Contact Gary Piscatelli: https://www.linkedin.com/in/gary-piscatelli-5a64766/

Hunter Douglas: https://www.hunterdouglas.com/

FULL EPISODE TRANSCRIPT
Adam: (00:00)
 Welcome back to Count Me In IMA's podcast about all things affecting the accounting and finance world. I'm your host, Adam Larson, and this is episode 108 of our series. Today’s conversation features Gary Piscatelli, Senior Vice President and CFO of Hunter Douglas North America. Hunter Douglas is the worldwide leader in custom window treatments as well as a major manufacturer of architectural products. Gary joins us to talk about business transformation and what kind of leadership is necessary to successfully complete a business transformation. Now let's jump into the conversation.

Mitch: (00:44)
What does business transformation really mean for today's business leaders?

Gary: (00:49)
You know, it's an interesting one. You probably ask, you know, 10 people, you get 10 different answers, but for me, it's pretty simple. It's getting better at delivering on your strategic objectives, you know, or whatever they may be. You know, in some companies they're, you know, financially focused, it could be sales, it could be profit, it could be market share. It could be market position. It could be long term  stability, customer acquisition, quality, product innovation, et cetera. Whatever those goals are, it's finding ways to accelerate, achieving those goals. It's as simple as that.

Mitch: (01:28)
That's a very clean cut definition and something much simpler than I've heard in the past, but definitely makes sense, and definitely the goal of a whole business transformation is improvement and acceleration. So, you know, when business leaders look to make these improvements and they hope to improve the organization, is there a  type of culture that is really needed for a successful business transformation, and in that culture, in implementing this, are there certain challenges that a business leader needs to be aware of as they're going through the process?

