Interview with Mel Epstein
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio video between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and managing director of M&C Group, Mel Epstein.
Visit www.CFOstudio.com to read about this interview and to watch the entire video interview
Zezas: Hi, this is Andy Zezas, host of CFOstudio.com. We’re lucky enough to have with us today financial executive, Mel Epstein. Mel has got a diverse and broad background, having been CFO for some pretty impressive companies including Saatchi & Saatchi and Ogilvy & Mather. Mel’s currently managing director of a firm called M&C Group. M&C Group provides business advisory services to small and mid-cap companies in the technology and media space around the country. Mel, it’s wonderful to have you and thanks for being on CFO Studio.
Epstein: Andy, thank you. It’s always good to see you.
Zezas: Mel, before we got started, we had some pretty interesting discussions. You had some great analogies. Did I understand you properly? You equated the current state of the economy to scuba diving.
Epstein: Andy, it’s very interesting. I always try to look for analogies to see what would make sense to people and clearly the economy is in a very deep hole, very deep hole. And, there is a lot of noise about whether we’re coming out of that hole fast enough and I have to relate that to a deep sea diver. I will tell you that I have never done that, but I’ve watched it quite a bit and studied it a little bit. Deep sea divers, the deeper they go, the slower they have to come up. They have to come up with all these gear on. They have a huge amount of technology. They’ve got masks and air tanks, bubbles flying, and flippers. But, if they come up too fast, there’s a real risk of the bends. They’ll be in the hospital, they’ll be sick. That will not be a good dive. On the other hand, if they come up at a reasonable measured pace, they’ll be fine. They’ll recover. They’ll be fine and that’s what the economy has to do. It has to come up at a measured pace. It’s unfortunate. I feel very bad for the people who are still in that deep hole, but remember that scuba diver, as he’s coming up, he’s getting fed air. And, it’s our obligation to make sure those people who are on their way up, have sustenance so they can survive and get up. It’s not a great analogy, but I think the point comes across.
Zezas: I actually think it’s a superb analogy because everybody wants the economy to recover quicker. Everyone wants it to happen now. We’re in that kind of world these days where people want instant gratification. In this case, it’s severe. It’s not just gratification, it’s recovery. It’s saving their financial lives, but the analogy is perfect because your right, we need to come up slowly, carefully. We need to make the right decisions is what I would imagine is what you’re saying and not just rely on the technology.
Epstein: It’s not just speed. Speed will do it wrong.
Zezas: You’re idea about the technology being a help, but not being the single solution. It ties into one of the other discussion that we had. You had some very specific perspectives on technology, communications, employment, and labor in the corporations today. Tell me your thoughts about that.
Epstein: Andy, as you know my business has been involved with technology for a long time. Personally, I’ve been a CFO for some big technology companies. I currently advise technology companies. I’m very familiar with what technology can do for companies and it’s tremendous. Technology is a terrific tool. It creates efficiencies, reduces cost, and increases profitability, but any company adopting technologies has to understand that there are some downsides. There are some changes that occur in the corporate culture as a result of those technologies and, you know, we talk all the time about the need or lack of need to go into the office on a daily basis because you can telecommute, true, very true. It’s very cost effective, but the lack of going in changes the social relationship. The employees don’t necessarily feel a part of the social structure of the company. The company may not know the employee as well. There is a lack of camaraderie, which ultimately leads to a lack of loyalty in my mind.
Zezas: Can’t you get some of the camaraderie online, I mean, through technology?
Epstein: I think you can get some, but I think nothing replaces person face to face contact. I think you need face to face contact to re-instill the relationship. You just don’t have that relationship, so I think there is a lack of loyalty from the company to the employee and from the employee to the company.
Zezas: A lack of what?
