Cerius Journeys: The Path of an Interim CFO is Rarely a Straight One

Denise Montgomery: Welcome to Cerius journeys. I’m Denise Montgomery. These are discussions with high-level executives who specialize in crisis management. Today’s guest is Mike Kovar. He’s a CFO, CFA, CPA with more than 20 years of helping top-level organizations, including Honeywell and LendingTree. Hi, how are you doing today?

Mike Kovar: I’m doing well, Denise. Thanks for inviting me. 

Denise Montgomery: You’re more than welcome. So one thing that I’ve been meaning to do with everybody, I don’t want to skip that with you, is just ask you in your own words to give us a high level overview of you, who you are, what you do, who you’ve done it with. 

Mike Kovar: I’ve been a fractional CFO for the last six years and I really specialize in helping the middle market companies achieve their vision.

What I’ve discovered is, as a general rule, is that most companies, head to the ground, are operating, but they really don’t have a comprehensive vision, much less a means to get there, right? And so what I help [00:01:00] them do is I help them formalize this process. Develop checkmarks and hurdles to get there.

And, if you radically increase profits, become more efficient and grow and hire more people and make everyone happy here. 

Denise Montgomery: And doing that, of course, within the financial realm, which is always one of the most painful realms to do that in. 

Mike Kovar: It can be, but I look at the finance realm as an opportunity.

I consider the CFO as more like a backseat driver of an organization where you’re in a unique position where you see everything, you see the impact of hiring additional salespeople, acquiring a new product line, reinvesting in a new product line, developing a new marketing strategy. You see the costs going out the door, but you also see the revenue coming in.

So in my opinion, you’re in a unique position to provide analytics or intel, which can effectively drive the organization forward. And that’s really what I specialize in, is providing a lot of information and intel about what’s working, what’s not, [00:02:00] and in my opinion, theoretically, if this was done correctly, it should drive strategic and tactical operating decisions.

Denise Montgomery: I wanted to ask you to give us a bit of an inside view of how this looks in practice when you were inside an assignment, a project and organization as a fractional interim part-time executive. For folks who don’t really know how that works, can you give us some insight into how your own assignments have looked?

Mike Kovar: Inevitably, most assignments developed from some sort of crisis. CFO has left a company’s missing bank covenants. They’ve grown beyond the capabilities of their bookkeeper or something here. And there’s a real need for some additional assistance, [00:03:00] an STC, a violation of compliance rules where they need something to occur.

Initially, you gotta jump in, hit the ground running and address the need, because that’s critical and that needs to be addressed timely and certainly I think there’s a lot of qualified individuals that can do that, but I think where I add a lot of value is the period after that where I could step back and look at the operations objectively.

I do things such as, I look at sales metrics, I develop a sales dashboard, I look at sales by channel, and what I do is I try to develop which of these channels is the most profitable. You’d be shocked to find out that if you did a gross margin analysis by customer, or maybe you wouldn’t be, a lot of my clients actually find that they’re losing money on certain customers when you pretty much add in customer service functions and other functions here that they really haven’t [00:04:00] quantified. And in a lot of cases, there’s not adequate controls over the salespeople who, God bless them, were just trying to sell and they have some discretion over pricing and they’re actually selling it a loss.

Overall, we’re talking about enacting some sort of financial discipline over the entire sales process here and developing metrics and drivers to push the organization forward. I look at it real quick. I look at my role here as not really keeping the ship afloat. I look at my role and my impact is propelling it forward into new realms.

Denise Montgomery: Since this series launches now during a time of crisis management, I wanted to get your insights on the difference between steady state leadership versus crisis [00:05:00] leadership. And I think maybe just the difference in the type of leader.

Who needs to be in a seat, in a crisis versus every day?

Mike Kovar: I think the difference really has to do with identifying key issues and decisiveness. Compliance needs, in my opinion, closing the books, the stuff that a lot of finance teams really focused on. In my opinion, that should not be the priority.

I think the priority today needs to be cash flow related PPP loans, disaster loans, making sure that you’re compliant with these requirements so that you’re keeping your people employed, and continuing to keep the doors open of the organization.

There’s a lot of organizations that have the ability, and I’ll jump into that. I think there’s an opportunity for a lot of [00:06:00] organizations here. And they don’t realize it. So for example, anybody that has anything to do with any company that has anything to do with fabrics might possibly be able to redeploy themselves into creating those cloth masks, right?

I’m seeing an unbelievable amount of demand for those already, and they’re fairly easy to make. And I’ve known a couple of companies that have pivoted at least briefly here to supply that. It’s not just for profitability, right? You’re actually helping people and helping people and becoming healthier.

So, there’s demand for it. You can help that demand. I hope that enough companies do pivot as well to kind of keep prices down. It happens when the supply and demand, right? When there’s a lot less supply, when demand is really high.

Denise Montgomery: I would imagine that as a finance professional, that’s been a really interesting thing to watch from your perspective.