Gary: (01:58)
Yeah. I mean, certainly some cultures are, you know, more conducive to accepting change than others, but you can't control the culture.. Certainly, you know, when you're starting to make a change and culture change takes a long, long time. So you have to really work within that culture, but there, there is something even more important than culture when it comes to change and that's leadership, and you know, without, you know, buy-in from leadership, even if it's just a CEO, but you need someone with decision-making authority, but then it, you know, has the ability to control that change to buy in, and if you don't have that, it doesn't really matter what culture you have. And, you know, I find leadership to be 100% accountable for results, including change. And it doesn't really matter what that culture is. You know, and there's some common things, to driving change, regardless of the culture. And the first thing is, Hey, no one wants to be changed. You know, if I asked you, you know, Hey Mitch, do you want me to change you? You know, you would say no, and you know, I would answer it the same way. So you have to go into it knowing that no one wants to be changed. Everyone thinks everyone else needs to change typically as well. So what you have to do is you have to find a way to talk to people at a level that they want to be talked to, and everyone would like their problem solved. Everyone wants their life to get better, right? So the first thing you have to identify is what are the things that are really wrong in an organization that you can get some alignment around.  The people would generally agree that yeah, you know what, that's a problem. We need to make that better. You don't even have to have, have a solution. You just have to identify a problem, right, and try and get alignment that people would say, yeah, I want that to be changed at that point in time, everyone's probably pointing the finger at everyone else. I think it's someone else's fault. It doesn't matter. That's okay. Even first step is get recognition of a problem. The second thing is to try and get people to fundamentally it without pointing fingers too much as to what do we think the root cause of that problem is? Right? So we can actually start to develop solutions around, change around how we fix it. And the third piece is, you know, even if you get people to say, Hey, we have a problem and we have a problem. You know, we definitely want to get better at X, Y, and Z, and we even know how to do that. You know what I've found? And I was kinda shocked. you know, I think it was probably that my third big change, I had a room of people, all finance leaders, and I spent 20 minutes talking about what needed to be different. Everyone in the room nodded their head, complete alignment. So then I said, who's with me and no one was with me and I just didn't get it. I'm like, why, why won't these guys? Why don't these guys have just told me, they'll have a problem. They're all senior leaders in a company. You know, they they're responsible as far as I'm concerned for driving improvement, but they're not interested. And that's when I figured, well, gee, I've got to have in advance figured out what's in it for them. Right, So I've also had to figure out how can I talk to them so they're going to get on board. Right. And, you know, everyone is motivated by different things, right? Some people are motivated by money. You know, some people are motivated by job security. Some people are motivated, motivated by, you know, career progression. Right, so, and you can't just come up with one solution, right, because everyone's got different factors, they're going to drive their ability to get on board because change comes with risks and they're in risk and work. Right. You know, it's not easy to change, right. So people are like, why should I, you know, spend a lot of time working on this when I'm, I'm happy, you know, doing my job as it is today and getting paid as I am today and what's in it for me? So you really have to think through those things, at least with, you know, a handful of leaders so they understand, you know, why it's going to be good for them. At the same time, what you can do is, you know, outside of that change, you can start to change your incentive program because you know, pay does motivate people. So, you know, even ahead of that change, you may want to restructure whether it's short-term incentives, long-term incentives, even your annual review process. So that, to the extent people get on board, they're going to get rewarded and that's something I've, I've done in the last two places I've worked, you know, ahead of the change was to change the incentive program. So at least the compensation elements somewhat addressed, you know, getting on board and compensating people for delivering. And that's why I go back to transformation is about accelerating achievement of business results, right? So you should be doing it because it's going to make the company better. From there, there's more, you know, the other mistake people make is, you know, especially a lot of, a lot of financially driven changes there's associated cost reduction and people make too big a deal out of cost reduction, especially around people. And if you try and sell a change that says, Hey, it's going to result in 25 or 30% of the people losing their jobs, and you then want people to work really hard to make changes so that they won't have a job that's hard to do. So, you know, as I've kind of moved through changes in my career, especially the last one that I worked on at the company, right now, we didn't even address that because here's what I've found. You know, I worked for a company and I led a finance transformation there and handled change differently. It was a top-down driven change sponsored by the CEO, and it's like, you will do it or you'll get fired. Right. That was their approach. It worked, it wasn't so nice. Right, and we probably could have done it differently, and it did deliver on objectives, but people were scared to death because we said at the end of this we're going to fire 35% of our staff. All right. So try and get people to work like 12 hours a day, 13 hours a day, work weekends when the reward is to get fired, right. The economy was at the right point in time, there weren't a lot of options. We were able to do it, but it didn't make it easier. And what I've learned in that process is didn't have to fire that many people, because a lot of poor performers were so scared of getting fired. They quit. So by the time we got to the point where we needed to terminate people, a lot of most people didn't get terminated, very few people lost their jobs. So we, in hindsight, we could've gone about it differently. We probably still wouldn't have the same level of attrition. We wouldn't have that scare the crap out of people to be, to be blunt and would have done it in a nicer way. I think people would have been more comfortable operating in the change. It was a good learning for me, and when I moved into another company. We did some finance transformation. You know, I talked about, you know, reorganizing staff and moving, you know, bodies around, because A lot of this, isn't a net reduction. It's trying to create business partnering roles and, and minimize accounting roles, which you'll hear a lot. And again, we didn't really have to get rid of a lot of people. You know, the people left and the people that left, we had poor performers and they should have left anyway. Right. I mean, they were the people that they, weren't going to survive because, you know, typically when you make these kinds of changes, you know, the accountability is, is, is kind of twerked up a bit, and people know that it's going to be hard to hide, right, in a new environment and people that are afraid of accountability and don't necessarily have the skillset to keep up, just leave. So that very few people end up getting terminated, and these organizational changes and even where I am now, you know, it's kind of the same thing. So what we did here was different culture. They weren't as interested in driving immediate cost reduction. So we said, look, it's not about cost reduction. If it happens, because you know, that's what the business requires, then we'll go for it. But we're not going to make these changes, you know, simply to try and reduce head count. And that was a message that was communicated over and over again. And it just made people feel a lot more comfortable and we haven't gotten rid of a lot of people cause we didn't need to. So, you know, if you can afford to procrastinate on communicating some of the harsher decisions associated with the change, you're better off procrastinating because you may find, you know, your original thinking about all these folks you're going to fire just, isn't true. And that's happened multiple times in my career. So either I'm lucky or I'm right. It's one of the two, maybe, maybe both. You know, the other piece is adapting. You have to adapt constantly. Everyone always wants this huge change and you should create a vision that really gets you to this place that maybe you'll never achieve, but you set, you set the goal really high, but the reality you said, you accept every incremental change you can get because as you inch forward, you get closer to that goal. And some folks, you know, have an all or nothing perspective, Hey, if I can't get this done, I'm going to do nothing, and you'll get faced with a lot of challenges. You won't be allowed to do everything you think you should do. And that's perfectly fine. You take what an organization will give you, and then you continue to focus on the end goal, but as you get closer and closer, it gets easier to get there. And another thing, and these are all lessons, is you have to do use failure as an opportunity to re-plan and address immediately. You can't beat people up for failures, because change is hard. If you failed as a leader, you're responding for that failure and you take full accountability for that and say, what do we need to do differently to get back on track? And no one should be penalized for failing. They should be rewarded for immediately bringing it up, so you still have an opportunity hopefully to try and, you know, readdress and get where you want it to go. The last piece, cause I know I've gone on, but this this is my longest answer to any question. Right? And I have, so just to, you know, is to constantly remind people of that ultimate goal, constantly remind people of the progress you've made and constantly remind people of, you know, what you've got left to do. And all three are important because people forget where you're heading. People forget about what they've already delivered and they take it for granted. So you already done some good things and you know, you should feel good about that and remind them, but always let them know that we want to be. You know, sometimes I use the words and it's simple. I was doing this the other day with someone, we were trying to set a goal and it was for a finance supply chain organization that we're setting up. It's a new, new organization, we're restructuring. And I said, remember what I told you, because this person was on my team for, for an overall company transformation for am right now. And I said, what was the goal that we had set for ourselves? And, and I can't quite say, cause it's not, not too clean, but I said, we want to be something awesome. All right. That was, that was the goal we set for the team, right? It was, it was an aspirational goal. And I said, so when you set goals for this organization, what do you want to be? And then below that, you'll describe what that means, but you need to set a vision for people that they can get behind that really inspires them to want to get on board, and you know, it can be as simple as you, you want to be awesome. And then you can explain to people what awesome looks like, but it's important to keep reminding people that we never, never get to awesome, but awesome is what we want to be.

