This episode features an interview with Michael Dinkins. Michael is a finance industry executive with more than 40 years of experience, and currently serves as President and CEO of Dinkins Financial and on the board of a number of publicly traded companies. On this episode, Michael discusses how the CFO needs to think about liquidity and access to capital, how to assess risk, why times of trouble reveal the true health of your business, and how to position your company to survive a crisis.
This episode features an interview with Michael Dinkins. Michael is a finance industry executive with more than 40 years of experience, and currently serves as President and CEO of Dinkins Financial and on the board of a number of publicly traded companies. Over the course of his illustrious career, Michael earned numerous awards during his tenure with GE and GE Capital, and served as CFO for five different public and privately held companies, the most recent being Integer Holdings Corporation, from which he retired in 2017.
On this episode, Michael discusses how the CFO needs to think about liquidity and access to capital, how to assess risk, why times of trouble reveal the true health of your business, and how to position your company to survive a crisis.
Key Quotes:
“A lot of people think of liquidity as ‘how do I get past the next 30 days?’ I think it's more of a five-to-seven year timeframe. You’ve got to plan your access to capital…[and your] ability to finance the strategy of the business over time.”
“I think the most important thing a CFO does is to make sure that the company has access to capital to execute. 90% of companies can't self-finance their game plan. They're going to need some type of external source of capital to execute the strategy. The CFO's job is to say, ‘I will get you that access to that capital on a timely basis, at good rates, with covenants that are not going to restrict you from executing your strategy.’”
“I serve on three different public boards, and I can assure you that [when Covid hit] no director came forward and said, ‘Oh, I've seen this before.’ This was unique…And the first reaction was liquidity. What many businesses did was draw on their revolver lines and put cash on their balance sheet–despite the fact that they know that the yield on that cash is virtually zero–just to be on the safe side because they could not predict how this was going to play out.”
“I think that before you go into a crisis, if you know what KPIs to look at and you know what things to really pay attention to that are going to forecast how your business performs…as soon as the crisis happens, you can say ‘Okay, I need to look at A, B, and C and I can kind of figure out how this thing's going to turn out for me.’ Some people know how to do that and therefore, when a crisis happens, they adjust.”
“People ask me ‘What’s the most important thing about a successful CFO?’ and I say it’s communication skills. Because they sit at their desk and they have an aha moment–so what? If they can't leave that desk and go convince the CEO and the rest of the management team and the board to go and execute, it doesn't work. They can have an aha moment but they've also got to be able to package and communicate it.”
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Links
[00:00:00] Michael: [00:00:00] I think the most important thing a CFO does is to make sure that the company has access to capital to execute 90% of companies can't self finance the game plan. The CFO's job is to say, I will give you that access to that capital.
[00:00:16] Ben: [00:00:16] Hello and welcome to the invisible vault. This episode features an interview with Michael Dinkins.
[00:00:21] Michael is a finance industry executive with more than 40 years of experience, and currently serves as president and CEO of Dinkins financial, as well as on the board of a number of publicly traded companies over the course of his illustrious career. Michael earned numerous awards during his tenure with GE and GE capital.
[00:00:39] And served as CFO for five different public and privately held companies. The most recent being into your holdings corporation from which he retired in 2017. On this episode, Michael discusses, how the CFO needs to think about liquidity and access to capital, how to assess risk. Y times of trouble reveal the true health of your business and how to [00:01:00] position your company to survive a crisis.
[00:01:02] But before we get into it, here's a brief word from our sponsor.
[00:01:07] Mackey: [00:01:07] The invisible fault is powered by the team at Kyriba the global leader in cloud treasury and finance solutions, empowering CFOs, and their teams to transform how they activate liquidity as a dynamic real-time vehicle for growth and value creation.
[00:01:22] Michael: [00:01:22] To learn more, visit Kyriba.com.
[00:01:25] Ben: [00:01:25] And now please enjoy this interview between Michael Dinkins, president and CEO of deacons financial and your host, Tom Butta.
[00:01:34] Tom: [00:01:34] Hi, I'm Tom Butta. I'm the chief marketing officer of Kyriba welcome to the invisible vault. I'm here today with Jon, our producer. Hey Jon, how are you? I'm
[00:01:43] Jon: [00:01:43] doing great, Tom.
[00:01:44] I am excited for everyone to hear the interview we just did with Michael Dinkins. I am also curious what you thought were some interesting takeaways that came away
[00:01:52] Tom: [00:01:52] from that interview. Uh, I think one of the key things was just how, um, Comprehensive the CFO's job is [00:02:00] what a CFO is doing is continually ensuring that they have the right information at their fingertips so they can make quick decisions in order to protect the business.
[00:02:11] And when things happen that are unexpected. You know, like the pandemic arises out of nowhere that you actually preplanned your risk by having the right type of access to capital. And by, by being able to make the decisions, as I said, that'll protect the business. And one of the things that I thought was very interesting about Michael and he emphasized that a few times.
[00:02:35] Is, yeah, CFO needs to have access to a lot of information and needs to know a lot, and they might have all the right data and the process set up to act on what that data's telling them. But sometimes having the conversation with the people who are involved in the area that's, you know, under inspection, as it were, provides a really, really important context.
[00:02:57] And that makes all the difference. Yeah,
[00:02:59] Jon: [00:02:59] absolutely. [00:03:00] I'm excited for everyone to hear this interview. I think there's going to be a lot of fascinating takeaways. Please remember to follow and subscribe to the show on whatever podcast platform you listen. If you listen on a platform that allows you to leave and a rating, please do so and hope you enjoy this episode.
[00:03:15] Michael Dinkins. Thanks for listening.
