Homza: Fractional CFO

Thursday, October 31, 2013

Doing Things "Righter" (October 2013)

Last month I wrote about Strategy vs. Execution and one of my readers wrote back and defined the terms as “Doing the Right Things” (strategy) vs. “Doing Things Right” (execution). I have never heard it expressed quite so simply before. I almost always find that simpler is better as simple provides clarity. Therefore, that saying has stuck with me and will for a very long time.

While I enjoy working on strategic issues I find that most companies devote much of their time and energy to day-to-day execution. Things that should work like a well-oiled machine often don’t. And the cumulative effect of not “doing things right” shows up on the income statement.

But what exactly does “right” mean when it comes to a particular work process or outcome? In many instances, right is not simply the opposite of wrong but rather is somewhere on the continuum of just OK to truly excellent or exceptional.

There are times when “good enough” actually is all that is needed and going beyond the minimum standard doesn’t add any value. But in most instances, performance is measured on a continuum of outcomes and constantly striving to do better is critical. In these instances, it is not just about doing things right, it is about doing things “righter” than you did them yesterday.

It is important to always seek to improve business processes. While a process that was put in place years ago may be working, that doesn’t mean it is at optimal efficiency. Customers change, products and services change, new competitors spring up while old ones fade away, and technology has dramatically changed the way we all live and work. That means that business processes need to change as well.

This isn’t limited to your core manufacturing or service processes (although those are critical) but also includes your HR practices, accounting procedures, customer service interactions, and everything else you do in your organization. Think about it, even janitorial staffs have had to change their processes to deal with recycling as opposed to throwing everything in the trash.

In a world where change is the ever present constant, it’s more important than ever to ask if your business processes are not just keeping pace with the times but helping your company outperform its competitors.

Are you doing things “righter” today than you did them yesterday?

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to For more information, visit www.homza.com

your cash is flowing. know where.^®Ken Homza
Copyright @ 2013 Homza Consulting, Inc.

Sunday, September 29, 2013

Strategy vs. Execution (September 2013)

The other evening I was at a dinner party and the subject of strategy vs. execution came up. I’ve played lead roles on both strategy and implementation teams so I have experience in both areas (still it was a Saturday evening and I tried to steer the conversation back to favorite vacation spots).

In my opinion, however, the question of asking whether strategy or implementation is more important is analogous to asking what’s more important in a car, the engine or the transmission. Neither is more important than the other because unless you have both, you’re not going anywhere. The same is true of strategy and execution. You can have a brilliant strategy but if you don’t execute, it’s meaningless. Similarly, you can be great at execution but unless you have a strategy that is in tune with the marketplace and your competitive position you will find yourself perfectly executing a strategy that doesn’t move the business forward in any meaningful way.

Early in my career, I was part of a company that was well known for strategy development but fell short on implementation. The company never achieved its potential and lost significant momentum and market share as a result. It had leading products and great ideas about how to position them in the marketplace as well as future needs but was always a step behind when it came to implementation. In short, something was “lost in translation”.

On the other end of the spectrum, I have worked with teams who are excellent at implementation but never take a moment to step back and ask if they are doing the right things. They would benefit tremendously from taking the time to step away from day to day implementation and think strategically about how to grow their business.

A business is a system and the only way to maximize the efficiency of that system is to make sure that the system is operating effectively as a whole. Over emphasis of one component to the detriment of others does not accomplish this goal. Rather, every area of the business needs attention. If a business does not regularly think about its long term strategic vision and where it is trying to go over the next three to five years relative to its external operating environment then it is leaving its future to chance and is likely to fall short of its competitors.

On the other hand, if the business has a brilliant strategy but cannot effectively execute on that strategy by doing literally thousands of things well every single day, then the vision is unlikely to turn into reality. Rather the company will be finding itself revisiting and updating the strategy but never making progress toward its goals.

