank to an appropriate level which is seen having exceeded targets?

In summary, for RBS to succeed, the board must not only be competent but also empowering and be dynamic to support the CEO in what he is doing. If management and the board are confident, not only to turn performance positive, but also ensure that strategy linkage aspects are fully in line with future expectations, it is on the right track. After all, It is about accountability , having the drive, introducing diversity in discussions and safeguarding the public assets overall.

Vijay Mistri  - Rentadirector

 

Corporate Strategy – The shift from reality.

Companies love formal strategies with graphs and a large array of information, data and where the company is heading. These look fancy and hours of hard work has been put in. While this all is happening, some individual with no strategy or plan starts a firm. In about 7 years, it grows by almost 20 fold with a reputation and strength.

While some companies fail despite all the sophistication of having a strategy, others with no strategy thrive. I have no intention to indicate that corporate strategy does not work or you should not have the right strategy in place. On the contrary, what I am trying to reflect is that having a sound strategy and using what the individual with no strategy achieved, would make profound shifts in performance.

Well, by now you must have figured out that this individual was me and I turned my company into a successful audit and consultancy practice a few years ago. With no advertisement and no internet presence, simple  word of mouth and listening to people’s concerns were key attributes to the growth of my practice.

This is a series of blog posts where I address some of my experiences and what worked for me.

On this post, I list 5 key elements which were my turning points:

1) Giving my time and being fully engaged:

It is obvious but an extremely valuable piece to any business success. The time given to potential clients and customers is crucial. Listening and ascertaining what they want prove to be instrumental to my growth. In fact I used to immerse into discussions at the initiation stages to an extent that I fully grasp what the problems are. I have noticed that many organisations executives ‘attempt’ to listen to their key stakeholders especially customers. But that is not enough. Going an extra mile brings life to your strategy. Being fully engaged takes patience, but the benefits outweigh any time utility. Executives exhibit in reports and voice out that they listen to customers concerns. Some come out and apologise to the public for any misconduct (in programs such as watchdog). I doubt if the root cause is ever discovered or even if it is, it may take a huge load of time and effort trying to fix it. You see many of such executives are simply following a trend without meaning and real substance.

2) Understanding the business core:

When I started offering professional services, I ensured that all relevant procedural steps were identified and formulated . These were not from text book theory, but grasping external and internal process impact points. Every organisation must be clear about what forms the value pipeline and how does this connect to the overall strategy.  Whether you have a multimillion operation or a small operation, you must ensure that all linkages are in place. Sadly, many companies fail to perform to its fullest due to lack of coordinated processes.

3) The right staff:

My first mistake was to hire a staff who gave me a fantastic picture of what he has achieved and how he can add value to the services we offered. A very good communicator who knew how to easily influence an employer. He had qualifications and looked poised and a hard worker. He did well for some time, but errors and differences started creeping in. His interpretation of assurance and mine were different. The result was that I had to get rid of him. From all my staff, I had one staff who was rejected by one of the big four. He proved to be the best asset I ever had and made a profound difference . I deeply appreciate the big four company for not offering him a position with their firm. In fact, he is now running the practice and is doing a fantastic job.

I personally don’t prefer some of the recruiting agents who have a straight approach. They have a set criteria and miss out on seeing the true talent. In order to succeed, you need to find out six key traits (These may vary from company to company): The energy level now and a year ago.. (and I have managed to pick this up from CV’s); the hunger to grow and learn (again checking from background),having confidence, communication and coordination linkage (organised and prioritization), well focused and consistent in progressing, very few job changes and

4) The right focus using discipline.

Sharpening your time and attention on the right and relevant matters will deliver value. It is no longer simply customer satisfaction but fulfilment.  This can only be achieved by being accountable to what is right. Discipline brings a well structured organised system to add value. During my time, my focus was simply to be an expert in what I do and deliver it with quality and efficiency. Commercial gains were secondary as I knew these would fall in place through building a company which offers world class service. Focusing on customer service, focusing on adding value to clients and focusing on building on quality and standards which are the best in the industry is best practice. It starts with all individuals and builds self confidence and momentum to drive a dynamic operation.

