Latest / The Start, Scale & Succeed Podcast / Your Numbers Look Fine But You’re Struggling with Jonathan Maharaj (stage 5) - Ep. 416

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Your Numbers Look Fine But You’re Struggling with Jonathan Maharaj (stage 5) - Ep. 416 · The Start, Scale & Succeed Podcast

• 0:00
  Scott Ritzheimer: Hello, hello, and welcome, welcome once again
• 0:03
  to the Start, Scale, and Succeed podcast-the only podcast that
• 0:06
  grows with you through all seven levels of your journey as a
• 0:09
  founder. I'm your host, Scott Ritzheimer, and if you're one of
• 0:12
  those founders listening today, especially from level five,
• 0:15
  you're leading a team of executives, your business is
• 0:18
  running strong, reports are coming in, compliance is
• 0:21
  handled, the machine is moving, and everything looks like it
• 0:26
  should be good. But you're still not confident that you're making
• 0:31
  the right decisions, and and there's still something
• 0:34
  bothering you-not just about financial clarity, but how it's
• 0:37
  going to show up in the organization. Well, if that's
• 0:40
  you, you are not alone. It's a common challenge in this level,
• 0:43
  and here to help us out and solve it is Jonathan Maharaj,
• 0:47
  who is a financial thought leader and founder of Aurora
• 0:50
  Financials, based in New Zealand. For over 20 years, he's
• 0:53
  worked as a CPA across auditing, consulting, and strategic
• 0:57
  finance, helping founders, executives, listed companies,
• 1:01
  and global brands focus on what truly matters. He helps leaders
• 1:05
  see the story behind their numbers, so they can move faster
• 1:08
  with more confidence and have fewer financial blind spots.
• 1:11
  Jonathan, welcome to the show from the other side of the
• 1:14
  world. Here with us, bright and early. Well, thanks for being
• 1:17
  here. Really happy to have you on. Excited for this
• 1:20
  conversation. I want to start with a question here because
• 1:26
  you've had the opportunity to to walk into meetings with boards
• 1:31
  with executive teams, and there's this situation where the
• 1:35
  financials can look okay. Maybe the compliance checklist is
• 1:39
  there. Folks are kind of doing what they're supposed to from a
• 1:42
  process standpoint, and no one can quite put a finger on it.
• 1:48
  But there's just not the confidence that they need.
• 1:50
  What's going on there?
• 1:53
  Unknown: This level that. Thank you for having me, Scott.
• 1:55
  Firstly, I really appreciate the opportunity to be here and to
• 1:58
  speak with you and also share insights with your audience.
• 2:02
  This level is really crucial because your your business or
• 2:06
  your organization is scaling fast, and the challenge that a
• 2:10
  board has is that a board governs, a board does not
• 2:14
  operate, and I call that a challenge mainly from an
• 2:17
  information asymmetry point of view. The operators of the
• 2:21
  business who are at this stage most likely to be your senior
• 2:25
  executives, your middle-level management, and actually your
• 2:27
  staff, the you know the front line, they're the ones who have
• 2:31
  access to the most up-to-date information. They know what's
• 2:33
  happening. You know, they know that a project's going to go
• 2:36
  over budget. But at the board level, you only get access to
• 2:40
  what you get given by management, unless you have
• 2:44
  concerns about what's happening, and so I think you know the
• 2:47
  topic we will talk about today is really interesting and
• 2:50
  valuable because in your gut you know that something is just not
• 2:54
  adding up. You know, based on you know your experience as the
• 2:57
  founder who started from the very beginning and started to
• 2:59
  scale it, and you know the metrics, and it just doesn't
• 3:02
  make sense. Or an independent board member who's coming in
• 3:05
  with with relevant industry insights and and things just you
• 3:10
  can't put your finger on it, but you know that that there's
• 3:12
  something missing from the story that you're getting from the
• 3:15
  numbers you're being presented.
• 3:17
  Yeah,
• 3:18
  Scott Ritzheimer: how do you start to chip away at that?