Obviously, any discussion about strategy could take up far more space than I devote to it here and countless books have been written on the subject. And the same is true of implementation and operations. But excellence in both strategy and execution is necessary to achieve optimal performance and stand out from the crowd regardless of industry.

Think about your company. Are you both thinking strategically as well as striving for excellence in the implementation of that strategy?

your cash is flowing. know where.^®Ken Homza
Copyright @ 2013 Homza Consulting, Inc.

Friday, August 30, 2013

(Little) Buying Influencers (August 2013)

Last month I wrote about customer loyalty and posed the question of whether businesses understood why customers stay with them. But what influences buyers in the first place?

As a former finance leader at LensCrafters I was one of the key proponents of attracting kids into the buying cycle for their first pair of glasses. Fortunately, not many children need glasses but getting them into the cycle early can create an enormous value chain. If you develop a buying habit early, it can be tough to break – particularly if the business provides a great product or service.

Businesses, particularly retail, need to realize that kids can be tremendous influencers. Now, they are clearly not making major buying decisions but they can be influential enough to push decisions that are on the margin. Large companies spend huge amounts marketing to kids but even products and services not marketed to children can be influenced by them. Here are a few examples (all from a five year old).

More than once I’ve gone to the car wash with the “rainbow colored soap” because my little guy thinks it’s fun to watch the colors run together. I can’t help wondering if the soap manufacturer thought of this or if it is just accidental.

I bought a dishwasher at a Sears Appliance retail store in part because it was easy to shop with a child. Yes, they have good selection, pricing and service, but they also have a small table, chairs, crayons and coloring book to keep the little ones entertained so that you actually have time to make a buying decision.

My new favorite place for a burger is Five Star, in part because they serve great burgers and in part because they have a good children’s menu.

Many businesses don’t have the opportunity (or the desire) to have children help influence the buying decision. But the broader point of this message is for businesses to stand back and understand the key motivations for customers to come to them in the first place. What brings them in the door and what keeps them coming back? What makes a customer loyal to such a great extent that they don’t even consider other options? What makes a customer choose one business over another in their initial buying decision? Particularly for this last question, the answer can help formulate a long term buying cycle of substantial value.

Businesses that understand customer motivations can do a better job of attracting (and retaining) customers. This translates into top line growth and ultimately into enhanced shareholder value.

As you think about your business, ask yourself the following: What were the key influencers that motivated customers to try your business the first time and what is the strategy to leverage the same motivations to attract new customers?

your cash is flowing. know where.^®
Ken Homza

Wednesday, July 31, 2013

Loyalty vs. Inertia (July 2013)

Are your customers loyal or are they returning due to habit or the inertia of not wanting to invest the energy to find an alternative? For some businesses, it is easy for customers to change. For others, it takes a bit of work so customers continue to patronize a business even after the quality of the product or service has declined.

I recently had a customer service representative for an insurance company thank me for my loyalty to which I responded: “Don’t confuse loyalty with inertia.” They were taken aback by my response but I had been disappointed with my agent’s service for some time and it has only been my busy schedule and limited agent interaction that kept me from making a change. Fortunately (for me) and unfortunately (for my prior agent) that question alone was the spark I needed to look for a new agent.

The straw that broke the camel’s back literally came the next day when I was trying to get a loaner car and was carrying an expired insurance card. At 4:30 in the afternoon no one answered my insurance agent’s phone. Typical, but even had someone answered their employee turnover is so high that the person answering is almost always too new to help. I solved the insurance card problem without their assistance. It was now after 5:00 and I returned a call from a new agent hoping to get my business. He had time to see me before he left for the day. I went straight to his office and made the switch. While I was there, he showed me the app they have so that I can always have my current insurance card on my phone . . . apparently, I’m not the only one who forgets to put the new card in their wallet.

This story is one of the reasons I am a fan of tools that are aimed at better understanding the customer experience. For a business to improve customer service, they have to understand their service levels from the perspective of the customer. A business should actively solicit customer feedback . . . and it doesn’t have to be a formal survey. A visit from the company owner or president is likely to turn up some interesting insights.

