Fire fighting, how FDs are struggling to cope

Are you a fire-fighting FD? Too busy controlling cash,
looking for cost savings, managing special projects, fixing IT systems,
monitoring controls and reassuring your backers, to pause for breath and think
strategically for the long term? If so, stop. It’s time to get tough with your
colleagues, your team and even with yourself.

Fire-fighting can be caused by many factors. “If a business is expanding
fast, it tends to create fire-fighting because of the need to generate cash to
fund the business and the need to grow systems to monitor that trading,” says
Mark Blayney, an experienced company doctor. “You are running to catch up. On
the other hand, if a business is going down the decline curve, it can cause
fire-fighting. If it is generating less money, the balance sheet is starting to
erode, you have trouble paying creditors and the bank is asking for more
information… When I walk in [to a company] and the FD has gone off sick, I know
there is a real problem.”

Paul Brice, a partner in KPMG’s restructuring practice, works with FDs and
MDs at times of stress. “During a financial restructuring, the thing that
surprises people is how demanding on time the whole process can be,” he says.
“FDs typically have to keep a huge number of plates spinning in addition to the
normal day job. The restructuring process can take between two and six months.
Unless they put the resources and mechanisms in place to deal with these
demands, they can become overwhelmed.”

Dealing with such situations calls for early acceptance rather than denial,
then seeking the appropriate extra help. Brice also advises developing an
effective communication strategy with interested stakeholders such as lenders.
“Ideally, an FD needs to put in place an effective and well-managed
communications protocol so that there is a clear basis for when information
should be expected, and an agreed point of contact for the day-to-day dialogue
with stakeholders – often through the company’s advisers. There needs to be a
mechanism so that FDs can focus on what they really need to do to help get the
company effectively through the process.”

Start afresh

Sometimes newly-appointed FDs can walk into their job, full of enthusiasm,
only to get a nasty surprise. “It’s not uncommon to find an accounts department
staffed by people scared of using computers, who view spreadsheets with
suspicion,” says Jeremy Willmont, corporate recovery partner with Moore
Stephens. “They are often long-term employees who are considered reliable. But
there’s a huge gap between what they are doing and what you need them to do.”
Unfortunately, re-educating staff and improving systems takes time, potentially
creating a firefighting environment in the interim.

It is quite understandable if FDs are feeling under the cosh at present. “The
burden of regulation is now ever-increasing,” says Vaughan Thomas, a partner
from PricewaterhouseCoopers’ performance improvement consulting business.
“Individuals are now balancing an enormously demanding and divergent agenda –
contributing to the overall business strategy, adding value to
‘business-as-usual’ in an increasingly difficult environment, managing increased
regulatory pressure, compliance and governance. Every one of these demands
requires the CFO and the finance function to stretch much more than before. This
is compounded by the pressure on the back office to become leaner and meaner.
It’s not as if you have lots of junior accountants lurking around to whom you
can delegate this load. Coping with all of this means that the role and scope of
the finance function must be updated to reflect the new reality.”

Company doctor George Moore of Resolution Inc believes a lot of FDs end up
fire-fighting because they get landed with too many responsibilities. Depending
on the size of the company they may be responsible for environmental reporting,
act as the company secretary, be in charge of HR, IT, investor relations and
office logistics. “That’s why the average FD is running around like a headless
chicken,” Moore says. “A typical FD must be able to negotiate at the very
beginning the resources they need, or slough off some of the other
responsibilities. Their best chance is when they start a job. Push it [extra
responsibility] down the department, or say it’s not going to happen.”

Learn to delegate

As an incoming company chairman, Moore is clear about what he expects of his
FD. “I say you are no longer responsible for HR, investor relations, the office,
IT or special projects. Give the company secretary role to someone in your
office. You have to learn to delegate and let go.” That isn’t always easy. “It
takes time to delegate,” says Moore. “It’s hard to find that half-day to show
someone how to be the company secretary. But you have to do it.” Moore adds that
FDs should try to delegate up, as well as down. “Investor relations is the
chairman’s job,” he says.

Fire-fighting FDs could also cut back the volume of data being reported. “You
often get reams of detailed reports on who the company sells to and what, and
broken down by profit margins and so on,” says Moore. “The only people who need
that level of detail are the sales people. So teach them how to find that
information and produce it. Sometimes you get lots of specialised analysis of
productivity issues that goes to everybody. It’s a waste of time. Most people
don’t look at them and don’t know what they mean. So work out what the key
metrics are and report on those. Focus on the things you really need to do.”

