THE DILEMMA OF A CFO & HOW TO GET OVER IT

There is a classic anecdote about an conversation between a CFO and a CEO .

An HR head proposes a training program for a sum of USD 1 million for a new team hired under the program " FAST ACHIEVERS " .

When the proposal comes for discussion the CFO puts up his point that what would happen if we spend this amount and these recruits post training leave the organization.

The CEO replies " What if we do not train them to be effective and they remain in the organization?"

This type of conversation is a typical conversation which takes place in every corner office and often the CFOs are caught on the wrong foot.

It is the job of a CFO to ensure that every penny spent is worthwhile and there is a Cost Benefit Analysis for the same.

But there are some costs for which it is difficult to guarantee returns as in this case and the best way for hedging such costs need to be determined by looking at alternative ways of improving productivity .

The CFO in today's time needs to understand the difference between traditional questioning on costs versus probing areas where costs can be reduced by means of technology .

The power of automation and technology is not even 25 % utilized in most of the companies and the trade off should be to do such automations and invest in building capabilities , brands , technological break through , new markets and products which would take the company to reach next level and/or sustain in this highly disruptive atmosphere.

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Every CFO must think of bringing in new perspective of how to bring value to customer and not only look at getting more revenue from the same service , but rather more revenue from more customers by improving services at lower price points by improving efficiencies.

If the company can do that it will automatically create barriers to competitors from entering into their markets and allow the company to break through into new markets which would not only improve their revenues but also the profitability by reducing the per piece or per serve overheads.

To give one example if I am a CFO of a logistics company providing express cargo to my customer who ships 10 million pieces to United States at a per piece/kg rate of say USD 10 which makes his total cost at USD 100 million .

Now can I propose a solution where instead of sending everything through express I send 80 % through bulk cargo at a rate of USD 2  per kg and do warehousing at a rate of USD 2 at destination and another USD 1 for last mile making the total cost at USD 5 or say maximum USD 6 . Now if my margin in Express was USD 2 , I keep the same margin here and pass on USD 2 to the customer by charging him USD 8 and by doing that I create a moat and also give a weapon to the customer to bring additional business of say 40 % . So my overall margin improves by USD 800000.


In terms of  productivity improvement some of my experiences and successes have been in the following


In every organization the amount of time spent on the following , in my views , is highly non productive and can easily save at least 20 to 25 % of manpower and overhead costs

1. The cost of churning Management Information Reports : The amount of reports that are churned by each department and the types and the ways in which they are done is one of the biggest source of NON PRODUCTIVE manpower . The best way to eliminate is to have a centralized system ideally under Finance and put up a DBMS ( Data Base Management System ) and on top of that an Intelligent Report Writer like SAAS or CRYSTAL with option to generate automated reports as well as sending report as per the scheduler .

Also option to design report can be given to the users for their one offs.

2. Meetings for Consensus Building

In most of the meetings there are at least more than 50 % of the people who have no idea what are they attending the meeting for and often the meeting has no defined agenda , timeline and even minutes are not distributed . Instead of having meetings Con-Calls are more effective and may be such meeting for Project can be clubbed with Monthly Result discussion where the HODs are present and they can download to their juniors

3. PPTs

PPTs for everything is another big time waster and most successful companies like AMAZON are doing away with Power Point .

In fact Jeff Bezos has written a mail to his employees not to have PPTs.