Oh what great examples are presented to kids these days.

Some of the worst types of hypocrites are thriving.

The first are all the ‘leaders’ who turn out to be crooks—Dennis Kowalski, Jeffrey Skilling, Bernie Madoff and a host of other hedge fund managers—to name a very few.

Then there are those who don’t practice what they preach; worse, they preach from very high profiles and at very loud levels.

I hate using political examples, but they’re the most prevalent.

One such is former House Speaker Newt Gingrich, who acknowledged having an extramarital affair even as he led the charge against President Clinton over the Monica Lewinsky fiasco—which was also hypocritical.

But the bottom of the barrel are folks such as Senator John Ensign, a ‘leader’ of Promise Keepers, an organization which, among other things, promotes a teenage abstinence policy of education, who chose to screw around (pun intended).

Gone are the days when kids listened wide-eyed and respectful to the words flowing from political, business and parental lips.

These days the kids listen, and then check out the actions of the bodies attached to those lips, either directly or by Google.

It’s not about the sex; sex and power having gone together since time immemorial. And it’s not even about who lied when caught. Almost every human lies about sex, including the kids.

A few centuries ago when I was young there was a saying, “People in glass housed shouldn’t throw stones.”

So before you become a ‘leader’ for any cause or attitude, do make sure that your own actions conform to what’s expected of those who follow you.

But be warned; reasons, excuses and apologies don’t cut it with today’s cynical youth.

And if you’re thinking of following, Google the person and make sure that their actions conform to your own standards of ‘acceptable’.

(Be sure to check out Biz Levity’s irreverent look at the Ensign scandal.)

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There’s a lot of talk that women wouldn’t have taken the same risks if they had been running Wall Street. According to Betty Spence, president of the National Association for Female Executives, that’s because “women don’t tend to bet the farm because their children live there.”

Don’t be too sure.

Perhaps women just haven’t been in a position to bet it, but they’re getting there.

“As early as this week, though, an American start-up company, AltaRock Energy, will begin using nearly the same method [that caused earthquakes in Basel, Switzerland]  to drill deep into ground laced with fault lines in an area two hours’ drive north of San Francisco.”

Susan Petty, a veteran geothermal researcher, founded Alta Rock to do geo-thermal research.

“In a report on seismic impact that AltaRock was required to file, the company failed to mention that the Basel program was shut down because of the earthquake it caused. AltaRock claimed it was uncertain that the project had caused the quake, even though Swiss government seismologists and officials on the Basel project agreed that it did.”

Am I the only one who is reminded of the expert warnings that were disregarded from people such as Warren Buffet regarding derivatives 5 years before they blew up or Harry Markopolos warnings a decade before the lid blew off Bernie Madoff’s Ponzi scheme?

Maybe Bella Abzug’s comment that “our struggle today…is for a woman schlemiel to get as quickly promoted as a male schlemiel” is finally coming true.

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Now click for another social consideration.

Image credit: Intersection Consulting on flickr

Now click to see what happens when you don’t do f2f.

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I’m traveling today, so I’d like you to welcome Miles Mochizuki.

Miles is a certified public accountant and principal at M. Mochizuki & Co. He is a CPA and MBA with more than 25 years of experience as a finance executive, auditor and consultant.  He is the former CFO of several technology companies in Silicon Valley and a financing specialist who has arranged financing ranging from venture capital, bank and lease financing to multi-million dollar debt and equity offerings on Wall Street.  His consulting clients include pre-IPO start-ups and established public companies. You can reach Miles at (925) 413-9198 and miles@mmochizuki.com

Summary

The recession and credit crunch have made cash a strategic asset.  While debt and equity financing is still available, these sources of cash have become unreliable and difficult to tap, increasing the importance of operating cash flow.

Optimizing cash flow requires the close scrutiny of incoming and outgoing cash transactions and the implementation of credit, purchasing and strategic decisions that impact cash.

Simply put, maximize cash by spending wisely.

Reduce and Control Expenses

Headcount is a main driver of operating expenses.  In good times as well as bad, organizational rightsizing is essential to effective cash management and controlling the company’s “expense burn.”  Operating expenses are also strongly influenced by the company’s business model and strategic focus.

Here, the aim should be to reduce complexity by eliminating unprofitable products, markets and customers.

Reducing complexity will also simplify the purchasing process and reduce the required investment in inventory.  Operating expenses such as travel and supplies should be examined and nonessential expenses eliminated.  The feasibility of a negotiated rent reduction and other contract restructurings should also be considered.

The company should adhere to a regularly scheduled check run, typically once a week as a means of instilling discipline in the disbursements process.  During this process, cash disbursements should be prioritized in order of importance to ongoing operations.

This usually means that payroll and essential vendor payments will have a high priority and will take precedence over other disbursements in the event that expected cash inflows do not materialize.

To the extent possible, disbursements should be timed to coincide with cash inflows so as to not unnecessarily deplete the company’s cash reserves.

Overall, the goal of managing cash inflows and outflows is to preserve and, optimally, increase the company’s cash balances so as to provide a financial buffer for operations.  This conservative fiscal management will also result in presenting the company in its financial best light for the purposes of bank credit lines and other outside financing.

Weekly Monitoring of Cash Flow

Another component of effective cash management is the preparation and review of a weekly cash flow statement.  This report should show in sufficient detail the items comprising cash receipts (cash sales, A/R collections, etc.) and cash disbursements (payroll, benefits, inventory purchases, etc.) for the current week and projected for the next 4 – 8 weeks.

