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Not a CFO issue? How would you consult RadioShack or others?

David McCann recently posted an article on CFO.com on September 15 regarding RadioShack's most recent CFO. He, John Feray, "jumped ship" for personal reasons, as the article points out. According to the analyst Michael Pachter the new CFO adds no value to Radio Shack's shareholders. Another analyst, David Strasser, says that the company's struggles are in sales, and it is not a CFO issue, nor does he think it's a CEO issue. The fault, he says, is with the business-model of RadioShack. I am not sure I agree with the thought that it isn't a CFO, CEO issue. Perhaps now it is too late to right the course for RadioShack regardless of who is at the helm. Was there a point in time when the CFO could have helped turn it around? Can the next CFO actually help turn it around now? Is the flaw with the CFO, CEO, business-model, or a mixture of all three? What would your advice to RadioShack be during these times? How would you consult with them if you were hired as interim CFO, instead of Holly Etlin (she was hired for the interim job)?

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I view RadioShack as a business that was never able to adopt to change or reinvent itself. RadioShack lost it's competitive advantage a looooong time ago. There are so many alternatives (Fry's, Amazon, Ebay, etc) that they can NOT compete with using the 3 P's (product, price, people). Outdated and limited products, higher prices and sales people who do not know the products. I personally would just go to Fry's (even if it is farther away) than go to a RadioShack store.

The best way any interim CFO can help is to redefine the business model and they need to be great at something or offering something of value that consumers/customers will go for.

I will reserve judgement or opinion on the CFO as I do NOT know the situation or dynamics inside the company.

It may not be a direct CFO issue but it is/was definitely a CEO and Board issue.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Emerson - I wonder what it was about RadioShack that hindered them to reinvent themselves? It seemed at one time there were as many RadioShacks as there were Walgreen's, as in one on every corner. I think their real estate idea was great, but the company seemed to be niche in its approach.

If you were the interim CFO, how would you redefine the business model for RadioShack? What could they offer of value that customers would be willing to go for?

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

A turnaround is the domain of the CFO. He/She is responsible for coordinating the efficient use of resources to accomplish this task. In a turnaround situation, the most important resource is cash. Every activity should be accomplished from a perspective of what will be the impact to cash, i.e. drain or increase. A turnaround is a non-stop series of cost-benefit studies.

Once the decision to turnaround is made, every aspect of the company should be on the table. The CEO/CFO relationship is critical to assess the current situation – financial (specifically cash flow), products, clients, processes (personnel and automation), business development… The two Senior Managers work hand-in-hand to prioritize the required changes to the organization and set strategy.

But in Radio Shack’s situation, the business model is flawed. You are dealing with a model requiring brick and mortar, as well as personnel, which are the two greatest costs for any business. Bankruptcy is a common tactic used to break agreements. This name will re-emerge out of bankruptcy.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Regis - Thank you for weighing in on the discussion. Regarding your conclusion that the name will re-emerge out of bankruptcy, how do you see the name of RadioShack and its business model changing so that it will re-emerge?

Anonymous
(CFO/Board Advisor) |

Radio Shack's problem(s) start with its Brand! Which is the preview of the CEO, CFO, CMO, Board, and entire executive Team. When you think of Radio Shack what comes to your mind first? Batteries? Place for electronic components and specialty components for garage techies? The place where HAM radio operators and police scanner folks got their components and supplies? Cheap electronics and electric toys? Its where you bought your speaker wire and antenna components. Small brick & mortar footprints in strip shopping centers? There is nothing cool about saying: "I got this at Radio Shake." When others began selling their commodity products, from big box retailers, e.g. Home Depot, Lowes, Wal-Mart, Ace Hardware, Best Buy, to every cellular chain ever started, Radio Shack failed to change and redefine their Brand. We have seen this many times in the retail and restaurant industries: EggHead? Craig's? Sears? J.C. Penny? Sizzler? Sambos? Radio Shake's Brand image is the problem. Radio Shack's problem was the management Team was slow to change, same as Blockbuster's. And that is a CEO, CFO, CMO, etc. problem.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

As I have said, it is a Board (primarily) and CEO problem.

What Radio Shack needs is a Board re-org that can craft a new vision for the company and a CEO that can help craft and/or agree to the vision and help define the strategies to achieve that vision. The CEO and his management team (which includes the CFO) can provide the Board with the necessary numbers and available strategies that the Board also needs to approve.

Several analogies that popped in my head are...

(a) you cannot save a sinking ship by changing the captain (and/or crew).
(b) the raft (RadioShack) would have been good on a slow steady river, but nowadays, they are sailing the high seas and a raft will no longer work and doomed to fail. They need a BIGGER and STRONGER ship!

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

I agree with Emerson, the CFO can make as many recommendations a they want but if the board or CEO doesn't take them into consideration the CFO is at fork in the road. My CEO and I have a great relationship but at the end of the day I can stomp my feet, raise my voice, and beg, but it is his ultimate decision and I can choose to accept his choice or what sounds like the happened in this case, jump ship.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Companies spend millions on developing brand names. Once a consumer knows a name, that name takes on a certain value. Twinkies is a great example. A cream filled cake is nothing new. But after production ended, the name surfaced again under new owners.

An example of a brand that changed its strategy and thrives is "Chock full of Nuts." If you lived in New York City in the 70's, Chock full of Nuts was on every corner. They closed all of their coffee shops and changed to a provider that sells coffee to Supermarkets.

The electronics industry is highly competitive and has had competitors come and go. I can see Radio Shack go on-line and re-emerge.

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