The Frustrated CFO

Why Do I Stay Subscribed to Quora Digest?

The truth is I have no idea why I receive Quora Digest emails.  I don't recall subscribing to the feed.  Of course, nowadays one can passively "accept" electronic deliveries of bullshit by failing to unclick some hidden option box.  I am certain, however, that  I'm not registered on Quora website.  I wouldn't.   

Quora, as in plural of Quorum - in the same way as Data is plural of Datum. It is basically a blogging hub masked as a Q&A platform: one registered person posts a question and all other registered contributors are invited to answer.  Strictly speaking, this unrestricted invitation to participate clashes with the name, which refers to "select groups."  Maybe the founders confused it with fora (the Latin plural of forum).  I don't know and I don't care: The whole concept reminds me of Coffee Talk with Linda Richman, when Mike Myers would get "all verklempt" and invite us to talk amongst ourselves by providing a discussion topic.        

Moreover, many things about Quora simply creep me out.  For instance, Quora's T&C state that contributors retain the copyright to their content.  Well, it's great that they threw that in, however, the enforcement appears to be highly problematic.  Questions posted to the site are open for editing by everyone.  This includes official editors and all registered users.  Users can also submit unlimited number of suggestions for editing the responses.  Therefore, the possibilities for modifications of the original material are endless.  The apparent absence of a solution for the copyright sharing basically nullifies the notion of IP protection.

It's weird that the site demands its users to register with their real names instead of handles and go through email verification.  It's not that I think people should hide, but they must remember that Quoara automatically releases users' names to the search engines.  We don't know whether the site gets some sort of fees in return, but it wouldn't surprise me if they do.  Just like it wouldn't surprise me if they intend to sell the subscribers' lists to other marketers as well.  But these are just my speculations.  In the absence of a clear mission statement, that's the only thing one can do - guess.  

In reality, the fact that Adam D'Angelo (CEO) doesn't seem to be interested in generating revenues makes me very suspicious of his actual intentions and motivations.  It seems only logical to suggest that they are spying on the contributors, studying their interests, behavioral patterns, and tastes in preparation for eventual commercialization of the site.  Or is it something even more sinister?  How the hell did they get a $900 million third-round valuation?  What sort of potential revenue this number is based on? 

As I said, it's creepy.  I don't even open Quora Digest emails.  But I'm not unsubscribing either - because of the subject line, which always shows the top question of the day.  I don't want to give up the opportunity to glance at it.  Most of the time, what I see reeks of laziness.  I mean, we live in the Internet age - go on Wikipedia or just google this banal crap!  But once in a while some amazing shit pops up. 

The other day I read: "How can you maximize your happiness in life?"  Wow!  Is this person for real?  60,000 antelopes just died in Kazakhstan for unknown reason and half of Europe is covered in water and mud, but this human is not only happy, he wants to bring the bliss to the next level!  Even crazier, he expects to receive constructive instructions from his fellow Quora members?!  Well, good luck with that!

Actually, it's not this kind of oddities that keep me looking.  I am more interested in patterns and trends.  For instance, recently I've noticed an increase in frequency of the questions concerning material self-sufficiency and economic survival.  Well, it's surprising that people on Quora don't talk about their inability to support themselves all the time.  I'm guessing that most of them consider bringing it up under their real names in front of the strangers embarrassing.  Nevertheless, the number of such queries is apparently spiking. 

Below are three questions I found to be most typical; with my brief comments (remember: I'm not subscribed, so I don't know the answers that followed; I can only provide my own):

1.  "What kind of salary guarantees comfortable living in NYC?"  What a terribly formulated question!  It should've come with a separate note explaining what "comfortable" means to the inquirer.  Cause, what's comfortable to a person fresh out of Idaho who has never spent more than $100 on a pair of shoes and considers a $350 Michael Kors bag a chic statement may mean financial misery to someone with a different background. 

For the sake of argument, let's assume that the questioner is single and actually meant comfortable, but not extravagant, i.e. a good one-bedroom apartment in Manhattan with no roommates; year-round pleasant climate control; full range of cable and streaming entertainments; cell and land phones; a car kept in a garage; designer coffee in a favorite shop; going out for drinks at least once a week; eat out twice a week; cooking with high quality ingredients; good cheese, wine, and fruit in the fridge; mid-range ($800-$1500) outfits; 2-3 new pairs of $500 shoes a year; one new $2000-$3000 bag a year, at least one annual vacation; a play and a concert once in a while.  And the answer is - $250K annual salary should do it, assuming the drinking is actually limited to once a week. 

And you thought that those who made $250K a year are rich?!  Not in this town, baby!

2.  "At Facebook and Google, why are many new CS graduates offered 120K+ with a 30-120K signing bonus while those with a few years experience are offered a baseline salary with no bonus?"  Well, the direct answer to this question is simple: Computer Science, in a sense, is like Medicine and Pharmacology - they continuously undergo major changes and developments.  I mean, double-entry bookkeeping was created 600 years ago and it will remain fundamental as long as accounting records will be needed on this planet.  On the other hand, today's standard surgical techniques were experimental only 5 years ago.  It happens even faster in high-tech where innovations occur pretty much on a monthly basis. 

While doctors never stop studying and researching, most (not all) computer engineers and programmers are not as motivated to stay on top of the game.  Those in training are taught the most up-to-date techniques and methods; they are subjected to the most recent trends.  And that's what Facebooks and Googles want - the newest and the freshest; in order to keep ahead of the rat race.  So, it's not about whether you graduated this year or five years ago - it's the set of skills you put on your resume.  Veteran coders who can match the knacks with 22-year-olds can demand pretty much the same level of compensation. 

But what interests me the most in this inquiry is its fiscal aspect.  There is no way the $120K/year new hires of Facebook and Google will be able to enjoy the comforts similar to those listed in point 1.  These companies operate largely in San Francisco Bay area, which, according to my observations of exactly 2 years ago, is even less affordable than NYC.  Of course, high-tech nerds of both sexes go to work in khakis and polo shirts and don't carry Prada bags to the office.  On the other hand, they buy more electronic devices than any other human and their coffee is far more expensive.  So, some corners will need to be cut.  

