MiBiz 2013 CFO of the Year Awards

TUESDAY, JUNE 11, 2013 The Goei Center • Grand Rapids, MI

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MiBiz CFO of the Year Awards / June 11, 2013

CFO OF THE YEAR AWARDS Tuesday, June 11, 2013 The Goei Center • Grand Rapids, MI Networking .........................5:30 p.m.

Dinner reception...............6:30 p.m.

Awards/Panel .................... 7:00 p.m.

MiBiz and the local chapter of Financial Executives International (FEI) celebrates the first-ever CFO of the Year Awards in West Michigan. We’ll be recognizing exceptional finance executives from the region in the following categories: ■ ■ ■ ■

Corporation, $500 million plus Middle Market, $50 - $500 million Small business, Under $50 million Nonprofit/Government Organizations

Winners and finalists will be honored during dinner. Then, we’ll invite the winners up front for a panel discussion about the challenges they’ve faced in the past year, best practices they utilize at work and what’s keeping them up at night as they head into the second half of 2013.

GOLD SPONSOR:

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CATERING: In partnership with

June 11, 2013 / MiBiz CFO of the Year Awards

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If the stories of the winners and finalists of the inaugural West Michigan CFO of the Year Awards are any indication, local companies are poised to take advantage of growth opportunities as the region’s economy continues to improve.

The awards and educational event on Tuesday, June 11 at the Goei Center in Grand Rapids — presented by MiBiz in cooperation with the local chapter of Financial Executives International (FEI) — was created to recognize exceptional finance executives from the region, but more importantly to have them share their best practices and discuss what keeps them up at night.

Chances are if it’s worrying them, you may want to pay attention as well.

The four winners and four finalists selected for the awards demonstrated an acute eye for fiscal discipline, according to the judges. Their behind-the-scenes actions didn’t just help their companies survive the dark days of the recession — they laid the groundwork for their firms to operate from a position of strength.

THE JUDGES The awards were judged by a distinguished group of executives, including: ■ Krista Dejonge CFO of Air Lift Company and president of West Michigan chapter of FEI ■ Bob Herr Longtime managing partner of the Grand Rapids office of Crowe Horwath, retired ■ Greg Lambert Veteran finance executive and CFO at HH Cutler, National Heritage Academies and PrepNet LLC

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MiBiz CFO of the Year Awards / June 11, 2013

■ Paul Mudde Professor of finance at Grand Valley State University and adviser at Rua Associates LLC ■ Nick Adamy Shareholder of Adamy Valuation Advisors ■ Doug Wilterdink Managing director of DWH LLC ■ Tom Madison Client executive at Hylant Group Grand Rapids and membership chair of the FEI West Michigan chapter

THIS YEAR’S HONOREES: Corporation ($500 million plus) ■ Winner: Judy Brown, Perrigo Co. ■ Finalist: Don Grimes, Wolverine World Wide Inc.

PAGES 6-7

Middle Market ($50-$500 million) ■ Winner: John Pindred, Family Christian ■ Finalist: Linda Constantino, Cherry Street Health Services

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Small Business (under $50 million) ■ Winner: Kraig Harper, Service Express Inc. ■ Finalist: Darin Caranci, The Hinman Co.

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Nonprofit/Government ■ Winner: Michael Freed, Spectrum Health ■ Finalist: Scott Buhrer, City of Grand Rapids

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HONOR ROLL

■ ■ ■ ■ ■

David Staples, Spartan Stores, Inc. (corporation) Rob Shuster, Independent Bank (middle market) Dave Burdette, Central Michigan University (nonprofit) Diane Rabe, Wedgewood Christian Services (nonprofit) Steve Howard, Consumers Credit Union (nonprofit)

June 11, 2013 / MiBiz CFO of the Year Awards

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WINNER: CORPORATION

JUDY BROWN PERRIGO CO.

■ 2012 revenue: $3.17 billion ■ Transformational moment: Moving to Stuttgart, Germany from Chicago in 1993, three years after college, when she was working for Ernst & Young. The move forced her to learn a foreign language in six months “for pure survival,” allowed her to take on “significantly more responsibility than I would have had otherwise,” and “opened my eyes up dramatically to whole different cultures and whole different ways of working.”

■ Key daily activity: “The one thing I feel I am always very responsible for is watching the long game and making sure — as we are making decisions today‚ that they’re prioritized to be the right ones for where we want to be three to five years from now.”

■ Community involvement: Board of directors and audit committee at Belden Corp.; CFO Advisory Board at the University of Chicago Booth School of Business; Advisory Board Member for the Deloitte Center for Health Solutions; Michigan Economic Development Foundation Board of Directors; Perrigo Charitable Foundation board member; National Association of Corporate Directors; American Institute of Certified Public Accountants ■ Education: Bachelor’s degree in accountancy (graduated with honors), University of Illinois at UrbanaChampaign, 1990; MBA, University of Chicago, 1998 ■ Personal: Husband, Stephen; two school-aged children, Chloe and Max

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MiBiz CFO of the Year Awards / June 11, 2013

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

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hen Judy Brown came aboard in 2004 as corporate controller, Perrigo Co. was a $1 billion corporation.

By 2012, and after a series of acquisitions and strong organic growth, the Allegan-based Perrigo’s sales had grown to nearly $3.2 billion.

