New Controller Stories (#223)
/In this podcast episode, we discuss several stories relating to being a controller for the first time. Key points made are noted below.
Don’t Piss Off Anyone
When I first became a controller, the previous controller had been fired the preceding Friday and I started work the next Monday morning. The company president didn’t like the job she was doing, and also thought the accounting staff wasn’t very good. So, he wanted me to show up, call a meeting, and tell everyone they sucked. You can imagine how this would have gone if I’d actually said that. Luckily, the president wasn’t sitting in the meeting, so I managed to put a more positive spin on things and just pointed out that we were going to clean up the systems. That’s a lot less personal. So, lesson number one – don’t piss off anyone on your first day.
Clean Up
After that, I asked the president about exactly why he didn’t like my predecessor. Turns out, she kept a very messy office and took between three and four weeks to issue financial statements. I inherited her office, which had probably a thousand pounds of paperwork in it. So, from the first day through about two months later, I spent the end of each day rooting through the paperwork to see what could be thrown out or archived. Most of it I threw out. At the end of that time, I have a big office with next to nothing in it. I kept a stack of paper that weighed maybe five pounds. So, lesson number two – clean up the mess, so you can focus on what’s really important – which is usually only a few items.
Produce Financials Faster
The paperwork cleanup was an ongoing issue, so then I met with the staff one on one. The assistant controller was really good, and the rest of the staff was anywhere in the range of adequate to good. So despite what the president was saying, the staff was actually OK. What was bugging the president more than anything was late financials. Since we were coming up on the end of the month, I decided to get the financials out really fast. However, this was a manufacturing company, and they were bursting at the seams with too much inventory. And the inventory records were not very good. So I ended up spending a lot of time in the warehouse to figure out what was going on with their systems. At this point in my career, I was already something of an inventory specialist, so word got back to the president that the guy in the suit actually knew how to run a warehouse. So about a week after I started, the president gave me the warehouse to run.
The Problem is the Systems
I can’t really recommend being given an extra department this early in the game. There’s just too much work to do already. Nonetheless, I took over the warehouse. And found that the warehouse staff was unusually good. The problem was in the systems. Which brings us to lesson number three – the problem is usually not the people. It really is the systems. If you can get people to trust you, it’s possible to mutually figure out what’s wrong and keep it from happening again.
That first month, we closed the books in something like three or four days. Which was taking a risk, because the inventory record accuracy was really awful, so the cost of goods sold figure was shaky. But there were still a bunch of months to go before the year-end audit, so there was time to keep improving the accuracy, which meant we’d have time to perhaps write off more inventory losses later in the year. As it turns out, the numbers were actually pretty close in that first month. So, when we issued financials so fast, and they were accurate, the president stopped complaining. Unfortunately, he also gave me the purchasing department to run. That was at about the end of the first month.
Limit Your Areas of Responsibility
I did not have time to run purchasing, because it had problems too. That brings me to lesson number four. Do not go around trying to grab additional responsibility when you’re just starting out. If you’re good enough, it will come to you. If you’re not good enough, you’ll sink under the weight of all the responsibility. So don’t try to run everything.
Identify Ethical Problems
But there’s more. I needed to meet the rest of the management team. Which meant talking to everyone – the sales manager, production manager, engineering manager, human resources, and so forth. This was a good group. But I got the impression very quickly that the president had major ethical issues.
He pushed the staff to do all kinds of things, like shipping goods without customers having placed orders yet, shipping goods well past midnight on the last day of the month, fudging inventory records, and so on. The reason was that the company had been partially acquired by a major international company, and the new owner was offering big bonuses if profits could be increased by a lot.
So this became an ethical strain as we got closer to the end of the year. The profit goal was about double what the company had made the year before, so the pressure was intense to jack up profits, no matter what. This had an interesting effect on the management team, which was really a decent group of people. We worked together to push back as much as possible, but the president was on everyone, every day. And he worked that gray zone pretty hard – where the decision to record revenue could have gone in either direction. We had Big Four auditors, and I ended up being much more on their side than the company’s in order to keep things honest. And at the end of the year, the president got his bonus – just barely.
When to Bail Out
Which brings me to lesson number five. No matter how good the staff is and even if the bulk of the management team is OK, you need to get out if the senior management group wants to stretch the rules. And from what I’ve seen and heard, that’s a lot of senior managers. So take the time to get the measure of those people. If it’s clear that you can’t trust them to be honest, then start looking for a new job. Otherwise, that company will earn a bad reputation, and it’ll be on your resume for the rest of your life.
So, to summarize. As a new controller, you’re ignorant of the company and the people who work there. So, be quiet and get to know everyone. Then figure out a quick win to gain a positive reputation – in my case, issuing financial statements. Next, don’t assume that employees are incompetent; in most cases, you cannot fix a problem just by firing someone. And finally, step back from the day-to-day activities and try to see what’s going on at a higher level. If there’re ethical issues, start planning your exit. And yes, I left that company after being there a couple of years – the experience was great, but the main lesson I learned was not how to be a controller – it was how to tell right from wrong.