Obviously their lower-compensated older co-workers have even harder time (hence, the exasperation and the bitterness).  Let's hope that they are smart enough to share expenses with their partners/spouses and don't plan on having any kids.

3.  "I'm unemployed, broke, balding, living with my parents, about to turn 30, friendless, depressed, and miserable.  How can I possibly turn it around?"

Ah, and here we come to the reality of the vast majority.  This boy probably forgot to mention that he has a degree(s) in Liberal Arts and no practical skills.  The horde of young people in similar situations is ever-expanding.  They are so far removed from the idea of "comfortable" living that a $120K salary seems just as fantastic to them as a $3 million book advance or a $20 million per movie compensation package.

They were brought up on the illusion that in this Land of Opportunities they have the freedom of pursuing their interests in humanities and, "as long as they work hard," their "rightful" place in the economic system is guaranteed.  They failed to realize that this clinically dead ideal has been kept on life support by the tuition-hungry education institutions for years.  They probably still don't know that the economic system in question has been deformed and became unrecognizable, just like the sociopolitical structures, environmental conditions, and human relationships.

I can just imagine the answers elicited by this question.  They probably fell into two categories: the ones from the peers ("Dude, you are totally fucked!" or "I hear you, bro!") and the ones from the middle-aged politically correct deniers of reality ("It's okay, things will get better" or "There is nothing wrong with being bold").    

As for me, only a few years ago I would've still tried to be motivational and push my entrepreneurial agenda, urging this person to crystallize his aptitudes into a small business idea and work hard on making it happen for himself.  I used to say that if misplaced children of my peers went into landscaping, housekeeping, and maintenance businesses, it would've solved both the employment and the immigration problems in one sweep.  But now we operate under the most severe government interference in the small-business matters (minimum wages, Obamacare tolls, US Treasury restrictions on borrowing, etc.) and the number of illegal immigrants became unmanageable.  So, giving such an advice would be adding insult to injury.  All I can say is - you are totally fucked, dude!                            

IBM Predictive Analytics, or Are We There Yet, Watson?

I have no clue what a Venn diagram for conjuction of this blog's readers and tennis fans would look like - probably unnoticeable to human eye, but whether you care about professional tennis or not, bear with me and I'll explain its relevance to the subject at hand.

Those who watched Australian Open during the last two weeks of January on ESPN2 (or any grand slam in the past few years) incidentally exposed themselves to various elements of IBM's "Let's Build a Smarter Planet" promotional campaign.  IBM has been sponsoring ATP and WTA tours for years. They don't limit themselves to the ads that run during commercial breaks, but it's a good starting point for our topic. 

The current versions of these TV spots are a lot of fun - very slick, very futuristic, very high-tech, very white-surface, and they feature Dominic Cooper (whom I first saw on stage [I cannot help myself, can I?] back in 2006 as Stuart Dakin in Alan Bennett's The History Boys)!  Handsome, in the contemporary sense of the word, and serious, but tongue-in-cheek, British actor promotes IBM's cloud, smart day in the office, and... PREDICTIVE ANALYTICS. 

Aha!  Very interesting:  Did IBM branch out into Astrology Charts and Crystal Balls?  The advertisement's copywriters are appropriately non-specific and vague so not to bore an averagely challenged viewer, but let's look a bit closer at the core issue here.

Predictive Analytics belong to the realm of other popular concepts, such as business intelligence and performance assessment - none of them new ideas, by the way.  Data warehousing may sound like a novelty, but collecting and organizing records in a particular order for easier access existed for centuries. The concept of information as a key to business success is millennia old.  In ancient times tribal chiefs were estimating how many spearheads their craftsmen needed to make in order to win a battle.

Yet, in the past 10-15 years, the obsession with gauges, graphs, and all other forms of Key Performance Indicators (KPIs) have become pervasive to the point of silliness, especially in business, financial, and data-management spheres.  Everyone and their mothers are absolutely convinced that they MUST have KPIs or they will be running a danger of failing, while analysts and software developers just know that they MUST provide KPI capabilities or their services will be deemed obsolete. 

Truth be told, the escalation of urgency is totally understandable.  The pace and
vulnerability of the business environment and entire human existence have increased exponentially.  Today, more than ever, we need to have timely and valid data that has a power of springing us into immediate corrective actions. 

Of course, as it always happens, the form obscures substance and common sense.  In most cases, the procurers of reports with colorful dials, bars, and pyramids end up just staring at pretty pictures, nothing more.

Now, the Predictive Analytics are a very special brand of information manipulation because they claim that on the other side of chewing up and digesting tons of historical data they can poop out specific recommendations for WHAT NEEDS TO BE DONE IN ORDER TO SUCCEED, i.e. an action plan for a prosperous future.

And I have to say, when it comes to chomping massive inputs of data, while allowing flexible and customized outputs, various IBM Business Intelligence Suites, including Cognos, are probably the best performance analytics software out there in the land of information management - terribly expensive, of course, but awfully powerful in terms of the facts-and-figures consumption (imagine Coneheads at breakfast).

And as noted, IBM wants to take you a step further on the road to the future of business intelligence.  In 2009 the computing giant bought SPSS, which stands for Statistical Package for the Social Science, a software product that was created in 1970 to deal specifically with the analysis of what I personally call “data with a psychological twist.”   In other word, it digests information that doesn’t necessarily have dollar signs or volume units attached to it.  It was widely used in sociology, marketing, health care, education, and government. 

In its current developmental stage SPSS has become an integral part of IBM's predictive analytics solutions, which presumably  can be applied in any field.  According to IBM’s own description, the SPSS’s mission is “to help organizations to predict what will happen next, so that they can make smarter decisions to improve business outcomes."

