OVERVIEW

• Cathy reports directly to the CEO, Jon
• Key player in ABS & likely Jon’s heir - been with the company for 15 years
• Cathy is considered to be an expert in mergers and acquisitions and has been the driver of ABSs acquisition strategy
• The company faces an EXISTENTIAL FINANCIAL CRISIS, primarily due to DRAMATIC YoY REVENUE SHORTFALL that is SQUEEZING CAPITAL, MARGINS & the COMPANY'S OPERATIONAL ABILITY TO RESPOND.
• Strategically, she feels technology will be critical to the future of ABS having seen the significant limitations that OUTDATED LANDSCAPE, MANUAL METHODS and ANTIQUATED PROCESSES have created for the business, and she will play a significant part in the creation of their future strategy
• IT reports to her and, as a strong and pragmatic leader, she favors business execution over politics
• Her “trust but verify” approach is behind hiring “supervision” for the CIO: Craig Stires. Lee is aware of this.
• Seeing her possible future, and the leadership void left by Jon, she is proactively developing the “group” structure on top of the old ABS hierarchy, which she intends to break up.
  
  

• University Degree in Business Administration
• Started career at Ernst & Young, progressed to Senior Manager position
• Joined ABS and quickly ascended to CFO role
• Involved in reporting project when SAP ERP was implemented

• Result-driven and very analytical
• Decisions are based on thinking and thorough investigation
• Seeks & values the opinions of others on her team, but retains final say on all spend decisions given the financial state of the company

• Attitude towards SAP: NEUTRAL, however she sees the value in business continuity and leveraging existing assets
• Power: Significant power, Financial Decision Maker, controls all unbudgeted spend decisions
• Emotional state: Fiscally Cautious but loves the M&A game, calm-assertive

Deferring to Tom

• to provide a plan to address near and intermediate term revenue growth

Deferring to Lee (CIO)

• to address the EDI issue that is putting strategic customer relationships in jeopardy

Cathy is not naïve about Tom's & Lee's ability to solve these problems and will completely take over control if necessary

• Reduce IT maintenance costs by 30% by the end of current year
• Reduce HR operating budget by 40% by the end of current year
• Reduce days to close annual books from current 60 days to 30 days (50% decrease)
• Reduce DSO from current 80.4 days to 70 days (13% decrease)
• Reduce SG&A to 10% of revenue (current is 15.7% of revenue – 36% decrease)
• Significantly reduce monthly reports processing time, from current 15 days to 7 days (50% decrease) and eliminate extra costs with external resources
• Avoid over-payments /Compliance Optimize working capital
• Working capital employed per unit of sales
• Inventory days
• Reduce DSO
• Reduce DSO Increase net margin/profit/income Increase operating margin/profit/income
• Reduce COGS/COS (gross profit margin management)
• Reduce variable cost of production
• Reduce IT/Finance/Marketing/Manufacturing related CAPEX/ OPEX
• Revenue Growth Rate
• Total Shareholder Return (TSR) – Large Enterprise
• Economic Value Added (EVA)
• Return on Investment (ROI)
• Return on Capital Employed (ROCE)
• Return on Assets (ROA)
• Return on Equity (ROE) – Large Enterprise
• Debt-to-Equity (D/E) Ratio – Large Enterprise
• Cash Conversion Cycle (CCC)
• Working Capital Ratio
• Operating Expense Ratio (OER)
• CAPEX to Sales Ratio Price Earnings Ratio (P/E Ratio) – Large Enterprise

Cathy is not unlike most CFO’s in this economy who have taken direct control over IT in order to manage this cost center, and the CIO, who has rarely enjoyed Board level confidence in terms of being perceived as strategic to the business

She is embracing technology and has a vision, however, is not technical herself but sees the operating efficiencies that properly aligned and deployed technology bring to the business

While she has been slightly burned by technology she sees it as more predictable and profitable than people when implemented properly

She is acutely aware of the high operating costs associated with FTE’s and seeks to have more control over both human capital and the revenue driving aspects of the business

She is ambitious and wants the CEO role and sees the opportunity to put the company back on its revenue track

While she would not admit this out loud she is emotionally attached to the acquisitions that she had so much to do with and does not want to see the company divest any of its operations, least of all the companies that have been acquired under her watch

While she personally likes Tom, she is not convinced that his visceral approach to the business is a fit for the future that she wants to build, this crisis will be his test

She has little patience for politics and sees Lee in a make or break position. She will defer heavily to Craig’s opinion in terms of how capable he is to assess IT solutions with respect to their impact on the business.

