Interview with Eileen Black
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio interview between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and financial executive, Eileen Black, director of finance of the Housing Authority of Bergen County.
Visit www.CFOstudio.com to read about this interview and to watch the entire on-camera interview.
Performance Metrics as a Path of Profitability
Zezas: This is CFO Studio and I’m your host Andrew Zezas, and joined today by Ms. Eileen Black, director of finance of the Housing authority of Bergen County. Having done and started accounting in Peat Marwick + Main, Ms. Black’s background includes being a finance executive major at a manufacturing of high tech goods, aerospace, business services and software companies. As part of the executive team, Ms. Black led a team to quadruple its size and profitability for seven years. As director of finance of the Housing authority in Bergen County, the third largest housing authority in NJ, Ms. Black oversees an annual budget of excess of over 55 million dollars. Ms. Black is here today to talk to us about Performance Metrics as a Path of Profitability. Eileen it is great to have you here today on CFO Studio.
Black: Thank you very much Andrew, it is a pleasure to be here.
Zezas: Before we talk about Performance Metrics, I want to learn more about your background. And your background is very diverse and very different from the way the paths of most finance executives have gone. At a time where most executives are becoming more specialized not only in the vertical but also in the industry but you have also taken a very different path. Why?
Black: I went where the need was. When I first came out of public accounting, I worked with manufacturing that was strong and aerospace. As manufacturing aerospace left the Northeast, I transitioned over into business services and other types of businesses such as software. Most recently during the financial crisis, I realized that the non-profits had a need for good financial management. Their finances were declining and it definitely was an area they were not paying as much attention to.
Zezas: Interesting. So you followed the path and the path led you to where you are.
Black: That’s right.
Zezas: And how have these experiences and the diversities in your experiences had been proven beneficial to you and your employers.
Black: Well, I think one of the executives that hired me during this transitioned said it best. He said, “Look, not only do I need someone with strong technical accounting skills, but someone that can solve problems, and have a leader that can execute these changes so we can get to our goals. I need someone with business sense and the ability to see the big picture. So I can’t teach that, I can teach the industry, but I can’t teach that.
Zezas: Understood. So it looks like you had an employer that really recognized the benefits of hiring a finance executive that had diversity in their experiences. How did that work out?
Black: Well that worked out great for both them and for me. I got to learn the business service industry. And when I went in I evaluated there processing’s and procedures and noticed that there was a hole in the internal control of the sales department that allowed billing to slip through the cracks.
Zezas: Big hole? Little hole?
Black: Pretty big hole. Two million dollars hole over a 18 month period.
Black: And ironically, the customer had a similar hole in their purchasing side that allowed this to occur. And this customer was a pretty large customer, with a pretty big company, fortune 100 customer, you wouldn’t have expected this. But I went in and fixed our process, hoped the customer fixed there process, and earn their respect. As well as recouping the 2 million dollars. They ended up doubling the business they gave us within the next couple of years.
Zezas: So fix the problem, earn the customers respect, and help them with their problem.
Zezas: Grab the 2 million. Recoup the 2 million.
Zezas: And the customer had so much respect for you that they doubled their business in millions.
Black: It is a great success story. I like it.
Zezas: Say the least, say the least, I’m sure your employer like you too.
Zezas: Okay so let’s talk about performance metrics towards a path of profitability. We really are talking about mid-size companies.
Black: Yes we are.
Zezas: Okay, giving the holding how does performance metrics work for such companies?
Black: Well there are four steps to the process. First the company has to know where its vision is and what their goals are to get there. And the goals are not I want to make “x” amount of dollars. The goals need to be specific as to what you plan to do to make “x” amount of dollars. Business lines you want to grow, that sort of thing. Once you have that, you have identified the processes that are critical to achieving those goals. Now that you know the critical processes, you want to optimize those; you want to make those as efficient as possible. You automate them whenever you can and that is a key, because when you automate them you can capture the data. And the last step is that you want the right measurements in place to monitor your progress against those goals. And that’s where the data analysis comes in.
Zezas: Okay, so give them to me again. The first one is goals.
Black: Goals. Then the processes that feeds those goals.
Black: And then optimize those processes and gather your data, automate it and gather your data and then create the metrics to measure how you are doing against those goals.
Zezas: Right. Now not to just to look at the information and say that’s nice. But to actually use metrics against which you can gather and value performance.
Black: That’s right. And the financial executives in the unique position can do that best because they understand the goals, they understand the processes, and the information that is available and the tools to use that information.
Zezas: Are most organizations doing this now?
