Welcome back once again, in this lesson, we're going to work on our very first day. What should we do first? The answer is nothing. Hey, everything. In this lesson, we're going to move beyond evaluating ourselves to begin evaluating your team. How do you know if you've got a good team or a bad one?

That's the topic of this lesson. Returning to my list of 101 things to do with the fish processing company, I was turning around. In this situation, I had the luxury of spending several months consulting with the company before being appointed to CFO. during these months, much of my time was spent surveying the situation. I spent my days walking around the office talking to the various executives, managers and employees having no background in the company or the industry. I asked a ridiculous amount of stupid questions.

But in asking these questions, and having them educate me about the business from the ground up, it wasn't long before my list of fixes began to grow. I kept meticulous notes from each meeting. documenting what I had learned, as well as some of my observations about the people I had met with, yes, juicy gossip that would be invaluable to share with people further up the food chain as we work towards ensuring that we had the right team to embark on an aggressive turnaround. As you can see from the list on your screen, some of my to do items were biggies like establishing key performance metrics, but many things were little things like circulating a report, one item took me 18 months to implement as I took the business and split it up into four different profit centers. Other two dues I could knock off in a few days, it was as simple as saying now we're going to do it this way.

I observed muffins go by and a quarter and close. The US company was a subsidiary of a Canadian public company. And I watched management perform the routines and sat in and and all the management meetings. And during these initial months, I was purposely and quietly making assessments, formulating plans and testing ideas. I was careful in timing, the release of the list of 101 things to do to do so without all the information would have left my findings more prone to challenge. And I was already stressing up the staff just talking about some of my ideas, change management and project management are important disciplines in a turnaround situation.

But coming out of this work, one of the key issues was that the finance function had lost credibility. But these were such good people and they were trying so hard that I know it was as disheartening to them, as it was frustrating for the other executives and the board of directors to articulate the situation. I came up with the following four slides. At the time, my objective was to capture what I was seeing and what I had in mind, and then later use this model with my staff to communicate and discuss current performance challenges with opportunities for improvement. In the years following my experience, it came to my attention that many of the big consulting firms also have similar sorts of tools that they call maturity models. So for the purpose of this lesson, allow me to jump on the bandwagon and call my simplistic three layers.

Model, a maturity model, albeit a poor CFOs version, I want to share with you the profile for each of the three levels. However, before we get to those three levels, let's talk about level zero failure. As this represents a finance function that's not meeting the needs of the organization or its stakeholders. It's either a function that is outright failing or has lost all of its key people. The first level is labeled compliance. Many small and medium sized finance functions struggle to keep up with the accounting and processing of information.

If you can relate, you will likely find yourself achieving this level of maturity. The second level of maturity is what I call center of excellence. And this happens when finance turns the corner and has better control over all of its responsibilities. I think all finance functions should at minimum be working towards or achieving this level. And finally, many finance organizations will only ever aspire to the third level, but for me, it represents an opportunity to reinforce continuous improvement. How Call this level, world class finance.

Let's look at each level more closely. As you spend your first hundred days in the job, you will begin making observations about how the finance function is performing. You'll gather information through discussions with your own staff, other managers outside of finance, and review the information prepared and circulated by the finance function. So as you gather these observations, compare them to some of the following operating characteristics of finance function. Achieving level one compliance may feel like a cleanup crew only becoming aware of key events and transactions after they have occurred. As a result, you'll often hear your staff complain that everything is an emergency and that they don't have time to deal with all the crap the other departments are dumping on them.

Every week as I flew down to Boston, I had to spend the first hour of my week listening to my controller complaining about all the crap that he was trying to deal with. I liked him a lot, but he really needed to vent like this just to get his week started. But this sort of culture wears out your staff. another indication of level one is that negative surprises just seem to keep on happening. The finance function has little visibility and is unable to forecast results. For the first couple of months at the fish processing company forecasting month and result was like throwing darts blindfolded.