Mike Kovar: It is. [00:07:00] There’s a lot of companies that have been fairly innovative about their offerings. I mean, a BJ’s, pubs, for example, restaurants and pubs, offering a 50% discount on all pizzas to get you in the door with a couple of other additional offerings, which I thought was clever.

And I picked up a pizza last night and there was a revolving door of people coming in and out. I know they’re way short of what their normal revenue is. But something as simple as that to keep the doors open. And it’s also helping people survive, right?

Sometimes it’s tough to get into grocery stores as well, and getting a $12 pizza is a good deal. I don’t know if I’ll ever go back to full price after having really good pizzas. 

Denise Montgomery: I wanted to back up and just get a quick overview of how you got where you are. Let’s start with geographically.

Where’d you come from and then go straight to [00:08:00] how’d you get to do what you do? Where’d you learn your tricks of the trade? Was it formal education? Was it on the job? Was it a combo? Just kind of a general overview. 

Mike Kovar: I’m originally from St. Louis, Missouri. My father ran a tennis center for about 50 years.

So I’m a competitive tennis player as well. And for whatever reason, I was extremely driven as a kid. For example, at age five, I was on the tennis court with some pretty good players and we’d have contests, and this explains a lot about who I am and why I do things. But, I’ve been blessed with some sort of internal drive.

We had a contest every month where we could win tennis rackets, close balls, whatever. That was a five or six year old kid playing tennis and just a bunch of drills against the board or whatever. And so my father would actually show me a new drill that gets the board. And he said [00:09:00] that he would actually see me work out for hours, five and six by myself against the board, which was amazing to me.

He said he had much older kids that would not work that hard. I’ve taken that to the next level where, no, I’m a nationally ranked tennis player, and in my opinion, it should be a lot better than what I am as well. But my point is that I’ve taken that internal drive to always succeed and push the envelope and go bigger and better.

And the analogy I like to use for people is that if I could run a 4.8 40,I want to know what it would take to run a 4.75 40 and when I get there, I wonder if 4.7 is possible. And if I can guess what the next question is, and it never ends. And so a buddy of mine [00:10:00] at the Pacific life insurance company looked at me one time and he made a really interesting observation. He’s a very astute individual. He said, “you’re just never satisfied with the status quo and you’re always stretching and reaching for more, doesn’t it bother you? The fact that you’re never really satisfied.” Normally? No, because it’s just in my DNA to drive forward.

I take that to the next level with my companies here. If you have X amount of revenue here, why not shoot for 25% more, 50% more? Can you be more profitable? Can you be more efficient? A lot of the companies fail to adapt and continue pushing forward, right?

And the best analogy I’ll come up with is: GM and Ford, 20 years ago, biggest auto [00:11:00] makers in the world, by far. And in consumer reports they were talking about how GM and Ford had improved dramatically in quality from 15 and 20 up to like 9 and 10. Dramatic improvement, right? This has to be related to Japanese car companies taking over, right? And Honda quality. And God love the engineer who said, “well, we’ve improved our process here. In the past when we were developing a new model of the Mustang, for example, we would only look at the previous model here and decide what we wanted to do. Now we’re actually looking at what the competition is doing.” And Lord knows they probably should’ve censored him. But that said it all right?

Is that [00:12:00] it? At the end of the day, if we were just concerned about what we were doing, we didn’t have our head up. We weren’t looking around. And that’s a problem, right? And so I tell my clients at the end of the day – just like a good employee, we provide information analytics in detail to their boss before their boss even asks for it – you as a company should provide guidance, information, analytics, and products before your customer is actually asking for it. Case in point: Apple. Did anybody ever think about putting a camera in a phone – all the devices in there – until they did it? No, because they told you they’re shaping that industry with innovation.

So at the end of the day, you can either react to the market and make a better mousetrap. Or you can lead the market by thinking ahead of the curve, but what people really need, [00:13:00] and a lot of companies have their head down and it’s hard for them to step up, right?

And I know they’re trying to survive and moving forward, but just like that employee that’s not really thinking about the bigger picture here. But I’ve tried to get these companies out of the trenches to think about strategically what they’re really trying to do when they’re serving their customers.

Denise Montgomery: That was really insightful. Thank you. 

Mike Kovar: My pleasure. 

Denise Montgomery: So my next question actually does go back. You, you have already touched on a couple, but it’s, it’s a very specific question and it’s about, who your teachers and mentors and leaders have been and what you’ve learned from them. I was hoping you would share an insight about one of the most meaningful teachers, mentors or leaders that you’ve learned from and what they taught you. 

Mike Kovar: Shockingly, and maybe this was why I am who I am, is I never really had a true mentor. And I always considered that one of the biggest deficiencies in my background here, but [00:14:00] at the end of the day, I’ve had a variety of different experiences in a lot of different ways.

