Podcast

Episode: 137 |
Michael Frankel:
Interim Executive Roles:
Episode
137

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Michael Frankel

Interim Executive Roles

Show Notes

Our guest today is Michael Frankel who has an amazing background – he’s been a corporate attorney at Skadden Arps, an investment banker, a private equity advisor, VP level business development roles at GE, LexisNexis, CFO of two companies, and held board positions.

Michael is currently the Head of the Deloitte New-venture Accelerator.

Michael shares his perspective on a range of topics including

  • how large consulting firms are setting up talent pools of independent consultants
  • interim CFO roles
  • how consulting firms are investing in Artificial intelligence to enable experts with technology

Here is Michael’s profile on LinkedIn:

https://www.linkedin.com/in/frankelmichael/

One weekly email with bonus materials and summaries of each new episode:

Will Bachman: Hey Michael, it is great to have you on the show.
Michael Frankel: Great to be here. Thanks for having me.
Will Bachman: Michael, you have been in a real variety of roles. I know you have been in M and A. You have done banking. Also you’re an attorney. You’ve been a solo practitioner for a while and done interim executive roles. Been board member and now you’re at Deloitte in their internal strategy team. I’m super psyched to have you on this show because the variety of perspectives you bring. Maybe before we dive into questions, let’s give people a quick thumb nail of some of your experiences of your background.
Michael Frankel: Sure. It’s a little bit of a laundry list. Went to the University of Chicago. I was an M and A lawyer, Skadden banker at Merrill Lynch. Spent about 11 years doing corporate development, M and A, and strategy and some general management at a bunch of big tech companies, companies like Verisign, Lexus Nexus Group. I’ve also been on a bunch of boards, mostly of early stage tech companies, one public company. Was the CFO of two small tech companies, Comixology, which was sold to Amazon, and then 50 on Red. About three years ago I joined Deloitte to lead the Deloitte new venture Accelerator, DNA, which is an internal team at Deloitte which helps build technology and what we call hybrid businesses within Deloitte.
Will Bachman: Awesome. You have some exposure with how larger firms are beginning to become more open to using independent professionals. I’d love to hear your thoughts around that. Our listeners, probably a lot of them are management consultants and kind of know that space pretty well, but outside of management consulting talk to us a little bit about how companies are starting to think about using independent professionals, contingent labor, whatever you want to call it.
Michael Frankel: Absolutely. It’s a big trend. And what’s interesting is I think it’s one of those things that’s going to hyper-accelerate because now everybody’s starting to consider the need for expertise. It started with very junior talent. It was easy to do contingent to flex your resources. Now people are starting to realize that there is very, very senior sophisticated talent in the market. I think part of this is the millennial trend that doesn’t want a full time role or is willing to not have a full time, long term role. I’m seeing both the big professional services firms and corporates starting to pull on those resources.
I’ll give you a couple of really good examples. One is, I’ll be biased and I’ll talk about my own firm, Deloitte has launched something called Deloitte Open Talent. That is a direct, rather than going through contingent agencies and firms like Spare Hire, although those are the real power in the market right now, Deloitte’s actually trying to gather contingent people directly that want to work on individual project. They’re looking for very, very senior and sophisticated people with financial analysis experience, industry experience, research experience, strategy experience. Another good example in a totally different industry is the firm called Hire and Esquire, HAE, which has created a contingent marketplace for law firms so that law firms can have flexible resources to bring on experienced lawyers for a five month project or even a year long project, but not bring them on full time, not put them on the partner track. I think across the whole industry you’re seeing a big push to take advantage of the flexibility and frankly really high value talent that is hard to capture in any case.
Will Bachman: What are some of the intermediaries that are playing in the space? For example, if you’re trying to get a senior finance professional, maybe a part time CFO, how are companies finding that person? Or if you are that talent, you want to be an interim CFO or a part time CFO, fractional CFO for five different companies, how are those matches being made?
Michael Frankel: I think it depends on whether we’re talking about large companies or small companies. For large companies there are some fairly well-established finance staffing firms. They’re not bringing on CFO’s but they’re bringing on mid level finance people into very large companies. And there are also some finance roles that show up on the contingent labor sites like Spare Hire and other ones like that.
At the small company level, it’s much more inefficient. What I’m seeing is two different models. The first model is those finance leaders, those CFOs for hire are just finding these roles by networking. They’re networking with early stage venture capital and seed funding firms and they’re getting introduced into small tech companies. They’re basically building themselves a practice. I’ve seen several experienced CFOs who built a practice where at any given time they have between two and four companies that they’re serving as kind of the part time CFO for. And as those companies mature and get bigger, they roll off and they roll onto another one. The other model is there are firms that are building that pull in these CFOs. There are examples on both East and West coast of firms that have portfolios of 10, 50, 100 pretty senior CFOs and they service a whole bunch of companies. And those firms have the scale that they do the marketing. They have reputation with venture capital funds. They can source lots of opportunities and then place the CFOs.