5) True purpose and meaning:

If you have a purpose that is good but if you have a passion and a meaningful purpose, that would drive your company to a different level. In fact that is true leadership. Organisations fail because the movement or purpose is not felt strong in many organisations. It has lost its meaning totally in many organisations and focus is on performance rather than following your true purpose.  When I see companies like Olympus in trouble or yahoo going through a difficult phase due to Executive Management changes, I find that the true purpose and meaning is missing from the boards of such companies. In fact Accountability and values are no longer considered foundations and performance pressures and short term thinking has taken precedence. These are companies which will keep eroding their capital in some form or other. Purpose further allows you to build your level of competence through the right training and understanding.

The above are simply some of the issues which can make a positive impact to your organisation. Through a disciplined approach, bring engaged, having a true purpose, understanding your business model completely and having the right empowered staff will have potential benefits to your overall value pipeline.

Vijay Mistri

 

Why organisations fail to grow into sustainable entities.

If you walk into any organisation, you will see some form of structure in place which includes people, processes, products and services which leads to value creation. It sounds simple, yet there are major challenges which organisations face. This is true, especially given the global uncertainties. Many fold up while others simply stagnate with no growth prospects. Forecasts are usually conservative leading to depressing results for many.

To add to this, there are regulations, external pressures as well as meeting owners expectations. All these issues result in companies facing difficulties in the long run.

In this post, I list 5 key factors which are considered as failure enablers.

1) Short term Thinking – Probably the most used phrase amongst many executives, yet the least understood . The biggest problem amongst directors and executives is that they are under pressure to keep posting strong results every single year. With a time deadline, they will do whatever it takes to ensure that they make profits. We have witnessed what the financial sector had gone through as regards the sub-prime crisis. The lessons are not yet learnt and companies fail to connect long term to short term. Instead of quick solutions such as innovating a product without considering the long term repercussions, organisations must have research and development  as a fore runner.

2) Growing beyond capacity -  Some organisations are so dynamic that they want to grow beyond what they are capable of. This leads to losing focus and may be detrimental to the core business in the future. Employing more managers and later closing divisions leads to huge financial drains. It is very important to think through properly before planning for any expansions.

3) The Right team – One of the biggest assets an organisation has, is the people they have working for them. If this recipe is not right, your organisation will face difficulties. Sadly, money and remuneration has taken precedence over work competence and skills. Executives are result driven, but only short term in nature. This leads to compromise and building upon fast results in order to please stakeholders. Leadership qualities are somewhat sub standard in nature.

4) Maintaining true focus and priorities – In a world full of complexities, companies tend to get controlled by events rather than control events. Instead of sticking to focus on the true existence and purpose, executives digress into a myriad of issues which contains a lot of fire fighting and micromanaging. The bigger picture is totally misplaced in the entire equation and matters considered urgent are dealt with. This is what they are comfortable with. Sadly complacency kicks and oversight and controls miss out on the true attention they deserve.

5) The core linkage process – One thing I have realised from my experience is to have a strong know how of Strategy, Risk, Finance and Best practice. This applies to all managers and above in an organisational ladder. These areas are crucial. I have heard many complaining that they don’t understand strategy or finance. The problem is, they don’t ask for the right help and don’t take initiatives to learn these important areas which form the core foundation of an organisational structure. A Steel company recently bought one of our finance training programs as well as had a workshop on best practice and saw some quick positive results . Executives must seek some level of relevant training which will help them improve their understanding and decisions they make.

I am sure there are some others which I will cover in the future, but for now, if you act on the above, your chances of having a stronger sustainable organisation are much higher.

 

Financial competence for executives and directors- Building sustainable organisations.

Recently, the IOD in the UK said that the major cause of organisational failings is due to high executive pay and lack of diversity. I agree up to a certain extent.