And I got a feeling that that’s probably what made me who I am. And, again, I’m from the Midwest right. We’re all straight shooters, there is no lingo, you know, there’s nothing slick about it. We are about hard work, getting results at the end of the day. And so, I guess I’ll say that a lot of my mentors and what has shaped me are my clients and the struggles that they’re having.

And I’ve also co-founded two companies, both of which successfully sold. And I really think the odds are so stacked against the small and middle market sized businesses, particularly smaller ones, where they just need a lot of guidance to really get through. 

And the world is changing faster than ever. Companies are leveraging the internet [00:15:00] and social media is taking down complete industries: Uber, Lyft, destroying the cab industry. Airbnb is dramatically impacting the hotel industry. If you’re not thinking, and this is where my risk management hat is on, if you’re not thinking about trends and what people are doing as part of your product line, you could get blindsided, too. And all these companies started in somebody’s bedroom on a computer, and it’s like the next great startup could be in a garage somewhere. 

Denise Montgomery: Or in a bedroom in isolation. Right now. 

Mike Kovar: You’re absolutely right. It’s kind of a scary world.

There’s no risk out there, but really considered trends and what people are doing as well in the companies. I think most positioned to leverage at this point, or ones that really understand what their clients need are thinking out of the box about what they could [00:16:00] possibly do going forward as well.

They’re not pigeonholed by what’s currently existing today. They really quantify future needs. 

Denise Montgomery: I definitely see what you bring already, which is a very broad perspective and a lot of looking under the piles, in the corners and in the dusty areas for things that might’ve been missed strategically.

And so I can already sense probably a bit of what your answer may be. This next question, but that question is, so what is your secret sauce? What is your special, unique approach to CFO work? If you can sum that up for us so people know how Mike works, it is different than others. 

Mike Kovar: The accounting and finance side of me is more traditional where you know, there’s a need, but we’ll address that.

And then I think everyone’s very interested in that. I think what differentiates me is [00:17:00] I’m looking to establish some level of discipline within the organization, get everybody moving in the same direction here, and establish a plan to obtain that vision. A lot of my clients, when I ask them what your vision is, and they say they’d like to grow. Or they’d like to be at 20 million when they were at 15. Or they’d like to be more profitable. I believe that things can only be improved if they can be measured. And so I think you need to get something formal on paper about where you really want to go, what you want to be.

What I really do within a day is I establish an overall plan roadmap to get there. If they don’t know where they’re going, we hash that out. And it’s not my vision. It’s the company’s vision. And if they’ve not thought about it, they should. Because not having a vision means you [00:18:00] don’t know where you’re going and you’re never going to get there.

So there needs to be the vision about where you’re going when you get there enough. There needs to be a plan. I help formalize a roadmap to get there with hurdles, benchmarks, and checks. Get everybody to buy off on it, and I believe that’s terribly important. Have everybody on the same page.

I’ve run a couple of competitive soccer teams. And having 10 guys all buy into the passing concept and having one guy be the dribbler destroys the whole momentum of what we’re trying to accomplish. He goes into that black hole, that individual and everything is disrupted, right? It’s just an unbelievable inefficiency.

So we get everybody on the same page and then what we do is we measure where we are. Periodically using the using against these hurdles and benchmarks to see where we are. And we may [00:19:00] decide that maybe the original goal was overly ambitious, but we need to understand and possibly tweak the current plan in order to get there.

Maybe we’ve realized, “Hey, that sales channel that we’re approaching will not support this level of growth. We need to consider investing in another one. Maybe the sales team’s not big enough to go where we want to go. We need to invest in it.” I’m a big proponent though – this is my CFA side of me – I don’t believe you’re going to really cut your way to profitability and growth.

I believe investments paramount. And this is – I call it my CFA – that’s my investment hat on. I think to grow a company, you need to invest in it. You need to invest in the people, get everybody on the same page, and great things will happen when you get everybody pulling in the same direction.

Get rid of some of the inefficiency. 

Denise Montgomery: I’ve certainly never seen a better example of needing to pull everybody in the same direction than what we’re living through right now. So I think your approach is being validated in [00:20:00] real time. 

That pretty much leads us to our final question here, which I have borrowed, from Inside the Actor’s Studio, James Lipton, who used to interview actors on TV.

And it’s a really simple one, which is, if heaven exists, what would you like to hear when you approached the pearly Gates. 

Mike Kovar: I suppose what I’d like to hear is that I maximize my gifts, impacted a lot of organizations. That I made companies a lot of money, made it more efficient, profitable, impacted a lot of lives, and kept jobs and people safe.

So I want my impact to be greater than just me. 

Denise Montgomery: That’s great. Thank you so much for taking the time to talk with us, that it all comes together in a big picture that I can see and. That’s really tough to [00:21:00] do with finance and with CFO work sometimes. So I really appreciate your insights. 

Mike Kovar: That’s my pleasure, Denise, and thanks for having me.

Denise Montgomery: Thank you for joining us on Cerius Journeys. For more information, join us at ceriusexecutives.com.