[00:03:20] Tom: [00:03:20] Welcome to the invisible ball. I'm your host, Tom Butta CMO of Kyriba. And today we're joined by a really special guest. Michael Dinkins, Michael, how are you?
[00:03:31] Michael: [00:03:31] I'm doing well. Thank
[00:03:32] Tom: [00:03:32] you. Good. Good. Your bio is an extraordinary bio. I have so many things I'd love to talk with you about, but it's clear that you've spent an awful lot of time in the, in the finance industry.
[00:03:43] And I've got to ask what was your first job in finance or finance related area? My
[00:03:49] Michael: [00:03:49] very first job was, um, when I joined general electric company on their, uh, financial management training program. And I was a supervisor in accounts receivable, [00:04:00] and our job was to get these copies of, uh, checks that was coming from lockboxes and KMN so that it could be Keven overnight, you know, back when you had the, they go IBM, mainframes.
[00:04:15] And apply them to all the customers and then check it the next day. So I was a supervisor and the counselor. See what? Well, that was my very first job. Although I've been exposed to finance throughout school, working with my uncle at 10 electric company, which is a family owned business, which will settle a break 100 years of operations on next year.
[00:04:37] Oh well, congratulations generation of family running nap. So I got some exposure to that working with my uncle and his accountant and just understanding the financials of Taylor electric company, but in a paid job. But, um, probably my first exposure to just helping my uncle with his business. And as it turned out, [00:05:00] I was learning more than I was contributing.
[00:05:02] So he knew it quite well.
[00:05:05] Tom: [00:05:05] Yeah, that's great. Was there any pressure or desire to follow in their path? You know, of being in the family business?
[00:05:13] Michael: [00:05:13] I started school. I, um, started major electrical engineering to go into the family business, but I had zero interest in it. I had a accident working there during the summer where we were at a factory and I was working in the panel and my uncle said he had turned it off.
[00:05:32] So I'm pulling the wrench down, but the bottom half of the panel was still alive and I touched it with the wrench and it threw me backwards about five feet. I felt absolutely nothing. So I thought, Oh, I must be in heaven. I sure hope so. Um, yeah, I can feel the ground on like, well, heaven can't be dirty. So, um, Oh my after [00:06:00] that, I decided to, I don't want to be an electrician.
[00:06:03] Um, don't want to do that. Luckily I was not harmed one. I owed those insulated wrench that I had. I obviously blew out the factory. My uncle was not a happy camper and he was yelling, you know, I said, I thought you said the panel was off. He says the factory is still running. I just turned off the top. So I didn't like it from an academic point of view of being an electrical engineer.
[00:06:26] And I wasn't very good at it as an electrician. So I decided I'd become an infant Nance. That would be a better career move for me. And it had been something I'd always been interested in. So, um, I just went back to what I was interested in.
[00:06:43] Tom: [00:06:43] Well, you've, you've obviously had a lot of success in your career.
[00:06:46] Um, and even just getting into the, the management training program at GE was, you know, was an accomplishment all by itself. You must have, must have learned a lot. I mean, that was it's legendary.
[00:06:57] Michael: [00:06:57] Yes, I did. It was a fantastic [00:07:00] training program. And I had the privilege of actually teaching one of the courses for five years.
[00:07:05] So not only did I graduate from it, but I became an instructor and actually taught it for five years. And that in the rotational jobs that they had in the financial management training program really does prepare finance people very, very well.
[00:07:19] Tom: [00:07:19] Yeah. Was that on the campus? And, uh, it was in Westchester.
[00:07:23] Michael: [00:07:23] The classes that you took for the financial mentor training program, which are local business taught by local managers, then there was portions of classes. Once you graduated for the financial mentor training program, there were series of classes that you would go to Crotonville to take additional courses that.
[00:07:40] Yeah, groom new for management, both. Some of them very Pacific to finance and others that were more broad, general type of opportunity. So once you got through the FMP program, yeah, she did go to Crotonville and take us through a series of additional courses. Yeah,
[00:07:57] Tom: [00:07:57] well, well, that's, that's fantastic. [00:08:00] And so from GE you went on and had a lot of different leadership roles, and then you became sort of the man, as it were as CFO in a bunch of different companies, then CEO.
[00:08:11] Maybe, can you give us a quick snapshot into that journey? Well,
[00:08:15] Michael: [00:08:15] one of the things that I, um, I love G and I learned a lot from GE and, but one of the challenges was the fact that I found myself going to meetings and being a party to decisions, but really not party to implementing them. So you went to a meeting, you might decide that you need a warehouse, so you need to do something and you will then turn it over to, um, Do you know, some people from corporate that would go and look at the property, et cetera.
[00:08:42] I want it to be more hands on. So when I left GE in the very first job I went to, it was the CFO role. It was with a printing company in Richmond, Virginia called Cadmus, which subsequently been bought by other companies. And, um, They're [00:09:00] primarily thing that they were looking to do was to grow the business and do a lot of acquisitions.
[00:09:06] And I've gotten a lot of exposure to doing acquisitions of integrated number when I was at GE capital. So I leveraged that aspect of things to join the company and, and, um, You know, become a CFO. And it also gave me an opportunity to really understand the right-hand side of the balance sheet, uh, when you're working in operations and manufacturing and, you know, left-hand side where we sitting was inventory and those types of things, but then getting over to the right, the right hand side, where you start worrying about how much debt and equity you have.
[00:09:38] Uh, and how to attract that debt and equity in the marketplace. Well, that's what my background training was. I was a finance major, not an accounting major, and that's what I picked up at GE capital. And that's what I love. And I kind of always try to go with businesses that were growing and changing and doing something different because.