During much of the period, from when she was appointed chief financial officer in July 2006, Brown has been at the helm of managing and building up Perrigo’s financial management. Under Brown’s leadership as CFO and executive vice president, Perrigo’s finance team has developed far more analytical skills, upgraded its investor relations, and created treasury and “very sophisticated” tax functions for the company’s complexity of today.

“She’s completely elevated the team,” Perrigo Chairman and CEO Joe Papa says of Brown, winner of the 2013 MiBiz CFO of the Year Award in the corporations category.

“She has all of the great qualities of a CFO,” he said. “She’s smart, she’s determined, she’s very resourceful on how she gets things accomplished, and she’s built a great team.”

The CEO credits Brown with instilling a “measures-based” system for making decisions and embedding his view throughout the organization of basing decisions on acquisitions and capital investments on the potential return on investment capital.

“She’s been very instrumental in making sure that’s become part of the DNA of our company,” Papa said.

In six years, Perrigo has made 13 acquisitions valued at nearly $2.5 billion that have enabled the company to grow its global reach and to expand into new product categories.

At the same time, her role since becoming CFO has expanded beyond the traditional financial duties and grew to include corporate communications and government relations and working with Papa as part of the executive team in planning and driving a growth strategy.

A maker of lower-cost store-brand medications that are sold over the counter at national retailers and of generic drugs prescribed by doctors, Perrigo saw product demand grow during the economic downturn. Contrary to many industries, Perrigo’s business model “thrives” in a down economy, Brown said.

“We didn’t have those types of stresses during the downturn. We had stresses, but they were more about prioritizing opportunities, which is a good problem to have,” Brown said. “If you think about the downturn economically, people are looking for value, and that’s actually been a positive for our business model. So while other industries have been more challenged in the downturn, our biggest challenge was how to deploy capital in the smartest way possible during that period because it wasn’t that we were limited in our options. We actually had even more optionality during the downturn, so it was really focusing on what were going to be the best investment opportunities.”

Prior to joining Perrigo, Brown worked at Whirlpool Corp. in Italy and the U.S. and for Ernst & Young in Germany and Chicago. It was while she was at Ernst & Young 20 years ago that Brown transformed her career: The firm sent her to Stuttgart, Germany to work.

The move required a complete break with home in an era before the World Wide Web, Facebook or Skype — and when calling home cost $4 per minute. Looking back, Brown said going to work overseas allowed her career to take off.

“Without a doubt, that was probably the critical decision I made early in my career,

■ 2012 revenue:CORPORATION $1.64 billion FINALIST:

DONALD T. GRIMES WOLVERINE WORLD WIDE INC. ■ Transformational person: While acknowledging he’s had many mentors in his career, Grimes said his boss at Brown-Forman Corp., a producer and marketer of wines and spirits, taught him the ins and outs of corporate finance and nurtured his growth as a CFO. The former boss was also responsible for recruiters calling on Grimes for the opportunity at Wolverine World Wide.

■ Key daily activity: Like most CFOs, Grimes is a numbers junkie. Every day, he tracks orders and shipments, as well as store sales from Wolverine’s consumer-direct business. “I think it’s also important to see how your orders from the third-party retailer customers come in on a daily basis and what the shipments are. I pay more attention to orders coming in than shipments going out because

Wolverine World Wide Inc.’s role in the complex acquisition last year of the Collective Brands Inc. Performance + Lifestyle Group (PLG) catapulted the traditionally conservative Rockford, Mich.based footwear and apparel company to the forefront of the industry.

The acquisition for the four PLG brands — Sperry Top-Sider, Saucony, Stride Rite and Keds — places Wolverine third by volume in the global footwear sector behind venerable giants Nike Inc. and Adidas AG and added to the company’s already robust 12-brand portfolio, which includes Hush Puppies and Merrell.

Few in the industry, including Wolverine Senior Vice President, CFO and Treasurer Donald T. Grimes, expected the company to execute such a transformational deal. After the 2009 acquisitions of the Cushe and Chaco brands, which came to about $15 million combined, Grimes said the company talked about biting off a larger deal for a company “between $75 million and $200 million in revenue.”

“I never dreamed we’d do a $1.25 billion acquisition,” said Grimes, a finalist in the 2013 MiBiz CFO of the Year Award in the corporation category.

Growing up in a trailer park in a blue-collar community in Louisville, Ky. and the first of his family to attend college, Grimes also never dreamed he would be in the position he’s in today as CFO of what’s expected to be a nearly $3 billion public company after the integration of the PLG acquisition.

The deal for PLG “was a situation where opportunity met preparation,” Grimes said. He and the executive team modeled for the company’s board of directors what different acquisition strategies would mean for Wolverine and how it could be financed.

“It was both a vigilant and constant study of our portfolio and where the ‘white spaces’ were in our portfolio and what categories beyond footwear we might be willing to expand into,” he said. “It was also getting the board of directors’ minds around the idea of

to pick up and go overseas,” Brown said.

“That was the absolute defining moment in terms of my developing confidence and taking on new skills. I took on a lot more responsibility and I was working, probably, at a level ahead of where I would have been if I had been in the U.S. It gave me a lot more opportunity.”

In her tenure as Perrigo’s CFO, Brown is most proud of the finance team she has assembled that handles not only the basic “blocking and tackling” but contributes to the vision for growing the company.

Brown oversees a staff of 129 people in the finance department, a number of whom she recruited as Perrigo grew and required greater sophistication in its financial management.