The big challenge is, do we have the right people with the right competence? Even if we do, are they placed in the right position at the right time? Sadly, there is a big concern when it comes to choosing the right talents. I believe that organisational failure is further due to lack of financial competence amongst executives.

The new rules is to shift thinking into a more integrated reporting framework. Understanding and linking, strategy, risk and best practice to financials is crucial in order to make the right and relevant choices. Measure of enterprise wide risk need to be linked to the financials with a stronger level of confidence when developing forward plans and business models.

I list 5 financial know how techniques which executives can use:

1) Understand your strategy – financial linkage: You need to know the core of your strategy fully. This is the first place to improve discussions at executive meetings. The richness in discussions is often missed out due to executives lacking strategy and financial understanding. By going through your strategy a few times, you will be able to master and see the financial link and connections more easily.

2) Learn from your financial team: It is important to spend time with your finance staff and learn more. Asking  key questions pertaining to strategy linkage will open up a new dimension of understanding. This gives you the opportunity to have constructive discussions.

3) Read financial related information to your industry. Some time ago, I was a group finance director. One of our unit director had a problem understanding financials. She was sharp and knew her business unit very well but lacked the financial competence which often led to her struggling to present her unit performance and linking this to strategy. Not only did I personally guide her, I also gave her current trends and financial information relating to the industry. In a few weeks, she developed a heightened level of financial knowhow . This resulted in her being more confident and improved her overall presentation.

4) Attend a Financial training program: there are many courses for executives on finance for non finance managers. We at Rentadirector have designed toolkits for directors and executives. Whatever mode you use, the reflections from such training can result in improved corporate performance. Taking home a few points and implementing these in your organisation can add to your competitive edge.

5) Ask incisive questions: The most important aspect of growth and success is to asking the right questions. By asking questions to your finance team, directors as well as executives, you will be sharpening your competence. How is this related to financial competence? Well, think of this.. all decisions have some degree of financial involvement. By asking questions, you are building a stronger financial understanding whether directly or indirectly.

In summary, it is not only diversity or executive pay, but the financial know how which can add value to discussions as well as build heightened levels of awareness of what is going wrong and what needs to be done. Executives must raise their standards and think about long term sustainable measures.

 

Broken Path: When a deviation from Corporate Strategy is not only permissible but is absolutely necessary

Broken Path: When a deviation from Corporate Strategy is not only permissible but is absolutely necessary

“Stay the Course”, “Never Give Up”, “Winners never Quit”; these are good adages for sports, life, and sometimes for businesses.  However, the purpose of this article is to provide some guidance as to when these adages do much more harm for an organization than they do good.

An extremely important part of managing a company is the ability to make pragmatic, logical, and thoughtful decisions; and a major part of the decision making process for managers and executives is to determine when the course of action that is being taken isn’t the course of action that should be continued.  From a management standpoint this part of the decision making process is every bit as important as that which includes taking advantage of opportunities, analyzing successes, and determining the initial course of action for a company.  For this reason management must put itself in a position where it continuously reflects on its strategies and actions in an attempt to garner a realistic understanding of whether those strategies and actions are benefiting or hindering the organization.

A major issue with this type of overt reflection is that it requires individuals who are, in many instances, extremely stubborn to take a look at not only their ideologies but themselves as managers and determine whether or not they must admit that they have been wrong in their previous decisions.  This should only be an issue if the manager believes that they are infallible, and since that doesn’t exist, it shouldn’t be an issue; but in fact….it is.  What managers must be willing to do is place the company’s interest above all else and make sure that when they are analyzing these strategies they are open-minded and willing to do what is necessary to protect the company’s interests.

