“I have doubts about the competence of the financial team at the company,” the audit committee chair announced to the board of directors at my first meeting as CFO of WD-40 Company. What a way to start, I thought. I had doubts too but not for the same reasons. His concern was understandable, however, as we were struggling to close our books and to offer the sort of timely clarity into financials that anyone should reasonably expect for a public company.
Thankfully, the company’s then board chair was a Fortune 500 CFO and offered an informed perspective on the obstacles facing the team undergoing implementation of a new enterprise resource planning (ERP) system among several challenges.
With awareness above 90% in many countries and used by millions around the world at home and on the job, WD-40is a unique brand. WD-40 is also unusual in that it’s a low involvement purchase yet consumers have very high regard for it. As I learned in social conversations, on planes, and whenever I told someone where I worked, many folks readily have a WD-40 story to tell. It’s also a $1.5 billion market cap company that does business in 100+ countries, delivers consistent financial performance, with talented people, a positive culture, and committed leadership. And with only 350 people or so, each person matters.
Having moved from VP Marketing, mine was an unusual CFO transition. Deliberately, my career had been uncommon as I’d served in business development, finance, marketing, and sales roles in the past. From the beginning of my career, I’d sought to learn as much as possible and to offer whatever assistance I could across the business. I had been asked by the CEO to bring that broad commercial insight to the company’s financial team and to elevate their role in delivering value across the business.
While any role requires a range of technical skills, I believe that effectiveness in a senior position, more often than not, comes down to leadership ability. Since I’d been with the company for six years, I also knew that I was walking into a very challenging situation:
- The company was integrating a new ERP system. The chosen vendor was small, customization was being done concurrent with implementation, and user training being done on the fly.
- At the time (early 2000’s), a wave of new SEC regulations were being imposed on all public companies — fallout from the Enron and WorldCom scandals. These regs placed additional demands on financial teams and auditors.
- WD-40 had just closed its first major acquisition which added 30% to its revenue. At closure, the decision had been made to eliminate almost the entire financial staff of the acquired company leaving little continuity in knowledge.
- Due to the acquisition, the company took on significant debt for the first time. The required lender reporting placed even more demand on the finance team. I also discovered straight away that the financing package wasn’t a good fit as we were in jeopardy of breaking loan covenants without any deterioration in business performance.
Each of those issues individually was a challenge for any finance team. Facing them all together at the same time while also subject to the normal public company reporting requirements was like dealing with the perfect storm.
In hindsight, many of the problems we faced were self-inflicted though certainly not anticipated. It was a combination of taking on more than we could deal with at one time and also not fully recognizing the downstream organizational effects of decisions made in systems, staffing, process, and financial structure. Suffice it to say, we went through a fair dose of organizational learning from all that.
While I was hugely concerned about the breadth and depth of our challenges, I was never in doubt about the people on the finance team. We faced an onslaught of new demands internally and externally. To be sure, the game had changed around us and we were short of players and equipment.
Aside from strategy, I believe that effectiveness for any organization sits at the confluence of capabilities, capacity, culture, and commitment. It’s useful for any company owner or leader to view things through these dimensions:
- Capabilities — the collective set of unique skills, expertise, and tools to address issues and opportunities in your business. Aspirations are certainly healthy but I feel like many folks overestimate capabilities.
- Capacity — the sum total of work that your team can effectively deal with. People can stretch for a period of time but not long term without trade-offs.
- Culture — who you are as an organization and why. Some cultures can be adaptable to change, others assimilate, others rigid. It’s important to consider what impact your culture has on dealing with change and crises.
- Commitment — This isn’t a measure of the number of hours the team is willing to work but instead the degree to which your business is lined up with the strategy. In my view, a company isn’t truly committed to a direction unless it has committed the resources necessary for success.
Based on our situation, we had work to do in all four areas. This perfect storm had created different needs and we needed to an orchestrated effort to move ahead. Although the company culture was working well, the rising workload and lack of visible relief was taking a toll on the team.
Like many business situations, we were dealing with quite a few moving parts. We were methodical in how we worked. I believe the approach we took is useful in many chaotic situations:
- Breathe. And create breathing room for others. Tensions are understandably high in a crisis situation. It’s an important time for leaders to stay calm and build trust by ensuring colleagues see you as an ally. Our approach: I talked with people individually about their biggest worries, frustrations, and asked what we could do that would make the biggest positive difference for them.