Black: Well, certainly the large ones are and many of the mid-size organizations are doing it. It’s a matter of degrees, how much are you doing it. Now FERF (Financial Executive Research Foundation), it’s part of the FEI (Financial Executives International) they have issued two reports in the last year on data analytics. Now the first one showed that the continuous monitoring of data resulted in less risk and superior performance. The second one was in conjunction with MIT slow management review and they serve a 4,500 executives of companies of all sizes, across all industries internationally. And I would like to read the results of that survey.
Zezas: Yes, please.
Black: Overall, organizations that uses analytics for competitive advantages were 2.2 times more likely to substantially outperform their peers. Now, 2.2 times more likely to outperform your peers. That’s what we all want to do.
Zezas: 220 percent. Wow.
Black: So, and this article talks about big data. There is lots of data out there. This is the data within your organization that you are gathering and it’s also the data that is out on the internet, in the cloud. And great example of someone that had success with big data is the old story with Amazon. They kept tracked of what you were looking at, what you were buying, made suggestions. They used streams of data and they used analytics to further their mission and make more money. So, that’s how a big organizations are, mid-size organization are using data and they may use some financial metric, some operational metrics and seldom pulling everything that they can.
Zezas: Well you must be talking about an awful lot of data for most financial companies.
Black: I am. And that is where financial data comes in. You need the judgment to know what do I need to know and how am I going to get it. And when I was at the software company, part of what we did was process credit card transactions for all of our customers. So we knew exactly how many credit card transactions they had every month, whether they were going up or down. So we knew how sales were doing. So we saw the spikes of the industry. So everyone use to say, “Oh this is kind of interesting in a macro standpoint.” The economy is doing better in this sector and not that sector. But no one took that information and used within our organization. We were selling software. So we started to use it in sales and realized that if the company is growing then we can sell additional software products. I used it in credit and collections because when I had to make credit collection decisions, I wanted to know how that company is performing because these were privately owned companies that you cannot easily get a lot of information on. So it is how you use the data.
Zezas: Okay, do you have another example?
Black: Sure, the company that grew its company with 4 times its size in 7 years. We use to look at profitability by customer, by product line, by sales person, every way manageable and there sales grew and profitability. And what we did was market those successful profitable companies, to give them additional services, found out what they needed, designed that and then sold it to them. The customers that weren’t as profitable, the product lines that were not as profitable we ask, why? And then we would make intelligent decisions. Can we turn them into a profitable customer or do we not want to keep this customer.
Zezas: So you were thinking of taking a lot of data, massaging, and truly distilling this data and creating a vehicle from which you can grow the company for greater profit.
Black: Right. And don’t forget that company that lost 2 million dollars in sales. If they have been monitoring there data, and have been looking at that profitability for that customer in growth they would have never gone on for 18 months, maybe a month and they would of seen the problem, yes. So that’s how you can limit your risk using data.
Zezas: So, we are talking about a lot of data, we are talking about a lot of large companies do this, even mid-size companies do this. Now what tools, now I’m not just talking about not for profit companies, agencies, but what tools would these companies use in order to deploy for profitability.
Black: Right. Well, once you set your foundation and you have your goals in place and all your processes, you then do need software to analyze this data, no question about it. I recently looked at a business intelligence software system that uses OAPT, that is Online Analytic Processes Technology. It allows you to look at all these variables, customers product line, whatever, and combine them in various ways in real time to look at the information. I implemented something similar 8-9 years ago, and this was about 10 times more powerful at a quarter of the cost.
Zezas: The new version, 10 time more powerful than one course.
Black: Yes, so you know where large companies can afford do it but I argue that mid-sized companies cannot afford to do it. They cannot afford with the risk that’s associated of losing sales or passing up other opportunities. They need to do this to outperform their peers.
Zezas: Right. It is all about remaining competitive.
Black: Yes. Absolutely.
Zezas: It sounds to me that organizations have two choices, either, you do this and move forward and be supportive and be super competitive, or slip back and who knows where that goes.
Black: That’s right. I mean it’s up to the executive team to drive the changes needed to where it’s needed for the organization to reach its goals. But I’d like to say that for the CEO, the information is clearly like a compass in the woods to where you want to go with as few surprises as possible.
Zezas: And the person controlling the compass, the executive, should be the finance executive.
Black: That’s correct.
Zezas: I would imagine that would be the most qualified position.
Black: I would agree with that.
Zezas: I mean. This has been fantastic. I truly appreciate you visiting us here at CFO Studio. I hope you come back and see us again.
Black: I thank you very much Andy. It’s been a pleasure.
Zezas: It’s been my pleasure.
Zezas: This is Andrew Zezas, your host at CFO Studio. Eileen Black. Thank you very much for watching and we will see you again.
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