“As I look at my team and all that they accomplished … that team has really flexed

orders eventually lead to shipments. That’s real-time information about how your brands are performing.”

■ Community and board involvement: Board of Junior Achievement (JA) of the Michigan Great Lakes; JA teacher/volunteer; group leader for 4th and 5th graders at his church ■ Education: Bachelor of Science, University of Louisville; MBA, J.L. Kellogg Graduate School of Management at Northwestern University ■ Personal: Wife, Mary; two children, Blaine and Claire

doing a larger-scale acquisition, how we might pull it off, how we might integrate it and how it might look like after the acquisition from a capital structure standpoint, and will we have the ability to pay off the debt that we took on as part of the acquisition.”

The opportunity came about thanks to Grimes’ efforts in cultivating relationships with investment bankers and in monitoring private-equity-owned brands that were potential targets within the industry. A connection with investment bankers at Robert W. Baird & Co. Inc., whose private equity division was also working with Blum Capital — a shareholder of Collective Brands that was looking to partner to make a bid for the entire company — eventually resulted in the creation of the three-way partnership that pulled off the $2.0 billion deal for Collective Brands.

In the transaction, Wolverine acquired the PLG business, while Blum Capital and Golden Gate Capital jointly acquired the remaining portions of Collective Brands, Payless ShoeSource and Collective Licensing International.

“We were plowing through some pretty uncharted territory for Wolverine,” said Grimes, who has more than 980 employees under his supervision, with six direct reports.

To finance the deal, Wolverine borrowed $1.275 billion in long-term debt through a bank syndicate, and an offering of corporate notes. While the company finds itself in the unusual position of being highly leveraged after completing the acquisition last October, Grimes said the company will use the increased cash flow from the new business to pay down the debt.

“This acquisition, I believe firmly that it’s going to pay off in spades for us in terms of what we paid, which was a full and fair price,” he said. “But based on the growth trajectory of the brands we acquired and the international opportunity that exists for growing these brands quite significantly outside the U.S., it’s going to generate a very significant return to Wolverine shareholders.”

their skillset,” said Brown, who last year was included on the Wall Street Journal’s list of “Best CFOs 2012.” She was also a finalist in this year’s Crain’s Detroit Business CFO of the Year Awards.

During her seven years as CFO, Perrigo has recorded a 16 percent compounded annual growth rate and its operating margins and cash flow have grown at a faster rate. Perrigo’s stock price in that time has grown about seven times its value in 2006.

The success of the company doesn’t mean Brown lacks for things to worry about or lose sleep over, however.

Among them: A “continued, absolute requirement that we are operating at the highest level of quality and compliance” for the 47 billion tablets Perrigo produces annually. The company has to make sure every day that it

— Joe Boomgaard, MiBiz

remains “extremely focused that every product is perfect.”

“You have to be able to do that with 100-percent accuracy all of the time. If you are out of compliance and your products aren’t doing what they’re supposed to do, that can throw your business model in an upheaval. That’s the thing we are always focused on, all of the time,” she said.

Future U.S. tax policy is also a concern, Brown said. If there’s one thing CFOs can live without, she said, it’s uncertainty, especially anything that’s critical to the economy.

“As a CFO, it’s extremely important to have clarity around the direction that we’re heading from an economic policy perspective. When you don’t have clarity, you are making some decisions in a vacuum, and that’s always challenging as well,” Brown said.

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WINNER: MIDDLE MARKET

JOHN PINDRED FAMILY CHRISTIAN

PHOTO: KATY BATDORFF

■ 2012 revenue: $280 million ■ Transformational moment: Getting an MBA and moving from engineering to finance while working in the mining industry. “I had a fine engineering career, but found I had more interest in management and the finance aspects of the business.” He credits a former boss and mentor, Thomas Garrett, with giving him his first shot in finance and teaching him the importance and subtleties of cash flow and liquidity management. “It’s allowed me to work effectively in private equityowned companies and leveraged situations,” he said.

■ Key daily activity: “Retail is detail, so a metrics management approach to running our business is very important. For us, it starts with traffic. We know exactly what the traffic is to every store in 15-minute increments so it allows us to schedule labor effectively and look at the levers of the business — traffic conversion, average dollar to sale, average item price and items per transaction. We do the same thing from a supply chain point of view and (are constantly) looking at operating metrics of our distribution systems and inventory.”

■ Community involvement: Board member and treasurer of The James Fund, a not-for-profit foundation of Family Christian serving orphans and widows in 14 countries and five locations in the U.S.; strategist for partnerships with International Justice Mission and World Vision; pioneered Good Goers Mission Adventure Travel (www.goodgoers.com).

■ Education: Bachelor’s degree in Mining Engineering from Queen’s College, Toronto, Canada; MBA in finance from University of Arizona; Chartered Financial Analyst certification from the CFA Institute ■ Personal: Wife, Victoria; three sons, Ted, Nick and Jack

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MiBiz CFO of the Year Awards / June 11, 2013

By BRIAN EDWARDS | MiBiz bedwards@mibiz.com

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fter a decade of preparing typical financial reports for Family Christian’s former privateequity owners, John Pindred now reports to his new board of directors on a key metric that most CFOs have probably never heard of: return on invested giving.

“It’s not a traditional financial metric,” he acknowledged. “We measure it by the impact we have on people’s lives.”

