You Need to Listen, Then Execute
Interviewed by Olivia Wolak

Interview with Ray Frost, Interim CFO, COO		 Date Interview: 02/26/2010
Date of Credentialing: 03/15/2010
Credential expiration: 07/01/2011
 

You have an operations background?

I’ve done a lot of work with corporate reorganizations and distressed situations, and know how to ramp up fast growth. I can dissect various viewpoints and come up with a solution that, in most instances, addresses the problem in a multifunctional capacity. Beyond working with spreadsheets, I look at the operational issues.

You need to build a constituency; otherwise you really can’t accomplish much.  A lot of times the solution is already inside the company. My expertise is in finding it.

What types of issues?

Ultimately, you have to look at what it all means for the sales and marketing folks, and figure out how to bring it all together so that you’re either driving growth or fixing a problem.

Tell me how you came in and turned around a distressed company.

There was a big steel engineering company that was in real financial trouble because of its high overhead, operating costs and long cash cycle. I worked with the owner and looked at how they were managing insurance, payables, and occupancy costs. We cut those G&A expenses 23 percent, and began requiring earnest money deposits to mitigate the cash cycle problem. These changes put us on solid footing so we could move forward.

That’s substantial. Give me another example of your turnaround work.

I was brought in as CFO for a telecomm equipment company that had invested heavily in what turned out to be the wrong technology. The market just didn’t want the product the company had developed. The balance sheet was pretty much upside down. I had to go in and help with cost reductions and cash management. There was no additional funding coming from the principal stockholders. Any further investment was going to have to be through retained earnings.

What did you do?

I re-engineered a lot of the processes inside the finance function. I reworked some terms and agreements with suppliers so we could stay afloat and was able to streamline a lot of things so we could address our core competencies rather than chase after a market that wasn’t interested. I helped negotiate agreements for private label products that gave us current technology to sell with no attendant R&D costs.

So you stabilized the company?

Yes, so it could be positioned for sale. It was tough because the people were very demoralized. There had been a lot of upper management changes and rotations inside the company so people had come and gone. By the time I got there the production folks were saying, “Here comes another one.” My willingness to listen to what the problems were, to work with the production manager, and to help him be successful gave me credibility inside the organization so we could accomplish some things.


 

You Need to Listen, Then Execute -- Ray Frost, Interim CFO, COO

Ray Frost has 30 years experience in corporate finance, operations and accounting, primarily with emerging and mid-market businesses. His responsibilities span helping to launch start-up enterprises to playing successful roles in turnaround engagements. His passion and greatest strength is operational finance in the manufacturing sector.

Would you say that your ability to work with people is one of your key strengths?

I truly think that the biggest lesson I’ve learned over the years is that you first need to listen. You need to process what you’re hearing with an objective viewpoint then respond to the issue, person, or overall situation. My ability to listen is probably one of the key things that differentiates me from some folks that come in with the belief, based on their own experience, that they have all the answers. You need to build a constituency; otherwise you really can’t accomplish much. A lot of times the solution is already inside the company. My expertise is in finding it.

When were you faced with a project where the solution was already there?

I did a project for an injection molding company that was constantly locking up its credit facilities and management couldn’t understand why.

How were you able to figure out what many couldn’t understand?

I went in and looked at the actual processes—how they were managing inventory relative to sales and demand. What I found was that their credit line was sitting on the shelf in the form of inventory—they had shelved $2 million of finished goods —for which they had no shipment date. Typically they would build standard products when the plant was slow and shelve them.

What did they need to be doing?

They needed to ask themselves: How can we change the way we’re building products so we have credit available to us when we need it and still meet customer commitments? Everything was in place, they just needed a fresh pair of eyes to look at the situation and lay out better ways to perform. In the end we re-worked the demand flow for raw materials and production schedules to meet delivery dates.


 

 

You work with many companies that are struggling. How do you initially approach situations like this?

The first thing I do is look at the overall attitude of the people involved. Is there a belief that the situation can be improved? And if there isn’t, how can I change that belief pretty quickly? If the people inside the organization have kind of written it off, you’re not going to be able to accomplish much so perspectives have to change and people have to execute.

And if people have written it off?

The fact that I’m a new face is generally a positive sign to folks. My presence demonstrates that the organization has made a commitment to repair, rebuild, and move forward into a better position. The decision makers, whether they’re inside the company or private equity holders, realize there is value in the company and they are committed to making it work. It’s really letting people know what the plan is, what their role will be and how we’ll measure success.

What’s your secret to success?

Keep an open mind. Things change. Always measure results against plan and adjust the plan if your market dictates changes are necessary.

That’s good. What else?

Understand the strategy but always emphasize execution. Never forget that the company goes home at night, you want them back in the morning energized and working hard. So you have to build trust and respect, quickly.

What was your best decision?

I invested my own capital and bought a small business in the late ‘90s-- a $1.5 million wood products manufacturing company. I owned the company for three years. It gave me the opportunity to do literally everything inside the business – sales, customer relations, marketing, build and deliver product, hire people, fire people. It really gave me a complete picture of all the issues that a business has to deal with. As a result I bring a lot more to the table than had I restricted myself to finance only.

How did that experience help you in your current interim practice?

It gave me a real appreciation for the challenges of driving top line growth. Prior to that, I didn’t really grasp the difficulty of selling and what it takes to be successful in that field. I also learned what it means to have outside directors and how to meet their needs and demands, and, at the same time, move the company forward. I learned how to keep your employees motivated and your board happy.

Those are valuable insights.

I love a challenge. I’m known for my energy, integrity and skill. I think that when people sit and talk to me, my passion for the work is pretty evident. The office is my golf course. It’s where I want to be.

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