Further, it’s important to seek out problems in order to find areas to meaningfully improve. Some of your most frustrated customers won’t bother to spend the time to respond to a survey. I have literally scribbled “your service is terrible” across surveys and given my phone number to see if anyone would call me. I have never gotten a call. The business wasted a great opportunity to get candid feedback.

The goal of these tools isn’t to validate that things are OK. Too often, customer surveys are considered a waste of money because no one really digs in and understands unique experiences that are driving the numbers. Customer experiences can’t be understood statistically without the person interpreting them having actually experienced what the customer encounters. It’s also important to keep in mind that the buying process is more emotional than analytical. The goal is to hear from the most outspoken customers and consider the validity of their feedback, learn from it, and improve the customer experience.

Are your customers true fans or are they returning out of habit or just haven’t yet taken the time to actively seek an alternative? Unless they are true fans, it only takes a chance encounter with a better vendor or one event that loses a customer forever.

If your customers can’t honestly say that they would recommend your business to a friend then they are at risk. What keeps your customers coming back . . . is it loyalty or inertia?

your cash is flowing. know where.^®
Ken Homza

Friday, June 28, 2013

The Art of Delegating (June 2013)

Delegating is an art. There is a huge difference between delegating responsibility versus tasks. There are also vast differences between delegating to one individual versus another. To delegate responsibility can initially take more effort than doing something yourself but in the long run, it is worth it. When you delegate responsibility, you are ultimately teaching others what you know and adding to their skill base. Initially, it might require a fair amount of time and follow up but in the long run, you will have transferred a skill or knowledge to someone else which will make them a more valuable resource to the organization. In addition, it also gives you more time to think more strategically and take on bigger challenges.

With respect to individuals, some people take the ball and run with it while others need constant direction in order to accomplish even the simplest tasks. It is this former group that is likely to learn and grow with an organization while the latter will likely remain in a similar position doing routine tasks for an extended period of time. In some instances, there is a place for them, in others, their lack of growth makes them less relevant to the organization over time and they end up out of a job.

Generally, my goal is to delegate responsibility to the greatest extent possible so that I can move onto other items (hopefully more important tasks that add more value to the organization). Delegating is a tool to allow me to become more effective. I never want to do the same thing more than a couple of times which is what it takes to understand the process, improve it, and transfer the knowledge to someone else. To the extent this is practiced across the organization (accompanied by automating tasks – effectively delegating to a machine) this allows an organization to move forward. Certainly there is a role for adding people as an organization grows and at times it is appropriate to “throw more bodies” at the task in order to get the job done; however, this is a short term solution and a distant second to improving processes and automating.

In order for delegation to work effectively, however, there must be two parties. Someone to throw the ball, if you will, and someone to catch it. If you don’t have someone on the receiving end who is willing to accept responsibility and grow in their role, then the process will likely be frustrating and the results will not be worth the effort. In addition, you need a party who is willing to “let go” and transfer some of their responsibility to other individuals. Some people look for opportunities to do this so that they can accept new challenges. Others seem to hoard their current responsibilities. Sometimes this is because they fear a loss of control, loss of perceived power, or believe no one can perform as well as they can. Whatever the reason, they eventually become a barrier to both their own success and the success of the organization.

Think about how effectively you delegate and whether you are maximizing the potential of yourself and those around you. Ultimately, the success of the organization is at stake.

your cash is flowing. know where.^®

Ken Homza

Friday, May 31, 2013

Less Is More (May 2013)

I am currently working on presenting an analysis of spending over various categories, time periods, and numerous items that are inconsistent from year to year. Fortunately, we have a substantial amount of detail. Sometimes a lack of detail is the problem in trying to understand a problem. In this case, however, the problem is not a lack of detail but rather being able to distill a large amount of data into a concise story.

It can be a difficult balancing act to explain a complex situation simply but that is often what is required in order for senior executives (who often have neither the time nor the patience to delve into the details) to arrive at a decision.