[00:09:58] Also to be [00:10:00] candid working at GE, it seemed like every time I turned around, I was working on another productivity initiative, which I III meant laying people off and restructuring. Uh, I want it to do something growth and, and doing, you know, making the business grow. So that's what Cadmus did. You know, we probably doubled the size of the business in two to three years, went through a series of acquisitions.
[00:10:25] Had to go out and do a secondary equity offering, obviously had to do debt financing for all of that. That's what I like to do. And they gave me an opportunity to do that.
[00:10:36] Tom: [00:10:36] Yeah, that's great. You know, you, you talked about, in my words, the importance of understanding the liquidity of a business in terms of helping to accelerate and manage growth.
[00:10:48] So if it's okay, I'm going to, I'm going to shift here into, uh, our first segment of this podcast, which we call cash crosswords. She'll meet them.
[00:10:59] Michael: [00:10:59] There's Katie [00:11:00] money. When do we talk about money?
[00:11:04] Tom: [00:11:04] And I'd like to specifically. Get a sense from you of really how you think about. Cash and liquidity. And the differences between those, those two terms as a finance major versus an accounting
[00:11:17] Michael: [00:11:17] pager?
[00:11:18] Well, cash is, um, the short term assets you actually have, but liquidity is what you have access to and how quickly and how easily can you get access to it while the, to draw down on revolving line of credit, when this, the ability to issue commercial paper, when you want to upsize a term loan. Oh, there's a number of different ways to provide the liquidity.
[00:11:42] And when I think about it, it's a case of matching up. What you are forecasting and strategically trying to get done with your company, with what options that you have and having more than one options in terms of being able to finance the company [00:12:00] long-term and not being boxed in that, you know, if I can't get into this market at this particular window, then I have no way of financing the company and what they intend to execute.
[00:12:11] So I think one of the things that our CFO tries to do is, yeah, I have a preferred path, a that's going to provide me with the financing. When I think about liquidity also, I'm not thinking about 30 days out. I'm thinking about two, three, four, five years out because the ability to finance the strategy of the business over time and have access to the capital to execute, what is the strategy that your CEO and the rest of the company plans to do?
[00:12:40] Yeah, you kind of have to plan that out and say, Hmm. There's no way to generate internally cash should do what we want to do. So we definitely have to go on the market. So we need to be in the market in this timeframe. We need to spread out our debt on this mature too, so that people will not be worried about our risk [00:13:00] and risk and so forth.
[00:13:01] All those things come into play. I think a lot of people think who liquidity is, you know, how do I get past the next 30 days? I think it's more on a five to seven year timeframe. You've got to plan your access to capital and recognize that if you don't get your margins to X. Your ability and get your leverage down to some number, your ability to go back into the market will be limited to just maybe a and B.
[00:13:31] And if the market's closed for that, then all of a sudden you can't execute the strategy the company was. Or if you do execute that strategy and you're doing it a hundred, 200 basis points, higher cost, and what you. Had anticipated, then that means that's, you know, the, the cap ex and other things come down.
[00:13:51] So I think that's where I think about liquidity more longer term, but also in today's world. Think about the [00:14:00] counterparty risk of who am I doing business with? Who's on the other side, I think about some, um, city just recently that had $2 million invested in green cell. Interesting. I can see them three months ago doing the year end.
[00:14:15] Report saying, Oh, things are fine. We got $2 million in the bank, everything. Well, you got to pay attention who you put, gave that money to and what they're doing. And, um, you know, you get into the details, you realize that they're taking risks. So I, I think also liquidity. When you think about it, you say, I have money parked here.
[00:14:35] I have money parked in these instruments, but you know, you might think that an instrument is liquid. But you got to pay attention to the volume of Trayvon in that, and that instrument that you have and saying, if I really want to get out, it takes 40 days. It takes four months. Um, I can't get out of this instrument that I'm in, you know, relatively quickly.
[00:15:00] [00:15:00] There's a lot of aspects to it that you had to pay attention to. And. There's a whole nother world out there that I think CFOs also have to pay attention to, which is, um, electronic currency Bitcoins and so forth cryptocurrency. That's an entirely different world that the whole blockchain and how that's going to be utilized going forward.
[00:15:22] All of that's going to be impacting liquidity. And I think also with populism, it used to be the getting your money out of a country. No, and you knew how to do it. It might be a little cost to it, but now that you could pop up and all of a sudden they pass a law or something, you just can't move your money out.
[00:15:41] So I think the governmental and political risk comes into play also. So I, you know, the CFO's job is getting much, much more complicated. So when I think about liquidity, All of those factors come into play. And I think beyond just [00:16:00] 30, 60, 90 days, I think in that three to five or seven year timeframe, because I think the most important thing a CFO does is to make sure that the company has access to capital to execute 90% of companies can't sell finance, their, their game plan.
[00:16:16] They're going to need some type of external source of capital to execute the strategy. The CFO's job is to say, I will get you that access to that capital on a timely basis at good rates with covenants. It's not going to restrict you from executing your strategy and all, by the way, all the counterparties on everything we're doing, I'll monitor them too and make sure that we don't have our money or something tied up with somebody that's going to create a problem for us.
[00:16:47] Tom: [00:16:47] Right. Yeah. Or a risk in your receivables or foreign exchange
[00:16:51] Michael: [00:16:51] exposure, you could have a major supply my company and they're doing crazy stuff. And you're sitting there saying, [00:17:00] yeah, the passing, all the metrics in terms of quality and on-time delivery. And we're great with them and a supplier and everyone's happy having them do better pay attention, what they're doing with the balance sheet and to Nancy and so forth.
