So, it was a cool blue sky, winter morning. In January of 2004, in Littleton, Colorado, just south of Denver. I was sitting. And a very non-script office building being head of planning for a telecom company. A little bit to the right of where the slide shows in your picture.
I was waiting to see my boss, the CFO. He had just returned from our board meeting where our budget had been presented for approval. It was the end of January so I only had a few days left to do my job, which was to get all that budget detail into our financial system so that we could close January. He's sitting as his desk because I knock on the door in the conversation when something like this.
“Hey, how to go the board meeting?”
“Fine.”
“So, the budget got approved?”
“Yes.”
“Great. So I can set the team loose on, loading it in the system.”
“Yes”
He was a pretty monosyllabic guy if you're getting that. Unless he was yelling at somebody, then some really choice worries came out of there.
But okay, great. Mission accomplishment. I’m about to walk out the door.
“Nevine.”
He's picked up this tome of a budget book that we create – about the size of the New York phone book when those still existed.
“This is worthless. This tells me nothing about what we need to be able to do to manage our business. These numbers are all made up. We all know that. It doesn't tell us about the risks, or the opportunities, or how we should respond to whatever is going to come at us out there.”
And he takes this book that I had spent the last six months of my life creating and chucks it in the trash can. Right there. He turns to me, says “Nevine, find a better way.”
Those words started us on a journey of an incredible transformation, that originated in Finance, which is not usually the place for transformation starts. Because Finance is about two things; inward looking and institutionalisation. And that's sometimes applies to the people working in Finance. I say that with great pride because I am one of those. But it started us on an incredible journey that ultimately led us to be much more responsive effective, and very successful.
So for a little background, tw telecom, the fibre optic telecommunications provider, b2b services, and all those dots on the map across the country - regional networks, building fibreoptic cables into customer buildings. A publicly held company grew to about 1.6 billion dollars in revenue. EBITDA margin in the mid 30%.
In telecom, for those of you may not realise this, 30% EBITDA margins are spectacular. Our CEO used always say “we're like a nice house in a bad neighbourhood.” As we were growing, we're starting to feel the pressure and the bureaucracy that comes with size. And a lot of that started with that budget process because it creates really bad behaviour with people. You're negotiating for forecasted numbers. You're hoarding money. You're doing all these kinds of things that are really not in the interest of making your organisation better.
And we knew that our biggest deal, our biggest driving metric, was our top line revenue growth – which we generated by building fibre optic cable into customer buildings. So in order to do that, we had to make capital investment decisions. And they had to be pretty real time for us to be better than our competition which will behemoth telecom companies.
And I don't even have to tell you who they are, all know them. But they are extremely large telecom companies that we were trying to compete against, in that most lucrative part of this industry, which is the b2b market. So for us, being able to respond quickly, being able to respond to those customer demands was extremely important.
It was very important for our success. It was actually critical for our survival. Telecoms is extremely fast moving and technical obsolescence can absolutely eat your lunch so you have to be in front of all these decisions in a very real time manner.
So what do you do when your boss throws out the gauntlet like that? Of like, “find a better way” without any other information? Because he also didn't know what that meant by the way – “just like find a better way”. So, what do I do? I hit Google.
“What do you do when you don't do budgets?”
Google gave me this lead. That book had just been published the year prior, in 2003, by Jeremy Hope and Robin Fraser. And they had gone around and they had talked to some really innovative companies about their planning processes and their management systems. And I read this book and I’m like, “yeah, that's pretty cool and interesting. That will never work for us”. Because we had a culture. We had a certain way that we did business. We had a certain way our three thousand people communicated and acted. And so from this book, which has some really good ideas and some really great case studies in it, I distilled down a white paper that I gave to my boss and said, “hey, what do you think of this idea?”.
My main idea, my central part of me being a Finance geek was, “Hey, let's go do a rolling forecast instead of budgets. How about that?”. He took the paper and he noodled on it for a weekend and he's like, “let's chat a little bit” and so we kicked it back and forth a bit and ultimately went to the executive team and the board and they said “yes, sounds good, let's do it”.
Of course, they were all scarred from our last budget process. Because that's what we Finance do the people. We scar them. And so they were all about “no more budgets, cool. Let's go with it. Figure out how to do this.”