Are they succeeding in this futuristic endeavor?  It’s hard to tell, because there is not enough readily available feedback: everyone’s KPIs are proprietary.  Even public companies will not disclose how IBM’s predictive analytics compare to the actual results.  Fortunately, there is one application of IBM’s analytical intelligence that is very public.  Here's where tennis comes back into the picture, offering us an opportunity to look at the system’s predictive aptitude. 

Nowadays, IBM's sponsorship of the Grand Slams also includes the powering of the websites of individual tournaments, including the Wimbledon, Australian, French, and US Opens.  And so, if you go on one of these sites’ home page you will see right there, in the top-right corner:  Smarter Analytics by IBM.

Well, right now it says “Completed Matches” above it because we are still almost 7 months away from the US Open 2015, but if you were to track a live match during a tournament, you can observe the IBM’s predictive functionality in real time:

This here is one of the most important predictive KPIs provided by Smarter Analytics - it is designed to show most important milestones one must achieve to reach one’s goals, and supposedly it is applicable to any data set. 

In tennis application they call them Keys to the Match.  Right there on the screen, in just two sentences IBM delivers the gist of the chart, explaining both the terminology and the methodology: “Keys to the Match system identifies key performance indicators – what players need to do to succeed in a match.  Each player’s performance is measured against their keys and updated in real time.”

This one in particular was for the 2014 Championship match between our very own champion extraordinaire Serena Williams and Caroline Wozniacki.  The system isolated three performance keys for Serena: 1^st serve points, medium rallies, and the returns of the opponent’s 1^st serve. 

According to the system’s algorithm these parameters are the most impactful in terms of the winning statistics.  The calculated "musts" are in blue and according to the statistical analysis of the historical data, Serena won 74% of sets when she won more than 61% of points on her own serve; 87% of sets when she won more than 49% of medium rallies, and 81% of sets when she won more than 38% of points returning her opponents 1^st serve.  

The red sectors show where Serena was in this match.  She exceeded all requirements: reaching 62% in the first parameter (very close), 54% in the second (also pretty relevant), and 68% in the third.  It is no surprise that she won the Championship match, but that wild discrepancy between the prediction and the actual in the third indicator (38% vs. 68%) makes me question its relevance.

We will come back to my doubts about the validity of the entire model in a moment.  Now, let’s see how we would apply the same approach to a business.  Here is a chart that identifies AZ Company’s Keys to a Successful Month: what needs to be done to achieve sufficient profitability and positive cash flow.

These are very familiar to all business runners and highly vital parameters.  Product mix is a crucial profitability factor.  The same goes for the portion of the gross profit eaten up by the overhead.  And, of course, the speed with which we manage to turn our inventories into receivables and receivables into cash determines whether we can generate more cash than we disburse during a particular period, in other words, produce a positive cash flow. 

The green bars represent the levels of the parameters at the moment this snapshot was taken.  Orange ones are the objectives that simply must be achieved, and pinks are desirable targets that supposedly guarantee a financially successful performance. 

According to the model’s algorithm the share of the highly profitable product X in the
trading mix should be at least 39%, because 69% of the months when such mark
was achieved were profitable. Obviously the overhead has far more definitive impact on the bottom line - the model confirms it by calculating a higher probability of success (79%) at its relatively lower levels.  There is even closer interrelationship between receivables and inventory turnovers on one side and the positive cash flow on the other – respectively 80 and 85 percent. 

Many business owners and executive managers, when they see a chart like that, get very excited by the prospective of having a system that can “see the future” – they think they’ve got the ultimate solution in their hands.  The widespread assumption is that Technology is smarter than a human, calculates everything faster and with higher accuracy.  And this application presumably eliminates the need to process information yourself - analyze, ponder, be anxious, listen to your gut feelings, or rely on anybody’s expertise.  Just follow the model’s suggestions and everything will be fine. 

If you sense sarcasm between the lines it’s because I am very resentful to such a blind reverence of computing technology.  And coming from me it’s a very serious statement, because I love progressive computerization.  But I cannot tolerate the lack of common sense.

Look, the selected parameters themselves are great – no question about it, but do we need a fancy program to tell us that the business is going to be okay if we push sales of a high-margin product to nearly 40% of the volume and turn most of our beginning-of-the-month AR into cash?  I don’t think so.  The years of our own expertise will kick in and reassure us – we don’t really need the statistical confirmation of the possibly successful outcome.     

But I have even more troubling concerns about this “keys to success” model.  Let me show you that the examples we just reviewed are fraught with at least two serious problems. 

The first one is the size of the statistical sample.  In quantitative research, you need a sufficiently large sample in order to be able to pinpoint trends with an acceptable level of realism.   Did you notice that Serena’s KPIs were related
to sets rather than matches?  That's understandable.  The Smarter Analytics uses just 8 years of grand slam performance.  In the period from 2007 through 2014 Serena Williams played 157 matches in the four major tournaments of the year.

Women play “win-2-out-of -3-sets” matches. Sometimes it’s 2 sets, sometimes it’s 3, and sometimes your opponent retires before you get to finish the first set. Serena has a high percentage of straight-set wins, so we can safely estimate her average at 2.25 sets per match.  This means that the predictions produced by IBM are based on a pool of
data collected over 353 sets.  It’s not US census, of course, but it's an okay sample size.

Now, in business, to approximate the tennis-model’s reliability of conclusions we would need to look at least at 30 years of a company's monthly performance data.  And that's a lot to hope for: 25 years ago the majority of small to mid-size companies were not even computerized and the paper journals and ledgers are either rotting in some storage unit or gone!          

But the bigger problem is the quality of the historical data, its relevance to the very specific, very present moment in time.  We operate in remarkably dynamic environments.  Business conditions change every moment.  One day everything is going great and another day everything falls apart.   Labor costs grow exponentially in every corner of the world.  Foreign exchange policies force one currency to soar and another currency to drop below everyone’s expectations.  Cyclicality shifts all the time: what was true for February of 2005 may not be applicable at all for this month.  And there are multitudes of industry-specific stressors. 

