Qorval Partners, LLC, Paul Fioravanti, Management Advisory Services

CEOCFO Magazine, PO Box 340
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IN-DEPTH INTERVIEWS WITH Top CORPORATE EXECUTIVES (727) 480-7070 info@ceocfocontact.com

Lynn Fosse, Senior Editor

Steve Alexander, Associate Editor

Bud Wayne, Marketing
& Production Manager

Christy Rivers - Editorial Associate

Qorval Partners, LLC - Florida-based Management Advisory Firm taking Businesses Out of the Red and Putting them Back into the Black

Paul Fioravanti, MBA, MPA

CEO & Senior Managing Partner

Qorval Partners, LLC

www.qorval.com

Contact:

239-588-0008

paulf@qorval.com

Interview conducted by:

Lynn Fosse, Senior Editor

CEOCFO Magazine

Published – October 19, 2020

CEOCFO: Mr. Fioravanti, what is Qorval Partners?

Mr. Fioravanti: Qorval Partners is a Florida-based management advisory firm established in 1996 by James R. “Jim” Malone, a six-time Fortune 500 CEO, and renowned global turnaround expert with an extensive, accomplished career and track record in the business sector as well as providing guidance in other areas such as corporate governance, government and higher education. Qorval is a boutique consulting firm where we work with a variety of businesses, from smaller entrepreneurial companies to middle-market, publicly held, and private equity-owned businesses, across a mix of industries. We provide a range of services, from turnaround and restructuring services, to financial and operational improvement, transaction advisory, due diligence support for acquisition, divestiture, and post-merger integration. We also frequently serve as Chief Restructuring Officer, trustee and expert witnesses weighing in on various matters related to early, mid and late stage businesses. Qorval works in healthy growth situations as well as distressed ones. We advise on a variety of challenging situations that businesses find themselves in, or are about to find themselves in. We often describe our approach to our tactical assignments as “red2black,” meaning taking businesses out of the red and putting bringing them back into the black. We often say, as compared with larger firms we compete with, our emphasis is on generating results, not generating reports. For businesses in crisis, time isn’t their friend, and high impact execution, not theoretical strategy, is what matters.

CEOCFO: Do most businesses recognize the need for expertise in some of these areas?

Mr. Fioravanti: I always tell a new client this: “You might not like many of the things I’m going to find out; you might not like what I have to say, you might not like me at all sometimes, but I don’t care about being liked, I care about doing what’s right for the client, and the situation, and no matter whether you love me or hate me, I promise I’ll always give you the truth. If I cared about what people think about me, I’d have a Facebook page and I’d be in another line of work.” Am I direct? Yes. Am I a fighter for my clients? Absolutely. They need to fight for themselves and learn “objective perspective” and crisp execution. Good managers recognize when they need help, poor managers think they can solve every problem on their own. Our own founder, Jim Malone, always reminds us that good leadership knows its limitations, and isn’t afraid to ask for help. A common problem or pitfall is that many organizations may wait too long to make the hard decision to bring in expertise from the outside. Poor execution can be as present in healthy businesses as in distressed ones. In some cases, when management, ownership, or governance takes a laissez-faire approach to dealing with intense challenges, it is often already too late. Some businesses can’t be helped as their apathetic approach or “ostrich” stance may have eroded the balance sheet, or they may have other problems such as a talent drain, having lost some key employees, or a customer drain, having lost some key customers. We’ve fixed and restored many businesses with severe financial, operational, even regulatory or compliance problems – it only works and can be turned around when we’re deeply involved and have the partnership, cooperation and truthfulness of the owners or senior managers.

CEOCFO: What do you understand at Qorval, on a very fundamental basis, that enables you to help people through a variety of situations?

Mr. Fioravanti: We understand business. We understand organizational and managerial behavior. This benefit accrues to our clientele and it’s the end result of the sum of extensive experience in wildly varied situations. I could spend all day telling you things companies and the people in them do, and it would blow your mind. I’m a professional “vault” and I have been involved in excess of fifty situations. Our firm has been involved in hundreds. Our original CEO and Founder, Jim Malone who is Qorval’s Chairman Emeritus and Senior Founding Partner, has an incredible background and has been called on by everyone from US Presidents to public company boards, to college presidents and heads of nonprofit and civic organizations, to mitigate crises.