• 3:20
  Because it's a really big divide and it's one that I think a lot
• 3:23
  of founders struggle with because you know if they look
• 3:25
  back over the history of the organization most of it they
• 3:29
  were right there they were in the thick of it they didn't have
• 3:32
  to worry about what was getting filtered to them or what wasn't
• 3:36
  so with a founder who who's now kind of struggling with that gap
• 3:42
  and wondering if they're actually getting the information
• 3:44
  that they need, or if it's getting filtered more than it
• 3:47
  should. How do you help folks to start to chip away at that?
• 3:51
  Unknown: I think the first thing is really to get to the root
• 3:54
  cause of the issue, and a lot of times, many founders they are
• 3:58
  focused on the symptoms. So, for example, right, sales may be
• 4:02
  less, or sales may have fallen this quarter compared to
• 4:05
  projections, right? I would say that is a symptom. I don't think
• 4:09
  that is a root cause. The root cause is further down the
• 4:13
  channel. Was there something that happened with the quality
• 4:16
  of our products or our services? What is our, you know, what are
• 4:20
  our customers saying, and and the thing I say is like as the
• 4:24
  founder, as the business scales, the founder really gets detached
• 4:29
  from the day to day running of the business, right? And so my
• 4:33
  goal with them is you know you don't have to go back onto the
• 4:36
  front line, but you do need to kind of walk the shop, as they
• 4:40
  say. You still need to kind of figure out. Hey, when I was on
• 4:44
  the tools, building this business, this was how we did
• 4:47
  it. What's changed significantly? And if sales is
• 4:50
  the issue, if sales is down, then you know, typically
• 4:53
  management at this level, it becomes political, right? And
• 4:57
  and I want to share this because we do audit. Right, and and I am
• 5:01
  an auditor. That was my first job at PwC, and even in our firm
• 5:05
  today, we do audit, accounting, tax consulting. Right, which
• 5:08
  gives us the 360 of what's happening. So I always have this
• 5:12
  auditor mindset when there's issues, and we've always been
• 5:15
  trained to have this level of professional skepticism, where
• 5:18
  you trust but you verify. And so when there's an issue as a
• 5:23
  founder, typically there's three buckets that I'd put them in.
• 5:26
  Right? There's either it's the system issue, it's a process
• 5:29
  issue, or it's a people issue. And I would say in most of my
• 5:33
  experience, it's the people issue, because you can have an
• 5:36
  amazing system, you can have an automated process that you know
• 5:39
  does everything perfectly, but you still need people to press
• 5:42
  the right buttons and to do things right. And as you scale
• 5:46
  at this particular level, the hardest thing to scale is
• 5:50
  culture, and having the right people with you that had the
• 5:54
  same vision that you had when you started, had the same
• 5:57
  genuine care for your customers, had the passion and drive to
• 6:01
  kind of go above and beyond, you know, the job description.
• 6:04
  Because as you get bigger, you know, the office politics starts
• 6:09
  getting introduced as well. Whereas when you were at the
• 6:11
  founder level, when you were building it, it's just you and
• 6:13
  your customer. There's no gap between. You know that you don't
• 6:17
  have to worry about all this other stuff. But the bigger you
• 6:20
  get, people tend to start self-preserving. So what that
• 6:24
  means is that because you have a say stable or secure job, even
• 6:29
  though job security there's no such thing as a job security,
• 6:32
  jobs can go at any time if markets change. People tend to
• 6:36
  preserve or self protect. You know, so if things things are
• 6:40
  going wrong, rather than escalating it promptly and you
• 6:43
  know getting the heat for hey you were the manager why did
• 6:46
  this happen on your watch, people tend to go like oh you
• 6:49
  know things will sort themselves out and and until they don't
• 6:52
  until things get bigger, and then you know by the time the
• 6:55
  board starts sensing that something's wrong you the the
• 6:58
  whole the horse has basically left the stable right it's out
• 7:01
  there in the wild, and they've got to rein it in, and it's
• 7:04
  hard. It's hard to do that. So, I mean, founders do still need
• 7:08
  to be quite close to the business and quite close to the
• 7:13
  customers, and I think the customers is an important one
• 7:17
  because they can give you unfiltered feedback on what's
• 7:21
  happening.
