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Reader Profile

Michael C. Smiley
CFO and Treasurer
Zebra Technologies

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

As companies make tough choices to navigate the rocky economy, how is the CFO’s role in balancing the need for near-term profitability with the imperative for long-term growth changing?

In the middle of the economic session that we’re having, there seems to be a misperception that CFOs now have a meaningful role in the business that they didn’t have before. In reality, if we are doing our jobs right, CFOs must be relevant in every part of the economic cycle. In the good part of the cycle, if you do your job well you and your company can build on success even in the downturn.

In the downturn, CEOs are continuing to work closely with CFOs to provide key insights about managing the business during a time so focused on finances. In doing so, the CFO has more pressure than before to show profitability in the near term. However, an increasingly important thing CFOs need to account for in the current environment is that the decisions made that show profitability now do not hinder the company’s ability to deliver on its long-term growth strategy. Whether it be continued investment in R&D, the decision to embark on major business initiatives that have some inherent risk, or dive into new markets, it is the CFO’s role to help the company not lose sight of the long-term even in tough times. In good times, CFOs must do a good job providing a strong financial foundation so the company can justify the investments needed to support change, drive innovation and ultimately deliver on the long-term growth strategy of the company.

How can CFOs effectively communicate this balance and the investments needed to deliver on long-term strategy to key stakeholders and to the Board, especially in these tough economic times?

The increased focus on cash flow during the current economic downturn makes communicating anything beyond numbers to shareholders, the Board and internal audiences, feel like it comes second. In fact, it is often the less concrete, longer-term vision that deserves increased attention in communications in tough times. Ultimately, a different kind of communication is needed to effectively illustrate the balance between the two and secure the confidence of those evaluating company performance.

First, CFOs must “go on the offensive.” More so than in good times, it is important to provide a detailed picture of how current business conditions are affecting the company and its customers or industry. This includes an honest depiction of what risks are most prevalent in the near-term, what the company is doing to mitigate those risks, and what long-term growth the company is trying to achieve by taking these actions. It is important to remember that most companies are not going swimmingly right now – and an honest assessment of how the company will get through this tough time and emerge stronger will be appreciated by the Board and external stakeholders as well.

What opportunities does the economic downturn present for companies to evolve and emerge stronger?

Now is the time to take advantage of things the company has done in the past. For companies with a strong financial foundation and a great brand, build on that foundation by attacking the market. Do the things that drive more value to your customers. With many companies having to make decisions right now to survive rather than to thrive, your competitors may not have the latitude to follow suit and compete.

Down economies also often give companies the opportunity to evaluate where the business is and ensure it is on the right path to build a long-term value proposition. Unfortunately, this way of thinking often goes by the wayside when the business is doing well and the economic situation appears to be less of a threat. Take advantage of the time to closely evaluate the business and make changes.

The CFO’s job is to provide a strong return to shareholders. That means businesses must make investments. We have to find ways to invest. In bad times, we have to re-evaluate decisions we made in good times and test some of our hypotheses as the environment changes. As a result the company may have to change course. For example, if some competitor grows weaker, you may want to get more aggressive in one market. That means making sure your capital structure is okay, managing your capital wisely and not investing in things that are over-hyped when the economy was good. In addition, when the economy is down you don’t want to be so pessimistic that you don’t take advantage of the opportunities that the current climate offers.

What changes have you made, or what are you focusing on at your own company, that you believe will make it emerge from the recession stronger?

We have taken a number of key actions to prepare the business to get through the downturn and emerge a stronger organization. These include taking costs out of the organization and prioritizing those projects with the most immediate and highest returns on investments, streamlining marketing functions to drive efficiency and a stronger global brand, and canceling products that didn't meet our profitability targets and reducing SKUs to improve efficiency and profitability.

At the same time we are striving to drive growth and deliver on our long-term strategy by maintaining our investments in vehicles such as outsourcing and ERP initiatives. These will ultimately help us lower costs, enhance business execution, and improve customer service. Finally, we are maintaining our commitment to R&D, upholding Zebra’s historic strategy of investing heavily in order to take the industry in new and innovative directions.

What permanent changes do you think this recession will create for financial communication with stakeholders and the Board, even after the economy improves?

Financial communication will continue to require increased detail and a focus on the short- and long-term vision of the company. This will include an emphasis on the financial foundation of the company. Companies that can show financial strength will get more leeway from investors, the Board, and shareholders to make the big decisions that ultimately drive business in new directions with high returns.

Michael C. Smiley joined Zebra in May 2008 as chief financial officer from Tellabs, Inc., a global provider of telecommunications networking products. At Tellabs, he led all accounting and finance functions outside of the U.S. and most recently served as General Manager for the Tellabs Denmark A/S unit, which has sales in excess of $100 million to customers around the world. During his six years at Tellabs, Mr. Smiley held various financial and operations executive positions including interim chief financial officer, vice president international finance, and treasurer. Prior to Tellabs, Mr. Smiley was located in Taipei, Taiwan, as vice president, finance, for the Asia Pacific region of General Semiconductor, with the corporation’s key manufacturing and revenue-generating operations in the region. Earlier in his career, he held positions of increasing responsibility at General Instrument, GATX Corp. and Itel Corporation/Anixter Brothers. He began his professional career as an auditor with Coopers & Lybrand. Mr. Smiley holds a bachelor’s degree in accounting from Brigham Young University and an MBA from the University of Chicago.