investiledysfunction

I’d previously written that honesty is not always the best policy and mentioned the case of Dov Charney, CEO of American Apparel, who called his company’s CFO, Ken Cieply, a “complete loser”.

Well, it seems things soured after the comment with Mr. Cieply stepping down from the CFO post of American Apparel on Friday, May 23. Good luck to Dov in finding a new CFO.

I’m a fan of straight talk as those who’ve read my blog know because there is a lack of it in the business world today as people tend to talk in euphimisms, jargon and platitudes all too often.

But there is a limit.  This weekend’s Wall Street Journal has an article Dov Charney and his company, American Apparel’s, growing pains.  (article available with password but a blog entry on WSJ is here)

Charney has built a very successful clothing company on the back of savvy marketing and merchandising but Charney who finds himself now the CEO of a publicly traded company probably should rein it in a bit.  He commented in an interview March 20 about his Chief Financial Officer, Ken Cieply, that Cieply “has no credibility” in the retail apparel industry and is a “complete loser.”  This probably is not a major morale booster for Cieply and also probably not smart for Charney to air American Apparel’s dirty laundry (pun intended).   

The one thing that finance and IT organizations constantly are complaining and moaning about is their inability to focus on strategy or become strategic.  These aspirations are never really well articulated but being strategic or better “a partner to the business” seems to have become the rage so everyone is constantly pursuing this.  It’s not a bad thing, but it doesn’t seem everyone understands why they’re doing this or how to do it. 

And in line with this, CFO Magazine ran an article entitled “Are We Strategic Yet?” which describes a study by our friends at McKinsey which found that 72% of new CFOs wanted to spend time on corporate strategy and 45% on M&A/business development but instead spent a lot of time on FP&A/reporting/performance management (56%) and accounting/audit/compliance (42%).  Typically, I’d be skeptical of research like this because a strategy consulting firm, McKinsey, issued it so it would seem a bit self-serving.  But I speak at numerous conferences and ”how do we become a more strategic partner?” is invariably a topic

For those who read CFO Magazine, it is customary they run an article describing this issue at least 2 or 3 times a year.  And this is not their fault.  It’s just that CFOs and finance organizations continually complain about this but seem to do little to tackle the problem.  They seem to be afflicted with the disease that Rose Macaulay nicely articulated when she stated,

“It is a common delusion that you make things better by talking about them.”

So what seems to be the problem?

• What the hell does strategy mean?  It sounds sexy to be strategic, but you were to ask CFOs and their finance organizations what it actually means, I suspect few would be able to articulate what this means.  I suspect many organizations and people across all functions would have problems articulating this.  So let’s agree on a simple definition of strategy.  Strategy simply is a plan of action to achieve particular objectives.  Feel free to disagree with me on that definition, but as this is not a post about the definition of strategy so I’m being sufficiently expansive. 
• Variance analysis is not strategic - Subtracting two numbers from each other and pointing to the resulting number as good or bad is not strategic.  Creating charts (no matter how pretty) which show a trend (”the bars are getting bigger so that is good”) is not strategic.  These are things that can be done by a college kid or an Excel-savvy middle schooler.  If we go back to our definition of strategy, it is about achieving particular objectives.  This means the finance organization is strategic if they can impact decisions that help achieve these objectives by utilizing data and information.  Just parroting back #s in interesting presentation formats is not strategic unless it helps to enlighten on these objectives.  If it’s just to look smart and busy, it’s a waste of time.
• Let bean counters be bean counters - This may sound terrible at first blush because the term bean counter has gotten such a bad rap.  Basically, not everyone is “strategic”.  What this does mean is that getting the numbers right and reconciling them and ensuring proper controls are in place has a lot of value - immense value actually.  And that the people who are good at those things may not be “strategic” nor do they need to be.  They need to make sure that invoices get paid and receivables collected and that people aren’t stealing money from the corporations coffers.  These are critical functions but not strategic per se.  They’re just required else the company ceases to exist. 

If the finance organization wants to be strategic, at least in part, they should focus on utilizing the information they have to impact resource allocation decisions.  To see an article discussing how to do this (and stop whining about it), please click here.