Major Players

When sales were declining at a retail business largely dependent on the levels of consumer spending in the four states hardest hit by home value loss, foreclosures, bankruptcies, and unemployment, the pressure was largely on the CFO to take rapid action. “There was no margin for error. It was really a matter of life and death” said Sport Chalet CFO Howard Kaminsky, who helped the company reduce expenses by $27 million last fiscal year. “We needed a big cut but we made sure we cut intelligently.” More so in recent years, CFOs have become agents of transformation responsible for changing behavior, systems and processes at their organizations to make them streamlined and more profitable. In the down economy this has meant the difference between shutting down and survival in many cases. For other companies, CFOs have been the diference between growth and a missed opportunity. Sport Chalet’s CFO for more than 25 years, Kaminsky set to work with an aggressive examination of the company’s practices, assumptions, models and costs and modified its business model to make the company more efficient. Beyond the accounting acumen, Kaminsky’s role as the CFO demanded skills in strategic planning in steering the business towards its goals. He focused on improving liquidity securing an amendment to the company’s loan agreement and temporarily increased the availability of capital an additional $10 million. He renegotiated lease terms to reduce base rent for store locations, managed vendor’s anxiety and maintained the vendor relationships through the difficult time; he improved inventory management and helped significantly increase payroll efficiency. He also reduced corporate overhead related to personnel and discretionary spending. “The role of the CFO has changed over time, now it is our responsibility to make sure we understand and influence strategy going forwards, and as we’re executing that strategy that we’re allocating resources appropriately,” said Steve Chopp, who is responsible for corporate strategy and development as the CFO of Pharmavite, LLC. Over the past two years, Chopp has focused on getting people at his organization… aligned with those activities that drive value, bringing insight to the organization and making sure everyone understands and works towards the same goals for the future. “Our role is expanding, it requires a broad understanding of the business and how it creates value and making sure that every day you’re executing against that,” he said. In the midst of the economic recession, many CFOs have been the driving force guiding their companies back to recovery. Tuan Ho, for instance, joined Bobrick Washroom Equipment in June of 2009 just as the company was being hit by the severe drop in non-residential construction, and found its banking relationships suddenly on shaky ground. Ho crafted a business restructuring plan within 60 days into the role as CFO. He presented the plan to the board of directors and banking partner for approval and executed that restructuring plan within 120 days of being hired. “A lot of it is you have lay out the road map to success and then you have to engage the team to be part of the solution rather than just dictate to them what they need to do,” said Ho, who quickly assembled teams within the organization and tasked them with looking for opportunities to drive out cost in the business among other things. “I had asked the banks to give me two months to put together a restructuring plan, and we were able to salvage part of 2009 and then we really structured the business for a very successful 2010 – we’re actually projected to make significantly more than we’ve ever made in 2010 with a huge decline in revenue.” Significant improvement His efforts netted significant margin improvements and the company was able to significantly improve working capital. “As CFO he helped guide us and show us how we can structure the company to reduce costs while at the same time continuing to invest in the future,” said Mark Louchheim, CEO of Bobrick. Although the company faced layoffs for the first time in its 100-year history during the recent recession, Louchheim said Bobrick is in the process of rolling out a host of new products, including the next generation of KOALA baby changing stations, booster seats and towel units- which will improve its competitive position now and better prepare it to gain market share when the economy recovers. In critical times, it has become more and more common for CFOs to transcend their roles and delve beyond the area of financial management to help move their company forward. When REM Eyeware’s growth was being stunted by an outdated software system that had been used for more than 20 years at the company, it was CFO Donna Nakawaki who stepped in to facilitate and accelerate the cumbersome software conversion. Much more than just overseeing the IT department, Nakawaki worked hands-on with programmers and technicians using her technology savvy to accelerate a critical process. “It was holding us back in multiple ways, I knew we needed to grow quickly and efficiently and we needed to move fast,” she said. “I had led software conversions before but nothing of the magnitude of this project, it was the largest software conversion I’ve ever seen, it was extremely challenging but we’re going to continue reaping the rewards of this system and we’re really looking forward to it,” she said. The old system did not have the ability to handle foreign currency invoicing, which was holding the company back. REM, who is now operating in 63 countries, has benefited from improvements to operations, ease of use, information sharing and interfacing with other departments, and greater reporting capabilities as a result of this conversion. Looking long term Other CFO’s have brought financial sophistication that has given companies renewed long-term vision. At One Lambda, a company that advances transplant diagnostic technologies based in Canoga Park, it was CFO Jim Keegan’s leadership in reorganizing the company’s management reporting systems, and enhancing and strengthening its budgeting and planning processes, which allowed the company to redirect its resources and take advantage of market opportunities in the down economy. “If we didn’t understand where we were and where the business was going we couldn’t have made the decisions on what type of investments were important,” Keegan said. Previously budgets at the company had been just spending plans, he said, however in an uncertain market it became increasingly important to know where the company was headed and forecasting processes became essential. “Having an understanding of where we wanted to be three years down the road was critical,” he said. “Managers became more aware of what they needed to do to get to where they wanted to go.” These budgeting and forecasting processes became a fundamental tool in aiding One Lambda’s strategic decisions such as investing in new research and product development during the volatile market. The challenges the economy presented over the past two years redirected the priorities of most CFOs towards creativity and agility in problem solving. “What has happened is we’ve gone through a very sharp correction in the markets and so the emphasis [of our roles] has changed pretty dramatically,” said Mike Winiarski CFO First Private Bank & Trust. “In the past it was a matter of looking at profitability and growth and managing sales profits, all the things you do on good times, now the focus has changed to conserving capital and resolving problematic situations in the business.” Winiarski, who joined the bank in the crux of the downturn in 2009, has played a key role in the bank’s progression out of a difficult situation and into a path of significant growth. “Every good CFO today has to have business sense, understanding what it is that drives success in the business and that’s not just a narrow measure of this month’s or this quarter’s operating results, it’s how do you build value in the business,” he said.