Mitch: (13:13)
A few of the things that I really enjoyed listening to, and kind of pulled out, I think lead us through the rest of the conversation here. You know, you talked a lot about the individual within the organization and ultimately with transformation, essentially reallocating resources, right? You talk about human talent. You know, how do we up-skill re-skill, you know, adapt to what's going on and what change is necessary. A big part of the finance function and, and adapting and upskilling reskilling is about the digital evolution and everything that has come in through the finance function, and my next question is, you know, what role does digital actually play in these transformations? And how can you adapt and adopt these new advancements? And then really with all of this potential and opportunity, is there a right time for it? So how does that fit into everything you just discussed?

Gary: (14:09)
Yeah. I mean, digital has been the buzz word for the prior, the past two or three years, and it's one of those things that depending on what consultant you're talking to, they'll tell you digital means something different. And you know, it reminds me a little bit of Sarbanes-Oxley from years ago when everyone was scared of Sarbanes-Oxley, it wasn't really defined and the consultants would define Sarbanes-Oxley and what it really meant. And I think we've got a little bit of that going on right now. So when I think about digital, I think about multiple things, you know, I think it could mean just improving your base systems, ERP systems, you know, you know, customer support systems, you know, manufacturing inventory management systems, but it could also there'll be on, it can be artificial intelligence can be artificial intelligence about data analytics and reporting. It could be artificial intelligence about robotics and, you know, automating, you know, transactional systems. Right. So, and I think it's just so broad when you think about digital. So when I think about transformation, as I said, the first thing you think about is having a common understanding of a problem, right? Having a goal of where you want to get to and thinking then thinking about what role does technology play now and possibly in the future in helping you get there is really, cause we're just talking about technology, right? So, and as you think through solutions, you have to think about technology. Now technology comes with a cost, both from a dollar perspective, you know, because it may cost you more to implement technology, but it also comes with a human capital cost, and what I mean by that is when you think about change, let's say you were going to go through a shared services project and you had people all over the place, and, you know, as one of those first steps, you know, let's say it's accounts payable. You wanted to have a common process for handling, you know, accounts payable. Accounts payable is a place you could all also implement robotics as well to try and, reduce your human capital needs. But if, if I were thinking about this one, I would probably look at that and say, well, Hey, if I was going to look at accounts payable, I'd probably first bring it together, make things common, right. You know, see how efficient I can get it, think about, you know, how much more technology might buy me once I've done that and then evaluate technology. And whether that's accounts payable, payroll, you know, general accounting, where areas, customer services is another one if you go outside of finance, right. That, you know, there's a lot of robotics in place right now, but I think you want to optimize the process first. You want to standardize, optimize the process, get your, your root systems standardized, and then think about things like robotics as an example. When I think about things like artificial intelligence and reporting, which is another thing that, you know, everyone's trying to sell everyone on artificial intelligence and reporting, Hey, the machine can actually figure this out for you and point you in the right direction. Right? There's a lot of work that goes into thinking about what's important, right? And if you don't know, what's important, you know, garbage in garbage out. So you really have to upskill your organization to have an organization in people that really are at that level first, before you would then invest in technology to try and help automate a lot of that solutioning. So I think technology comes in at the end, you know, not at the beginning and it's, it's no different than where you're in, you're implementing an ERP system, right? And you've probably heard people that have failed in ERP implementation was because they made them technological projects, right? They're not technology projects, they're business projects. The most important part of getting an ERP implemented is making sure you understand how are you going to do things who's going to do it, how you're going to do it. And that, that blueprint that some consultant use that design phase and getting that design right, is the most important piece, and I think the same applies to some of these other forms of technology, whether it's robotics or artificial intelligence on, on reporting. I think it comes at the end, not at the beginning, unless you're already ready, and a lot of companies are, I don't think are ready.