The return on invested giving (ROIG) measure became important after the Grand Rapids-based Christian retailer, which operates 280 stores in 36 states, transitioned in late 2012 from a closely held private company into a 501(c)(3) nonprofit organization. After two decades of ownership by private equity firms, the $280 million (revenues) organization is now governed by a nonprofit board and plans to deploy its excess cash flow to further Family Christian’s ministry interests, which are centered on assisting widows and orphans. The five-year goal is to give away $100 million annually and impact lives for good across the globe, according to the company.

Partnering with tax, legal and nonprofit advisers, Pindred was the primary financial architect of the transaction that saw the company’s management team partner with a group of Atlanta-based businessmen to acquire Family Christian from New York City-based Blackstone, one of the largest private equity firms in the world. Terms were not disclosed.

The Canadian-born Pindred’s role in helping engineer the idiosyncratic transaction and lead the transformation of the company into a ministry-focused nonprofit retailer impressed the judges and earned him the award as the top West Michigan CFO

in the middle market category.

“It’s been a longstanding goal of the leadership here to put the company in the right kind of long-term hands,” he said. “In some ways, it’s a relief to not be in that private equity process where there’s an expectation of an exit in three to five years.”

Pindred added he has no complaints about the way Blackstone or previous owner Madison Dearborn Partners, a Chicagobased PE firm, treated the company over the years. Several partners at the investment firms were personally supportive and wrote checks to the company’s foundation.

“Private equity guys get a bad rap sometimes, but in my experience both firms were very kind to the company and allowed us a lot of flexibility with our culture, our ministry … and our dual bottom line,” he said.

The sale of the company presented some unique challenges for Pindred and his team.

While the due diligence process was pretty traditional, the post-close process was a bit trickier. The transaction was initially closed as an asset sale between two private companies in November. About three weeks later, the new owner was merged into a 501(c)(3) organization when the nonprofit status was approved by the Internal Revenue Service, according to Pindred.

“It was far from standard,” he deadpans, adding, “It was pretty interesting to go through, though.”

After the accounting and tax cleanup from the multiple transactions, Family Christian was able to begin realizing cost savings and other benefits of its tax-exempt status. Several suppliers now offer Family Christian preferred nonprofit pricing, and the retailer was recently awarded a grant from Google for marketing. The benefits should give the company a bump in operating margin and profitability, but Pindred politely declines to quantify how much.

“Let’s just say it’s material,” he says. “It’s going to have a significant impact on our

ability to give and realize that return on invested giving vision.”

That means Family Christian will be able to extend its funding and support of other nonprofit organizations such as Bethany Christian Services and Lifesong, as well as its ministry work. The company runs about 20 weeklong mission trips each year to Mexico, Guatemala, Honduras, China and other international and domestic locations. Each trip draws about 10-15 Family Christian employees and, Pindred said, “they’re typically oversubscribed.”

Pindred has a hard time computing the impact the ministry work has on Family Christian’s employees and overall performance. Rather than accounting, he turns to physics. “[The mission trips] have that flywheel effect where you send employees on a mission trip and they have an opportunity to see how the company is impacting lives and caring for the widows and orphans. Their heart gets transformed, and they get gas in the tank to come back and do the hard work that’s required in retail. That drives better results and allows us to do more ministry work, which gets more people engaged … and the flywheel really starts to spin.”

Today, the trips and ministry are such an integral part of Family Christian’s culture, he said, that “it really helps us drive our performance and retain good people.”

The improved performance should also provide cash flow that will help Family Christian combat the strong headwinds presented by the digitization of books and other media, which represent a substantial portion of the retailer’s sales. As the real estate market begins to recover and rents tick upward, that will also present challenges for Family Christian as it looks to grow.

Having worked at retail companies that were in a turnaround mode before he joined Family Christian, Pindred was well-acquainted and equipped to deal with those types of challenges when he joined the company in 2004. He couldn’t say the same about the test of hopping on a plane to do mission work when he first arrived.

“If I had been told that was part of the job description, I’m not sure I would have been confident enough to sign up for it,” he said.

“But our CEO at the time, Dave Brown, challenged me to engage and go on a mission trip to Mexico.”

Since then, he’s been on three other mission trips, the latest being a trip to Honduras, where he was joined by one of his three sons, Nick.

After four mission trips and countless hours of volunteer work and strategy to help drive Family Christian’s ministry, he’s a bit of a changed CFO. “When I came here, I was a pretty traditional, bottom-line-oriented finance guy, but I have a much deeper appreciation today for culture and for appreciating the opportunity to have an impact on people’s lives through our ministries,” he said. “It’s humbling to be able to serve people like that.”

FINALIST: MIDDLE MARKET

LINDA CONSTANTINO CHERRY STREET HEALTH SERVICES ■ 2012 annual revenue: $60 million ■ Key daily activity: “Definitely planning and looking forward. What does our future look like in the next year, two years, three years? That’s a question we talk about all of the time. We’re projecting all of the time.”

■ Community involvement: Michigan Primary Care Association finance officers committee, board member of Michigan Blood, former board member of Kent Health Plan ■ Education: Bachelor’s in business administration with a major in accounting, Western Michigan University, 1979 ■ Personal: Husband, Dan; two adult sons, Adam and Andrew As chief financial officer, Linda Constantino helped to manage two of the biggest initiatives ever for Cherry Street Health Services.