Will Bachman: And they can probably find the right flavor of CFO. If it’s a retail company that does e-commerce or just industrial company, whatever, they can find someone who maybe lives in the right space and geographic area and try to match you up like that.
Michael Frankel: Exactly. Although, my experience is that so far, the majority of these kind of roles tend to go into tech. The reason for that is that it’s more likely that you want to bring on somebody who’s very senior, but only part time if you’re very small but growing super fast. If you’re very small and you’re not growing, you probably get away with a bookkeeper. You’re just going to keep them forever. And if you’re big, you hire a CFO. It’s the part time CFO is sort of usually, especially if we’re talking about somebody who’s a sophisticated finance person, is usually needed where you’re hitting the gas like crazy. That’s mostly tech companies, maybe biotech.
Will Bachman: What are some of the special skills that small, fast growing company needs in terms of … is it thinking about how they’re going to do the next round of financing? All that equity as you’re planning the working capital? What’s the actual stuff that that senior, sophisticated interim or fractional CFO is going to be doing?
Michael Frankel: I’d put it into three buckets. The first one is capital and fundraising. And that’s not just how you raise money and how much you should ask for and what terms you should get, but also when you should raise it, how much are you going to need, how do you prepare for a fundraise. It’s all that expertise. The second bucket is how do you build financial systems. A lot of these companies literally have a spreadsheet, maybe QuickBooks. There’s an expertise to how you build financial systems so that you can actually run your business. You can pay your bills. You can invoice. You can monitor your business. In a lot of cases, you can understand your businesses, because these businesses have evolved very quickly and the financials are very often the key to understanding am I growing? How profitable am I? How profitable could I be? What things that I’m doing are productive and not productive? What marketing spend is working and not working? That’s sort of the second piece to it. And the third is financial insights on the business, which sort of bleeds from what I was just saying was the second one which is understanding how my business is working.
Those are the three things that I think, other than, I guess, the fourth obvious one is on a day to day basis running the financial team. Right? Making sure bills get out, things like that. Those are the three big buckets. They’ll vary based on the stage of the company and based on are they about to do a fundraise? Have they just done a fundraise? But they feed off of each other because if you have good financial systems, you’re able to produce good financial reporting and metrics and KPIs which will help you raise money because you’ll be able to demonstrate how you’re company is improving. You’ll be able to project out. “Look, if we can grow, this is what our margins turn into.” Things like that. They feed off of each other.
Will Bachman: For a team that has a product that’s getting traction and growing quickly, they want a sophisticated CFO who might normally be running a company that’s much larger because … also having to put so many new things in place as they grow.
Michael Frankel: That’s right. If you think about it, it’s a maturity model. You start out with either a bookkeeper or just one of you chooses to do the financial part. At some point you get to having a bookkeeper just to keep the paperwork and input the numbers and keep the bank accounts. But you’re not ready for a CFO yet, but you need some of those insights so that you’re not creating a gaping hole, a gaping debit of financial acumen that you’re going to need fill in. That’s where these part time CFOs are great because they’re cost effective. You don’t need 50 hours of somebody’s time a week. You need like five. The bookkeeper can do a lot of the heavy lifting. But you don’t want to get so far behind that it hurts your chances of getting a new round of funding or even just making your business work.
Will Bachman: Okay. It literally might just be five hours a week that you’re getting this person, this fractional CFO. And they’re different than a consultant because you’re expecting they’re going to stay with you for an extended period. They really are part of your team, but they’re just there either remote or they only come in a day a week or something.
Michael Frankel: That’s right. My experience is they’re usually much, much more senior than what you need. They’re not like one step ahead of what you need. They’re like five steps ahead. They often stay with you for a long time, depending on how fast you’re growing. Number two, they may help train the CFO you eventually hire. You’ve got somebody who’s naturally the CFO of a $400 million, $300 million business, your business is $3 million, you get to like $8, $10 million it’s time to hire a CFO. Your interim CFO can actually train up that person and help them succeed. And they’re used to that. They don’t expect to be around for five years unless they fall in love with the company and decide. And that happens every once in a while, but not that often, they decide to go whole hog and say, “I want to be the CFO and stay.” But usually they’re doing this purposefully because they want this lifestyle. They want this environment. They want the diversity of running with different companies.
Will Bachman: Are companies doing this fractional senior level person with other traditional corporate functions? Are there fractional HR people or fractional CIO people?