For decades Kodak was competing with BASF, TDK, etc. for the worldwide market share of film distribution.  Who knew that the biggest challenge would come from the photo and video equipment that didn’t need any film at all? 

20 years ago American agricultural sector exported nearly 3 million tons of frozen meat and poultry to Eastern Europe.  Then came 1999 and protectionist governments in the region declared US produce unsanitary.  Prices tanked and multiple industries contracted. 

15 years ago fashion industry had six major seasons.  Today it operates in micro-cycles with styles changing every two weeks. This dramatically altered the landscape of apparel importation. 

Well, business insiders live and breath this knowledge, but does the prediction model take into account all these factors?  It simply cannot – any mathematical algorithm can only account for a limited number of time-proven constraints.  How can we presume then that what might have been true historically will apply to our current conditions?

Even Serena’s keys to success, as far as I am concerned, are not too trustworthy, even though they are based on the game that have been played by the same rules year after year, on exactly the same courts, tended in exactly the same way.  But was it the same winning Serena Williams in September 2014 as she was in 2007, when she fell away in quarterfinals?  Or was she even the same in January of 2014, at Australian Open?  Can you spot the difference that made a significant improvement to her swing?

Can IMB’s "social" software comprehend that?  I don't think so! 

There is no way I'm putting away the years of expertise and my business instincts to start relying 100% on some computerized predictions in my strategic and tactical decision-making.  It may be a good contributing tool (again if you can afford it), but a computer is nothing more than a sidekick to the human brain; even if it's the IBM’s star artificial-intelligence child Watson.  Hence, the appropriate name it's given.  Yes, it can answer questions posed in natural language and wins Jeopardy! thanks to the 4 terabytes of information stored inside its metal guts.  Yet it's not able to intuit the right response to a simple clue “This hat is elementary, my dear contestant!”  My mind, on the other hand, serves up the answer instantaneously.

An expert with a common sense should be able to formulate her conclusions and make fast decisions herself, without any magical software, as long as she is steadily provided with timely and relevant information - whatever it is: business, sports, or arts.  It's as I always say: give me sensible data and I will tell you what needs to be done.

    

 

CFO Folklore: The Illusion of Irreplaceability

This is what always happens with severely responsible and talented people who take pride in the quality of their work and apply themselves hard, regardless of the rewards and recognition, material or otherwise: They do an extraordinary job in every function they are assigned, they show initiative and undertake tasks beyond their scope of responsibility, they set their own lofty goals and high performance standards, they pull off feats of creativity and miracles of ingenuity.  Truly they accomplish things that no one else would in their place. 

More frequently than not they don't run around screaming about their achievements - after all, they simply cannot operate any other way and they don't care that nobody asked them to be like that.  They themselves know that they are the best.  Plus, people around them acknowledge such efforts in one way or another - subordinates show respect, peers get testy, etc.  And the bosses?  They either don't notice anything, because their heads are usually up their asses, or they are too limited to appreciate the ace-level pilotage they are witnessing. 

As someone afflicted by this condition, I can assert that there is nothing healthy about it.  Privately wallowing in the knowledge that you are "simply the best" and that your work ethic is a cut above everyone else's, while not being adequately rewarded for your efforts, is nothing more than an addiction to one's own ego. It's vanity of the worst kind, because it violates the principles of objectivism and merit-based recognition.  And, like any addiction, it is accompanied by a couple of supplemental attributes. 

One of them is the inevitable development of passive-aggressive behavior: no matter how many times a person is going to say that she does it for the sake of her own self-satisfaction, something deep inside wants to be celebrated for the extraordinary abilities, efforts, and results.  This secret desire is in a constant fight with an extreme dislike of boasting.  Thus, the feelings and impulses get mostly suppressed and come out in the form of classic indirect hostility and resentment.

Another attribute is the illusion of irreplaceability.  The tormented crazies convince themselves that without them the company will not be able to survive; that everything will fall apart and go to hell.  They believe that there is no way somebody else could be found to fill their shoes.  And why not?  Nowadays, people like that are quite rare.  It's most likely that, if an employee in question leaves on her own accord or is let go for some reason (because she becomes unaffordable or her attitude becomes unbearable), the employer will never ever have someone that good in the same position.  But does it really mean that losing these truly invaluable workers is an incurable disaster?  Are they really irreplaceable? Let me answer this question by doing what I frequently do - relating the readers to an example from popular culture. 

In case you have not had a chance to check out the Netflix/Lionsgate's co-production Orange Is the New Black, I urge you to do so - trust me, you will not regret it.  The show's creator, Jenji Kohan (widely known for her Showtime offspring, Weeds), is a member of a still rare breed of entertainment developers, who is able to focus on female characters without reducing the finished product to gender-specific genres.  Orange is the New Black takes place in a women's federal prison, and its ratio of male to female characters is about 1:10.  Yet, 47% of IMDb users who rated Orange is the New Black (8.5 stars overall) were males.

One of the primary characters in the first season of the show is an inmate of Russian origin, Galina "Red" Reznikov (Kate Mulgrew).  This formidable woman runs... no, she rules the prison's kitchen and has an influence on pretty much the entire social canvas of the place.  By the show's start she has apparently been there for years and assumed a role of a Godmother for a tight circle of her "daughters."  She can be a real bitch, and a newbie should think twice before contradicting her.  But the truth is she is doing a remarkable job, keeping her fellow convicts and the staff fed and even rewarded with treats under the conditions of ever-shrinking budget, broken fridge, and oppressive hostility from some nasty guards.  As early as the 5th episode, it is impossible for the audience to imagine the kitchen without Red.  Obviously, she herself thinks she is irreplaceable.