In October 2011, the Grand Rapids-based provider of health care for low-income people merged with two behavioral health organizations, Proaction Behavioral Health Alliance and Touchstone Innovare.

At the same time, Cherry Street opened the $27 million Heart of the City Health Center at the south end of downtown, a facility that was developed with a complex financial package using state and federal tax credits, loans, grants and philanthropy.

“Those are huge milestones for us,” Constantino said of the merger and new health center.

Constantino, a finalist in the 2013 MiBiz CFO of the Year Award in the middle market category, considers helping to manage the two among her top professional achievements, as well as managing the organization’s continued growth and physical expansion.

Cherry Street Health Services in the past year opened the new Wyoming Community Health Center and served 56,000 people in 2012 through medical and behavioral health, dental and optical services.

Constantino joined Cherry Street Health Services in 1993 as a part-time accountant.

Cherry Street at the time was a much smaller organization, which required her to wear many hats and become involved in other areas, human resources and information technology among them. She worked her way up over the years to finance director by 2000 and became CFO following the merger with Proaction and Touchstone Innovare, which was designed to integrate the medical services Cherry Street offers with behavioral health.

“We are treating the whole person,” Constantino said.

Constantino today oversees the financial and business operations of an organization that generates $60 million annually in revenue. She manages a staff of 35.

The period right after the merger, and integrating three organizations into one, was the biggest challenge that Constantino has worked on.

“The look and feel of our organization became so different,” she said. “For a while, it was hard to figure out. What is Cherry Street? What is our culture? What are our values?

“That’s something we’ve looked hard at over and over.”

The merger created issues of financial viability because of new costs it generated “that none of the three of us had a full handle on,” she said. With the new Heart of the City Health Center coming on at the same time, “there were things that came up cost-wise that were a challenge financially. We kind of hit the skids there for a while right after the merger, and we had to regroup and say, ‘Wait a second. We can’t grow faster than we already are.’”

So Cherry Street enacted a hiring freeze until “we really figure out what everybody did and we knew every nook and cranny of our new business.”

“I’m certainly most proud of helping guide the organization through the last three years as we prepped for a merger and growth, lived through the merger and growth, and came out the other side as a new organization that is consistently growing to meet the medical, dental and behavioral health needs of so many kids and adults,” she said. “It really is exciting.”

Looking ahead, the biggest challenge Constantino now faces is helping Cherry Street keep up with the rapidly changing health care landscape with the federal Affordable Care Act and reforms in clinical and payment models.

Among her worries is wondering whether the organization is making the right assumptions about the future.

“What is this going to look like in a year?” Constantino said. “It’s always the future.

Our industry is very much in flux right now. We have a lot of unknowns and we have a lot of things we have to plan for and be ready for.”

— Mark Sanchez, MiBiz

June 11, 2013 / MiBiz CFO of the Year Awards

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WINNER: SMALL BUSINESS

KRAIG HARPER SERVICE EXPRESS INC.

PHOTO: KATY BATDORFF

■ 2012 gross revenues: $39.9 million ■ Transformational event: “I had a new boss that pushed me to take part in a performance management system.

It helped point out areas where I wasn’t very strong. We use it today, it helps us understand our goals, and track our results. It allows us to dive beyond the financial numbers to performance and operational numbers.”

■ Key daily activity: “Transparency is key. Even when we were still small, we had people in different offices and we had to figure out how you communicate with everyone. (Employees) can’t have an impact if they don’t know what’s going on.

We have a lot of communication here.”

■ Community and board involvement: Treasurer and Board Member for the West Michigan Chapter of Association for Corporate Growth, Men’s Ministry Leadership Team at Corinth Reformed Church, junior high mentor ■ Education: BBA in accountancy, Western Michigan University, 1989 ■ Personal: Wife, Nancy; two daughters

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MiBiz CFO of the Year Awards / June 11, 2013

By NATHAN PECK | MiBiz npeck@mibiz.com

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inancial transparency might not seem like a growth strategy, but that’s exactly what has helped guide Service Express Inc. during a period of remarkable performance.

Growing at a double-digit clip 14 out of the last 15 years, the company found managing growth to be a challenge. By maintaining solid systems controlling cash flow, CFO Kraig Harper has helped the executive team of the on-site data center maintenance services company grow from a single location to 23 around the Midwest and Southeast.

But to hear Harper describe it, the nuts and bolts of finance have little to do with the company’s success. Harper, the winner of the 2013 MiBiz CFO of the Year Award in the small business category, credits a corporate culture that empowers employees with the data and responsibility to make decisions to align their individual performance with the goals of the company for SEI’s performance.

In 2012, the company had gross receipts of nearly $39.9 million.

The success arises out of a long-term vision to move financial operations away from the tendency toward always looking backward — last quarter’s sales figures, this month’s expenses — and toward predictive analytics. The effect of the shift was to make financial data more democratic and enabled a bottom-up decision making process, in which managers and employees can see how the decisions they make will impact the bottom line.

That ability was enabled through Harper’s strong stewardship. The day-today cash flow questions are ameliorated in large part due to SEI’s service that keeps customers coming back. Even in the midst

of the worst of the recession, their customer retention stayed at 98 percent, which the company sees as evidence that customers will continue to pay for services they value, explained Ron Alvesteffer, president of SEI. By making accounts receivable a background function, Harper’s 23-member financial team has allowed the company to focus on higher-level strategic issues.

