Episode #112: How the Finances of Manufacturing Impacts All

Transcription:

Stephanie Neil:

And joining me today is Lisa Propati, who is the vice president and general manager of WLS a ProMach brand, and Bob Hirsch who's a partner at Grant Thornton's Business Advisory Services as well as the national managing principle of the company's manufacturing practice. And so we're talking about business acumen today. I can google the definition of what that means, but I'd like to hear from both of you your interpretation of what that means. I don't know, Bob, if you want to start.

Bob Hersh:

Sure. So for me what that means, and again, it's like I've got an MBA as well. So it's not just the operations and how parts move or product moves through a factory or even through a supply chain. It's like we're all here to make a profit for our company, we're here to make money. And understanding when a product flows through an operation, how value is added and ultimately a customer wants to consume that product is really important. So it's important to understand how a product moves through the process, but also how the money moves through the process so that you're making the right decisions along the way.

So you might be an engineer designing a product, but that has direct impact on can you make it profitably, can you distribute it in the right way? Do your customers really value and want to buy that product? All of that's really important. So business acumen to me is not just the operations side that we all kind of tend to being the engineer that I am at least, but it's how does the money flow through the process and that adds another dimension of insight as you're growing in your career and your, you're helping the company get products to market.

Stephanie Neil:

And so if I'm in sales and marketing or I'm an engineer or I'm in communications, again, it might be difficult for me to understand in that role why I need to understand how money flows through the supply chain and through the manufacturing process. Lisa, do you want to talk a little bit about why, regardless of your role, you should understand how money flows through the organization?

Lisa Propati:

Right. Well so to Bob's point, most companies are in business too. Obviously they want to sell great products, but they definitely, it's all about the bottom line and they want to make sure that they're making money. Anybody that comes into a position in a company, they need to understand how they impact that bottom line. So it's all about how all the little pieces of the puzzle flow through and what you can do, as Bob said, to be value add. So if someone is an engineer and they just know that they have to do a job with no goal, then you can just do a job.

But if they know that the goal is that they spend five hours designing something and then what happens if they take 10 hours to design it or what happens if they take two hours to design it, what does that do to the bottom line? What does that do to the whole cost structure to the margin? What does that do to even the throughput to get something faster to the customer? So I think it's really important that each individual in a company understands what their piece of the puzzle is and how to translate that into finance and accounting because that's really the language of business.

Bob Hersh:

And if I could add to that, it's like Lisa and I both talked about bottom line because it comes down to the bottom line, but it's important that you understand all three financial statements as well. It's not just income, profit and loss, it's cash flow. It's how you affect the balance sheet. And what I would encourage everyone to do is understand how those three primary financial statements affect everything that a company does, how we're measured. You got to understand all the dimensions. I think, Lisa, if I can be so bold to speak for you as well, it's like when we talk about bottom line, it's not just the bottom line, it's all three of the statements. That's important

Lisa Propati:

For sure.

Stephanie Neil:

So how would people understand that mean? Where do they go to get the resources to understand that?

Lisa Propati:

So there's lots of different resources out there. I think one of the best resources is to go to somebody either in your network, outside of your company or definitely in your company and figure out what makes money, what are the goals, what are the things that individual can do in their department or role in their skilled labor that can help make the money. I would say, you need a little bit of the broad base where you can look, you could read a book or you can do some kind of online program, but if you can talk to somebody within the company that has a full understanding from the whole sales cycle and as Bob pointed out what the cash flow is, what happens to your balance sheet, I think that would be the best resource for someone. Really, it's just asking lots of questions and staying curious.

Bob Hersh:

Yeah, well said Lisa. The two things that when I have young professionals come to me, what makes a good consultant? It's staying curious, it's that insatiable intellectual curiosity and sort of an untiring work ethic are the two things that I always try to coach on. But the other thing too that it's knowing your network, but you're not going to learn all these things like overnight. I still learn things about manufacturing operations every day. So don't be afraid of you don't know everything because none of us know everything. It just have the confidence to engage your network. Ask the question you might think is stupid because it's always learning and that never stops. The minute you stop learning is the minute you're kind of career stagnates. And so it's not that you need to know everything right away, but it's being curious, asking the questions, having the dialogue with somebody that's been there and has lived it and getting that perspective is really important.

Stephanie Neil:

And you even said to me, Bob, when we spoke several months back when we were working on this project that you wish you knew at 20 years old how important it was to network.

Bob Hersh:

Absolutely right. Because I spent a lot of time sitting behind a computer slinging code coding, coding systems, kind of understanding the requirements. If I had done a better job, not just talking to my clients, talking to my colleagues, understanding what was going, but being out in the ecosystem, if professional organizations talking to people in other manufacturing organizations, I had a great career, but I would've had a better trajectory than I ended up.

