Part of its success has to do with the power of the idea itself. According to Wikipedia, lean manufacturing is “a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination.”

As far as business logic goes, that’s close to unassailable. Try sitting in a meeting and arguing to the contrary: “I think we should waste a lot of time and money on products our customers don’t want. Can I have my promotion now?”

One measure of an idea’s power is the extent to which it can be used beyond its original context. Here lean manufacturing pays off in spades. Lean procurement, lean construction, lean logistics, lean software development – even lean government. For the business world in general, the important part is not so much “manufacturing” as it is “lean.”

Lean principles can also be applied to corporate roles – and for many companies, the role of the chief financial officer (CFO) is a perfect candidate. Some companies need to trim down: perhaps they have a CFO but they’re not getting the value they need. Others need to beef up: perhaps they need a CFO but don’t have the resources to add one as a full time position. Either way, the lean CFO can help.

According to the Wikipedia article cited above, “lean is centered around preserving value with less work.” This describes the essence of the lean CFO idea – though I would replace “preserving value” with “adding value.” The lean CFO adds value both at the accounting level and at the strategic level – helping companies to get their financial house in order while also helping to define priorities and take financial action to realize business objectives. This runs counter to the idea of the CFO as an executive-level bean counter whose primary responsibility is to rein in spending. Fiduciary duties and financial risk mitigation remain a vitally important part of the lean CFO’s job description – but these responsibilities are approached with a mindset that asks: How can I help increase performance, enable innovation, support growth and improve overall business health?

Oh, and did we mention that the lean CFO works on a part-time basis – perhaps just a couple of times a week? That’s the lean part. For small and mid-size companies, this is a proven model – one that I‘ve been using for years. The CFO Connection has many clients with relationships that extend more than a decade. The simple fact is, many companies need the financial acumen and strategic vision of an experienced financial officer. What they don’t need is someone to attend endless meetings, engage in office politics, cruise the cubicles, and figure out how to use the office copier. And they don’t need the salary overhead. What they do need is more value with less work – and that’s what the lean CFO delivers.

Stay tuned for future CFO Connection blog entries. We will be exploring other aspects of the lean CFO as well as a wide range of issues relevant to the world of business and finance.

The CFO Connection

If your company is one of the many that have hunkered down to weather the storm, then this article is about you.

Let talk about a two part strategy that may help you come out of the deep recession stronger that you went in.

Understand where you are making money.

If you are selling more than one product line or to more than one industry or geographic area or a combination of all three, then it behooves you to understand what is going on.
Break out your Profit and Loss Statement into fixed and variable cost and isolate those cost that won’t go away. Next develop a break-even analysis for each market. You now have a friendly statement that will lead you to decisions on where to focus and how to reallocate your resources. Eliminating unprofitable product lines can result in the reduction of more cost  than sales  You can only do this effectively with a properly structured financial statement.

Having more meaning Financials, you will have a better understanding of your cost and profitability than most of your competitor.

Attack

Some of your competitors won’t be around when we come through the storm. Some will  but may be so crippled that they won’t be positioned to take advantage of the new day. Here is a way that you can gain the advantage. Right now identify those competitors and go after their customers. How?

Here’s how:

•    Turn your under utilized work force into a task force. Ask them to help you identify the weak competitors. Then do your homework and identify their customers.

•    Identify their profitable offerings. If your competitors have loss leaders, let them keep that business and attack the profitable business.

•    Give these potential customers attractive incentives to buy from you, maybe even below your total costs, BUT…Do not lower your price. You will be stuck with that pricing when the economy comes back. The incentives should be in the form of signing bonuses or other one time compensation that results in money in your customer’s pocket and in an investment in a long term relationship.

For two hours he had listened to tales of the great things his company was doing in the marketplace to increase product awareness. He had also carried on at length about the wonderful ways his CFO suggested of taking advantage of an inconsistent economy. By the end of the evening he realized just how wide the gap has become between big companies that can afford to hire top-notch talent and smaller firms that can’t.

Resolving to find a way for his small business to get access to the type of talent usually employed by top firms, he did some homework and found that it is possible for small companies to hire high-level executives ― provided that there is a willingness to hire them on a part-time basis.

The part-time executive provides a combined continuity and expertise that is difficult to duplicate for the price being paid. Bringing skills that specifically suit the business needs, and usually with a minimal learning curve, the part-time executive works for a set period each month (usually a couple of days on-site) and is available for limitless discussions by phone or email. The individual is paid a set monthly retainer. Staff and senior management have a rare opportunity to learn from someone who has a wealth of professional knowledge and is “out there” learning from other professionals.

So is working with a part-time executive a better way of operating than other avenues available to a business? Not necessarily. Frequently a company’s senior management has the expertise to function at the high level in the marketing, financial or operations area. In that case it probably makes more sense to bring a consultant in to deal with specific issues.

The part-time executive is an idea whose time has come! Before you do without or write that next “Help Wanted” ad, consider bringing in a part-time executive instead. Like our friend Jim, you’ll find your business growing much faster than you expected and with considerably lower overhead.

Originally published in Productivity Report, 2002