“A (good financial) team is a lot like your health,” Alvesteffer said. “You don’t think about your health until something goes wrong. You get the wrong CFO or the wrong team in place, you’ll have trouble. I can’t make the right decisions without having great info. We have a solid (financial) foundation so we’re not worried about whether the checks are coming in. It allows us to work on our business, not in it.”

With the speed at which the marketplace changes, taking an iterative approach to forecasting allows the company to remain nimble as it makes investments, said Alvesteffer.

“Rather than revisiting our forecasts quarterly, we can look at what we’re predicting as of today … then look at what we’re predicting as of June 28th and make decisions about how we’re allocating our resources,” he said.

Focusing on the future The move toward predictive analytics has been a nearly two-year-old process, starting with educating experienced managers on how the shift from spreadsheets describing past performance toward more living documents would benefit the company.

Education was a key component to the rollout of the process.

“We asked, how do we get predictive analytics to our managers in a way that will help increase their ability to do what they need to do? As we moved along in the process, they could begin seeing the value and what this

FINALIST: SMALL BUSINESS could do for them,” Harper said. “Here at Service Express, we recognize that change is constant. We have managers that are hungry for more and more info. The plan is always evolving and it has led to cross-departmental conversations.”

The incremental rollout prompted a groundswell of interest among department heads and managers, who in turn pressed for more data about their impact on the bottom line. The effect was that the bottomup approach to implementation was more effective than if executives had directed the change from the C-suite, said Alvesteffer.

“When we started, we took it a little at a time,” he said. “For us, a service organization, labor is our largest cost. We started by predicting our labor needs and then predicting the revenues we could associate with that labor. We had managers that were trying to do this themselves, independently.

They appreciated being able to predict our revenues, and then being able to connect that with the labor resources we needed.”

Showing returns on investment While the change has translated into a more connected and engaged workforce, predictive analytics has helped the company speak more effectively with its shareholders.

“How do we, while we’re in growth mode, show shareholders as they invest in the business (the) returns for the investments we’re making,” Harper said in looking at predictive analytics. “We can demonstrate how these assumptions might play out.”

The process has led the company to slow its plans to expand the footprint of its offices. SEI had initially planned to open an additional four offices in 2013. The use of predictive analytics allowed Alvesteffer and the rest of the executive team at SEI to be able to support their decisions with a solid business case, rather than a gut feeling, or historical data alone.

“We decided, in order to maintain our high level of customer service, to hold back a year on our expansion plans,” Alvesteffer said. “We decided that we wanted to be 100 percent staffed up, and ramped up for growth, in each office.”

Building on strengths Being headquartered in West Michigan, SEI has been able to count on a pool of talent that has a strong work ethic and entrepreneurial bent. As the company expands outside of the Midwest, it is incumbent upon Harper to seek out employees with similar values and experience, who will thrive in a transparent environment such as SEI. “Culture is a very important part of Service Express. We want people who want information to know how they can have an impact on the business,” Harper said.

“With every person we bring in, we have the opportunity to dilute or strengthen your culture.”

DARIN CARANCI THE HINMAN CO. ■ 2012 gross revenue: about $25 million ■ Transformational figure: Early on, Caranci said he learned from his father to work hard and surround himself with great people. He credits his accounting team and the rest of the staff at the company for working well together and driving the company’s success.

■ Key daily activity: In the day-to-day handling of Hinman’s assets, Caranci said managing cash is a big deal for the company and essential for various financing arrangements. This keeps the firm’s numerous properties functioning on a daily basis.

Staying organized and keeping ahead of the various moving parts that go into this process is key, he said.

■ Education: Bachelor of Business Administration, Western Michigan University ■ Personal: Children, Claudia and Nolan

As the West Michigan commercial real estate sector claws back to life with a pervasive notion of cautious optimism, The Hinman Co. of Portage has been proactively shoring up its financial position.

That’s why over the last couple of years, CFO Darin Caranci and his team financed or refinanced roughly $50 million in real estate.

“The downturn in the economy and increased regulation within the banking industry has forced financial institutions to think and react differently,” said Caranci, a finalist in the 2013 MiBiz CFO of the Year Awards in the small business division. “Investor real estate for some has become a turn-off. Access to capital sources for investor real estate still exists, but it has become more difficult to obtain.”

Since Caranci joined the company in 2005 from his previous role as CFO at Keystone Community Bank, Hinman has doubled in size. Caranci said he attributes that growth to his strong relationships with the financial institutions he works with as well as the long-standing reputation of the company.

“Our ability to produce accurate, timely financial information to support our current and future business deals goes a long way in maintaining those relationships,” he said.

The ability to understand the needs of banks, their loan committees and lending officers and being open to creative solutions to meet lending partners’ expectations are what makes Caranci successful, said John Crandle, vice president and senior commercial loan officer for Horizon Bank.

“In a very challenging commercial real estate environment, Darin has leveraged his skills and understanding of the banking industry to help navigate (Hinman) through some rather treacherous and unexpected storm waters,” Crandle said. “As a community bank, we are fortunate to work with The Hinman Company, whose already solid reputation has been raised immeasurably by Darin’s contributions over arguably the most difficult lending environment in his company’s lifetime.”

