All of the guys in the department had fought to get on this particular audit because of the time of year and the location. A young staff internal auditor named Mike Bechara waited in the “bullpen” with the other staff auditors to see who would be picked by the senior auditor for the job.
The “Senior” was a guy from Western Pennsylvania. I’ll call him Dave. As Dave came down the corridor of cubicles, the rest of the Staff crowded around him. Not yet 30 years old (and not used to being in a position of authority) he cockily eyed the crowd and with a gruff nod of his head he mumbled, “Bechara…lets go.”
In my early 20s (and not used being magnanimous) I smugly shouldered my way through the crowd and followed Dave into the Manager’s office for the pre audit briefing.
The assignment was for a pre-appointment audit. We worked for an insurance company and before the company would sign up a new agent they would perform a pre-appointment audit to evaluate the financial condition and integrity of the agent.
Later that week, upon arriving in the sunny Virginia office of the agent, we were ushered into a conference room to set up. As I unpacked my stuff I prepared to execute the hard work of financial analysis, examining reconciliations and evaluating systems.
Dave had other plans.
Mike, you’re coming with me to the management meeting. The boss said I have to “professionally develop you”, he informed me.
The management meeting! The Promised Land!
Long known amongst the staff as a fluff meeting designed to get the Seniors away from the hard detail work, I was ecstatic at being able to attend. As we were ushered into the executive office of the agency’s President, Dave warned me, “Don’t say anything stupid.”
As the meeting started, the President in a booming voice began to spin tales of how he was the mover and shaker about town; how he had closed insurance deals with celebrities and about how he met a Senator on the tarmac of the airport to sell him insurance. Interspersed between these tales of business prowess, he made mention of the luxury items he had accumulated personally (houses, boats, cars) during his time in business.
As I listened I forgot Dave’s admonition about speaking and asked, “Are there any areas of the business that you are concerned about?”
The agent looked at me like I had asked him if he wore deodorant.
“My concern is that I am here in the office teaching you about my business instead of out there getting more!” he growled back.
Dave remained stone-faced and just looked at the agency President.
Of the hundreds of risk assessments, internal audits and investigations I have performed over my career, I can consistently point to the meetings with management as the key arbiter, the pivotal point in making big decisions about whether to extend credit, consummate a merger or sign any agreement.
I recently read a great piece by ConvergEx’s Nick Colas where he supplies his own experiences in management meetings from an investor perspective. Here are some excerpts from this great article.
Meetings between public company managements and investors are the bedrock of the fundamental investment process. The reason for that, however, is often lost in translation. It is not, for example, because most investors or analysts are systematically better at reading “Body language” about the quarter or new products. Seriously – they aren’t. No – the reason that management meetings are useful is because, over time, managements let down their guards and act like regular people. And in those moments, truth – about character, about wisdom, about judgment – comes rolling out.
Even today many teams, whether they are audit teams, field exam teams or due diligence teams, underappreciate and undervalue the process of meeting with management.
Perhaps it’s our data driven driven society where we think we can financially engineer our way out of any problem, from a bad acquisition, an underwater debtor or perhaps even an economic slump…..
At any rate, let’s go back to our management meeting in sunny Virginia. The agency President went on and on describing how he would do anything to close a deal. When Dave asked him about his financials, his customer concentrations or his software systems he became agitated and dismissive. At one point he exclaimed “The back office people handle all that, and anyway, what’s important is that I can deliver the business!”
We ended the meeting and went back to doing our analysis work. I had a hard time concentrating as I thought I blew it in the management meeting. “Dave had basically told me to keep quiet and I asked a stupid question”, I thought to myself.
At the end of the review the financials looked fine and we had no major issues. I asked Dave if he thought we would sign the agent. He didn’t answer but just gave me a sort of half sad smile.
Back at the office later that week, I was shocked to find out that we did not sign up the intrepid Virginia agent. I got pretty nervous as I naively thought that the agent backed out and went with another underwriter. After all hadn’t the numbers and the analysis checked out? Wasn’t he a big time player in his area with a lot of contacts and business?
Before lunch I saw the Manager of Internal Audit coming down the corridor towards the bullpen. The Manager?….coming to the bullpen?
I looked around for a box to use in cleaning out my desk, but before I knew it the Manager was in front of me speaking rapidly:
“Dave just updated me….Good question…Next time don’t be intimidated…ask a follow up question.”
It was not until years later that the agent was involved in some questionable practices with another underwriter.
Have a great week,
Michael Bechara, CPA, CRMA
Granite Consulting Group Inc.