The 3 Primary Ways Your Company Can Benefit from a Fractional CFO

Business owners often look at the basic numbers to know how they’re doing. How are sales? What are our operating expenses? How much money did we make last month? But they don’t use these numbers as a tool to grow sales, improve profitability, strategically plan for the future, and grow the bottom line. That is the key role of the CFO. But what happens when company management recognizes the need for a CFO, but cannot afford to hire someone in that role on a full-time basis? This is where a fractional CFO can be a lifesaver. Smaller companies that have a limited budget can get the same utility from a part-time CFO but at a significantly lower cost than hiring one as a full-time employee.

There are three primary ways that a CFO helps guide companies in their day-to-day operations:

  • Cash Flow Management: How much money will the business have tomorrow?
  • Profitability Improvement: Understanding and reducing costs
  • Financial Statement Visibility: Information that allows the organization to make changes

As a CFO with over 25 years of experience, I’ve seen the gamut of problems that organizations can face. Here are a few real-life stories of how using a fractional CFO for company operation problems resulted in success. None of these clients could afford to hire a full-time CFO, so they elected to hire one that worked for them on a part-time basis.

Cash Flow Management

The problem: An owner called Tuesday afternoon and said that he needed some help and asked if I could start work the next day. I arrived at his plant Wednesday morning and he ushered me into his office and closed the door. He breathed a visible sigh of relief and said, “I’m so happy that you’re here. I really need a CFO. Your first job is to figure out how we’re going to cover payroll on Friday.”

The solution: With the help of a fractional CFO, the company was able to put a halt to any further expenditures and found cash available through AR collections and deposits from customers for new orders placed with the company. Payroll was covered and a cash-flow forecast was put in place to manage the cash used in the company going forward. This ended the cash crunch, panicked deadlines, and managing the use of money going forward.

Profitability Improvement

The problem: A printing company was in its second generation and the son of the founder was now in charge. He struggled to maintain the profitability his father had achieved. The company had just lost $125,000 in his third year of leadership when he called for help.

The solution: A weekly profitability analysis was created for each completed production run. This uncovered a 35 percent variance from the production estimate to the actual production costs. The staff didn’t understand their costing structure and how standard costs were calculated. Looking at each job, the direct causes of the problems were identified, from slow press run times to set-up issues, to “third shift” inefficiency. Identifying those issues to plant operations prompted changes in quoting and production, increasing accuracy and eliminating production problems and waste. This reduced variances to less than five percent, improving profitability in the next 12 months to $410,000.

Financial Statement Visibility

The problem: An Internet retailer was having significant growth of 50 percent annually, but their financial statements showed huge swings from great profitability in one month to huge losses in the next. The owners knew that they had money in the bank but didn’t know if they were profitable.

The solution: The company was producing financial statements on a cash basis, not an accrual basis. This means that they were looking at how money flowed through the bank, not the profitability of what they sold. So, if they didn’t spend any money (pay their bills), they showed a large profit. If they paid all their bills, they lost money. Revenues and matching costs should be reported in the same period. Changing their reporting approach identified that the company wasn’t profitable. After some research, it was discovered that their pricing algorithm was wrong. Fixing the pricing model changed the profitability of the company and allowed them to continue their significant growth–profitably.

Fractional CFOs and the Bottom Line

Companies need someone who is strategic instead of tactical. They need someone who focuses on how to affect the bottom line, not to just report it. It doesn’t matter if the company is doing $2 million in sales or $2 billion. But not every company, no matter how much they need that advice, can afford to pay $250,000-$350,000 a year for a C-suite executive totally dedicated to finance. Many middle-market companies have steered clear of hiring full-time general counsels, chief marketing officers, or VPs of sales or HR in favor of hiring skilled executive staff on a fractional basis.

If companies don’t need a graphic artist full time, they hire an outsourced designer. For the same reason, they don’t have a full C-Suite of executives in every discipline. They can hire them on a fractional, part-time basis to provide the knowledge and business experience they need when they need it. Business leaders make decisions in many disciplines, and finance is one that gets left out more often than not.