Caranci said the industry learned many lessons the hard way thanks to the financial crisis, which shut down or crippled countless property management and real estate development firms. For some, the market seemed to fall apart overnight with assets plummeting in value and falling into foreclosure.

“It was amazing that one day the marketplace felt an asset was worth something and the next day the same asset with the same tenants was worth half or less as the previous day,” he said.

Although the market is much improved from where it was just a few years ago, Caranci said there is still plenty of uncertainty to overcome before investment conditions open up to pre-recession levels.

“Hopefully the pendulum doesn’t swing back overnight like it did a few years ago, where the financial markets unfolded,” he said. “Those that made bad financial and real estate decisions really made it tough for us that did everything the right way. Fortunately, we have the talent within our company to handle the various aspects of complex real estate transactions, which has allowed us to maintain our current portfolio and ultimately grow our business.”

— Elijah Brumback, MiBiz

June 11, 2013 / MiBiz CFO of the Year Awards

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WINNER: NONPROFIT/ GOVERNMENT

MIKE FREED SPECTRUM HEALTH

PHOTO: KATY BATDORFF

■ 2012 gross revenue: $4.1 billion ■ Transformational moment: Growing up in a big family as one of eight children in a small town. “What a big family teaches you is compromise, particularly when you have one bathroom. And what a small town teaches you is acceptance, because in a small town you know everything about everybody. You accept people where they are.”

■ Key daily activity: “Check my ego at the front door and to remember to see all of the good that’s in front of you, rather than all of the problems. My tactical best practice is: What’s the mood I set every day I walk into an organization?”

■ Community involvement: Past member of the finance committee for the Kent County Arena Authority; director at the Healthcare Financial Management Association; board of the Alliance for Community Health Plans.

■ Education: Bachelor’s degree in accounting, State University of New York, 1979 ■ Personal: Wife, Paula; three adult daughters

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By MARK SANCHEZ | MiBiz msanchez@mibiz.com

S

ome of the best business lessons Mike Freed learned came well before he even went to work.

Growing up in a large family, he learned the art of compromise. In the small town of Granville on the New YorkVermont border — population 2,000 — he learned how to accept people just as they are.

Freed uses those lessons from his youth today as chief financial officer at Spectrum Health and CEO of the system’s health plan, Priority Health.

“Those are great life lessons. As an executive you have to meet people and communities where they are in order to get anything done and, I think, those are things that at the time you don’t realize are paying off for you, but they pay off big time later on,” said Freed, winner of the 2013 MiBiz CFO of the Year Award in the nonprofit/government category.

“It’s very important in the health care world and a very diverse culture to be able to say, ‘Just because I view this this way doesn’t mean that’s reality.’ That’s not necessarily reality to somebody else,” he said. “Your view of reality is not necessarily everyone else’s view of reality.”

Freed initially joined the former Butterworth Hospital as CFO in 1995. He became CFO of Spectrum Health in 1997 following the merger of Butterworth and Blodgett Memorial Medical Center that created West Michigan’s largest health system.

The last executive from the pre-merger days, Freed has led Spectrum Health’s financial management during a period of strong growth and a number of acquisitions. Along the way, Spectrum has maintained solid finances and an Aa3 bond rating ever since,

even during the recent economic downturn, one of just 38 health systems in the country to do so.

“Because he can explain these complex principles, he has demystified the balance sheet so that non-financial people can understand and appreciate the value of good financial planning,” said Rick Breon, CEO of Spectrum Health. “Our organization is conservative when it comes to planning, but Mike will push us to take on appropriate financial risk. That has enabled us to steadily move forward as an organization, confident that we have a solid financial foundation to support goals. Mike believes in our mission and vision. He is a strong supporter and driver of our value proposition — that high quality care can cost less.”

Among his peers in the industry, Freed has high respect, said Lody Zwarensteyn, president of the Alliance for Health in Grand Rapids.

“He has a clear grasp of his job, the community and what’s happening overall in health care,” Zwarensteyn said.

Prior to joining Butterworth Hospital in 1995, Freed worked as a CFO for 10 years.

He was the treasurer and CFO of Central New England HealthAlliance in Leominster, Mass., and the former CentMass Systems Corp. He previously served as vice president and CFO of HealthAmerica of Pennsylvania, an HMO in Pittsburgh, Penn., and was director of finance and CFO of Saratoga Hospital in Saratoga Springs, N.Y. He jokes today that he became a CFO at just 28 years old because there were few choices otherwise for his employer. At the time, many CFOs came from an accountant background and had worked at one of the large national accounting firms.

“There just weren’t a lot of people in front of you,” said Freed, who prior to his first job as a CFO worked as a senior accountant at KPMG in Albany, N.Y.

“You got a lot of opportunity and you were too stupid to know any better that you were way over your head because you looked around and everybody was just like you, so that was kind of a unique experience,” he said. “That just doesn’t happen today. You just don’t see that.”

During Freed’s years as CFO, Spectrum Health has invested heavily in new facilities and to expand clinical capabilities that turned the health system into a provider of highly specialized care such as organ transplants.

Looking back, Freed is proud to have had a role in the health system’s growth and views West Michigan’s collaborative nature as playing into what Spectrum has accomplished.

“The beauty of my job right now is that I get to look back and say, ‘That wouldn’t have happened just anywhere.’ That was a unique and very typical West Michigan approach to building Spectrum Health and all of its entities. I take a lot of community pride in that because the community could have blown it up at any time,” Freed said.