• 7:23
  Scott Ritzheimer: I think that's really good, and and one of the
• 7:26
  things that I like to see founders at this level do is if
• 7:30
  you kind of look at the history systematically, we've been
• 7:33
  moving them further and further from the front line. Right? They
• 7:35
  used to do it, then they manage the people who do it, then they
• 7:38
  lead the people who manage the people who do it. Now they're
• 7:40
  leading the executives who lead the people who manage the
• 7:42
  people, and it and it can create so much of a gap that two things
• 7:46
  happen. One, this this kind of information problem that you're
• 7:50
  describing, but then for a lot of founders, they started the
• 7:55
  thing because they love the thing, and so not only do you
• 7:59
  start to lose some of the information, but you can lose
• 8:02
  the love for whatever it is that you do in the first place. And
• 8:04
  so, what I like to see them do is to create space, and it looks
• 8:07
  different for everyone, to get back to the front line because
• 8:11
  you can, not because you have to, right? So you don't have to
• 8:15
  be the one, you know, soldering pipes, you know, when they
• 8:18
  burst, you know, at three in the morning or whatever it might be,
• 8:21
  but being giving yourself an opportunity to be close to it
• 8:25
  again, I think, is so helpful from an emotional perspective
• 8:29
  and from a financial or informational perspective. Would
• 8:32
  you agree,
• 8:34
  Unknown: Scott? The point that you really are touching on is
• 8:37
  that leadership changes as the business grows bigger, and I
• 8:42
  don't mean the fundamentals of what makes a really good leader
• 8:46
  changes, right? You know, so servant leadership, empathy,
• 8:49
  providing good feedback-all of those things, those ingredients
• 8:52
  still stay. But I think the type of leadership changes mainly
• 8:55
  because you can't, or you are not now leading every single
• 9:01
  frontline worker directly, you are now leading and influencing,
• 9:06
  you know, your first degree of management, and hopefully
• 9:09
  through them and their values, beliefs, culture, and alignment
• 9:14
  with the organization, and you, who hired them, will be able to
• 9:18
  kind of perpetuate the same culture and and and beliefs
• 9:22
  across the organization, right? And I think the key thing here
• 9:24
  is, as leaders, you know, and this is a this is I don't know
• 9:28
  if this is scientific or not, but it's just my experience. The
• 9:32
  bigger the organization, the more dysfunction there is, and
• 9:35
  the reason for that is because you get to a certain level where
• 9:38
  executives are very well paid, and you know you as the founder,
• 9:42
  you've kind of checked out of the organization mainly because
• 9:46
  you know when you were in the early stage of the grind or the
• 9:49
  hustle, as people call it, like you're there, you know, 24/7 If
• 9:53
  if something breaks with the pipe, if it's plumbing, you are
• 9:56
  there on the front line. Your customers see you. You build the
• 9:59
  value, but. Now you're relying on others to do that, and I
• 10:02
  think that you get to a certain level as the founder that you
• 10:06
  just can't be everywhere always, and you need people, and you
• 10:09
  have to trust that they'll do good. And this is why I say it's
• 10:13
  really hard to scale culture. But what I've seen in
• 10:17
  organizations is that you know if you have the right person and
• 10:21
  you have the right values. You treat your people well. You'll
• 10:25
  be able to attract the right kinds of managers and people
• 10:28
  into your organization, right? Because you know if there's an
• 10:31
  issue, or people, your people know that you will handle it
• 10:34
  transparently, consistently, and fairly. You know, and that you
• 10:38
  know what does that mean as a leader? It doesn't mean that you
• 10:40
  sugarcoat everything, but it means that you think about the
• 10:45
  people that are working with you, your you know your loyal
• 10:49
  staff, and if market conditions change and you have to
• 10:52
  restructure the business, you have to let people go. You know,
• 10:55
  for me, it's always the hardest decision as say a CFO or
• 10:58
  somebody who's supported founders in turnarounds because
• 11:01
  behind the numbers is people, and that's why I'm saying. When
• 11:04
  you look at the numbers, you think about the story. Like, how
• 11:07
  did we get here? What did people do? What decisions did they
• 11:10
  make? What families will be impacted by this? And you have
• 11:14
  to be upfront. You have to say, look, guys, we're doing the very
• 11:16
  best to save as many jobs as we can, but these are the
• 11:20
  situation. These these are the circumstances that we're facing,
• 11:22
  and I feel you know at this level, leaders they still need
• 11:26
  to lead, but it's leading differently.
