Below is the 5th of a number of posts over this week based on my review of Ram Charan’s important new book: Leadership in the Era of Economic Uncertainty,McGraw Hill, 2009. ~Please pass it along to colleagues who could benefit from this information.
--Now it’s ALL about the money—cash, that is.
Charan puts a lot on the shoulders of the CFO. Again, it’s all about cash in hard times. Cash feeds the bulldog. In traditionally good times, CFOs focus on the broad issues of financial systems and overall financial health of the company including risk evaluation and compliance. It’s more of a monitoring role. In uncertain and even “toxic” times like this, operationally oriented CFOs act more like CEOs in that they become more hands on and head in. Strictly managing cash resources will quell any damaging rumors that can spread like wildfire and destroy corporate credibility overnight. Here are a few of many suggestions Charan has for leaders in uncertain times.
1. Know the Numbers: This might sound ridiculous but in this section Charan means that CFOs, in uncertain times, must stay focused on cash metrics such as: cash flow, cash generation, cash collection, cash usage, credit lines, repayment of debt, pricing policy, and cash burn rate. In essence, the CFO should monitor the corporate finance dashboard like a hawk.
2. Train Management about the Balance Sheet: Most leaders get profit and loss, but in uncertain times it’s more about the balance sheet such as accounts receivables, inventories, capital expenditures, as well as how leases, debt payments and refinancing affect the balance sheet and overall financial stability.
3. Keep the Board Informed: Though by far the shortest section in this chapter, I think it’s one of the real keys. As one who has sits on boards with financial responsibility, I can attest to this being very important. Charan advocates that the board be informed on a “real time basis” and that reporting should increase in such uncertain times, particularly between board meetings.
4. Other important areas that Charan comments on in this section are as follows: Set the Tone, Advise the CEO, Guide the Budget Process, Advise about Compensation, and Guard Against Customer and Supplier Defaults.