Once you believe that you understand the problem and you begin trying to put together a clear, concise summary for others to understand, you may find yourself going back to the details and doing further exploration. I have often found that in trying to provide an explanation, more questions arise and that the very process of trying to distill a complex issue to a limited number of underlying root causes requires one to refine their thinking in order to be crystal clear.

In a world where email and texting have become the primary form of business communication (often dashed off far too quickly), the well thought out business memo is somewhat of a lost art. And while that seemingly antiquated form of communication may seem inefficient, there are times when it was certainly more efficient than a plethora of hastily prepared emails that are misunderstood and serve primarily to generate more emails.

As I am preparing the analysis and trying to explain how a large number of issues have impacted the financial statements from one year to the next, my initial assessment is that the issues can be summarized into three key bullets. Underneath each of those will be a very limited number of items listed from largest to smallest. While I could list 20-30 items underneath each bullet, the top three to four will account for 80% of the variance, and listing more will simply cause the reader to lose focus. Instead, we’ll have the detail at hand or in an appendix in the event that someone wants to see it (usually, there is comfort taken that the detail is available but people usually trust others to do the analysis and don’t dive in more deeply than necessary).

As you think about any business problem, whether you are trying to explain it to the next level of management or understand it yourself, try to distill it to its simplest form. Through this process, you’ll likely gain more clarity of the underlying issues which will help in identifying potential solutions.

This article is shorter than most that I publish . . . but then again, less is more.

your cash is flowing. know where.^®

Ken Homza

Monday, April 29, 2013

What Is Your CFO Thinking About? (April 2013)

The other day I was in a Board meeting awaiting my portion of the presentation I began thinking about the level of detail that I had at hand. Other than to gather a few last minute facts and write the materials (memo, PowerPoint, etc.) I don’t prepare for Board meetings. I feel it is like preparing for a test of what you have learned in life . . . either you know and understand the company or you don’t. What occurred to me, however, is the very different level of detail I have in my head for various client companies at the same time.

I have a client who is in a very challenging position and as a result I can speak to the exact amount of cash they collected each day last week. I know the AP balance and the five most critical bills we have to get paid in the coming days. I know precise amounts of payroll runs, the day the cash pulls from the bank and how we have to manage cash so that payroll clears. All of this is important, but none of it adds long term value other than for the company to survive the next week so that perhaps we can think about the long term sometime down the road.

On the other hand, the Board meeting that I was attending was for one of my most successful clients. Four months into the year we are ahead of our most aggressive expectations. I can speak off the cuff to revenues, expenses and cash balances relative to plan. I can speak to where we have favorable and unfavorable variances and why. I have a framework for speaking to the amount of cash we will build between now and year end as well as the amount of debt we will repay. But the facts that do not need to occupy my mind are exact dates and amounts of specific vendor payments, payroll runs, cash collection dates, etc. As long as we are managing according to plan all of this can take care of itself and I can leave the details to the accounting managers.

Instead, I can use my time to think about various scenarios that we might encounter over the next three to five years. We can develop scenario planning models on how we will operate under different sets of economic and industry circumstances. The Board kicked off an active discussion of risks the company could face in the future. We plan to follow up this discussion with an in-depth call and spend additional time on this topic at a future Board meeting. The night before I had dinner with a Board member and had a discussion about how we could improve the financial operations of the firm. He had some good outside perspective and offered to spend some time with the team.

My point is that your CFO should be thinking about long term issues and related consequences. He or she should be part of an active discussion about long term risks and opportunities to the business. They should either be part of or driving the strategic planning process. If they are spending the majority of their time dealing with near term tactical issues or crises, then that is a sure sign that the business is troubled and the entire management team needs to be pulling together to get the company on a stable footing. It’s only from that position that the company can grow and become successful.

If you’re not sure where your company stands, walk into your CFO’s office and ask: What are you thinking about?