So I set my team loose on the stuff that we in Finance do best. Tactical things. “Draw me some process maps, get me some spreadsheets with rolling forecasts going, build me some trading decks, I can do all this.” And we kept referring back to this book to make sure we're kind of staying on message and staying on topic. And with that came to realisation.
“What we're doing isn't kind of like a finance thing. This is kind of like a culture thing. It's like a big cultural change that I’m suggesting here”
And change was a very scary word for our company. We were terrible at change, we sucked at it. So much so that I had been asked to be on a task force to do a post-mortem on our last major IT implementation, which was a massive failure. It fell on its face because we didn't know how to do change management. And so we had recommended to our executives. “Hey, why did you bring somebody in house? So, we can make change or think of it as part of our DNA.” We can be good at, you know, institutionalising, and really getting people to embrace that.
So we had just hired this brand new director of change Tad. So, I call up Tad. “Tad, hey, I'm doing this really big and cool important thing. I could really use your help because I’m not totally sure how I bring 150 functional leads of all different disciplines across the company into this process with me because I have to enrol them in my initiative.”
Except at the time, the word enrol wasn't in my vocabulary. Finance dictates stuff at people. We don't enrol. We just tell you what boxes to check on those spreadsheets. So, Tad taught me about burning platforms. And a good friend who works in oil and gas told me it's a really tacky thing to show a burning platform, so you'll just have tease your imagination.
But Tad really helped us change our communication style. How we looked at our stakeholders. The fact that we even realised, we had stakeholders. You know, how do you communicate with them, when do you communicate with them? How do you bring this whole thing together in a way that makes sense for people?
We learnt about things, like, change readiness assessment. Let me tell you something, that's not something Finance people have in their vocabulary. They don't know nothing about that. But my team significantly changed and they started becoming visible in the field. We actually took them out to the regions to start having these conversations about what was going to happen.
The other part that I realised, as part of this, was that this isn't just a Finance thing. So I went back to executive team and said, “hey I really need you guys to lock arms on this with me. I need you to sponsor this. And you should have a clear message that comes down from our executive team.”
And our CEO is like, “hey, cool, yeah, sure.” It's a different way we're gonna manage the business. So, they came up with this phrase:
“A fundamental change in how we manage and evaluate our business”
And they locked arms around that and they start a communicating that. And lo and behold, we started seeing that come through in our change readiness assessment. By the way, if you've never done them, they’re little surveys to ask people if what they're hearing is what you're saying. So really powerful tool once you’ve figured out how to use it. So we were out there, we were training people.
And this is all happening in the span of about a year by the way. We're still in 2004.
We realised that, when we were pulling the budget out of organisation, it was sort of like unravelling a sweater. A whole bunch of stuff came with it. First and foremost, our rewards and incentives program, which were all tied to meeting that budget. Which we had just gotten rid of.
So, as we pulled the budget out of this whole thing and we started to realise what all were impacting in terms of different processes, we started to have to come up with answers for all these questions.
How is an approval going to work? How do I hire somebody? How do I get capital assigned to my market? How do I do all these things?
And so it became a constant iterative process of answering questions. And, you know, figuring out from all the different people around the room that I was talking to like, what were their pain points? What were they struggling with?
The biggest thing we realised is we were on, autopilot. As long as the budget was there, the vast majority of decisions that had to get made were made with one question and one question only, which is:
Is it in the budget?
If it's in the budget, you have to do it. Even if it's no longer important, relevant, or necessary at that point in time.
If it's not in the budget decision, it's just as easy. I don't have to talk to you about this. It's not in my budget. Therefore I shall not go there.
So now we have, “okay, so what question do we ask instead, since we took away the budget, and who's gonna ask the question?” Well in the old world me, Head of Finance, would have been asking the question, “what are you spending your money on?”. Well we decided that wasn't what we wanted to go.
We wanted to go with creating speed in our organisation. We wanted people to be responsive to the customer, so we wanted to push those decisions out to the front line. So we’re like “empowerment, yay, everybody's always wanted that, right?”. Every feedback you've ever seen is like “I want to be empowered” until you realise, it comes with accountability.
And that was really scary for people. Yeah, they wanted to be in charge of those decisions. But when suddenly, the rubber hit the road right there, it's like “well, what about repercussions? How do I know you people, in Finance, who, by the way, we don't trust aren’t going to hold us against those six months from now.”