Guess what?  Towards the end of the season, the combination of some people's foolishness and others' unsavory scheming gets her kicked off the throne and out of the kitchen.  So, what happens?  Do the lights go out in the mess hall forever?  Do the prisoners get shipped to another facility to be fed?  Nah ah!  Another head cook is found right there in the general population and installed in front of the range; she brings in her own crew; the cooking continues somehow.  True, there are no more yogurt favors, the menu is severely skewed towards Latin-American cuisine, and even the oatmeal comes out spicy.  But the plates are not empty, people are not starving.  Life goes on, while Red is driving herself insane with displacement anger.        

So, the answer to the above question is: No, you are not irreplaceable.  It may take a whole team of less adequate and more expensive people to pick up your tasks.  And collectively they will accomplish less and it will not be brilliant, but it will be just good enough for the business to continue, at least in the short run.  Let me assure you that nothing will fall apart, because doing things half-assed and with little care has become a widespread norm.  Everyone accepts poor quality at a higher cost nowadays, and so will your bosses.  And you, with your talents, skills and unsolicited attempts to jump over the high-standard bars, are just an ego freak.      

CFO Folklore: Watch Out for Sudden Meetings Behind Closed Doors

If you are an executive employee (i.e. hired help, not an owner) in a small business,  you know what I'm talking about. 

Everything used to be pretty transparent: The owner(s) dropped by your office and discussed strategic issues sitting in front of your desk.  They ran their ideas by you, stealing yours in the process, which you didn't mind, because you've learned to think of it as a sign of their appreciation.  You were a mandatory participant in tactical meetings with various third-parties and considered a welcomed member of the Board of Directors.  You were copied on all email exchanges, etc.

Then, BLAM! All of a sudden everything is hush-hush.  And it's not like you did anything wrong or have been slacking.  No, you are still your highly professional and ingenious self.  Yet, when the owners meet (without you now), they close the doors.  You know that there are meetings going on without you.  You know that there are important matters that your general business acumen could've helped to resolve, but the owners don't seek your opinion anymore.  From what you can see (and if you are a CFO, you see more than anyone else)  they need your help, but they don't want it.  You are excluded from anything outside of your direct professional responsibilities. 

And this is unpleasant, to say the least, because, let's face it:

(a) It's a negative change - it would be better not to be included in the first place, then experience rejection for some unknown reason; one minute you were special, an equal, and another (this is how you feel) you are not different from the receptionist, and

(b) The whole damn thing forces you into a guessing mode, which is a direct way to anxiety and depression.

While this situation is definitely common, I will allow that reasons behind it could vary from business to business, and from one owner's personality to another.  Yet, I bet that the following four scenarios, crystallized from years of close observation of various business owners, are applicable to the majority of cases:

1.  The owner(s) feel intimidated by you. This happens very frequently.  Many businessmen have superiority complex and think that they are the smartest people in any room.  And then you enter the picture.  At some point the owner realizes that you know more, catch faster, and handle things better than him. 

Most hired execs (including yours truly) think it's unfair that We, the brilliant and the laudable, are forced to work for "some schmucks," but the person on the other side is hurting too.  No, no, no, I'm not going to feel sorry for the poor millionaire boss, but just think for a second - he is caught between the understanding how important you are for the company and his desire to stop feeling like an idiot in your presence. 

This sounds like a difficult situation, but rationally speaking this is the best case scenario.  IF the boss is a logical person, who cares for his company's (and his own) well being - he will come around; the doors will be opened again.  Of course, if he is a self-centered asshole on an ego trip and nothing else matters... see Scenario 4b. 

2.  The owners fucked something they are responsible for and the business is not doing well (you, the CFO, may not even know it, because the commercial errors didn't translate themselves into fiscal events  yet, but it's coming).  The last thing they need at this point is you judging them with your I-told-you-so eyes.  They feel so awkward that they'd rather hide away than use your help.

3.  The troubles are even worth - to the degree that makes them loose sleep and keeps them in a state of perpetual panic.  The problem may not even be caused by the business that employs you.  For example, one of the owners just got an audit notice from IRS; he knows that some shit could be found in his other businesses that will destroy everything.  Or an owner got busted with large quantities of cocaine on him.  Stuff like that.  Well, you should consider yourself lucky that you are not invited inside those conference rooms with closed doors - you are better off not knowing anything about it for the sake of plausible deniability.

4.  The worst case scenario - the meetings are specifically about getting rid of you, while minimizing the impact on the company. We can further subdivide this one according to the underlying causes:

(a)  You are too expensive and the owners, while knowing very well that you worth every penny they pay you, don't think the business can afford you anymore, not even with a 30% base reduction.

(b)  That owner in the first scenario simply cannot deal with your superiority any longer.  He doesn't care how good you are, you've got to go, so that he can forget about you (and he will) and start feeling good about himself again.  I have to say, this one is your own fault - if you needed that job, you should've curbed your attitude.  (Oh boy, don't I know how incredibly difficult that is!)       

Oh yeah, I almost forgot!  There is a possibility of a fifth scenario (also straight from my experience with rampant business owners): If the boss starts having frequent (and kind of longish) meetings behind closed doors not with other execs or third-party relations, but with his secretary, you probably need to read my post When Your Boss's Secretary Becomes His Girlfriend, written 2.5 years ago.  It is, by the way, one of The Frustrated CFO's Top 5 most popular posts to date.  So, I know that this particular scenario is very common. 

While the reasons for the closed doors vary, your course of action is limited two just two options: (a) suck it up and continue doing your job for the sake of your paycheck, or (b) look for another job and, if you get lucky (real tough for CFOs nowadays),  get out.  Take my advice: don't lower yourself to passive-aggressive stance, or seek an open confrontation with the owners, or attempt to "ask around."  You will not achieve anything this away and it will only make you feel worse.  

If You Are Cheating on Your Taxes, Don't Step on Anyone's Toes

I've been going to the original Bumble & Bumble salon on 56th Street since... Well, who cares?  Especially when we talk about, to paraphrase Benjamin Franklin, the only two certain things in this world - our attempts to resist aging and taxes.