• 11:30
  Scott Ritzheimer: From this kind of auditor perspective, where do
• 11:35
  you see where do you see this go wrong? So, founder again, I
• 11:41
  think it's pretty safe to say for the vast majority of them,
• 11:43
  there's a base assumption that they they really care about the
• 11:47
  work that they do. But like you said, as organizations grow, and
• 11:50
  this is like shocking for for me, even though I'm in this
• 11:53
  world, to still say it. But it's like the idea that businesses
• 11:56
  get more dysfunctional as they grow is so true. But it feels
• 12:00
  like it it's the opposite. It feels like it's more put
• 12:03
  together. It feels like we're doing more of the right things.
• 12:06
  It feels more mature. Where do you see that that kind of
• 12:10
  disconnect show up, especially from an auditing perspective?
• 12:16
  Unknown: I think the key thing is a lot of times when we're
• 12:18
  thinking about issues, we focus on what we call internal
• 12:22
  controls, right? And the the version of internal controls
• 12:26
  that we have is often described as a hard set of internal
• 12:30
  controls, right? So you'd have two people or three people
• 12:33
  signing off checks or bank payments before they go out,
• 12:36
  right? You have layers of you know preparer, reviewer,
• 12:40
  approver, that kind of thing, right? And all of those things,
• 12:43
  those mechanisms, I would say, fall into the systems and
• 12:46
  processes bucket, right? Those things are easy to fix. I think
• 12:51
  the challenge when it comes to really this part of scaling is
• 12:54
  the soft controls, you know, the psychological safety of workers,
• 13:00
  the alignment of values and beliefs, right? Whether your
• 13:05
  people are actually okay, are they worked to the bone? Are
• 13:09
  they, you know, is it unsustainable? And maybe this is
• 13:13
  an issue of sustainability as you're trying to scale and grow
• 13:15
  faster. There's a physical limit on how much your people can do,
• 13:19
  how many boxes they can pack. Do we need to invest in automation,
• 13:22
  right? And I think the soft control side or the people side
• 13:26
  is really the shift in the leadership. So at the early
• 13:30
  stage, right, the founder is really built is focused on
• 13:33
  building the business and making the customer happy, and that's
• 13:36
  all around the systems and processes. Then as you start
• 13:38
  scaling, you're getting more people, more people. Now you're
• 13:40
  getting investor funding. Now your reputational risk is the
• 13:44
  highest concern that you have because investors don't like
• 13:47
  what you're doing. It's going to be in the media. It's going to
• 13:49
  affect the next round, your next business, your legacy, all this
• 13:53
  stuff, right? And I think you know, as you get to this phase,
• 13:56
  that's what complicates it. That's what makes it a bit
• 13:59
  dysfunctional because it's no longer just one to one you and
• 14:04
  your customer without all of this other stuff. There's now
• 14:07
  more stakeholders involved, and I feel as a founder, the key
• 14:11
  thing is to get the right people on the bus with you, right?
• 14:14
  Because if you trust that they'll do the right job, if
• 14:16
  they're competent, if they are paid well, if they are have got
• 14:19
  very clear KPIs, and KPIs, I think, is where the founders and
• 14:23
  the board can really start shaping what they want to see.
• 14:27
  So, for example, right, if you want to see, you know, if your
• 14:30
  net promoter score is low, and most of the complaints that you
• 14:35
  get is really about your contact center or some other thing,
• 14:38
  right? People are waiting in the queue for too long, right? So
• 14:41
  you make sure that every single level, from top to bottom, has a
• 14:46
  KPI that's related to solving that level of root cause. And
• 14:51
  when everyone is aligned, and I and I really bring it back to
• 14:54
  like the soft controls probably will be stronger than the hard
• 14:58
  controls because if every. One is incentivized to make sure
• 15:01
  that the net promoter score goes up because a higher net promoter
• 15:04
  score means, you know, your your Google reviews, your you know
• 15:08
  Glassdoor ratings, all of this stuff increases, and you you're
• 15:12
  able to attract more customers. Then everybody is going to put
• 15:15
  in the extra effort because they know there's a link between
• 15:17
  doing stuff and getting the incentives. Right? If the link
• 15:22
  is broken, people will be like, you know, why should I, why
• 15:26
  should I do 20% more if there's no certainty that I'll get this
• 15:30
  bonus? So you know, the dysfunction really is trying to
• 15:34
  manage all of these different interpersonal situations and
• 15:41
  people and behaviors and stakeholders, while trying to
• 15:43
  just put everything, you know, keep everything coherent and
• 15:47
  growing together.