Right. We also realised, they really weren't good at making financial decisions because the question up until now had been pretty binary. So we started having very explicit conversations.
“Hey, just because you're empowered, doesn't mean you have to do this in a vacuum. You've got, you know, if you have an idea and you're not totally sure if this is the right decision, go talk to you peer group. Go talk to your boss. Just saying.”
“Ask your team, your team is full of great ideas. Oh, and by the way, you can call me at Finance too. Because we will help you if you have to model something. If you have to figure out the financial repercussions and the outcomes, we’ll be happy to help you model that.”
We changed the dynamics of how decisions were being made in the company. And as part of that, we made a brilliant move that we didn't realise at the time how brilliant it was. We embedded about half my Finance team on the front line. And the reason that was brilliant because it did a couple of very important things.
First of all, it moved the entire decision process with them out to the front line to where our sales and operations people met our customers. Where our business was really thriving.
By having them out there they were able to facilitate those real-time decisions. And on top of that, they were learning like crazy. They started to really understand what it meant to be in the shoes of the salesperson or in the shoes of an operations person. They were starting to see problems through additional lens. They were starting to see where processes were broken and where they were bottlenecked.
And then they could take that information and come back to corporate and, in the context of a financial outcome, discuss how change should happen in the organisation in terms of doing some really compelling things to streamline processes and make them much more effective in terms of getting to decisions quicker to help our customers move forward.
Meanwhile back at corporate, while my team was starting to dwell out there in the field and have a ball, we were starting to work on all these other processes that we had to unravel and redo and fix.
And we did a lot of that in the context of either looking at the facts and data that drove the process. Like for approval, for example, our goal was, “let's get 90% of the stuff that that crosses your desk at your approval level”. And every general manager stood up and said, “hey I approve quarter million dollars for the stuff”. And we pulled the data, “Yes, you do. Once a year. Well, once a year you can go talk to your boss. The other stuff you do is 50 thousand dollars or less. Guess where your approval level is going to get set at.” And so we started moving things forward in that kind of a manner.
We had to change how we did rewards and compensation. Because, when you take the budget away, that are kind of kills that side of things. And so, what we moved towards was a much more retrospective view of “how do we perform? And what was the context of the environment we performed in?”.
If we had say, a 6% growth target out there, well, that was great. Unless all your competition did 10%. And what if you only did 3%? Well, if everybody else said -3% in 2008, 3%, even if it wasn't your 6% that you had said, was awesome. So we really started putting things in the context.
Now, I entitled the slide process agility, but I will tell you, at the time when we were doing this, the word agile wasn't in our vocabulary. It was just starting to have some glimmer of appearance on our IT side but it really wasn't what we were about. We were talking about being responsive and nimble and proactive and those kinds of adjectives instead.
Our first time trying rolling forecasts process was terrible. Absolutely terrible. People were clutching onto that budget mentality. Because that's what we've been beating into them for the last decade. So it took a long time to kind of get past that. But we started to figure out, was that, yeah, it's not going to be perfect. Expect that. Acknowledge that there's bugs and problems and issues and questions that haven't been answered. And learnt from those, adjust, and do it again. But by doing it every 90 days, and not just once a year, we really started to learn and build momentum around this process.
So we've been working, like, killer hours all summer long, trying to get this thing up and off the ground. And about November time frame we had just, you know, run our first Forecast cycle and it was awful. We got through it and we, you know, we were grouping and I decided it's going to take a week off. First time all year. Because my dad decided he was going to celebrate his 65th birthday in Germany. Which is where he had gone to college and all his friends were.
And so like, okay, fine. I take my two little girls and off we are in Germany for a week. And I’m checking my email one morning because, yes - I’m a control freak. And there's a note from our CEO, and she always wrote these really cool emails, and I was like, yeah, okay.
“By the way your CFO has resigned.”
So here I am 5 thousand miles away from my super cool transformation project that's sitting in Denver. I had leaned way out as the Finance person. I mean, I’m like hanging out over the edge because no only had I gotten rid of budgets, and served all these processes, and the guy who was holding my safety line, had just left the building.
So we turned to Colorado at the end of the week to find out that I had two bosses because they had appointed co-CFOs in the interim. So, they were trying to figure out, which one of them is going to be CFO. And by the way, they told me they hadn't precluded yet that I was going to possibly have somebody from the outside, come in and take over that job. Awesome.