All I'm saying is that I have a first-hand experience with the house that Michael Gordon built - in this very location, starting back in 1977.  In fact, the masters I come to see here have been at B&B since the very beginning!  This says volumes about the environment of the place. It has a very unique ambiance - you feel special there.  That's why the company has an impressive record of retaining clients and employees alike.

Up until the 2006 sale of the B&B brand (the salons, the products, et al) to Estee Lauder (most people don't realize that it also owns Clinique, MAC, Bobbi Brown, La Mer, Origins, Jo Malone, Smashbox, Aveda, and Darphin), from time to time you could catch a site of Mr. Gordon on the premises.  His mannerism always struck me as a peculiar combination of a relaxed composure (grapevine has it that he is into Buddhist spirituality) and a blatant assholiness toward some employees.

But, as I always say, you don't get to be a successful entrepreneur by being warm and fuzzy.  To survive in business you need to be tough.  Some of us can be tough and decent at the same time.  Unfortunately, that's very rare.  Well, since I didn't need to deal with him personally, I was able to abstract Michael Gordon into what he was as a small-business owner: someone, who started from nothing and grew his brand to international recognition.  I admired him for his courage, drive, and strategic savvy. 

Also, one cannot dismiss the fact that for Mr. Gordon it wasn't just about branding, growth, and money.  He was truly a hair-man, devoted to the idea of creating high-quality products that satisfied a wide spectrum of needs.  Unlike the vast majority of other famous salon owners (Sally Hershberger is one example), who are engaged in "private label" merchandising (i.e. buying generic, mass-produced,  "juice" and pouring it into containers with their names), Michael Gordon actually developed unique mixtures, which are used to great effects in many salons and homes. 

It was his quality standards and unrelenting drive to succeed that fascinated me.  Imagine my surprise, when I read in New York Times that this remarkable and shrewd businessman was arrested for tax evasion.  And it wasn't even for something cleverly devised (not that I would approve that) - no, it was plainly stupid: he didn't declare on his tax return the $30 million capital gain generated by that famous sale of B&B. 

The charges (both criminal and that of stupidity) against him are mounting: when he was questioned by IRS about this omission, he claimed ignorance of the fact.   And that's lying to a federal agent, because apparently there is evidence of his active attempts to hide this money. 

What is the point of lying like that anyway?  Didn't he sign his tax return back in 2007?  He never heard of capital gains? Weren't there a horde of lawyers and accountants involved in the closing the deal?  Nobody mentioned the tax liability?  Hard to believe.     

NYT didn't make it a secret that IRS has acted on a tip received from a "confidential informer."  Of course, they did.  Truth be told, IRS doesn't have sufficient resources to look for specific violations of the tax code.  The best they can do is to react to the red flags selected by their algorithms.  Your employer reported your earnings, but you didn't include them on your tax return - an inquiry will commence.  Itemized deductions  exceed certain levels, even if by $100 - the flag will be raised.  Meanwhile, corporate executives receive multi-million dollar perks and call them "business expenses"; private shareholders transfer stocks and property between related parties and don't recognize capital gains; owners make equity withdrawals and show them as loans - and none of it ever get noticed.  

However, the situation changes if someone makes a call, sends a letter, or an electronic message to IRS, detailing a case of the tax evasion.  If this someone provides sufficient information and the violation is big enough to prick up agents' ears, they will be on the case right away.  Especially if it involves a notable figure that can get media interest (hey, you cannot blame IRS agents for wanting some attention). 

Even though IRS has, what they call, a whistleblower reward program, it's not easy to get paid for reporting tax violations.  Obviously, in most cases, the informants are not motivated by money.  Typically, they have some sort of a relationship with the evader and it resulted in two outcomes: an incredible animosity that goes way beyond a simple grudge and the knowledge that the government is being shortchanged.  The IRS becomes a mere weapon of revenge.

This is why Leona Helmsley went to jail in 1992.  The Queen of Mean dragged behind herself a trail of disgruntled contractors, corporate employees, and household help, who really hated her.  Some of them possessed hard evidence proving that millions of dollars spent on personal properties were billed to Helmsley's real estate business. 

And that's why Michael Gordon got arrested.  In his brazen manner, he must've rubbed the wrong way someone with the first-hand knowledge of the $30 million unreported gain.  That hurt someone dropped a note to IRS.  

Do I have to state the obvious?  Don't steal big bucks from government - it's dangerous.  But if you make a conscious decision to dodge some taxes, make sure that no one knows about it but you.  And I mean NO ONE.  If that's impossible, make sure that you are super nice to those who are onto you - they have your freedom in their hands.       

Related articles

Founder of Bumble and Bumble Accused of Hiding $30 Million From I.R.S.

Legal Expert's Rundown on Employers' Rights to Discriminate

I frequently write (and talk) about the distortion of bill of rights in the workplace and other similar perks of employees' existence.  Hell, I even have a separate category for posts devoted to nepotism. I always stress out that small-business employers can pretty much define their own rules, as long as they put them in writing and notify new hires of how things are done in their domain.  Not only that labor authorities don't look into employment conditions of companies with less than 50 employees, but, even if one or another wrong-doing is brought to their attention, they will take the corporate side as long as there is a correspondent written policy in place.  And think a hundred times before suing your former employer - you may end up staring at a defamation law suit filed against you. 

Now, I have an opportunity to direct my readers to an expert's list of legally permissible ways employers can discriminated both existing employees and job applicants in a business of any size - big or small.  I have previously quoted a veteran employment law specialist and award-winning writer Donna Ballman on the issues of workers' rights.  And, as you can see, her popular blog Screw You Guys, I Am Going Home is a single proud member of my Blog Roll.  I highly recommend for everyone to follow the link below and read her latest contribution to AOL Jobs - the characteristically concise summary of legitimized discriminatory practices.  I guarantee that at least some of them will surprise you.