[00:17:13] So I think it's becoming more and more. Complicated as we have a global business and political risks and populism that comes up was a big push. When I was, you know, in the seventies and eighties about global, global, global, and everybody was trying to make the rules easier. Then all of a sudden you've got tariffs coming in and you got this coming in.
[00:17:35] So. Those tariffs, um, means that you're hedging plan for currencies could be dramatically different than what they were in the past. So those are the things that I think about what liquidity. Wow. That's
[00:17:47] Tom: [00:17:47] that's a lot.
[00:17:52] Michael: [00:17:52] And there's another piece to it. As companies become more customer centric. I E the, they want to respond [00:18:00] to, uh, what the customer needs are almost real time. And I won't say the company, but it was talking to them and the customer made a change in terms of what they wanted to do. And an operating manager was bragging rightfully so how they turned that around and over the weekend and started doing something different for the customer, but I'm think like a finance person I'm like, Hmm.
[00:18:23] I wonder if that's going to be at the same good margins that your previous business was since that's probably may not have been covered in your contract at all in terms of how to price this. So everyone got this all done. So now how are we going to price it? No, by the way, how do we price it and put it on an invoice that.
[00:18:41] Somebody on the other side is going to pay him pay on a timely basis and you don't get the invoice tied up for the 120 days because people say, I don't understand what this is, and it doesn't match up in the so parched number that never existed before. So all these things come into play from a funniest person that says the more customer [00:19:00] centric a company becomes the more flexible in real time.
[00:19:04] You have to be in finance in terms of the ability to react to that. So you're. Operating people want to on a Friday, say, yes, we'll make a change for you in, you know, be making it for them on Monday. You got to make sure that you still have the same margins on that and still have are better. Actually, it should be a little bit better since you're.
[00:19:29] You're reacting at the last minute and it doesn't get caught up in, in, um, doesn't get paid on a timely basis till they get paid every 15 days, 30 days, 45 days, whatever it is, it gets tied up for 120 days or something. So long-winded answer to your question on liquidity. All those factors come into play.
[00:19:47] Tom: [00:19:47] Yeah, well, there's clearly a lot of complexity to it, and it's also clear based upon what you're saying. That is absolutely central to effectively the future of every business. My, [00:20:00] one of my questions is you kept talking about the CFO needs to know the CFO needs to know the CFO needs to know it's a lot for the CFO to know.
[00:20:06] Is there, you know, is there anyone whose job it is, is to really manage liquidity across the enterprise, across the supply chain? You know, across the different areas of, of, of finance and beyond. So
[00:20:20] Michael: [00:20:20] CFOs. Yeah. And that's the reason why I bring that up. It's the CFO's job that even while you were assigning it, a regional contract, they have wording in it that will give you that flexibility.
[00:20:33] To react on a real time and then still do all the backroom stuff and things don't get caught up. Those are the factors is the CFO's role in the treasurer's role, the relies on most real time that this deal has changed and for them to recognize. So since you're doing that, that means we're going to source more out of Mexico.
[00:20:56] Yeah, I've got labor in Mexico. I may have hedged it and think I'm okay [00:21:00] on my margins. But now, since I found out what we did over the weekend, I need to be re forecasting and I might need, need the hedge to pay. So even more because I'm gonna be making the product or service with, um, peso labor, but I'm still gonna be.
[00:21:18] Selling that in us dollars. So it's those types of things that on a real-time basis, because you know what the factors are in your forecasting, it's the intellect and knowledge of the, of the treasurer and the CFO. The tools are just the ability to say, instead of taking four or five days to recalculate, how much you need the headset pays.
[00:21:39] So you could do it in a matter of a few hours. And that's where technology comes in. And now I'm actually executing. So they did that over the weekend. And within a few hours, I can figure out if I need to, you know, start hedging that peso your Monday morning. That's the ability. I think, you know, you gotta, you gotta first [00:22:00] have that issue recognition, but then you want to have the treasury tools and technology to know where your baseline is and what you need to do differently.
[00:22:07] So I think the answer to that is the CFO owns it. That's where, and you don't want the CFO to miss that, get all done with it. After the game is over with and you're, you're figuring out the quarter, you say, Oh, our margins are down because you know of currency. Uh, well I know you had a chance to maybe protect.
[00:22:28] Tom: [00:22:28] Yeah, exactly. So, so which leads me naturally to my guest today is the one year anniversary of when the CDC called, uh, you know, the Corona virus pandemic. Right. Amazing 12 months. We all know what happened, you know, in that time period. I expect the board, suddenly board calls suddenly started flooding in right to every CFO CEO calling the CFO.
[00:22:55] You know, what, what was that like? What was that? Do you think that experience was like for all the CFOs that [00:23:00] you've talked, but then you've been through, you've been through, I expect a couple of other of these sort of financial crises. These moments that are, you know, there's a lot of uncertainty I
[00:23:09] Michael: [00:23:09] serve on, um, three different boards, public boards, and I can assure you that no director came forward and said, Oh, I've seen this before.
[00:23:20] Let me, let me tell you how I managed through it. So this was unique. So this one was unique. The situation where everyone is sitting in a house and nobody's going to work and, and, um, no one's traveling. This was something you need. The first reaction was liquidity. And what many businesses did was they draw on the drew on the revolver minds and put cash on their balance sheet.
[00:23:46] Despite the fact that they know that the yield on that cash is virtually zero, but just to be on the safe side, because they could not. Predict, geez. How is this going to play out? And even if [00:24:00] my bank is going to be solid through this and okay, so let me just draw my line and the Delta between the two, because you know, you're paying a little bit of basis points just to have the unused portion on your line.