On top of his role as Spectrum’s CFO, Freed last fall took on the duties as CEO of Priority Health.

Under his leadership, Priority formed a partnership this spring with Tennesseebased Healthcare Blue Book to begin publishing cost and quality data on providers in the health plan’s care network. The initiative builds on a transparency push Freed started as CFO at Spectrum, which years ago began posting data on its website on the average cost for certain procedures.

In a consumer-driven era where people are paying more out of pocket for their health care, Freed considers greater transparency as a much-needed move.

“Out of respect to the community, we owe that kind of transparency,” he said. “When you talk about value, how can you not have any transparency to prove that value?”

Despite the sound financial footing and the large market share Spectrum Health enjoys, the job as system CFO doesn’t lack for things to worry about. He calls worrying “one of the hazards of the job” for a CFO. “Worry just becomes a chronic disease as a CFO, and it doesn’t get better with age. It just gets worse,” he said. “It’s something you have to fight all of the time. Because I always worry, ‘How do you stay out in front if it?’ I always worry, ‘Am I missing something?’”

His biggest worry, and the largest challenge he’s had to overcome, is maintaining a long-term outlook and avoiding becoming paralyzed by the problem of the day.

“It comes down to kind of the same challenge over and over again. The challenges that you overcome is that … if you’re walking across the rope bridge or the high wire … and everyone says, ‘Don’t look down’ — what’s the first thing you do? You look down,” Freed said. “The natural tendency is to look down and to not look ahead. Sometimes, it’s really hard to look ahead, yet you have to be persistent and say, ‘Look ahead, look ahead.’”

FINALIST: NONPROFIT/GOVERNMENT

SCOTT BUHRER CITY OF GRAND RAPIDS ■ 2012 gross revenue: $389.8 million ■ Transformational moment: Through the years, Buhrer said his engagement in team sports gives him focus in that he can only be successful when his team is. Referencing Detroit Red Wings head coach Mike Babcock, Buhrer said there are moments when you can be a great teacher, but when one person tries to do too much or misses his or her assignment, the team and the structure break down.

■ Key daily activity: Buhrer outlined three concepts that he puts to use daily. First, always take the long-term view in budgeting. Second, apply the principles of lean thinking that give a structured analytical approach to identify the right course of action. Third, apply the principles of cost accounting and make subsidies explicit. Don’t make them implicit or bury them through poor financial reporting. Focus on the cost of services, not the cost of functions.

■ Community and board involvement: Michigan Municipal Risk Authority Finance Committee, Michigan Municipal Services Authority Advisory Board, Convention Arena Authority Finance Committee, Grand Valley Bio-solids Authority Board Member, Kent Hospital Finance Authority Board Member ■ Education: Bachelor of science, Ferris State University, 1977; Admitted to American Institute of Certified Public Accountants, 1979; Admitted to the Institute of Certified Management Accountants, 1991 ■ Personal: Wife, Lisa Ives

While many municipalities are struggling from one annual budget to the next, Grand Rapids remains a bright spot in the state for fiscal management.

That’s thanks to the Grand Rapids’ Transformation Investment Plan, a program that links the city budget with its sustainability goals for the coming years, said Scott Buhrer, CFO for the City of Grand Rapids and a finalist in the 2013 MiBiz CFO of the Year Awards in the nonprofit/government division.

“The financial meltdown has provided a blend of challenges for both private and public sector entities,” he said. “Our approach was to develop a unique problemsolving method and that was the transformation plan.

“We decided we needed to change and develop a sustainable plan for the future.”

The key to balancing Grand Rapids’ obligations was, in part, the ability for Buhrer and his team to work with city employees and bargaining units in a completely transparent manner. The transformation plan involved 76 different value streams or tactics and each required an individual project manager. To date, city employees have taken concessions totaling 12.5 percent of their cost of compensation, he said.

“Our employees are bright people and came to their own conclusion about how to participate as part of the solution,” Buhrer said. “We wanted to keep the best parts of our past, but knew we couldn’t keep everything in the transformation when creating an operations platform and a sustainable asset platform.”

The operations platform is on its way to achieving its goals and the asset management platform is in development, he said.

“Mr. Buhrer has provided expert leadership on debt issuance for infrastructure and capital investments and with strategic refinancings has significantly reduced our debt burden and net cost,” said Eric DeLong, deputy city manager. “His work in restructuring our retiree health obligation has been critical to our transformation success. He is following up with work of statewide importance regarding potential debt financing of the city’s remaining retiree health care liability.”

Although some cities resist change and continue to wait for financial salvation from the state or from some quick reversal of fortune for their tax bases, Buhrer is proud of Grand Rapids for facing its responsibilities head on. From individuals to stakeholder groups, at the end of the day, all showed a willingness to take part in finding solutions to keeping the city’s finances on track, he said.

While macroeconomic factors including the federal budget deficit, global economic policy and stock market intervention versus true economic growth are concerns, Buhrer said he is confident city officials have a firm handle on what can be controlled locally.

Buhrer said he’s also concerned about the repeal of personal property tax and reduced state revenue sharing, but those decisions aren’t going to be reversed. The best way forward is to move on and deal with the new reality, he said.

— Elijah Brumback, MiBiz

June 11, 2013 / MiBiz CFO of the Year Awards

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MiBiz CFO of the Year Awards / June 11, 2013