Mitch: (18:15)
So I'm going to kind of combine two questions here because you, you just started to touch on something that I did want to get to a little bit later. So you talked about kind of testing out certain departments, certain tasks maybe. And I wanted to know, you know, what your thoughts are as far as, is there a way to determine if transformation is even right and whether it's the right time, the right place, so on and so forth. And many times we hear finances usually, the first function that, you know, should be assessed for transformation because of a lot of the technology that you just talked about. So what really is the finance departments function or a responsibility when it comes to, you know, assessing and testing out different transformation across the organization?

Gary: (19:03)
And then there's, there's finance and then there's, just business leaders, right? And I think folks who work in finance, you know, wear their finance hat, but I also think that is where general business hat. You know, so from a pure functional perspective, you know, finance plays the role, you know, as the, objective function to provide data, to really understand the current situation and, provide a perspective and objective way as to what do we think improvement looks like, what will it deliver in benefit and what will it cost? Right. So the finance function needs to play the role of making sure the organization objectively looks at both the need for change and the benefits associated with change costs and benefits associate with change. So that's the functional responsibility. The, the business, responsibility is to go back to question one, right? How do we drive business improvement, and what's our role as leaders in the company and driving business improvement, and where do we see opportunities? How do we tee up those opportunities in a way that people understand them? How do we try and push those opportunities and agitate action, you know, where we can, and then how do we take a more responsible role in driving that change, if that's what it's going to take, to help us accelerate achievement of those objectives and that active role could be in the function or that active role could be in working on, helping another function achieve those objectives. It doesn't have to be within finance.

Mitch: (20:42)
I guess this is a good way to wrap it up. You know, just also considering what you just business leaders, organizational leaders, whether it's in finance or not, depending on what hat you're wearing, what role do you have when it comes to responding to subsequent results from business transformation. Meaning evaluating the outputs and, you know, establishing those benchmarks for the improvement, the acceleration, the success as an organizational leader, how do you communicate that, and what's your role as this continues to evolve over time?

Gary: (21:19)
Yeah, I think it's just to remind people, you know, so a lot of, a lot of benefits associated with change, some are very tangible and easy to look at and others are squishier, right. So for example, if you are looking to drive, improve sales, you know, tying your change effort directly to improve sales can be very difficult, right. Or if you're looking to improve quality or customer service or, or some things that, Hey, your change effort probably influenced it, but can you specifically point to, was that the only thing and it's unlikely, right. So I think, I think we make a lot of the analysis a little bit too binary and, you know, and cause, and effect, and there's multiple causes and multiple effects. So it becomes very difficult. So what I try and do is just step back and say, Hey, look, if we look at the big picture, do you be seeing an improvement here? Yes or no. Do we think the situation is better or worse based upon how we're operating today? Then we can talk about how we operated before and how we're operating today. Did it improve things or not? Did it improve things enough? You know, you can answer that question and say, we had a goal. Whether or not, the change effort and enabled enough or not. It's hard to say, but you still might have the same goal. And then you, it becomes somewhat irrelevant. I don't care if the change effort did more in something else compensated to offset that. Or I don't, I don't care if the change effort didn't get all the way there. I still have a goal. So it goes back to one of the earlier questions. You're constantly looking at the end, end goal and trying to figure out how to get there. And it doesn't really matter at that point, whether or not you perfectly delivered or over-delivered, you know, you have a goal, you might have a new goal that's even more aggressive. You're constantly trying to get better. So what I try and point to is, Hey, here are the benefits. I think we achieved. Here's the ones that a little clearer to look at versus others. I still think we have opportunity for improvement because you always do, even if you're at your goal and what do we do next to get there. And the, and the finance function, should be continuing to agitate continuous improvement. As the CFO, you know, you should be agitating to try and make the organization better all the time.

Closing: (23:33)
This has been Count Me In IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like, what you heard. And you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.