[00:24:13] So. You drawing your line paid a little bit. Interest rates were so low. So that's what a lot of people did. So this one was a unique one. Then as you came up and kind of figure things out, I think in many cases for some of the businesses, I was connect to connect it to you realize it wasn't going to be as bad as you thought, which was, you know, drastic was going, gonna potentially.
[00:24:40] Not make it through this thing. And then you start coming up with a game plan. How are we going to get back to business on what can we ship? What can do, right? And then if you had a robust forecasting system and as I work with different businesses and talk with different businesses, the turnaround time to do a forecast, [00:25:00] Measured from some people able to do it in a few days to some people, it took them a few weeks and it really just shows the processes, whether they were documented understood.
[00:25:10] You knew the variables to update your trust, your system, that people know how to use them. So I think that's where all your tools and processes started showing whether they were robust or not. The fact that some businesses were able to. Get a handle on this and figure out where they were at in a matter of days.
[00:25:29] And some just threw up their arms and said, we don't know. So you're
[00:25:33] Tom: [00:25:33] basically, there's, you're talking about the fundamental need for visibility.
[00:25:38] Michael: [00:25:38] I, I think that before you go into crisis, if you know what KPIs are, look at, you know, what things to really pay attention to this, going to forecast how your business perform.
[00:25:53] And I use the analogy sometimes where a ledger system is like a scale that you get [00:26:00] on in your way, so much at the end of the period. But. Somebody knows the diet of what you ate every day. Somebody knows, you know, in sales and so forth, somebody in operations know how much exercise you have done and what your cardio and how often you exercise.
[00:26:18] You get those two pieces of information over a period of time. And you know, the starting point, you can predict that weight pretty easily. Well, if you have those KPIs within your business and know where to monitor in, as soon as the crisis happens, you say, okay, I need to look at a and B and C and I can kind of figure out how this thing's going to turn out for me.
[00:26:40] Some people know how to do that. And therefore, when a crisis happen, they just. Execute what they adjust and they figure out, okay, here's what we need to do. And others, they don't know. And they're debating which ones were really. Tell them how things are going to turn out and some [00:27:00] have to just throw their hands up and say, well, I'd get on the scales at the end of the quarter.
[00:27:03] And we'll see how much weight we gain a loss crisis. Like the COVID will reveal where you are on
[00:27:10] Tom: [00:27:10] that. Where would you say most companies are as you talking about tools and systems and the ability to operate in real time, have visibility in real time. Talk about. The need to be able to forecast with confidence, right.
[00:27:23] You know, at the same time having, um, this agility, uh, vis-a-vis foot being, being flexible, we've talked about having awareness of currency fluctuations, regular regulatory impact. And those are just a few of the things that you talked about in terms of sort of managing risk. So that means that. As you said the CFO needs to have the systems, not just the intellectual horsepower, but the systems in place to enable them to make more confident decisions.
[00:27:52] I mean, where, where do you think most companies are, as it relates to call it the digitization of corporate finance? [00:28:00] And
[00:28:00] Michael: [00:28:00] I think it was beyond corporate finance. We can remember because corporate finance is coming with the scale. They obviously need the treasury part operations and sales management. And I do this without the ability to really have the data.
[00:28:14] This is my impression, but I think we're in pretty good shape. Because I think the vast majority of, um, companies manage through this pretty well and, uh, got the hands on it. I think another key factor, the, what you just said, and it may be also what's differentiated. Is the ability for the CEO and the CFO of a walk into a room with their board in their subordinates and convince them they know, because I'm looking at a and B, we need to go do this and get people to execution sooner rather than later, I think that's the other key factor or someone that says.
[00:28:53] And I'm worried about it. I need some more data and you haven't gotten the execution. You're still trying to figure it out. So don't [00:29:00] underplay the personal performance of the CEO and the CFO and their communication skills and people ask me, so what's the most important thing about a successful CFO. And so it was this communication skills because they sit at their desks and they get an aha moment.
[00:29:17] So what if they can't leave that desk? And go convince the CEO and the rest of the management team and their board let's go and execute. It doesn't work so they can have an aha moment that they've got to be able to package and communicate it in general. I think corporations manage through it pretty well, but just their supply chain and did fairly well managing through it.
[00:29:44] That's my impression. I don't have the data. I'm sure some McKinseys and others will go back, do some study Harvard, you know, and post mortem on COVID and we'll see what the data says. But in general, I think, uh, corporate America, I don't know about two European [00:30:00] countries because I haven't traveled a lot and really not into the details of their performance of their companies, enough to have an opinion, but I think we did reasonably well.
[00:30:09] And I think it's part of it. I, I know. That a good portion of it, where you do have a bell curve where I'm sure you're going to point to something that did horrible, but in that middle, I think was fairly good performance. And I think a lot of that has to do with the fact we have competence, CEOs and CFOs and our various organization.
[00:30:29] And again, no matter how much data you have. And the clarity of that data to tell you where to go somewhere else. So make the decision and convince everyone around them that they were ready to go. This is what we're going to do. We're going to shut this plant down. We're going to keep this going and we're going to do this.
[00:30:47] We're going to do this. We're going to accept this order. We're not going to accept disorder. We can get the employees back in and this'll be the protocol for COVID to keep them from being, you know, becoming ill. It gets down to [00:31:00] leadership and leadership gets down to communications.
[00:31:03] Tom: [00:31:03] That really gets us into our next segment, which we call the playbook.
[00:31:07] You
[00:31:07] Michael: [00:31:07] hand me an idea that I can shock the world with. I got one more page in my playbook. I get out there and
[00:31:16] Tom: [00:31:16] that's really where we drilled down into the specific strategies and tactics that are used by CFOs to do the kinds of things that you've just said, which is. Really to lead. So you talked about the importance of data as a baseline, talked about the importance of the right tools.