- Engage. Your team and yourself. The only way out is together. Some attempt to lead by pronouncement…this is what we’re going to do and then they walk away expecting it to happen. Leading in crisis is a lot more involved. I worked to stay close to the problems and followed through on the requests from the one on one meetings. By allowing people the space to do their work while also being involved, I wanted to be able to respond quickly to needs. I also wanted people to see that I was all in. And I also wanted them to feel this: Success on at the end would be because of them, failure was on me.
- Understand. In high urgency situations, there’s a common tendency to react, to pursue solutions before the problems are well defined. Too often, that wastes time you don’t have and resources you need for other purposes. We were facing a wide array of complex and interrelated challenges. Working together, we mapped out our current situation, our long term goals, and some intermediate steps that would help us get there. Sometimes, you can’t win the war from the start, you need to live to fight another day.
- Assess. All companies have an array of processes, formal and informal, that help facilitate the work. Once people get busy and the procedures baked in, it’s sometimes hard for anyone to look at them critically again. Tough times might be the perfect trigger to revisit how things get done. Even before the crush of the four big issues, our closing process and analysis took too long. We mapped out each, looked for choke points, and figured out ways to simplify. What couldn’t be simplified, we looked for automation. As a result, our financial close process changed significantly and we also decided to bring in an analytics package to supplement the flow of information from the new ERP system.
- Prioritize. Review the demands and split between absolutely need now, need later, don’t need. Then set priorities and communicate those to all. In our case, we had demands coming from so many directions. I talked with other functional group leaders to share our situation, our plan, and our priorities. We needed their help and I felt like saying no to their requests would be met with support if they understood why.
- Define your plan. Steps, timelines, responsibilities, and resources, etc. Set realistic expectations and bring the resources to get the job done. We went through a few steps. First, we asked ourselves a question: Setting aside our current financial set up, if we were to define the ideal capabilities for a company with our characteristics, what would that look like? That become our end goal. Next we reviewed all of the major challenges, timing, and priorities. That led to our intermediate steps. We then identified capacity and capabilities gaps and determined what we needed to address them. Ultimately, we had our plan and resources.
- Commit. Assign specific responsibility and resources to your plan. We took a four-fold approach: 1. take away work that isn’t absolutely needed, 2. automate as much as possible through the installation of a reporting package, 3. simplify our work processes, and 4. add resources short and long term.
- Communicate. Although listed last, communication is part of each step along the way. We did regular check-ins with people to confirm understanding, identify obstacles, share thoughts, recognize effort, and ask for feedback. We supplemented that with regular progress updates via email, staff meetings, and conversations across the company. Inside the company, our motto was to communicate always and all ways.
I’m proud to say that the team rose to the occasion. With hard work, applied learning, and evolution of our processes, we completed the integration of the new ERP and the acquisition, met our external reporting deadlines, created and delivered the first comprehensive financial analysis package, refinanced debt via private placement, shortened the pre-crisis financial close cycle by 2/3, retained staff, and elevated the value delivery by the team by moving from reporting results to providing deeper insight.
While the details may differ in each situation, many of the organizational issues are similar whether a company is facing a crisis, growing rapidly, navigating a turnaround, changing corporate strategy, or just starting up. As a result, I believe that this blueprint can prove useful to many other companies. Welcome your thoughts.
Original post: Bulldog Drummond
About the Author: Michael Irwin draws from his past as start-up founder, executive officer of a $1 billion market cap company, public company CFO, VP Marketing, chief strategy officer, head of sales, and board member, Mike uses his diverse, mutt-dog like background to help companies grow sales and improve effectiveness. He’s also a community volunteer, youth soccer coach, author, and marathoner. And he crashes bikes, but not on purpose. Follow him at BottleRocketAdvisors.comor connect at firstname.lastname@example.org or on LinkedIn.
NOTE: I’m thankful to many who had an important role in this. Their advice, expertise, effort, and patience helped us move through a very tough situation. At WD-40 Company: Fe Propati, Karen Herbert, Susy Moranville, Jay Rembolt, Amy Berguson, David Phan, Carol Chappie, Jim Rogers, and the entire finance group, CEO Garry Ridge and the board of directors; Doug Lambell (Bank of the West), David Quakenbush, Mitch Reed, and Matt Douglass (Prudential Capital), Tim Malott (Shoreline), and Matthew McGrath (Capital One).