Michael Frankel: From what I’ve seen, and I know the finance area a little bit better, I’ve seen some examples with a CHRO, although it’s a little less likely because I think, and this may be wrong, I think it’s perceived as a role where you don’t need as much senior sophistication and because there are some vendors like TriNet and ADP that will provide a lot of the help you need. I know one company that basically had their office manager become their head of HR and that person, they happened to be on TriNet. TriNet provided so much training and support that basically the office manager turned head of HR was able to figure out how to set up a 401K plan, how to do benefits, things like that. I think that it’s probably coming, but it seems to be coming slower with HR.
CIO and CTO, much less likely because these are tech companies. They might have a senior advisor, someone on the board who is a big gun CTO who advises them. But if you’re a technology business, whoever’s running your technology day to day that’s a founder, that’s an employee. Legal is probably the other place there you sometimes see it, although, again, less likely because there are more little boutique firms that have very sophisticated lawyers that can support companies like this. Law firms have built venture capital practices specifically to support companies like this at a low enough cost that it’s appealing to them. Financial firms have not done a good of job. It’s a little harder to find a accounting firm with somebody who can be your part time CFO at a reasonable cost. Law firms have done a much better job of serving that.
Will Bachman: That’s interesting. I guess on the CHRO, the more transactional type HR stuff that makes sense you can outsource that. I wonder what’s going on with the more strategic HR like helping to hire your next senior level executives on your team or thinking about your talent strategy and all that kind of stuff.
Michael Frankel: I think you’re right. I think it’s a big gap. I suspect, and this is just me guessing, culturally you’re more likely to find founders who think they’ve got a handle on the people stuff than founders who think they have a handle on the finance stuff. Finance is sort of it’s scary and it’s a little weird and it’s your path to funding. You’re more likely to go, “Oh, I got to make sure I do that right.” I think that founders are, often to their detriment, not focused enough on the importance of the people stuff. Or they think because they’re personally very focused on it that they don’t need to bring in a pro.
Will Bachman: Let’s turn the topic a little bit. Let’s talk about the types of things that forward thinking companies and professional services are doing around enabling experts with technology. Human plus machine that’s taking place, I suppose, in accounting and consulting and legal and all the professional services. Can you talk about some of the trends that you’re seeing there?
Michael Frankel: Yeah. I think it’s a really cool area. In my mind, the way to think about it is, let’s go back 100 years, pre most technology. There were all these things that were just done by smart people, experts. And the experts would do all this different stuff for you, law and accounting, finance and strategy. Now there’s a bunch of technology that’s emerging and we all, if we watched the Terminator movies, know that at some point in the distant future there will be a box with a light on it that will do your strategy for you or will do your finance for you. But what I think all the big professional services firms have realized is there’s a giant roadmap between those two realities, during which there will be, and I’m now using a term that we use at Deloitte, there will be a hybrid world where a lot of business problems … Some business problems are already fully automated and that’s great. And there are probably some business problems that are still purely human. But a significant number of business problems have to be solved by a combination of human and technology, human analytics, human and data where you need a certain level of wisdom, insight, creativity that only the human brain provides. But you need the speed and processing and complexity and execution that technology provides.
All of the big firms are struggling with how do we build those offerings? We don’t want to necessarily compete with a big technology company building pure technology. But how do we build an offering that solves our client’s problems by combining human and technology? And the other reason it’s interesting is the clients are struggling with the complexity of the technology. Not to be snarky, but you give a baby a computer or you give a baby a machine gun you may not get a good result. You have a lot of companies that are being handed very complex technology and their internal teams may not know how to use them and optimize them. They have a choice. They can either hire a very expensive pool of experts or they can turn to a professional services firm that couples those two together.
Will Bachman: Can you give any examples of spaces that you’re seeing in professional services where part of the traditional work done by a professional is now being done by a machine but they’re working together?
Michael Frankel: Oh yeah, absolutely. There are all kinds of work flow solutions where a lot of the work flow can be automated. But there are points of judgment in the work flow. You need to analyze a situation. You need to make a business judgment about how to react to the data that’s coming out. There’s all kinds of different work flows across all kinds of different problem sets where, let’s say 90% of the process is totally automated, but there are points during the process where the human interacts and goes, “Okay, based on that, we’re going to make that decision.”