[00:31:31] And then you talked about then having the confidence to make decisions and communicate those decisions or decision paths confidently. Do you think that CFOs largely have the data that they need and have the tools that they need at the same level for the office of the CFO as say the office of the CRO, the chief revenue officer or the.
[00:31:52] Yeah, the
[00:31:53] Michael: [00:31:53] CIO. And I think that's a broad question when you think about across America and the various different industries. [00:32:00] So it's hard for me to answer for general across America, but let me give you my impression. I do believe that the CFO has the data that they need. I'm of the mindset that it doesn't all have to be digitized and come to you real time and a dash water, et cetera.
[00:32:17] You can pick up the phone and call one of your manufacturing plants and ask them two questions and kind of know if they're on, on, uh, two or three questions and know if they're on track to make the quarter are things are going on. So one of the things that I think in terms of data, Is just pick up the phone and call key people that are running various operations, have a brief conversation with them.
[00:32:39] You can get an insight and, and, and in many cases there's a, there's a particular plant or operation at that point that doesn't have a good quarter. You're going to have a, be hard to make the quarter. But I do want to also emphasize that what the things that a CFO is should be doing right. There's now only calling where you don't have the data [00:33:00] digitize, just call around and ask and you can probably get the information.
[00:33:03] So from that point of view, I say yes, but I also want to emphasize that a CFO should be worried about the longterm. They know that they put together a three, four year plan where the business is supposed to be executing a or B, and they know that this project needs to get done. So maybe they're supposed to be a new sales person added to get you into a new market or something.
[00:33:26] And the whole game plan was to get that person on board in the first quarter of 2020, and recognizing no one can travel. People can't do interviews. You got to think in your mind that, Hey, this person's not coming on board. We're not going to be introducing a new geographical area or a new product or whatever, because of this happening.
[00:33:46] Let me give an early warning to everybody now that our strategic plan that says, well, this is where we're going to get an improvement. From 21 over 20, is that risk? So the CFO should be worried both not [00:34:00] only the short-term beta in terms of, um, calling around and getting information they need. But also the more long-term data that says let's get an early warning.
[00:34:10] We're going to have a problem come late 2020 on this fourth quarter. And it's time to do the 21 budget because we knew we was gonna, and I'll say maybe it's a geographical area or a new industrial is going to target because we hired somebody or a group of people in the first quarter did not happen.
[00:34:29] Let's start thinking now about what we could do as alternatives. So there are 21 is going to be okay. That's what a CFO has to do. And yes, I do think they have the data isn't all digitized and easily on a dashboard. So it just hits you in the face. No. If you got a phone call,
[00:34:46] Tom: [00:34:46] somebody, do you think it's possible that you can get all that data that you need or.
[00:34:51] The information that you need in a dashboard, do you think that's something that we can look forward to actually having for CFOs?
[00:34:58] Michael: [00:34:58] Um, a little bit old school and [00:35:00] I'm not sure I have that as an objective because when I was a CFO, the ability to pick up the phone and call someone. And talk to them and just have that dialogue back and forth.
[00:35:12] I just think that's richer insight and a dashboard with a number. Not that I'm saying you shouldn't have a dashboard with key numbers, but the habit as an objective, that that's all you do. That you can sit on a dashboard and look and say, Oh, I know exactly what to do in my company. I'm not there. I think there's a value there calling people and talking to them.
[00:35:35] Tom: [00:35:35] Yeah, no, no, no. And feeling it right. Getting a sense of that level of confidence as an example. Yeah. What about risk? You know, how do you think about risk in terms of make decisions on either, you know, big areas of investment or managing or protecting, you know, the potential downside, because you've got these models that you've created and you're talking about doing fi you know, models out five years, which [00:36:00] is, I mean, that's pretty far out there.
[00:36:01] How do you assess. The risk associated with those plans. And then, you know, both on the, on the upside as well as on the
[00:36:08] Michael: [00:36:08] downside, let me put the risk on a couple of different categories. I think there's execution risk that says, as I tried to accomplish a, let me think through all the various risks, you know, cyber security comes into play.
[00:36:22] Hedging currency comes into play. Fire comes in the play, you know, all these types of, you know, things that come into play on those things, that around execution type phase, then there's risks of other things going on around you because whoever would've thought. What's happened with game stock and their stock, and you're sitting there planning and you're like all of a sudden, what's the trading volume on your stock goals, you know, something crazy and something different that you had that.
[00:36:53] And not too long ago, the banks could not move funds around for almost a whole day. [00:37:00] So Matt as a sitting CFO, but I can imagine there were some people that were planning on getting certain things paid for and done and so forth. And all of a sudden the thought that they federal currency, the banks are not moving funds around.
[00:37:15] There's all those types of risks that are outside of your controls that you have to plan for. So I think that the. Way I think about risks is to really think about the unknown. And how would you manage through the unknown and probably the most important thing about that. It goes back to communications when it happens.
[00:37:39] Who do we need to get on the phone or zoom call and so forth, and how do we get execution and how do we know get out when you're a global business? How am I going to get the game plan and the information out to everyone? How am I going to find out what's happening in China? How am I going to find out [00:38:00] what's happening in India and so forth?
[00:38:02] So I think the way I think about risk is more around the systemic. Process of our ability to gather information about what's happening. And then disseminate out. What we want to do in is that process really, you know, pre plan who has the authority to make this decision, you can have one thing that says, Oh, before we do this and required for signatures in a crisis, you can't get four signatures on something.