Stephanie Neil:

Just from the perspective of being a woman in the male dominated industry. Lisa, do you think that curiosity, business acumen, networking, is that even more important for a woman?

Lisa Propati:

So I think it's important for everybody and I think to build on what Bob said is that it's really important to get a very diverse network, not just in manufacturing or not just in machine manufacturing, just to make sure that you reach outside. So to your point, yes, is it important? I mean, if you're the only woman in the room, yes it would be great if you can have a few people that you can rely on, talk to, call and ask questions. And then from those relationships you build on to bigger relationships. I think it can help build confidence being the only woman in the room with networking more. So maybe it is more important, but I think it's important for everybody to really make sure that they get out of their comfort zone. Don't just network within the people that they tend to talk to every day and reach out to others. And what you might find out is that other people want to reach out and talk to them and they might not have the courage to make that first step in making those connections.

Bob Hersh:

A hundred percent agree. So true.

Stephanie Neil:

So both of you also have come up with some business tools for people talking about getting out of your comfort zone. I mean, I know for a lot of people it is out of their comfort zone to talk about finances. And Lisa, you created this program Finances for Non-Financial People. I'll raise my hand on that one and if you can share that with me, but tell me a little bit why you created that and then Bob, I'll go to you because I know you did something similar in your organization, but Lisa, why did you create it? Who was it for?

Lisa Propati:

So early in my career I was giving a presentation and I was all excited about my debits and credits and how fancy the financial statements looked. And I looked around the room and noticed that everybody wasn't as excited as me, which is normal. But I also noticed that there were many of them in the room that looked very puzzled. And so I stopped and I realized that many had questions. And to Bob's point, a lot of people won't ask that question, won't raise their hands and say, "I'm the one that doesn't understand." So I started asking questions and realized that the people that I was presenting to didn't really fully understand what I was presenting to. So when I said, okay, I'm going to write a program and I'm going to take this down into something that everybody can understand, and what I did is I wrote a program that related to people's personal finances.

So I said, okay, here's your P&L, it's your paycheck every month and it's all the bills that you have to pay and what do you have left over? That's kind of your net income. Okay, so let's talk about your balance sheet. So your balance sheet is what you owe and what you own. And so you talk about your car and your house and those are the things that you own, but do you really, because you really owe your car payment or your mortgage? And then we kind of went through a whole process and once they understood it, when they related to their own personal finances, but the light bulb went off above their head and now they understood all the financials within the company. I mean maybe not everything, but it gave them a really good starting point for them to apply it to their own personal lives.

It put them in into an environment where they felt safe and they felt like they were knowledgeable and they could work their way through it. So it was the manufacturing team, they were out on the shop floor, all of the kind of first and second line managers and supervisors. That was my... From there, it went on to the rest of the company because it was really good for everybody, I think, to understand their little piece of the puzzle.

Stephanie Neil:

Tell me, Bob, because you did something similar, which I find fascinating because your business is all about money and you've got a manufacturing practice, you did something similar internally.

Bob Hersh:

So if you think about what my business is, I already mentioned audit, tax and advisory. We've got three service lines, three primary service lines, but each one of those service lines kind of thinks about their clients and their problems in a slightly different way, if not a completely different way. And the challenge that I was trying to overcome is when I bring a young professional into a client, I wanted to make sure that we had a baseline of knowledge that we expected all of our professionals to have so that we could have the business conversations with our clients.

So it wasn't just accounting focus, it wasn't tax focused, it wasn't just operational and system focused that everyone sort of had a baseline. So we all started talking the same language to our clients when we were in front of our clients. And so we put together a program of those basic skills. Of operational skills, quality skills, financial management, the financial statements. It went across the board of everything that we need to know to make sure that we're asking the right questions to our clients so we can engage in the right business conversations with our clients and get to understand our clients in the way they view their businesses so that we can help them in a value added way. That we're not just showing up and spewing what we think we know, but engaging in those conversations and understanding how our clients look at their business, the challenges that they have and what is open to them to help them solve the problems where we can help.

The other thing I would add to that, Stephanie, I think you and I talked about this as well, is manufacturing isn't fathers or grandfathers and I purposely use father and grandfather's industry anymore. It's not the type of environment, and Lisa, I'd love to get your take on this. It's across the board. It's not where dad gets up at four in the morning and there's a lunchbox that's packed for him and he will goes to Troy, Michigan to build a car. Gets off at 3:00, goes to a bar, has a shot and a beer, and then goes home and has dinner with his wife and kids. That's not what we're talking about anymore. Manufacturing is not just a, we're building product, but it's a creative knowledge-based, technology focused and not completely technology focused because I could give a lot of examples where just the raw people interaction is really important.