I couldn't predict whether we were making money or losing money. At times, the more we sold, the more money we lost. Another trait might be when it comes to preparing financials for external reporting. If you hear any of your staff talking about issues being ignored because their inner material, it's either that they're lazy or they're overworked. We had a tree as sort of approach for dealing with financial reporting issues. This sort of approach is fine if you're the auditors, but if your management you should be more proactive and on top of all your accounting issues, and my favorite, hoping and praying that mistakes don't happen.

The first few months with my fish processing company. I had no idea what When the next shoe was going to drop, only that it would end did this stem from a lack of formalized systems and processes, either don't have the right resources or too few resources to dedicate to continuous improvement to break this death spiral. And finally, your financial reporting framework is likely very limited. You work towards regulatory or tax filing deadlines, but that doesn't make information timely or useful. The information may not be in a format that enables insight or decision making capability. The Board of Directors cannot figure out why the US subsidiary was losing money based on the information they are being provided.

The plant people blame the sales and marketing department for constantly changing the production schedule. The sales and marketing people believed that the cost structure was out of line and that it wasn't their problem. I used to say that we competed harder with our sales internally than we did with any of our customers, suppliers or competitors. If you hear any of this during your first hundred days, you can self assess the finance function at level one. Level One is a lot of work. And I've been in a few situations where the entire finance function relies on one or two key people lose them and the whole place falls apart.

You can be Pennywise and pound foolish if you want to keep running a finance function like this. Unfortunately, one challenge you may have is that the CEO or the board also perceived the finance function as a cost center in these situations with cost containment as the primary objective. This makes your job even harder to escape a level one sentence. Level Two is a very achievable model for most finance functions. Let's review what level two looks like. At this level of maturity.

You have a full staff complement of the right skills and sufficient resources to fulfill your mandate. Also, your systems and processes are well defined and established. They are designed to accommodate issues as they arise without upsetting the normal workflow. Very importantly, nothing surprises you or your team, you're connected and in the loop about all that is going on the business, you know, you have turned the corner when other managers and executives start turning to you or your group for advice. It could be financial analysis or terms of a sales agreement. This is an initial indication that the finance group can provide value beyond just keeping the books.

And in that thing, the financial reporting framework is multi dimensional. It not only meets gap, but it also provides information in a format that enables insight by management and the board of directors. Level two feels good. Finance is a partner in the business along with the other departments. So if that's the case, what work in finance offer in level three, level three world class finance is an ideal state. It's based upon ever improving best practices.

It's a fundamental shift in the perception of the finance department. From what is a cost center to a value center? Let's look at the operating characteristics. To achieve this, the finance group needs to be actively exploring opportunities to create value through such things as Investor Relations, financing structures, tax optimization and risk management. The finance group thinks and acts as a center of innovation as well. It could be as simple as finding new ways to tighten up the closed process to implementing new and better reporting tools.

And world class finance functions the finance group and you as the CFO are called upon to act as a strategic adviser. Finance is uniquely positioned to bring a 360 degree perspective to different types of opportunities. Every decision made offers a risk reward trade off and who better to make these sorts of decisions then the finance function. And finally, the reporting frameworks enhance not only to provide a clear lagging financial indicator of performance, but a real time in leading view as well. By measuring key performance indicators in real time management has the opportunity to intervene and react more quickly to changing assumptions. Well, I get pretty exciting to seeing all that happen if you work or run a finance department, where you can honestly say the finance is delivering on all these expectations.

In fact, the simple if maybe sad reality is, is that many non financial people in the organization don't even realize what a value creation oriented finance function can provide. So in this lesson, we discuss assessing the situation, where does the finance function you inherit or manage today stack up in the context of these three levels of maturity, changing levels doesn't happen overnight. In fact, you can use this sort of maturity model to set up an annual plan for your department, something for you and your staff to work towards. When you pull your plan a year from now, the idea is that you See a measurable improvement of the maturity model for one or more facets. There are a few more pieces to get into place before we can start acting upon these findings. In the next lesson, we're going to talk about building a finance team, as this alone may address some of the issues you have identified.

Until then don't stop to get to talk when you get to stop.