As stated, the main purpose of this article is to provide a systematic method of determining when a strategic course must be reviewed, and a system of basic protocols to utilize if it is determined that that course should be reversed.  While there are a multitude of ways to determine when a particular strategy has gone awry, the following examples of extremely noticeable ways to make this determination:

1. Projections/Benchmarks have been missed – This is probably the easiest way to determine if something is working or not; as companies generally create benchmarks and projections to lay out the goals of a particular action or major strategy (OR AT LEAST THEY SHOULD), this is one of the simplest ways to determine if a change in course is necessary.  This is not meant to advocate a cut and run strategy at the first sign of discourse but to insinuate that if a company is not meeting its projections then it is time to analyze your strategies to determine the underlying cause of the missed benchmarks.  As stated, a major part of corporate decision-making is making INFORMED decisions; changing course on a whim is not informed, it is reckless, so whether a manager determines to stay the course or reverse the course it should be done by analyzing the data that is present and then making a decision based on a structured analysis of that data.

2. More resources are being utilized than originally assumed – Another easy marker that shows that there may be a problem; if you are using more capital, more staff, or more production resources than what was originally projected then it may be time to review whether or not the current strategy is working.  Resources are generally the lifeblood of any company, and when too many of those resources are committed to a particular project/action then it becomes the responsibility of management to determine if there is a problem with the current strategy and what the continued ramifications on the company’s resources will be if the course of action is continued.

3. Sustainability Issues are presented – Even when things are going well there may be signs that a change will be eventually needed.  Sustainability from a strategic position is a major issue in determining the long-term prospects of a company, and management should always make sure that sustainability is always a part of their corporate strategy (whether that strategy is long-term or short-term).  Negative sustainability issues can present themselves in a number of ways; the most common are likely to be:

1. Capacity Issues are being presented – The ultimate catch 22 in business; demand is up and our customers are purchasing our products/services; but we are running low on capacity which could eventually cause us to begin creating inferior products, or could mean we are required to turn away business.  Both of these could have long-lasting effects which could damage our reputation and our ability to compete in the market.

2. There is a finite time-frame relating to the current strategy – Sometimes, as a manager, you can see the end of the road; maybe new technology will eventually replace your products or services; maybe your customer base is being rendered obsolete, or maybe your once unique product is seeing a major flood of competitors.  In either circumstance you are now tasked with determining how to change your strategy to account for the future; this may mean subtle changes or this may mean major changes; either way you must act fast to determine how your company should progress.

3. Unsustainable Growth – Sometimes, it is simply a point of understanding that the “Good Times” won’t last forever.  In many instances the most notable sustainability issue is that demand for a given product or service will eventually drop, and its management’s job to determine the course of action that must be taken to make sure that when demand does drop that the company is in position to replace the lost revenues with new and innovative strategies.

4. There are major market shifts – One of the most egregious issues that arose during the beginning of the current global recession was the inability of managers in industries ranging from technology to manufacturing to financial services to notice the indicators that were being presented in the market.  Specifically; they didn’t open their eyes to the fact that a major market shift was taking place and because of that ambivalence many companies were destroyed.  A major part of planning at the strategic level is being able to recognize the signs that are present in the market and then making decisions based on the key indicators that are derived from those signs.

If it is determined that a change in course is necessary based on these or any other indication mechanism that is utilized by management, then management should be cautious.  As stated; hasty decision making will eventually lead to poor decisions, so when an analytical platform suggests that a change in course is necessary, management should re-assess their results.  If after this reassessment it is still determined that change is the best course of action then the decision makers must have the ability to make these changes in an expeditious manner; not being diligent can be very problematic in these instances so management must be direct in its changes and have a workable plan for implementing these changes.

The goal of this article was simply to reiterate the point that sometimes a change in strategy is necessary and being too stubborn to make that change may have dire consequences; furthermore there are ways to determine if a change in course is necessary, and by using them the company is in a much better position to make diligent and correct decisions.

Vijay Mistri

CEO & Founder

vijay@rentadirector.com

Rentadirector.com

 

Discipline in maintaining vision: Bringing excellence in Executive effectiveness for individuals, directors and executives.

Vision needs to be real!! But why do businesses as well as individuals fail despite having visions?

Well, it may sound simple, but it is true. Visions may be inspirational but they don’t hold the passion, drive, energy and consistent enthusiasm one needs.