I’ll give you an example. Again, I don’t want to flog Deloitte offerings. But I’ll give you an example within Deloitte. In the life sciences area we have analytic platforms that will analyze data out of a hospital and look at hospital operations. They’ll come up with metrics for the performance of that hospital. But you need a human to assess why is the performance good or bad and what can I do to improve it? For some reason, our intake rate is really slow. Patients are coming in, but they’re not getting put into the ER quickly enough. Now, we need an expert to come in and see how are you processing those patients. What processes can we change? How can we improve them? There’s a human element the analytic engine can’t figure out. There are a lot of examples where analytics, work flow are two where it’s very natural to have automation speed things along, but human interaction to assess the complexities of what’s actually going on.
Will Bachman: Do you have any thoughts for independent professionals on looking at the work that we do and trying to put it into a process to assess if there’s pieces of it that we should think about trying to automate in some way?
Michael Frankel: Yeah. Absolutely. I think that that will make these independent professionals dramatically more valuable. Fundamentally, independent professionals have huge amounts of IP stuck in their brains. We’re really smart. We’re really experienced. We’ve seen things a lot. We know how to do things very well. As long as you are charging on a time and materials basis, I’m not sure you’re getting the full value of all that insight. You’re getting an hourly rate. If you can figure out how to create a tool that automates the obvious parts of what you do, you can then charge for that separately or at the very least you can do things radically more efficiently.
What I would do is step back and say two things, number one, are there parts of my work flow that I could easily automate? Macros in excel spreadsheets, templates. Some of this everybody already does. We all have templates. We don’t start from nothing. We have a signature one in our email. We don’t retype that every time. Are there parts that I can automate? And, I would say the related thing which is less technology but still really powerful is are there areas of my expertise that I can make replicable so that instead of applying them custom every time, I can turn them into a tool, turn them into an asset? If at the beginning of every project the first thing I always do is take these 14 steps to assess my customer’s situation, why don’t I templatize that? Why don’t I automate it? I can either make it into a tool kit or I can hire a junior person to do it. But it creates more leverage where I’m not recreating the wheel over and over again. I do think even for solos who aren’t going to spend an enormous amount of money building a piece of technology, there’s a lot of stuff you can do that allows you to focus on the creative part of what you do and not the rote part of what you do.
Will Bachman: Are you familiar with any tools to kind of go about that? I know Zapier is something that some people do to automate some tasks if it’s between websites. Are there other kinds of things that you’ve seen tools people use?
Michael Frankel: I’m not as familiar because obviously I’m in large organization where do a lot of custom build. Honestly, there’s a lot of automation in basic tools like Excel, basic tools like Power Point that you can use. I’m sure there are other as well. If you want to get into the development business. The other thing I point out is it’s not just about technology automation, it’s just about pure process automation. Just stepping back and looking back all the projects you’ve done over the past couple of years. If you’re doing the same thing over and over again for almost every client, there’s a way for you to automate that and potential to productize it. And this is a business decision that people want to go down the path of is are you happy just getting hourly rates or do you think you have something that’s unique enough in the way you approach a set of problems that you hit over and over again with your clients that you want to turn into a product and actually charge for?
Will Bachman: Big opportunity for that. Question for you. You’ve sat on a couple boards, to change the topic again. How does that happen? How do you get invited to join the boards of the companies that you did?
Michael Frankel: Yeah. Public companies, big companies, there’s usually a head hunter. It’s a formal process. Although, I would say even with the public company I was on, it was personal network. But with the early stage companies it is almost always personal network. And personal network either to the founders or to the financiers, the venture and seed funds, or to other vendors that hit those companies early, usually lawyers, sometimes accounting firms. That’s the ecosystem of people that surround an earlier stage company. My experience is that the way you get invited to boards is to build networks in that community number one. And number two have a clear value prop for why you’re going to be on the board. What is it that you’re bringing to that little company? Especially at that stage, they have very little capital. They don’t want to be giving away their equity and frankly they don’t want to be giving away their time. They choose their advisory board and board members incredibly carefully to be people that can help them succeed with their near term goals. Having a crisp value prop for what you’re going to do for them, I think, is very important.
Will Bachman: What’s the benefit of being on a board of a company like that? Typically do you get equity in the company? Are they just paying you cash? Or is it just because you learn a lot? What’s the reason to want to do that?