But anyway, it's late November. It was much too late to start up a budget process. So, they just kind of let me be. And so we moved on from where we were and just made, you know, continued on with our forecast processing and kept learning from it. And what we noticed was that, as changes happening, as we decided to kill off those sacred animals like the budget, more change was happening all over the organisation.
Our IT department was becoming agile. Which aligned beautifully with our new funding processes because they were on quarterly cycles and we learnt about doing things like funding teams instead of funding projects. Very cool things were happening all over the organisation and um, just change kept coming. The tone of everything was changed. It was collaborative. Silos were coming down. We were no longer stuck in that place of just trying to deal with bureaucracy all the time.
And my Finance team transformed. They went from being called things like bean counters and revenue prevention to becoming really valued business partners in the organisation. They were present, they were innovating, they were having a ball. So much so that Finance became a destination department where people wanted to build their careers. You just don't hear about that ever anywhere.
And we learn to get really good at aligning our strategic objectives with our operating plan. Which was where the tactical support was happening for all those initiatives, which we started calling our financial capacity. A very elegant process to constantly keep those things checked and balanced to make sure that we're making progress.
This is ultimately what translated into our new document that we would give the board every year. It was a 20-pager instead of that giant phone book thing and our board really loved it because it talked about how we're going to support all our strategic initiatives.
So, here's some things that I learnt, as part of this massive transformation project. Transformation is a culture thing. Like any kind of transformation of size, it is a culture thing, and it's hard. And you need to include those stakeholders all around. Think broadly about who your stakeholders are. Because it usually goes beyond the people just sitting on either side of your walls. There are vendors, customers, shareholders, communities, there are all kinds of stakeholders that might be included in that conversation.
And Finance can be one of those if you start thinking about communicating with them at a different level, My team certainly stepped up to that in terms of becoming a valued business partner. If you're going down a path of empowerment, remember that's scary for people. So, make sure you have a support system in place when you start to empower people. Because while they say they want that, they only want it till they actually get it.
And I’m standing here in front of you as a converted Finance person. You need change management. I don't care what flavour it is. I don’t care if you're the ascribed to Heath or Kotter or Prosci or homegrown something or whatever it is. We had the Tad method.
As long as it's something structured that helps you get through that enrolment process. That's what's really important about it. If you're doing something like this you need to go at 80%. If you wait to make it 100% perfect, you're never going to go. It's way too scary. Layout that vision. Figure out those couple steps and move forward. And expect to fail, adjust, and repeat, and go quickly.
And you have to have a sense of humour about this. Because this stuff is hard. It's going to make you cry if you don't laugh about it. And the more fun it is, the more likely people are willing to enrol in that process with you. So getting back to my theme, there is an ‘i’ in Agility, actually I would say there's two ‘i’s.
For me it was innovation, because we had to break somethings to make new things happen that work better. And it was inclusion, it was about bringing all those stakeholders together to be part of this conversation and engage at a much different level.
I will never claim that the success of tw telecom was because I went down this path of getting rid of the budget. But in the 10 years we operated without budgets from 2004 to 2014 our company delivered 40 consecutive quarters of top line revenue growth.
And if you think about that timeline, that includes 2008 and 2009, when the world was on fire. There are too many companies out there who can say that. Our new CFO, who was appointed a few months after the last one left, was interviewed for Business Finance Magazine in May of 2010 and the article ended up being entitled “where only the agile survive”. I don't know who came up with that title - probably one of the editors of the magazine. But it was the first time I think we really realised that what we had done was create business agility. Even though at the time when we were doing it we were just about trying to be more responsive and survive.
I knew that he was with me when he was quoted as saying, “we don't talk about budget variances. We talk about results.”
Unfortunately, our Cinderella story came to an end on Halloween, 2014, when Level Three, another huge communications company, acquired us. Most of our management team chose not to continue on with the combined company. And so, unfortunately, a lot of our really cool processes and a lot of success we saw got swallowed up in this acquisition.
And as telecom goes three years later to the day, CenturyLink communications acquired, Level Three. So, all of this is now in the bowels of some massive telecom company and unfortunately no longer being taken care of. But I will tell you, it was probably the proudest 10 years of my life in terms of some of the things we accomplished.
Thank you all for letting me share my story.