Manage your time

Moore is firm with any fire-fighting FD burning the late night oil. “I don’t
want someone working in their office until nine or 10 at night,” he says. “I go
in and say, what’s on your desk? And I put it in the bin. If it’s important, it
will come back.”

FDs struggling to manage their time, who seem to be constantly fire-fighting,
may be part of the problem. “Some people love to be out there on the edge,” says
Alistair Nee, an executive performance coach with Penna. “They have no interest
in planning ahead.” Alternatively, some people may keep themselves busy to avoid
doing other things. Those who “haven’t got a solution to the bigger picture” may
have a reason to always be busy with the smaller detail, Nee explains.
“Fire-fighting isn’t necessarily a surprise. It can be planned, even if
unconsciously planned.”

Alison Ringrow, a leadership coach with Penna, believes FDs who are
constantly fire-fighting could benefit from coaching ­ so improving their own
time management, delegation and general leadership skills. By developing greater
emotional intelligence (EQ) they are also more likely to understand others and
get better results.
“With the development of EQ there come more powerful relationships with the
people you work with and who report to you,” says Ringrow. If FDs develop
coaching skills, they could help their own team members to develop better time
management, delegation or problem-solving skills ­ so providing better support
for the FD. “It begins with self-awareness from the individual FD,” says
Ringrow. “Only then, when they have worked on themselves, can they expand their
influence to the people around them.”

Outsourcing

Assuming the budget allows, FDs might also turn to external help in the form
of advisers or consultants. Outsourcing could also be an option, although this
may bring its own challenges. “The problem is getting ready to outsource,” says
Chris Beer, managing director of Resources Global Professionals UK, a
professional services firm that supplies project-focused professionals. “If the
processes aren’t in good shape and you are trying to get them off your desk
because they are a pain, that’s a recipe for more pain. A good outsourcer
probably wouldn’t want to take them on.”

If processes need improving, that might mean bringing in short-term
specialist help. In general, in-sourcing expertise for a short period may be a
good option for fire-fighting FDs, Beer suggests. “If there’s a burning platform
and you know what the root cause is, you could bring in some process expert who
can beat down the fire. You can bring in an expert for a discrete period of time
to fix the problem.” That knowledge can, in the process, be transferred into the
organisation, so improving its resilience for the future.

FDs who survive a period of fire-fighting may emerge stronger for it. “It’s
an enormous education process,” says Paul Woodley, a long-time company doctor.
“In a warped way, it’s enormously fun for everybody because they find the
workplace has assumed a significance that’s greater than in the past. You have
to work all hours to solve problems. You have to work with colleagues to
implement recommendations and you have to trust people enormously.” For example,
the process of trying to tighten cost control can bring the management team
closer. “You get a lot of operational management together in a room and discuss
what the priority is for spending cash,” Woodley says. “You have the store
manager, the sales manager and so on all working together to say where this cash
gets allocated. So you end up building a much closer team. Once it comes out of
the difficulties, that team goes on and achieves successful things.”

FIRE EXTINGUISHER

Steven Bertram, FD and acting MD at Ramco, the Aberdeen-based oil and gas
company, has recently emerged from a period of fire-fighting.

Around 18 months ago, Ramco got into difficulties when the Seven Heads gas
field in the Celtic Sea, in which it held a major stake, proved disappointing.

“We were truing to put our first gas field into production,” Bertram
explains. “We got it on stream almost on budget and on time, but the geology was
not as expected, so it didn’t produce as much gas as it was supposed to. It was
generating less cash. We had bank borrowing to pay for it, so we had the bank
breathing down our neck.”

Recalling those times, Bertram says, “It’s important to keep a cool head and
have good advisers and look at all the options available to you. Take things
step by step.
Ramco’s management first assessed potential technical solutions, such as
drilling more wells. It then took the decision to sell the field and some other
asset, to free itself from debt. By doing this Ramco is now in a position to
concentrate on its exploration interests.

Bertram sees some positives in the experience. “Some investors have said to
me that they would rather back a management team that had some experience and
seen the rough as well as the smooth,” he explains. “And a colleague who has
been working hard on the fire-fighting described the last year-and-a-half as
‘character-building’. having been through tough times you inevitably learn
things, and it reduces the chance of making the same mistakes in future.”

The need to delegate some routine functions can also be beneficial to the
team as well as to individuals. “It gives the more junior teams a chance to
expand and develop their own experience,” says Bertram. “So there are some
positives, provided you come out the other side.”