• 15:50
  Scott Ritzheimer: It's it's so much and so little all at once.
• 15:52
  It really is a lot to think about and a lot to do. But you
• 15:56
  have to keep your eye focused in a very narrow window. Now,
• 16:01
  Jonathan, there's this question that I have that I ask them. I
• 16:03
  guess I'm interested to see what you would have to say to it. The
• 16:06
  question is this: What is the biggest secret you wish wasn't a
• 16:09
  secret at all? What's that one thing you wish every founder
• 16:12
  watching or listening today knew?
• 16:16
  Unknown: I think every founder starts a business focused on you
• 16:19
  know the vision of of how this company is going to be amazing,
• 16:24
  and you know, you start off with such enthusiasm. You invest your
• 16:29
  savings. You your family is supporting you, and all of that.
• 16:32
  But I think the biggest secret is, and and and this is just
• 16:36
  from experience, is that business is hard. It's messy.
• 16:40
  You know, it takes a lot of courage. You face a lot of risk
• 16:46
  in the U.S. There's a lot of litigation as well. You know,
• 16:49
  somebody scratches their finger, and all of a sudden it's a
• 16:52
  lawsuit, and you know all of this other stuff. And so you've
• 16:55
  got to manage all of these things. So I think you know,
• 16:58
  using my auditor background, like go in with a level of
• 17:02
  professional skepticism, still believe, still walk with faith,
• 17:06
  still you know do your best, but have a realistic approach,
• 17:10
  right? You know, like look at the market first. There are
• 17:13
  really big players in there. Like you will be crushed. You've
• 17:17
  got to fight asymmetrically. You've got to do things
• 17:19
  differently. And I think if you spend more time doing the
• 17:22
  planning and the thinking and the self-reflection of really
• 17:26
  this is where I can fight and play better, I think you'll do
• 17:29
  really well because business is hard. And I feel like if you if
• 17:33
  you're realistic about it, you your chances of not being in the
• 17:37
  statistic of what 20% of startups that fail in the first
• 17:40
  year and 80% in 15 years, you can you can break that trend. So
• 17:45
  go for it. Just keep doing your best, but you know, just keep
• 17:49
  your eyes in eyes open to changing market conditions.
• 17:55
  Scott Ritzheimer: Yeah, Jonathan, there's some folks
• 17:57
  listening that would love help just navigating this space,
• 18:01
  particularly from a financial perspective, where can they
• 18:03
  reach out to you and find more out about the work that you and
• 18:06
  your team do?
• 18:07
  Unknown: Sure. So I'm on LinkedIn. You can connect with
• 18:09
  me on LinkedIn, or you can just come to my website, which is
• 18:15
  www.jonathanmaharaj.com, and it's got my contact details
• 18:19
  there. But happy to continue the conversation there.
• 18:22
  Scott Ritzheimer: Brilliant, brilliant. Well, Jonathan, thank
• 18:24
  you so much for being on the show. It was really a privilege
• 18:27
  and honor having you here. And for those of you watching and
• 18:30
  listening, you know that your time and attention mean the
• 18:33
  world to us. I hope you got as much out of this conversation as
• 18:36
  I know I did, and I cannot wait to see you next time. Take care.
• 18:43
  Hey everyone, Scott Ritzheimer here. Thank you so much for
• 18:45
  listening to the Start Scale and Succeed podcast. I hope this
• 18:48
  episode gave you exactly what you need for the level you're in
• 18:52
  right now. If you want to discover what level you're in,
• 18:56
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• 18:59
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• 19:04
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• 19:07
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• 19:11
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• 19:14
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• 19:22
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• 19:25
  scaling, and succeeding, and I'll see you in the next
• 19:28
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