Epstein: Loyalty, and that becomes very expensive. If employees who are very valuable and have a lot of corporate knowledge and a lot of corporate history don’t feel loyal, they may just leave the company. That’s an expensive change for a company. So, I would advise some of my clients, and what smart companies are doing, to come up with alternate programs to instill a personal relationship, more loyalty among people. Certainly, work conferencing helps. Certainly, communications and intranet helps. There’s no question that you still need periodic face to face meetings. None of that technology replaces the shake of a hand. You’ve got to do that, but we do have to understand that technology is not only coming to the office less and everything is going to be fine. You’ve got to do things to offset the change that, that takes.
Zezas: So, like the scuba diver who can’t rely solely on the technology, there are decisions that have to be made and they have to be made at the right way, at the right pace.
Epstein: Exactly right. Pace is very important.
Zezas: Tie the issue of technology into that of the overall economy. You started out saying that the economy has to be handled like that of a scuba diver. Talk to me about jobs, housing.
Epstein: I think there is a direct correlation. I think there is a linear relationship. Technology has enabled companies to utilize fewer employees to get the job done. We call it productivity. Productivity is up because for a given amount of output, it takes less labor hours to produce that output.
Zezas: That’s wonderful.
Epstein: Very cost effective, improves profits, and is terrific for the company. But, in an economy that doesn’t have increasing demand and that’s why GDP is so important; if the demand for the products doesn’t go up, then it takes fewer employees to produce the required output. Fewer employees mean layoffs. It means unemployed people.
Zezas: That’s where we find ourselves now.
Epstein: That’s exactly where we find ourselves now. So, technology has been terrific from a cost perspective on an individual company basis, but not necessarily on a global economy/macro economy basis. There are a lot of off shoots to that. We can go into a lot of different directions. One of the things that occurs to me is that smart companies are utilizing the fact that a lot of good people have been laid off. Some of these layoffs are actually are some senior people with terrific experience, terrific background and knowledge, they’re on the street. They’re looking for what to do. Some of my clients, and some companies who are not my clients, have found it very smart to take in these people on a part-time basis. In two to three days a week, they get a lot of knowledge out of these people at a cost that is 40, 60, maybe 70% of what it would cost to hire them full-time. It reduces cost, there is no long-term commitment. The company gets a full benefit. The executive can do that and schedule himself or herself and if you can pick up one, two, or three of those clients, those part-time situations, the executive is just as well off as before. So, it’s a win-win situation for the company who gets the talent and knowledge at a reduced cost. It’s a win-win for the executive who can pace himself who has a variety of assignments, who can schedule his own, who wants to come out of retirement and still contribute. That is exactly right.
Zezas: So, the opportunity exists all the way around. As an employer, I can get the best talent at a low cost and contribute to the economy as well.
Epstein: That is exactly right. I think it goes…you’ve got to go a little further because not everybody is an executive. Some of these laid off people are mid-management or lower staff people and that’s a serious problem for the economy. What some companies are doing are bringing in the people on temporary basis or interim basis and people know that. They go into an assignment for three months, four months, what have you, and it’s hard to separate that problem from another problem that we have, which is the housing problem. If you look at the economy, you’ve got to say that jobs and housing are probably the two biggest issues. And, I look at it in a very simplistic way. I say that a temporary employee can’t take on a permanent mortgage. So, you have people who are temporary and if they want to move and take on a job and buy a house, that’s a 30-year commitment for maybe a three month assignment. It doesn’t work.
Zezas: So the question is, how do you build an economy of temporary employees when the mortgage industry needs permanent mortgages?
Epstein: The only way to do that is if these temporary employees know that when this assignment is over and by the way, it may extend or it may continue, but when it’s over there’s another job to go to. They need to know that so that they’re comfortable taking out the loan. The lending institution needs to know that so they’re willing to make the loan. So, it all ties together.
Zezas: Mel, we’re out of time already. I’m going to invite you to come back to CFO studio and I want to thank you for your great comments and your great ideas. We’re going to have you back for a second interview
Epstein: Thank you, Andy.
Zezas: Thank you very much for listening to us at CFOstudio.com. I’d like to thank Mel Epstein for being here and you’re going to see him again, because Mel’s got some great stuff and I know he’s just getting started.
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