While no two situations are alike, it is often that we find ourselves being able to leverage our experience, expertise and leadership to help a client through a difficult time. Often managerial or board member myopia becomes a barrier to progress; often the shallow experience of even long-term industry fixture managers impairs the organizational understanding and sets the tone for a myopic culture. It’s not their fault - they just do not have the advantage of having seen and been exposed to the mix of situations Qorval has been in. That diversity and breadth of experience is infinitely valuable for companies and their leadership when they find themselves in situations they do not possess the mindset or background for. An early warning indicator is when they lack a bias for action, and it’s apparent then that it is important that they seek outside counsel.

CEOCFO: When you are first engaging with a new client, can you tell if they are going to be receptive to what you might find?

Mr. Fioravanti: It varies. Some of them are very receptive and open to the change. Others will say that they are, and the truth is they aren’t. In extreme examples there are those that fight it tooth and nail. I personally have been in several engagements where an owner wasn’t open, honest and truthful because he or she did not want to be exposed, or others where the CFO was doing a poor job, or was dishonest, and didn’t want anyone looking over their shoulders. In some cases, the board is the problem. Or it’s a tenuous family dynamic. The challenge with being a consultant or an advisor is you are walking a fine line of providing counsel, expertise, advice, and focused on trying to get the organization to avoid further pitfalls in some of the problems that created this situation that they are in. The unfortunate downside of that is that sometimes the principals, owners, managers, view that as us “shining the light on their failures.” That is not our approach, nor is it the approach of any good advisor - but often the challenge or acknowledgment of the reality that they find themselves in is met with reticence, skepticism, and often blame. The reality is sometimes no one wants an advisor there even though we are the only ones who can fix the situation. No one wants the fire department or rescue at their house until they need them, and those 7 minutes between crisis acknowledgment and the time they arrive are an eternity. I often say, everyone wants advisors, but no one wants the advice.

You will jump into a situation for a couple of weeks, perhaps it is a company that has been run by the same person for two years, or thirty years, and there is a litany of errors and poor management and sometimes they will try to ascribe that to whoever their advisor is, whether it is their attorney or CPA or consultant. Generally, that is not the case, most people that seek help know when they need advice and getting the right advice is critical. Much like the medical analogy, a doctor isn’t just a doctor, and just as you would not go to a podiatrist when what you really need is a heart surgeon - you really have to get somebody that specializes in the specific tactics and needs that the company is having issue with. I’m not your accountant, your attorney, your mechanic, or your podiatrist; I am your advisor and your fixer.

Generally, a CPA, accountant or attorney or a financial advisor will say they do not do turnarounds, they do not fix companies or raise capital. We have the same respect for those other professions, we will bring them in as needed when we need another set of eyes. Beyond other professionals we also use a network of subject matter experts. For example, if we have HR and labor relations challenges, we bring one of our SME’s (Subject Matter Experts) with that background. We have a great stable of subject matter experts and tactical gurus. They are more like special forces professionals than they are general infantry; neither is less important, but they are more tactical, in for a shorter mission, with specific deliverables, for a higher impact assignment. It’s like the difference between a paramedic or ER doc versus a general practitioner. They provide different services but equally important.

CEOCFO: Qorval has industry expertise in a wide range; was that a deliberate strategy?

Mr. Fioravanti: It is an evolutionary process on the basis of what experiences the firm has had, the composition of the people in the firm and the industries that they may have worked in. It is something that has evolved and morphed over time. In some cases, you get a repeat pattern where you may have worked in a discrete vertical such as defense, manufacturing, healthcare, pharma, automotive, higher education, technology or telecommunications for multiple engagements in that vertical or segment. You develop relationships and an understanding that has value to the people in that industry. It is not unusual for even the larger consulting firms to share a mix of industry focus areas with all the customers and clients that they serve. The idea is that you cannot be everything to everyone, but it is important to hire a professional that has a blend of, as well as, specific industry expertise. The diversity of experience is critical because you see things that other people haven’t and likely never will. There is no substitute for experience.