This report should be prepared by accounting with input from sales and purchasing.  It should be reviewed by the CFO or Controller, along with the current week’s A/R and A/P agings and check run.  Follow-up items from this review should be discussed, as appropriate, with sales, operations and management.

Cash as a Strategic Asset

There is no question that in these uncertain times, cash and ready access to cash are strategically important and may make the difference between winning and losing.  A company that manages its cash well will be in a strong position to weather the downturn and take advantage of the opportunities to strengthen its market share.

Conversely, in this economic environment poor cash management can quickly lead to insolvency and bankruptcy.

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I received and email in response to last Tuesday’s post about the value of adding QF to your culture’s DNA that absolutely floored me.

“Jess” said that “the disruption caused by indulging in QF” was expensive and difficult considering today’s economy. He said that this wasn’t the time to look for innovation, but to focus on survival; and that even in good times innovation was expensive and not all companies could afford that level of brain power.

Granted, a lot of CEOs have a hunker down mentality right now, but even casual reading will show that the smartest companies, whether large or small, are using this time to innovate and build, so they can move swiftly when things turn around.

But it was the special brain power for innovation that blew me away.

Innovation isn’t about hiring a Steve Jobs think-alike, but about tapping into the people you have and creating a culture that encourages and rewards ideas—even if they upset the status quo.

One of the most innovative and creative business segments these days (and historically) is the wholesale drug trade, AKA, drug lords.

The constant innovation required to smuggle their product is amazing and I doubt that the innovators have special training or degrees from Ivy League schools (other than their financial and legal talent).

The innovation is driven by market forces and necessity.

Creativity is a mindset that can be cultivated in everybody IF the company’s culture supports it and managers have skin in the game.

The requirements for a culture of innovation are already well represented here and in numerous other places.

Skin is accomplished by tying part of managers’ compensation to the group’s innovation.

This requires a well publicized set of measurements, not a boss’ opinion that changes with mood or whim.

(Hat tip to Biz Levity for the drug link. Subscribe if you want to add some business-irreverent laughter to your life).

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Wally Bock, citing an article in Forbes, talks about the value of storytelling to get your point across. And it’s true. I frequently use stories to help clients understand a concept more easily or wrap their heads around something that’s very new to them.

Yes, storytelling is an extremely powerful tool, but I see two problems inherent in these discussions.

The first is that the political, religious and business leaders used to illustrate storytelling’s influence are always positive examples and, obviously, plenty of those on the dark side have used it too.

Secondly, there is rarely any information on how listeners can shield themselves from the enthralling effect of the story in order to evaluate the actual ideas being presented.

I remember a friend telling me that he was mesmerized after hearing Bobby Kennedy, who he opposed, use stories to describe a situation and what he would do to change it. The effect wore off, but he found it a frightening experience.

Combine these two and you have a recipe for disaster—Hitler was an expert storyteller from the dark side, which is why he still has adherents.

Business leaders tell stories, called visions, constantly.

But as adults, involved in adult pursuits, we have a responsibility not to suspend our common and critical senses and swallow the story whole.

Here is how you stay balanced.

Enjoy the story, but remind yourself that it is a story and that once the telling is done then the content needs to be dissected and evaluated by the left side of your brain as opposed to embraced in toto by the right.

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Do you have a nickname? I’ll bet you also have a nicktitle—do you know it?

There’s an unwritten equation that who you are (your MAP) = what you do = what you’re called.

When you’re at the top of a company you’re called ‘CEO’.

But what’s the nicktitle? What does CEO mean these days?

When it comes to business titles people are creative and the variations are numerous and telling.

Here’s a tiny sample of what I’ve heard from people when asked to define ‘CEO’ based on what they read and their own experience.

On one hand you have

• Conceited Egomaniacal Overlord;
• Caddish Elitist Obstructionist;
• Controlling Embarrassing Obsessor;

and on the other you have

• Concerned Energetic Overachiever
• Caring Enabling Oddity
• Charismatic Enterprising Optimizer

and in-between you have thousands of variations.

What’s nicktitle?

If you don’t like your own it then it’s time to change your actions, which means changing your MAP.

And whether you consider that good or bad news, the main point never changes—it’s your choice.

For the sake of your staff, family, friends and other stakeholders I hope you choose wisely and well!

Image credit: Marco Bellucci on flickr

My best wishes on your special day to all the fathers reading this.

“Becoming a father is easy enough, but being one can be very rough” –Wilhelm Busch (And has nothing to do with furnishing the sperm.)

“When one has not had a good father, one must create one.” –Friedrich Nietzsche (This is for all you guys who have filled the father role for someone who needed it, whether for a few days, weeks or for life.)

“My father didn’t tell me how to live; he lived, and let me watch him do it.” –Clarence B. Kelland (Monkey see, monkey do and this leads us to the next bit of wisdom…)

“Every father should remember that one day his son [or daughter] will follow his example instead of his advice.” –Anon (See above.)

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.” –Mark Twain (This has to be one of the smartest things that Twain ever said—and that’s saying something!)

But it’s Wadsworth who really sums up parents and kids…

“By the time a man realizes that maybe his father was right, he usually has a son who thinks he’s wrong.” –Charles Wadsworth

Have a wonderful day!

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