By Robert Miller, Short-Term CFO
Facts do not cease to exist because they are ignored. – Aldous Huxley
There are times when you will face a change in your agency’s executive management structure. Sometimes it’s an orderly transition. A CFO might decide to retire for example but provide your agency the time to plan for the transition and allow a comprehensive executive search. Other times, however, you will not have the time for an orderly and stress-free transition. It is in these times of crisis, when you need somebody who can step into the CFO role and highlight the issues transparently, develop consensus with the Board and the Management and use staff in place efficiently execute the approved plans. Let me share a short story in which I prevented imminent financial insolvency at a major transportation agency.
The agency had lost faith in their CFO and decided that an immediate change was required. And, I do mean, immediate. They retained me and I arrived on-site with seven days’ notice.The timing of my participation reflected their dire situation. I was retained to evaluate the current situation,report back to the CEO and the Board of Directors, develop consensus about the path forward and to execute approved plans to return the agency to solvency. They needed immediate corrective action.
In the first seven days of the engagement the scope of the financial challenge was identified and initial alternatives were developed and presented to the Board and the CEO. The Agency’s financial plans had been built on overly enthusiastic financial forecasts and revenue assumptions. I noticed the CEO and key Board members that the Agency faced insolvency within 120 days.
In crisis management mode, I managed a team to develop options, communicate alternatives to the CEO and Board of Directors, and implement new strategic initiatives. All plans had to be implemented without impacts to service integrity. A weekly reporting process was implemented to maintain consensus between various internal and external constituencies.
Key operational focus areas included:
- Negotiations with funding sources including the FTA to gain access to funds on an accelerated basis.
- Rewriting operating and administrative plans in cooperation with senior managers. We reduced the annual budget by 10% without impacting service levels.
- Obtaining Board approval to obtain short term access to funds earmarked for capital projects.
- Modified elements of the employee benefit plans to defer cash obligations. These changes included elements applicable to employees participating in collective bargaining units.
- Developing and delivering a streamlined staffing plan for the Finance function at the Agency that would support the CEO and Board going forward, maintain critical capabilities within the organization and provide for internal staff development.
Working collaboratively, we successfully addressed short term liquidity issues and moved forward with modified operating budgets and plans that conformed to accurate revenue projections while meeting the requirement to maintain service levels.
Beyond maintaining the service levels, we also had to address the capital projects that were in process when this financial crisis hit. Key administration and capital projects focus areas included transitioning to fleet to more fuel efficient vehicles and physical infrastructure development.
The Transit Executive Bench is a powerful team of experts and I am proud to be a member. At times, you will be under crisis and you will need an expert to help you assess the situation, build consensus on the way forward and implement change. Our Bench has the skills and experience to get the job done, and quickly, even under challenging circumstances. Contact us – we can help.
Ultimately, Metro addressed the objections, and the communities bought into the plan. Since the beginning of operation in 2005, the Orange Line proved to be one of Metro’s most successful routes, exceeding ridership projections (it reached Year 2020 ridership numbers within 6 months of opening), reducing cross-town travel times, easing congestion, including on the nearby freeway, and consistently attracting new riders. The bottom line lesson that was reinforced by this ultimately very success project was that even the best laid plans will not work if the concerns of the communities they impact are not honestly addressed.