The ability to make tough decisions quickly is often the difference between success and failure.
After all, if it were easy to be a leader, everyone would be one.
“We had 16 million people pick up a guitar during the pandemic, 30 million worldwide. And Fender really benefited from that,” Matt Janopaul, CFO at Fender, told PYMNTS as a part of our new executive series, “Tough Calls.”
“Then, of course, we get to 2022 and people decide to start taking vacations or doing other things with their disposable income. Guitars were no longer the priority – and the tough call I had to make was dealing with retail partner cancellations of orders in the magnitude approaching $100 million,” Janopaul explains.
That is roughly 600,000 guitars and 200,000 amplifiers, some coming from Asia, others from two factories in North America, and the rest from third-party original equipment manufacturers (OEMs).
Suffice to say, the financial implications of this shift in consumer behavior were substantial, and the consequences of inaction would be severe.
“One of the core values I stand for as a CFO is a sense of urgency,” Janopaul says. “When these tough decisions come along, [Fender] by our very nature, we have a stance of ‘let’s act.’”
“You have to be willing to make decisions and then course correct quickly after those decisions, particularly if you’re in a tough situation or in a crisis,” he adds.
In this particular situation, Janopaul and the rest of Fender’s executive team quickly took a step back and asked, “How can we slow down all the factories?”
“And you know, slowing down manufacturing plants is not easy,” emphasizes Janopaul.
As for how the Fender CFO was able to manage this worst-case scenario?
“It took a cross-functional effort to make it work, and again, it took action. It was one of those things where we could not wait,” Janopaul says.
“Importantly, from the CFO standpoint, you want to make sure you shore up your balance sheet very quickly. And then immediately go, frankly, into sales mode… We set targets. We said, ‘Here’s where we want to be by the end of the year…’ We looked at every single piece of our operating expense infrastructure and said, ‘Where can we either cut costs or slow things down?’ …It was like being on a red-eye flight and you hit turbulence in the middle of the night, and we were able to successfully land the plane,” he adds.
By widening the aperture and taking a long-term view of what’s right for the business, organizations can frequently surprise themselves with how adroitly they are able to navigate a tumultuous business landscape, while gaining valuable experience cutting their teeth on disaster scenarios.
“It first starts with being calm and mindful of the situation. Very rarely are tough calls truly catastrophic to a business — and often, the rest of the organization will look to the CFO or other senior finance leaders for calmness and clarity, as well as data,” Janopaul explains.
“If you start with that as the foundation, and then overlay the idea that nothing is sacred, that when making these tough calls, we might have to do things that are unpopular or that have never been done before…often what happens is that out of these tough calls, and borne of patience, comes a new opportunity,” Janopaul emphasizes.
There are generally three key traits that aid leaders in navigating even the most difficult of challenges: perceptual acuity, qualitative judgment and credibility.
“For CFOs, the idea of quantifying qualitative judgment is something we do all the time. We wake up to it, go to sleep with it, and think about it on the weekends. And so, same thing with credibility. In our world, you have to be credible,” explains Janopaul. “Judgment and credibility are table stakes, any leader worth their salt has to have them…even if it takes learning it over time.”
That’s why, as he explains, it is the ideal of perceptual acuity that is “by far the most important.”
“It is what I would call pattern, or trend, recognition. Being able to learn from those patterns and trends can be powerful, particularly with tough calls, because a lot of this is having a process that you can take off the shelf and put in place to address whatever may be going on when there’s a crisis or a tough call,” Janopaul says.
“It is the ability to look around corners that is really critical. It allows a business, particularly one that might have cyclicality or [be subject to] other external trends, to be able to respond and react in a proactive way,” he adds.
All of this is why, with a cross-functional approach, regular business update meetings, and a commitment to delivering quality and innovation, Fender continues to strike the right chord in the ever-evolving music industry.
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