[00:38:32] So do you have a plan to how to get it done in a crisis, particularly when person X is not available? So when I think about risk as is more along the lines that. Okay. The risk that we all kinda anticipate, you know, fire storms and so forth, political risks and so forth. But then we recognize that the unknown happens that you just can't, you know, plan for.
[00:38:57] I think about how, and I think, [00:39:00] again, what really impacts this is a level of confidence people have in the CEO and the CFO and other key leaders. That, when they communicate to the organization, they can get to execution and buy-in of execution faster than say the other organization, because, Hey, you read about a CEO, you hang up the phone and the CEO finishes saying a, B and C, and there's somebody somewhere saying maybe I'll do it.
[00:39:32] Maybe I won't. Go get me this information before I decide if I'm going to do that, that happens with an organization. They don't get execution. So I that's how I think about risk as the ability to push down execution as far into the organization with clarity. And everyone knows that you said go North at 10 miles an hour in someone didn't get.
[00:39:54] Bad communication, or I think he said go South at a hundred miles an [00:40:00] hour, then there's just bad communications. That's how I think about risk, the better organized organization with communications and so forth. They're going to execute through those unknowns better than someone
[00:40:12] Tom: [00:40:12] else. Yeah. I mean, the theme I'm hearing here is you need to know more so you can do more faster, right.
[00:40:18] And more confidently. Um, and part of the process is actually having prebuilt those communication channels, both digitally through information, standard information, but then the conversations with people. It sounds like that's really
[00:40:30] Michael: [00:40:30] important. And you've got to have a culture where you've talked to each other.
[00:40:34] So now when you read it, move, everyone's ready to move. And if you've never talked to anybody or done certain times, one of the vessels I'm on the board on, they decided recently they have the leadership conference is going to be virtual. But the fact that the leaders are talking to each other and getting to know each other, et cetera, and seeing each other's face, if something pops up.
[00:40:57] They're likely to get better execution. [00:41:00] Then if these people that are in it's a global business, then people that have not seen or talk to each other, and normally they were coming actually set out on lunch table and get to know each other, that stuff is important in order to drive speed of execution.
[00:41:17] So that's how I think about risk is, and I, and that's why I think one of the most important contributors to risk management is the HR leadership. Selecting people that not only know how to execute, but people that can play on a team. And we can be part of a team so that people that can switch from being the decision maker saying, let's do this to being the person that is, I see getting the decision that someone else wants them to execute.
[00:41:44] I think about way back when the Chicago bulls with Michael Jordan and left the Chicago bulls and, um, Phil Jackson calls some play and it wasn't for, it was for should the final shot instead of Scotty pimping, a Scottie Pippin refused to go on the game. [00:42:00] That's what's happens when you don't have buy-in isn't it, you know, now other people, when you think about corporate America, they're in the game, but their heart's not in the game and execution.
[00:42:09] That's what I think about risks. I think about the leadership, the type of people in the leadership and the culture will really show up. When you have a risk that you're trying to manage, particularly one you haven't been through before, when there's a fire at a plant and people have been through it, uh, they manage through it when there's a COVID and everyone says.
[00:42:33] No, one's traveling, what's happening, et cetera. Then, you know, that's from all of this. So that's what I think about race. I think about risks from the perspective of, um, if you do all the right things, pick the right people. When those times come, you're going to be able to execute through them better than the guy next to you.
[00:42:52] Yeah,
[00:42:53] Tom: [00:42:53] you talk a lot about the fundamentals of leadership. This is moving into our segment, call the report from the future.
[00:43:01] [00:43:00] Michael: [00:43:01] We don't need roads. I see the future, the future's the finish line. The world is what we make of it
[00:43:12] Tom: [00:43:12] based on everything you've said, what is the future? CFO look like, you know, does, is it the same kind of criteria, you know, that you think a successful CFO has today?
[00:43:23] Or do you think some of that will change?
[00:43:25] Michael: [00:43:25] I don't think it change materially except to say that I think that the leadership and communication becomes more important because the diversity underneath you in terms of the mindset, not only diversity in terms of race and gender and so forth, but in terms of the mindset.
[00:43:45] The education perspective that they have on things, the way that they see the world, that's going to be so dramatically different than what it was say when I was managing, because the school or [00:44:00] what people got exposed to and believed in was narrower. Just simply because. There was less out there. Now there's such a variety of different thoughts about the way the world operates.
[00:44:13] The way corporate America operates from us being the most horrible people in the world to the know the best people in the world. I just think the level of diversity that you're going to have. To get a group of global people to buy in and execute, I believe. And then also the data you're going to have more information in the ability to home man information down to the data that really makes important so that you can make decisions and decide what to do and get people to buy in.
[00:44:47] I can remember when I was working at corporate, um, GE corporate finance at headquarters, and there was another guy on the staff and our boss looked at him one time. He says, you do the most brilliant [00:45:00] analytics. You're the best at it. And then you come to the wrong decision. Who does the most best analytics doesn't necessarily mean they're going to make the best decision out of that data.
[00:45:12] So when I say that we're going to have better data and we're going to focus in on it, you still got to make the right decision. So I remember that and we all kind of keep at it. Well, I'll try to give a straight face because I'm sitting there thinking the same thing when he was presenting his stuff. I'm thinking, well, that's not what I would do.
[00:45:33] My boss was Bob Nelson. One of the best managers I ever worked for, he was really brilliant at figuring things out. In fact, he was the one that really drew those three circles that, um, GE use for time to decide, uh, how the portfolio should be, um, segments of the portfolio. But I think that's the key. I think the key is that one they've gone to have better data because these systems are getting better and better and better [00:46:00] Caribbeans and other companies are giving you better data, better information, but you still have to make good decisions out of it.