But we need to move from that sort of view of manufacturing to the sort of creative, diverse, attracting talent across all of our demographics because that's what's going to make manufacturing, and specific in my view of the world, American manufacturing that much stronger. That's where we need. And so we really need that sort of diverse skillset. It's not just engineering or sales. There's a lot of creativity that needs to happen to bring a product together. And Lisa, you live in this world. Packaging is not just you're creating a bottle, there's a lot of things that goes into that. Technology and creativity, artistically, there's a lot that goes into it and we need to really embrace all of that so that we're attracting the right sort of skill sets into manufacturing.

Lisa Propati:

For sure. And just to build on what you say is, so really I do believe that manufacturing has changed because now it's not just making the car, it's really selling the solution for our customer, especially in packaging. And I'm in the pharma side of it, so there's lots of regulations, but we need to make sure that we can give the customer what they want. And in order to get that solution that is creative and innovative, you need to bring diverse teams together. It can't just be, like you said, your father, grandfather, everybody that's in the same room with the same opinion, they all came from the same place and then they're all going to say the same thing because then there's no creativity. When you get people from all different backgrounds and from all different other industries that can go in, it can really help solve the problem or create the solution in ways that we didn't even think were possible when you get many different people in the room, it's a hundred percent true what you said.

Bob Hersh:

One of the things when I'm hiring people, I'm not just looking for engineers or product people. There's this one view of the world that I have that when we're coding systems, I actually look for artistic types where I have recruited music majors and turned them into coders. Because if you think about what you're doing in terms of coding a computer, writing computer code, all you're doing is you're manipulating symbols in a way that solves a problem. If you think about what a musician is, they're manipulating symbols in a very artistic way. And God, if you can use that type of skillset in a coding situation, man, you come up with really cool product, really cool solutions for our clients. And I think that to me in my mind is sort of the quintessential thing. I'm not just looking for software engineers, I'm looking for people that can be creative in a very fluid situation. And there's nobody better than an artist to do that. You need both viewpoints to get it to come out right.

Lisa Propati:

You do. And everybody that comes in, they just have to have that initiative to really go in and learn. It's no different than learning about the business or learning something new. You have the initiative, typically you can teach the skillsets.

Bob Hersh:

And the skillsets you used over career. What I was doing those many years ago that I won't put a number on, it's a lot different than what I'm doing today.

Stephanie Neil:

It's so interesting though, because I think that of manufacturing and we think of these rigid roles and you're saying you're thinking outside the box and you want to bring in different types of skillsets, different types of personalities. I'm just wondering though, when we start to think about how a person could individually to take responsibility for the financial success of the organization, other than the curiosity factor, the networking, bringing different skill sets, how do we know that we're actually contributing to the bottom line of the organization?

Lisa Propati:

There has to be really great communication within the company so that they know what the goals are and you need somebody to connect those puzzle pieces. What does each individual's job do and what are the things that need to be done to increase that financial health of the company, if you will. So I would say it's going to start within the company and you need to have that education. And then once you have the education, that person needs to say, okay, this is my job. These are the things that I can control. So what are the things upstream and downstream from me that I can control to make my job better, to help increase that bottom line? I think it's just never stop asking questions, networking within your company and making sure that you're all rowing in the right direction.

Bob Hersh:

And I think there's an aspect of, I don't know what I'd call it, sort of self-reflection in that as well as if you understand what the financial goals are, what the overall organization's trying to do, the communication aspect that Lisa talked about, if you reflect on what those goals are and how you perform your job or the product that you personally deliver, whatever that might be, if that's informed by the overall goals, it's going to come out the right way. So it's not just an outside coming in, it's an inside looking out how do I contribute to the organization in the best possible way.

Stephanie Neil:

In general, women's salaries are still lower than men in this industry and many others. And can understanding the financial aspect of your company or the business as a whole, can that influence pay parity in some way, shape or form, do you think? And then that's another loaded question, but just curious.

Bob Hersh:

I think in an ideal world, it absolutely is going to help. But at the same time, I mean there's a history here that we need to overcome and the gap has to be filled. And I think we do that by some of the things that we've talked about. Making sure that Lisa and I as leaders in the industry are presenting the right opportunities at the right time and helping people in their careers all the time. And we have to be conscious of it. It can't just be something that happens accidentally. We have to be very purposeful making sure that we, me particularly, give my female young professionals the right opportunities in making sure that my biases are left at the door and we're putting the right people in the right place at the right time.