What she is not sharing with her leaders is that she is willing to make significant IT investments as a “one step back in order to make two steps forward” if she believes that the business impact exceeds the costs within a reasonable amount of time. She is a realist when it comes to the systemic nature of this problem and will commit funds if the return is compelling and financially justified. This is her chance to show the board what she can do visa vis the current CEO

When playing the role of Cathy - Push the sales teams to transcend the technology and SPEAK THE BUSINESS VALUE that SAP has brought to similar businesses in similar situations. Amateurs compete with each other, professionals compete with themselves.

PROBLEM 1 - fragmented & outdated technology infrastructure crippling revenue

• While Cathy is deferring to her Sales/Marketing, IT, HR & Operations leaders to manage their own KPIs, she is aware of the “elephant in the room” problems associated with the company’s fragmented and outdated technology infrastructure that is crippling revenue
• Given that she is the ultimate financial decision maker, any revenue related solutions are going to be high on her priority list (see LoBs leaders profiles for details on specific problem).
  

Business users will be able to create reports in real time

External hiring costs can be reduced

There will be less pressure on Cathy and success will help rebuild her reputation.

• With the elimination of homemade spreadsheets, accurate data and better decision-making in uncertain markets will significantly help operations
• There will be a decrease in accounting costs, along with a strengthening of operational processes
  

Goals and Desires / Need Pay Offs

If ABS has a central solution for planning and budgeting:

• With the elimination of homemade spreadsheets, accurate data and better decision-making in uncertain markets will significantly help operations
• There will be a decrease in accounting costs, along with a strengthening of operational processes

Goals and Desires / Need Pay Offs

When ABS has an HR self-service solution for employees and managers:

• HR headcount can be reduced and profitability will increase
• Employee satisfaction will increase
  

Have to be able to integrate the current infrastructure and have a single source of truth for all departments.

Reporting solutions can help quickly analyze data coming from different systems.

Further requirement can be met with Business Integrated Planning

1. The first is of course the decreasing revenue which we believe is the basis of the whole scenario. When revenue decreases it affects most benchmarks negatively. The question is what caused the revenue to drop, losing customers or discounting the products. Or both?

2. Decreasing gross margin indicates that the efficiency in the production and/or the price realization is poor. Increasing competition puts pressure on the pricing with a decreasing gross margin in its wake. Procurement has an obvious effect on the gross margin and if working capital improvements are prioritized it might have a negative effect on pricing.

3. EBIT margin (Operating margin) is also dropping indicating that the company is not able to cut costs at the same pace as the revenue is decreasing. In order to decrease the costs, the processes within SG&A must be focused and streamlined which means a great deal of structural and operational IT investments.

5. Cash flow is positive, yet small, and the cash situation is not an issue right now. The cash situation has improved by increased borrowings, capital injection and zero dividends for 2019, which indicates that the owners and board have the insight and willingness to do something about the current situation.

6. R&D is picking up. ABS has not spent much on R&D historically and now they are in a situation where their products are lagging. During the last year, more resources have been allocated to R&D as it is evident that they need to develop products for new market segments.

7. The inefficiency is also visible in the slight increase in SG&A, much of this is probably IT related.

Inventory includes all the goods a company has in its stock that will ultimately be sold. Inventory turnover indicates the rate at which a company sells and replaces its stock of goods during a particular period. The inventory turnover ratio formula is the cost of goods sold divided by the average inventory for the same period.

Inventory Turnover Ratio = Cost Of Goods Sold ÷ Average Inventory

Days sales outstanding (DSO) is the average number of days it takes a company to receive payment for a sale. A high DSO number suggests that a company is experiencing delays in receiving payments. That can cause a cash flow problem. A low DSO indicates that the company is getting its payments quickly. That money can be put back into the business to good effect. Generally speaking, a DSO under 45 days is considered low.

Days payable outstanding (DPO) is a financial ratio that indicates the average time (in days) that a company takes to pay its bills and invoices to its trade creditors, which may include suppliers, vendors, or financiers. The ratio is typically calculated on a quarterly or annual basis, and indicates how well the company’s cash outflows are being managed.