[00:46:08] And that's not a given. And then you got to get buy-in and execution. From those decisions. And I think there's just going to be a much more diverse workforce between people working into older ages, people starting at young ages, people coming with a variety of different cultural backgrounds, because they're coming from all over the world.
[00:46:30] And I think that's going to be a challenge for the CFO of the future is, uh, okay. We've got all this data that may make the right decision. And then how fast can my organization execute that decision and how do I get buy in to get it executed? It's going to be a bigger challenge than I think it was in the past.
[00:46:51] Tom: [00:46:51] You've got this lovely breath of experience that has caused you to be successful. And I'm sure you've learned from the best. [00:47:00] And you've maybe learned through some of your mistakes that you've seen. What advice would you give to a first time CEO? What was the one? Piece of advice you would give to the first time CEO?
[00:47:11] Well,
[00:47:13] Michael: [00:47:13] I'm an elder in my church, so I would always start by saying pray because you have to also recognize the responsibility that you have, the number of families that are connected to that business. Not only the employees and associates that you have, but then their entire family. And therefore that's a huge responsibility that the businesses successful and you pushing all that success down and the stock prices going up and people are getting raises.
[00:47:43] Your company's able to contribute things to the community. I always say, Hey, pray that the Lord will give you guidance. And with this blessing of being in that role comes a huge responsibility. Then I would say, you know, the second thing is, [00:48:00] which is another way of saying stay humble. Recognize that you got there and you have tremendous talent to get there by saying, and again, you can bring different religions on, but just by saying the word prayer, you're saying it's not all me.
[00:48:16] All right. So another person we'll get to that humbleness in a different way, if they weren't a Christian, but that's another way of saying, Hey, stay humble and recognize. It's not all you right. Then build around you. A team, I think what's most important. And what I would say to them build around you a team of advisors and people.
[00:48:41] That can bring you what I call completed staff work, because you have so much stuff to execute that if your people working for you, don't bring you completed staff work, which is the old GE term. You're going to have problems. What is the completed staff work they've taken, what that has to [00:49:00] be decided in analyzed it and put it in a format and giving you your options and other alternatives so that when it's presented to you.
[00:49:11] You only have to then concur with the decision or modified the decision slightly and you can go and execute, but if they bring to you just problem after problem, and you have to be the one to figure that out and make the decisions, then that's just, you're not going to be able to execute. So you, at that point in your career, Well, you need to surround yourself with people so that they can, you completed staff work and you're going to have enough confidence in them and let them go and be, and get out there.
[00:49:42] Right. And that some of them can do part of the communication yeah. For you so that it doesn't all fall in your lap. So if you're not surrounded with a strong team, that's bringing you completed staff work. I don't know how you're going to be successful in ISA prey, but. Put another [00:50:00] word on it. You can just say humble, stay humble enough.
[00:50:03] So that the way that you approach people and communicate to people, they can see that, you know, it's not all you because it isn't all you and my opinions.
[00:50:13] Tom: [00:50:13] That's great advice and it's very evolved advice. So thank thank you for sharing that. Okay. So before we wrap up, let's do a couple of quick hits.
[00:50:22] Quick, quick, what would you be doing if you weren't doing what you do
[00:50:26] Michael: [00:50:26] could probably be a gel or something. I'm trying to find a way to make a living. It sounds
[00:50:31] Tom: [00:50:31] like you follow your passion, but you know, is there, is there something, yeah.
[00:50:35] Michael: [00:50:35] I know you said short answer. I'll give you a quick answer. When I was a little kid, I used to watch Walter Cronkite on TV, the only three channels he would give the news about what's going on with the stock market.
[00:50:45] I would sit there and say, I'm going to understand that someday. So it sounds crazy to say that you're this nine, 10, 12 year old kid saying, Hey, I want to be in the finance world. Particularly back in those days, there were no [00:51:00] black people in corporate finance. So the fact that I'm saying that. Growing up on a little farm in Bangor, Michigan, where you run it out and taking care of the chickens and so forth and saying, Nope, but that's what I want to do.
[00:51:13] So I, I really don't have an answer to that question cause this is what I wanted to do. And the family business said, Hey, you know, help out with XYZ. But then I, um, Told my uncle. Nope. Not going to go in the electrical business. I'm going to be a finance guy. I dunno.
[00:51:32] Tom: [00:51:32] It sounds like you had a hand on your shoulder, so to speak.
[00:51:34] Yeah. That's guiding you forward from an early age. That's wonderful. Okay. Last question. What's the craziest item someone ever brought to you for signature?
[00:51:44] Michael: [00:51:44] What I probably thought was maybe one of the craziest ones. The guy brought me a game plan and eliminated in his own job. So I'm looking at us and I'm like, um, Wow, you don't have [00:52:00] in this, you just eliminate your own job.
[00:52:03] And I'm making a long story short. He ended up having his job eliminated and, uh, in some respects, uh, I realized that he gave us a good, smart answer because his plan was correct and was the best plan to go forward. And I guess the person wanting to make a career change. So. Yeah. So sitting there reading something and realizing that a person is eliminated their own job, that's probably one that kinda caught me by surprise.
[00:52:35] Um, Okay. Did I read that right?
[00:52:38] Tom: [00:52:38] Well, Michael, thank you very much. This was a wonderful gift of time that you've given us and gift of experience. So I really appreciate it. I'm sure the listeners to this podcast are going to get a ton of value. So thank you. And I look forward to staying in touch.
[00:52:55] Michael: [00:52:55] Thank you.
[00:52:55] Thank you.
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