8 Ways Employers Can Discriminate Against Workers - Legally by Donna Ballman         

What to Expect from a Boss with a Peter Pan Syndrome

Oh, Peter Pan, the "boy who wouldn't grow up," he is so endearing in his never-ending boyishness.  He doesn't care about the adult world problems.  His disregard for the laws of physical and emotional gravity allows him to fly without wings and fight pirates with an uncommon valor; but it also propels him out of the windows of the heart-broken girls: Wendy, and her mother Mary Darling before her, and who knows how many more.  Really, he belongs in his Neverland.

Yet, Peter Pans live among us.  You meet them every day: in your office, on your business trips, in stores and public transportation; you pass them on the street; they may be related to you and you see them across the dinner table.  They don't soar in the air or prance with swords (well, maybe some of them do).  Nevertheless, their true nature is that of unabashedly cocky young boys ready for adventures.  

Permit me to clarify.  We are not talking about physical appearance here.  People who look 10-15 years yonger than their age, whether because of their genetic make up or because they treat their bodies right, can be very grown up.  I am not talking about those who take part in what society perceives to be "young" activities either.  I actually think that people who never stop going to rock concerts and enjoy parasailing in their eighties are on a higher plane of sophistication.  No, the subject matter here is the psychological immaturity; the inability to accept the reality of the adult world.       

The Peter Pan Syndrome is not officially recognized by the Diagnostic Manual of Mental Disorders.  It's considered to be a "pop-psychology" term.  In other words, it's okay to use it in cultural and social context, but no doctor will get reimbursement by insurance for treating this affliction - there is no code for it.  I frequently wonder whether it is a ploy of the closeted Peter Pans of psychology.

Peter Pan of J.M. Barrie's story can be recognized right away.  The book illustrators even gave him pointy ears, hinting that he is not quite a regular human.  But in every-day life they are hidden inside people who appear to be all grown up.  Yet, there are certain telltale signs one can pick up right away.   It could be a sports car too small for the owner's body, or a tan in the middle of winter, or a jacket a size too small for a middle-aged banker, a hipster watch on a wrist of a 60-year-old lawyer, a second wife 25 years younger, a newborn child at 57.  I'm sure you know what I am talking about.  

However, at the end of the day, it's the personality traits that betray the Peter Pan's tendencies - the propensity for undisciplined, uncontrolled, irrational, irresponsible, disorderly, intoxicated behavior.  But, like with all archetypes, the negative trends coexist with positive potential that manifests itself as a free spirit, unbound instinct, potential for growth, hope for the future, untamed forward drive.

It's one thing to handle Peter Pans socially and even privately.  It's a completely different matter when you are confronted with men-boys in the work place, especially if one of them is your boss.  You have to be very careful: bosses like that think that they are invincible; they believe that they will come out on top in any situation.  They take big risks and trust they can get away with anything.  If they are lucky, their endeavors may lead the company to brilliant successes.  But many of them get smacked against the cruel wall of reality, crash and burn.

One of the most prominent symptoms of the Peter Pan complex is absolute inability to take No for an answer.  Many private-business CFOs deal with the childish behavior of their bosses and can fill in the blanks in this conversation:

CEO:    I want to...

CFO:    We cannot do this...

CEO:    Why not? (like a 10-year-old)

CFO:    We don't have...  And it's against...  We will jeopardize...

CEO:    I want to do it anyway... (like a 5-year-old)

It's very difficult to find the right way of dealing with an intelligent and talented person, who looks like an adult, but frequently falls into the pits of the child-like stubbornness.  The only thing you can do is to be constantly aware of the reality of the syndrome.  Hope for the best, but prepare for the worst.

Let me leave you with this popular culture example.  Mark Zuckerberg, a student at Harvard University, threw a tantrum like a 3-year-old boy in a sandbox, when his girlfriend dumped him - he called her mean names and told her secrets to the entire nursery school.  Then he ran out and slammed the door behind him as hard as he could.  The result of it was the creation of a network that pervaded the lives of hundreds of millions of people all around the world and made him the youngest billionaire.  Now, he will never grow up - he never got a chance to face the real world.  He went from childhood into a fantasy land.  He boasts that he wears the same thing every day.  So, does Peter Pan - the protective uniform of a boy who will never grow up.

The Boss Who "Cares" aka The Hypocritical Bastard

Hey you, hard-working people, regardless of your profession, stature, or rank! I am talking to all of you!  Beware of "NICE" BOSSES!

You know the type - he always smiles at you, tells you jokes (and laughs loudly himself), asks about your family (sometimes even during first interviews), says "thank you" at the end of the day, declares that he wants everyone who works for him to be happy, claims to keep your opinion in high regard.  

This is all BULLSHIT!!!  This boss is a liar and a hypocrite!  Don't think for a second that because he acts like that on the surface, he really cares and will do right by you in terms of things that really matter, i.e. create material (compensation, benefits, working space) and moral (respect, recognition) stimuli for you to work harder and feel satisfied with your own performance!  

In fact, this faux exterior should be taken as a first sign of a shitty character.  There is an old proverb that applies perfectly here: "He makes a very soft bed that will be hard to sleep in."  The only person such a boss cares about is himself!  At the end of the day, all that huggy, phony warmth is just for him and him alone.  And because people like that lie to themselves the same way they lie to others, he goes home honestly believing that he is a swell guy and a wonderful boss.  He simultaneously pats himself in the back and jerks himself off.

 But when it comes to serious, important staff...  This is the guy who will fight you tooth and nail for every penny of raise or bonus you want to give your direct subordinates at the end of the year.  It doesn't matter to him that you only want to reward those who applied themselves the hardest, grew, learned, developed, and that you keep it all within the budget.  He'd rather double his own withholdings (for being so wonderful!) than reinforce the merit.  In fact, he will say, "Didn't we pay for her plane tickets when she went to her grandmother's funeral?"  Yes, we did - you suggested it to  be "nice."  So, now you think that was in lieu of the annual performance bonus?