Lisa Propati:

I would agree it needs to be a very intentional quest for anybody to take women that do have that initiative that want to move forward. And if this is something that's important to really help mentor, sponsor, build networks. I don't know that that's going to change by itself, the pay gap, but I think that it absolutely, it has to help and knowledge is power. So the more knowledge you have, the more valuable you become. You would think that the correlation will be that the pay will follow.

Bob Hersh:

And again, and so it goes back to your earlier question about some of the knowledge and training things that we've put together. All of that helps. It's like you've got to have that sort of foundational knowledge and those building blocks so there aren't any knowledge gaps, so that everyone is perceived as having that baseline knowledge so that the opportunities are there that there aren't any deficiencies in knowledge or capability. And we need to make sure that as we put our young professionals in these situations, they've got the training, the support, the mentoring, the coaching, the real-time feedback, so if something's not created and it's not right from the get go that that constant feedback loop is also very important and that will affect the pay gap.

Stephanie Neil:

Yeah, and interesting though, I mean I love how you guys set up some internal programs, but what if there's an individual at an organization and they don't have something like that? Is it okay for someone to approach the CFO or their director or manager and say, "Listen, I need help with this. Can you put this together or can you point me in the direction of where I can get more information?" Is that okay to do as an emerging leader?

Bob Hersh:

Please.

Lisa Propati:

Absolutely.

Bob Hersh:

I wish my [inaudible 00:19:23] would come more forcefully with those types of things instead, like, yes, please. Because, again, I don't know everything I got to know. I'm sure, I know I've have blind spots, but we got to talk that through and figure out how we fill those across the organization.

Lisa Propati:

I completely agree. Ask anybody that you can, anybody with the knowledge, I'm sure more often than not, people within an organization are more likely to help.

Stephanie Neil:

And what about we keep talking about asking questions, being curious, networking. What if you're on the shy side and you don't want to do that? Have you ever mentored anybody or had some employees that you've had to bring them out of their shell to be like, listen, I want to encourage you to ask more questions and here's how you can do it. What's your advice for somebody who maybe doesn't feel comfortable asking those questions?

Lisa Propati:

That is such a good question. So believe it or not, I used to be shy back in the day. I don't remember when that was.

Bob Hersh:

I'm with you. Yeah, I'm with you.

Lisa Propati:

And so the first thing you have to do is you have to get uncomfortable to grow and you have to ask one question because what's the worst thing that could happen from asking one question? And then when you ask one question and you get that knowledge and it kind of inspires you to say, hey, I can ask another question and then I can ask another question, and all of a sudden you're like a four year old asking lots of questions over and over and over again. And so really just get out of your comfort zone and do it once. And the more you do it, the easier it gets.

Bob Hersh:

Stephanie, you asked me the question earlier about I wish I had known 20 years ago what I know today about networking. The essence of that question is actually what we just talked about. It's a confidence thing. It's a being afraid to ask the wrong question because I was shy, didn't want to show, I didn't know something. You got to get over that. The faster you get over that and have that confidence, the better off going you're to...

Stephanie Neil:

And Lisa, I think I heard you say before, I mean you don't want people to think they know everything. You want them to be asking the questions and be hungry for more information, right?

Lisa Propati:

For sure. I don't know everything. I'm the leader of this brand. I don't know everything, and my whole team knows I don't know everything. I mean, that's kind of why you have a group around you, so collaboratively you know something, but as you keep talking and learning, I learned something new every single day. We recently had a sales meeting and I had people that have been here for 20 years and we all learned something just by sitting there and talking about our sales process and our product. So you never stop learning no matter how old you are, how much experience you have, there's always some little nugget of information that you can learn.

Stephanie Neil:

So any final thoughts from either one of you as we sort of wrap up our first learning circle on business acumen?

Lisa Propati:

I would say stay curious, keep learning. Knowledge is power. As a female in a male dominated, don't ever be courageous when it comes to being the only woman in the room. It's fine. It's really fine. Everybody is going to treat you just fine and you just have to, when you have the courage, you're making the way for everybody behind you. So just stay positive, be courageous, be vulnerable, and just keep learning.

Bob Hersh:

Yeah. Gosh, I don't think I can add to any of that. That's just really well said, Lisa.

Lisa Propati:

Thank you.

Bob Hersh:

Confidence, courage, putting yourself out there is the only thing you can do. You can't be afraid of it. If you're afraid of it, you don't advance. You got to put yourself out there.

Lisa Propati:

That's a hundred percent true.

Stephanie Neil:

Excellent. Well thank you both so much for this conversation. I personally learned a lot, so that's good.

Lisa Propati:

Me too. Thank you so much.

Bob Hersh:

See you everybody.