Where Does the Cfo & Tma (turnaround Management Association) Fit Into the Future of Busness
I was reading CFO Magazine recently, which ran an excellent article by Vincent Ryan, senior editor. The article entitled "Mastering the Turnaround" focused on the important role the CFO plays in a turnaround as well as during and coming out of bankruptcy. Throughout the article Ryan sited example after example of how key the CFO is to the correct strategies and implementation of a successful cost control, cash preservation plan to limit the devastation a company will face in bankruptcy and beyond. "The CFO has to be the arbiter of what's best for the company?" states Ryan.
Further into the article the CFO role is better highlighted: "A good CFO will recommend business and operational adjustments at the first sign of trouble, not when a default occurs", says William Lenhart, national director of restructuring services for BDO Consulting. Most importantly Mr. Lenhart points out a major cause of issues for companies big and small, public and private. He eloquently states: "During high growth years, inefficiencies creep into processes than can be quickly identified to pare costs."
I paused in my reading to ponder that statement. Why wait until a company is in trouble to pare down costs and inefficiencies that creep in during high growth years?
The CFO of a company, through the high growth years, is the one who should be the voice of reason, not only removing the inefficiencies and high costs during the high growth years, but preventing the inefficiencies from occurring.
The difficulty with this statement comes from a CFO's inability to do their job. When the CFO is, in many cases prevented from doing their job, the results become apparent. Whether it is a strong-willed CEO or a management team incapable of implementing the proper disciplines recommended by the CFO or a combination of the two, the CFO is prevented from creating the necessary environment of financial discipline and efficient process improvement to prevent these excesses from occurring. Example after example of turnarounds show a sampling of these theories, which prevent the CFO from creating, during a high growth period, the disciplines necessary to prevent the future downfall, which in hindsight can be seen many times way into the future, had someone been looking for it. The signs of the future storms are visible, like the handwriting on the wall for all who might be there to read.
My personal move from company CFO to Virtual CFO has placed me right in the middle of TMA, where professionals are working everyday to rescue and cure the ills created by management's inefficiencies and high cost environment during periods of high growth.
I have observed excuse after excuse from all levels of management within a bankruptcy scenario or a mere turnaround directed by the lenders in order to avoid bankruptcy. What are some of those excuses you ask? Good question and here are a few choice excuses:
1. The market has cooled off
2. The market is too hot
3. Too hard to find good, talented employees
4. Too much competition to maintain market share
5. We are in a recession
6. ________________________________ (fill in your favorite excuse)
I am sure you have heard many more, so many we could fill this page. The recurring themes in most cases are: "THE MAGIC BULLET" didn't work, no matter how much money we threw at it; and "I did every thing right, but the forces outside myself created poor results". Anyone familiar with the work of Jim Collins in "Good to Great" can tell you that pointing to outside forces and using magic bullets is a surefire approach to a extinction or bankruptcy, whichever comes first!
So where does all of that leave the CFO and the TMA?
Good solid companies, time and time again, will turn to a strong CFO to guide a recovery, a turn around or a bankruptcy. When measuring the results of successful companies you find great synergy between the CFO and the CEO as well as the executive management teams all working from the inside out to move their company's financial success. They utilize disciplined, consistent principles of sound management and financial restraint. No magic bullet, no excuses, no excessive spending and inefficiencies are few and far between.
When companies function within these core principles, the words turnaround and bankruptcy do not fit into their vocabulary. In that case, will TMA wear out its welcome? I believe not. As long as egos and inefficiencies exist I believe TMA is here to stay far into the future of business. Don't you?
Diane Dutton is an author, speaker, MBA & CPA, with over 26 years in business finance. Dutton is currently CEO of ESO Business Advisory Services, a Virtual CFO Company and CEO of CK Systemz, business software, currently providing Client Keeper to Beauty Professionals and author of A Woman's Ladder To Success.
Article Source: ArticlesBase.com