Michael Frankel: I put it into a few different categories. Number one, you get equity. How much ROI you get on that equity if it’s worth the time that you’re investing is largely correlated to how you … It’s like being a stock picker. It’s how well you choose the companies. Sure, if you chose to join the early stage board of Google and Spotify, you made an enormous amount of money. I would say just like all investing choices, on average people do okay. They don’t do great. I wouldn’t count on it being this gigantic windfall. But it’s just like being an early stage investor. In fact, that’s the way I always think about it is you are investing in an early stage company except instead of offering dollars you’re offering hours. But you can calculate the value of your hours. That’s how much money you’re investing in this little company. I would take that approach to make sure that you’re not being unwise about the choices of companies. If you wouldn’t make a financial dollar investment, then I wouldn’t give them an hour of your time because the same thing. Number one, there’s that financial return.
Number two, there’s the fun of it which is early stage companies are a lot of fun. They’re exciting. You’re doing something radical. You’re thinking differently. Being on a board or an advisory board is a way of having a little bit of that experience without making that your whole career. Those people are betting their entire year or two years or three years in the success of the company. You get to be involved in that while betting 30 hours of your year.
And then the third benefit and it feeds back into the first two is while it’s not a guarantee, generally speaking, being on boards causes you, gives you opportunities to be on more boards and potentially be on bigger boards. Either because the company you’re on the board of or on the advisory board of just becomes bigger, it’s successful, or because you build relationships that builds your network and you sit on more boards. It can often be a pathway to more boards, more interesting boards and better financial return for bigger and more successful companies.
As a general matter for expectation setting, I would assume that any venture-backed, certainly, early stage company is going to pay zero dollars for being on a board or advisor board. They’ll do pure equity. There’s standards as to how much equity it’ll be. Public boards will pay cash and that will vary from small amount to big amount depending on how big the company is.
Will Bachman: Do you have any morning routines or any routines at any time of your day that have made you more productive?
Michael Frankel: Yeah, I’ve got a couple. One is I’ve started meditating. I do the little 10 minute meditation. Can’t say it works for everyone. I think it’s incredibly valuable for me, especially first thing in the morning. It clears my brain. Puts me in the right mindset before I start my day. I also try to workout six or seven days a week, same thing, first thing in the morning. For me, that happens to work really well to start my day with a really positive, good mindset. The other thing I try to do is walk around. I think physically just getting up and moving while I’m on calls is both physically and psychologically helpful. And then the last thing is if I have a particularly stressful and, or unpleasant interaction of some sort, I just take a break. I try to do a little reset. I’ll go do something physical. I’ll file papers. I’ll go make myself a cup of coffee. Just something to create a crack and then reset to a positive mindset.
Will Bachman: Your morning you’re working out, you’re meditating. Can you walk me through a typical morning? What time do you get up? Do you make the coffee first or tea first or meditate first? What’s that look like?
Michael Frankel: Yeah. I’d say average day, especially if I’m working from home that day, I’m up around 6:30 to 6:45. I make my daughter breakfast, help get her ready for school. I have a home gym. I’m working out by about 7:30 to 7:45. By about 8:15 I’m done working out. Meditate for about 10 minutes. Make a cup of coffee and I’m at my computer by 8:30. That’s probably my standard day when I’m not on the road traveling. I try to recreate that without, obviously, the daughter when I’m on the road.
Will Bachman: Right. Make a peanut butter and jelly sandwich just because.
Michael Frankel: Exactly. Either that or bring a seven year old on business trips, neither of which would be that productive.
Will Bachman: Any books that you’ve gifted often?
Michael Frankel: Well, I’m going to give you a goofy answer. I’ve gifted Cyrano de Bergerac often, which is my favorite book because I just like it. Even though it’s got nothing to do with business, it’s this sort of extreme, passionate aspiration, this purity of approach that says, “This is what I want to do. I’m not going to filter my plans based on anything. I’m going to decide this is what I want to do.” I don’t gift my own books because they’re all mergers and acquisitions books and they’re incredibly technical and boring. The other thing is I always like Michael Lewis books because they tell the story of people who are doing something really dramatic, really extreme but they give you some insight into the human aspect of it, which I think is always the part of business books that’s missing. I think we try to make business very economic and very mathematical and we forget that business is entirely done by a whole bunch of human beings with personal biases and problems and arguments with the wife and struggles with stopping smoking and whatever else is going on in their lives. And that’s what makes it so much more interesting.
Will Bachman: Absolutely. Cyrano de Bergerac. I guess I’ve seen the movie. I need to read that. Awesome. Michael, this has been a fantastic discussion. I want to thank you deeply for joining us. Where can people find information about you online or contact you? I can give a website. What would you like to hand out with that.
Michael Frankel: I’ll send them two different places. You go to Amazon, you can find my books under Michael Frankel and mergers and acquisitions. And then if you go to MichaelFrankel.net or if you go to corporatedealmaker.com you’ll find some basics about my background.
Will Bachman: Fantastic. Michael, thanks so much for joining.
Michael Frankel: Hey, thanks for having me.

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