It’s important for every business leader to know what the numbers are telling them. That way, they have the information that they need to change operations to drive profitability. That’s the key to success and growth for any company, which is why many organizations should consider hiring a fractional CFO.

How to Move People Past an ‘Us Versus Them’ Mindset at Work

The “us versus them” mindset is alive and well in organizations of all sizes, both domestic and global. Often, this type of mindset and bias results from command-and-control leadership and legacy business models, according to the recently-published 2017 Gallup Global Workforce Study (opt-in required). Among other findings, the study reinforces that only one in three U.S. workers are engaged, interactive and collaborative in the workplace.

Why is that?

One of the root causes of employee disengagement is an “us versus them” mindset. This mindset is a subtly pervasive form of workplace bias, preventing diversity and inclusion. Not only that — this mindset holds us back from achieving peak productivity and profitability.

Over time, an “us versus them” mindset becomes ingrained as a cultural norm. Dualism is fostered instead of dialogue. But It doesn’t have to continue to be that way. By breaking down big, hairy issues into bite-sized, feasible projects, collaborative and profitable dialogues are started across the workplace. As more and more small teams create remarkable client outcomes, the rest of the workforce will want to follow suit.

If you want to move past the “us versus them” mindset, start a dialogue about the profitability of collaboration.

Yes, profitability. When you talk profitability, you have a business discussion, not just a human resources conversation. You position HR as a profit center instead of a cost center. Have the profitable collaboration conversation across the organization, not just in departmental silos.

We need enlightened HR professionals who want to lead by acting locally. But where to start? Let’s explore where to find cases of the “us versus them” mindset in your organization.

Two Classic Cases of ‘Us Versus Them’

Dueling Departments

The first scenario turns people from different departments and professional disciplines into adversaries.

All you have to do is attend your next meeting, look and listen. Sales and marketing may be at odds with engineering and operations folks, and that is the way things always seem to go. For starters, employees speak two different professional languages. Also, historically, they are not motivated to learn how to speak — and think — like their colleagues across the table.

Alternatively, the legal or finance departments show up late in the project because, historically, they are excluded from conversations “until they need to be brought in.” You know what happens next. Projects are stalled or derailed, based on a behavioral precedent that has morphed into accepted business process.

These “but we’ve always done things this way” scenarios play out in countless meetings during the course of every week. As a result, non-collaborative, unprofitable “us versus them” biases are perpetuated. Why not address the bias, collaborate and move beyond that mindset?

Knowledge Workers Versus the Rest of the Workforce

Often, an “us versus them” mindset leads to resentment of the educational “haves” by the “have nots / couldn’t affords.” And often, less-educated colleagues and workers performing rote tasks don’t have opportunities to learn and develop in order to become part of the teams working on more complex tasks. However, manual workers may be just as capable of complex problem-solving as their more-educated counterparts, given the right tools. Typically, these workforce “Cinderellas” get stuck right where they are, eventually becoming entrenched in a biased, rote workforce mindset.

On the other hand, knowledge workers often have zero interaction with workers on the assembly line or loading dock, for example. Yet, rote workers often become beta test end-users of new systems, processes and apps created by their erudite colleagues. As a result, there is very little comprehensive appreciation and knowledge of what workflow theory actually looks like in practice. Often, these processes fall short of what was anticipated.

Think about how much you could improve the outcomes if knowledge workers collaborated with those end-user line workers, sharing feedback about product and process improvement. How often does that cross-training scenario happen in your organization? It’s not that hard to accomplish.

Bring People Together

Consider what would happen if you brought together a new cast of collaborators on behalf of creating enduring client outcomes. Either they’d quickly jettison old habits and mindsets, or the project would be derailed. As a result, project goals and outcomes would take precedence over ingrained habits. Colleagues would have no choice but to start connecting the dots differently, collaboratively and more creatively.