And this is the guy who will reply to every great proposal from the members of his executive team, writing the exclamation-point emails: "Thank you!" "Great idea!" "Brilliant!" But he will never green-light the actual implementations.  You will see the mean gleam in his eyes every time the life proves you right or someone on the outside of the business confirms that you understand it much better than he does.  If that happens, he will enter a crazy cycle, competing with you all the time, even though he is the boss and, therefore, already won by default. 

I believe that the best working environments are created not by cuddly fakeness, but by indiscriminate fairness, accommodation of professional growth, and respect of achievements (the principles I myself exercise).  If that's impossible to have, I prefer an honest brute instead of a "nice" hypocritical bastard.  In this economy (or, as I call it "new reality") only a few of us get lucky and find "better" jobs.  The rest must tolerate whatever hateful things they are forced to experience.  And that's Ok (there is no such a thing as a "perfect" job anyway), as long as you face the reality with the full understanding of the situation and don't get fooled by appearances. 

The Clueless Boss of a Frustrated Downshifter

The economy and the resulting miserable state of the job market forced many financial executives to downshift, i.e. take jobs way below their levels of expertise, authority, and adequate compensation.  It's been almost a year since I wrote about the heartbreaking reality of first finding such a position and then accepting it for the sake of having food on the table and keeping the roof over your family's head.  Yet, the painful topic is still relevant.

But let's look a little further.  We have an opportunity to examine an interesting situation brought to my attention by an actual downshifter - a former CFO of a, now defunct, $500-million-dollar firm.  After a year of a futile job-hunting he accepted, at 50% of his former compensation, a Controller's position in a young and small ($30 million) company, ran by two owners - a female CEO and her partner with a COO title.  

How many times did I write about accidental bosses?  And here we go again: this business has started because the two partners got lucky. They were in the right place at the right time with extensive connections and sufficient funding at hand.  Neither of them actually needed it to survive, but the opportunity were too exciting to pass up. 

Guess what?  The CEO never led a company before.  She never even worked in a commercial enterprise.  Her partner has an MBA from an Ivy League school, but he only worked overseas.  Neither have the chops to make good executives, yet both have undeniable talents and a lot of enthusiasm.  She is a sales ace and the toughest negotiator you can find.  He is incredibly detailed-oriented.

Not only that they managed to get the company off the ground eight years ago, they kept it growing with minimal labor resources, including  a single bookkeeper.  Hiring a senior financial person was definitely not among their priorities. Until...  Some people are just born lucky.  An even bigger  opportunity presented itself.  To implement it they needed more capital.  The dogged COO wore down one of the major banks into providing them with a substantial trade finance line.  Among bank's mandates was hiring a proper Controller. 

Enter our former CFO.

Because both execs are not very clear on the leadership functions, the division of responsibilities is blurred.  The COO was in charge of the Controller's hiring.  The CEO never even saw the candidate's resume or salary history.  When COO decided that this is their guy, the CEO was called in for a minute to shake the future Controller's hand.  

Yet, once our downshifter started working there, he realized that the woman's word was the final authority on pretty much all other issues.  Now, because she lacks corporate experience, she is not capable of assessing the Controller's performance.  In her mind, any other accountant would provide the same input as this guy, who managed in the first three months to correct more procedural, systematic, recording, and administrative errors than he did in 25 years before this job. Moreover, he contributes into the company's strategic decisions.  All that for a price of a low-brow peripheral Controller.  The CEO has no clue that what she's got was a gift; that she got very lucky again and obtained an Hermes bag for the price of a Coach.

This is a big problem.  If your boss doesn't understand your value, she cannot appreciate your contribution. The fact that someone with lower qualifications and less experience would not be able to attend to the sophisticated tasks you accomplish remains unnoticed.  As a result, you are helping to better the company without a chance for a fair reward. 

What to do in this situation?  You are not the type to brag every time you do something extraordinary.  The first thought comes to mind is to re-introduce yourself.  The guy who hired you didn't share your resume with his partner, so give her one together with your salary history.  You can say, "I understand you've never had a chance to look at it before and I think it's not fair for either of us."   I know some people will say it's tasteless, but the options here are limited.

Secondly, you must propose a proper evaluation system for all staff members.  Because these people have no idea how to go about it, they will turn to you.  This is your chance!  Provide them with the format that allows employees to list their own accomplishments.  Then, make sure that reviews are actually conducted.

Finally, if you don't get satisfactory acknowledgement anyway, start looking for another job.  Maybe you will be luckier this time around.  It's like I always say, employment at will works both ways: they can separate from you at any time, but so can you.

Quote of the Week: Women of Power as Mothers

"Do yourself a favor... don't have kids... Ruins you ambitions, keeps you from what you want in life...  I'm not a good mother...  Kids are like clients, they want all of you, all the time.  Don't get me wrong.  I love my son...  Love's nothing, love's easy.  They come out of you, you love them.  What you do after - that's the hard part."

                    Patty Hewes (Glenn Close)

                    Damages, Season 1, episode 1

                    Written by Todd Kessler,

                    Glenn Kessler, Daniel Zelman

The Frustrated CFO's comments:

I watched this and thought, "Wow!  This is hard core.  You cannot dismiss the truth here."  A couple of episodes later Patty ships her disobedient and rebellious son to a Reform Academy.  He is snatched away kidnapping-style.  She is all about efficiency and getting her way. 

Can women have it all?  No, they can't.  Not, if they want a glorious career and "ideal" children. There is no such thing as an "ideal" child.  They are humans, not dolls, and just as fallible as their parents.  And the career?  Please... there is always something. 

What women can have are two zebras (if they are lucky!): white stripe is followed by the black one, and so on, and so forth.  Ups and downs at work, good and bad times with kids - the hard life... and that's if no real tragedies happen.