In the business world, practices are many times ineffective and the reason is not holding the vision as a core embedded lively force of energy. To make matters worse, a small or medium sized company may have a few directors, who don’t have the same level of energy and passion to make it a collective force to maximise value throughout the organisation.

Here are 7 tips to make your vision, effective, lively and full of passion:

1) Have a clear and specific vision: It baffles me to see vision statements not clear and too generic. If you are an individual or an executive, your vision statement must be clear and succinct with precise core values defined. Check your vision and recheck it again with some associates and colleagues.

2) Believe in your vision: to begin with, you must take a lead role and believe in the vision you have. Whether you are a business person or individual, the strength lies in how much you believe in it!! Immerse yourself fully and believe in your vision fully.

3) Show off your passion: It does not matter if someone else thinks of you as someone who has lost it!! so long as you walk the talk and show it in your physical appearance, you are making it happen..Someone once told me that a mantra is something that you repeat 10,000 times in order for it to be powerful.

4) Visualise your vision: Sounds silly but if you can form an image of your vision, you will be closer to making it a reality. A decade ago, I wanted to talk to a big group which I had never done before. Two weeks later, I was attending a professional function and was called on the stage (and this happened without any preparation) to speak on the stage.

5)Share your vision: You need to share your vision with your friends and family or your staff. By repeating and relaying the right message, you will be increasing the overall energy level. This is powerful as you will have more people believing in your vision. In companies, collective conducive force works when there is alignment in their long term goals and objectives. This is normally lost at times. A quick exercise: ask each and every director  (and executives) what the company vision is.. (As a professional management coach, I was surprised with a company, whose unit directors did not know or forgot their vision statement).

6) Decisions: if you have your vision embedded and instilled in your DNA, you will be able to make decisions which will connect to the long term with ease. This is an art which has been forgotten as many end up fighting fires. Remind yourself of your vision before making any decision.

7) Celebrate at certain stages: progression leads you closer to your vision despite challenges. This progression must be recognised and appreciated. Take some time and enjoy your progression. It does not matter if you have had a few failures so long as you have learnt and are on the right track.

If you can work on the above with discipline, you will start seeing results which will amaze your ability. It takes hard work and dedication in achieving your vision but it all starts from the mind!!!

©Vijay Mistri Founder and CEO of rentadirector.com

email: vijay@rentadirector.com

 

The Benefits of a Part-time Finance Director

The Role of the Finance Director
The focus is on the future of the business and how it generates profit and cash going forward. Believe it or not the finance director is usually more interested in revenues and margins than costs because that’s where the real big growth potential lies in most businesses. Cost cutting can only go so far although when times are tough, it is necessary to take away any surplus resources that are not essential or creating more value than they cost.
Is A CEO A Finance Director?
Most of the company owners choose to deal with their individual finances. This can be a massive fault from the point of view of objectivity. Unnecessary business expenditures are far less difficult  to justify when subjectivity is compromised. However, not all company proprietors are knowledgeable enough in finance to make severe determinations of modification that need to be created to save a failing earning situation. Nor do they have enough encounters in financial management to create financial projection that  match with peripheral or  external financial situation . These are just a handful of examples of the positive aspect of a portion-time finance director.
Finance Director and Check out Dog
In most  instance , when a business operator finds time in earnings, the finance director turns into crucial . It can take a certain quantity of individual evaluation of financial ability designed for an enterprise operator to realize there is neither the time nor economic expertise to deal with the work of company finances on a day-to-day organization .It is not an  indication of defeat or fault to hire a part-time finance director. Rather it is an  indication of professionalism and strength that proves organizations  dedication and improvement . The finance director can be an organization owner’s very best supporter  when financial data is requested by compliance auditors. Financial management  is meant for small and reasonable-sized corporations were just a matter of adding and subtracting, any employee who  could handle the task. Delivering exact, reliable financial  reporting on a daily basis helps to create excellent option and saves time. Fees for a part-time finance director are constantly a return on investment.