Eventually, everyone would work outside of their “normal” behavioral comfort zones. Consequently, team members would more readily leave their bias and baggage outside the door and view the project as a professional development opportunity. Once one project is a success, the team would have new expectations about how much they should collaborate.

Want to know how to overcome “us versus them” bias? Allow teams to experience what productive and profitable collaboration feels like. Let your own organization’s engagement scorecard showcase how two-thirds of employees are engaged, for starters. Why continue to settle for anything less?

#WorkTrends Recap: Building Strength-Based Organizations

A healthy organization runs on the idea that people should be respected for the unique strengths they bring to the table. A strengths-based organization takes this idea a step further and fosters an environment where employees are actively engaged in their work. This results in better productivity, retention and profitability in the long run.

On this week’s #WorkTrends chat, we were joined by author Josh Allan Dykstra as we discussed a better way to create strengths-based organizations. Although this concept has been around for more than a decade, most organizations have “false-started” on it. We explored why these “false starts” have happened and why it’s time to try a new approach. A truly strengths-based company is the competitive organization of the future.

Here are a few key points Josh shared:

  • If you align roles with what energizes people they will be intrinsically motivated to keep working.
  • The companies that intrinsically motivate employees are naturally the most successful.
  • There’s a difference between competencies and strengths. Finding the middle is key.

StrengthsMissed the show? You can listen to the #WorkTrends podcast on our BlogTalk Radio channel here. You can also check out the highlights of the conversation from our Storify here:

Didn’t make it to this week’s #WorkTrends show? Don’t worry, you can tune in and participate in the podcast and chat with us every Wednesday from 1-2pm ET (10-11am PT). Next week, on July 20, host Meghan M. Biro will be joined by Tim Low from Payscale to discuss how to put people first in compensation.

The TalentCulture #WorkTrends conversation continues every day across several social media channels. Stay up-to-date by following the #WorkTrends Twitter stream; pop into our LinkedIn group to interact with other members; or check out our Google+ community. Engage with us any time on our social networks, or stay current with trending World of Work topics on our website or through our weekly email newsletter.

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#WorkTrends Preview: Building Strengths-Based Organizations

A healthy organization is built and runs on the idea that people are respected for what unique strength they bring to the table. A strength-based organization runs on this idea and creates employees who are actively engaged in their work. This results in better productivity, retention and profitability in the long run.

Join this week’s #WorkTrends chat as we discuss a better way to create strengths-based organizations. Although this idea has been around for over a decade, most organizations have “false-started” on it. We will explore why this “false start” has happened and why it’s time to try a new approach. A truly strengths-based company is the competitive organization of the future – come learn more from author Josh Allan Dykstra.

Building Strength-Based Organizations

#WorkTrends Logo Design

Tune in to our LIVE online podcast Wednesday, July 13 — 1 pm ET / 10 am PT

Join TalentCulture #WorkTrends Host Meghan M. Biro and guest Josh Allan Dykstra as they discuss how to build better strength based organizations.

#WorkTrends on Twitter — Wednesday, July 13 — 1:30 pm ET / 10:30 am PT

Immediately following the podcast, the team invites the TalentCulture community over to the #WorkTrends Twitter stream to continue the discussion. We encourage everyone with a Twitter account to participate as we gather for a live chat, focused on these related questions:

Q1. How can an organization become more strengths-based? #WorkTrends (Tweet the question)

Q2. What are some ways to capitalize on individual strengths? #WorkTrends (Tweet the question)

Q3. In what ways can a strengths-based business outperform other organizations? #WorkTrends (Tweet the question)

Don’t want to wait until next Wednesday to join the conversation? You don’t have to. We invite you to check out the #WorkTrends Twitter feed, our TalentCulture World of Work Community, LinkedIn group, and in our TalentCulture G+ community. Feel free to drop by anytime and share your questions, ideas and opinions. See you there!

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