Generally, I suppose industry expertise has value, but I also think it is overvalued, especially by the professionals in that industry – every industry thinks it is unique and special and we often get the “but, you don’t understand, this industry is different…” prelude to a defensive soliloquy on why the company or manager resists change. The reason I say that, is having jumped into a bunch of challenging roles in my career where I have had to be a COO or CEO or a CRO (Chief Restructuring Officer), the industry experience was far less important than our ability to be tactical and fix the organization. For example, one of the companies that I led a restructuring on not too long ago was a $350MM global pharmaceutical manufacturing company. I had very limited experience in that space prior but what was needed was not industry experience, what was needed was a bold decision-making objectivity, a lot of hard work to drive results and the ability to carefully manage and handle stakeholders. When I say stakeholders - it was a range of constituents with vested interests in the company’s survival and sustainability: customers, prospective customers, employees, compliance officials, the board, the management of the organization. Understanding what the vested interests are of each of the stakeholders, is very important in getting to consensus and getting to a successful turnaround that drives results both operationally and financially.

CEOCFO: Was there an aha moment when you recognized the value of the stakeholder situation or did that develop when you started helping more and more companies?

Mr. Fioravanti: Generally, there is a trajectory that happens with turnarounds which are part of a subset of organizational transformations. I always describe a successful turnaround as normally having three to five winning moves. It might be something as simple as: 1. increasing price for the products supplied to the customer, maybe you are a subcontractor that is manufacturing products that go into something else and maybe you artificially held your price down to the point where you cannot make money; or 2. it may be workforce management, maybe you have too many people or not enough or maybe you have the wrong people, or it may be 3. A lack of granularity or transparency on the concept of the Pareto principle - we know it as the 80/20 mathematical rule - but you may have situations where some percentage of your customers create a lot of headache, drama, expense and difficulty and there are a handful that create all the profit.

For example, in one recent client situation, they have 25-30 active customer relationships and about 90% of their profit is generated by four customers. That tells you that the other twenty-something relationships have to be better managed in order to not disproportionately drain the resources on the organization. In the extreme case we talk about the concept of firing your customers which seems to be a frightening concept; there are some customer relationships that you have to assign new pricing to – and say, look, I can continue being your supplier but under our current situation, the margins are too thin, the quantities and increments are too low, perhaps we need blanket purchase orders or larger quantities. I have had those renegotiations and discussions with customers of the companies I have been working on. Sometimes you have to “ask for the sale” again and again to balance out the relationship - so it’s not an abusive or one-sided one. For long-term sustainability of a supply chain relationship, both parties have to endeavor to treat each other, and themselves, fairly.

In our pharmaceutical example, the solution to making a particular plant financially sustainable so that it would not go out of business and risk no longer supplying much needed medicine, was to increase the volume. The client was willing to increase the volume that we would provide by 50%. We go from providing 62 million tablets that we are producing and selling to a larger pharmaceutical company to increasing that to 95 or 100 million tablets. Provided there is marginal profit on the products being sourced, it very much changes the economics of that particular plant - to the extent that that operation now becomes financially sustainable. It is ok to ask for more from your customer. It is ok to say, “I need your help.” It is ok to say, “here is how you can help me and my employees.” I think many entrepreneurs or established businesses fall into the fear trap and find themselves too timid to ask a vendor or customer or stakeholder to meet them halfway. We all have a boss.

CEOCFO: What has changed for you under COVID in terms of people coming to you and people being able to afford to come to you?

Mr. Fioravanti: I think the SBA programs - PPP, EIDL, e.g. have been a Godsend for businesses. In many cases they have enabled those businesses to weather the storm and get on the other side of the pandemic - to the extent that they can realign, pivot and survive. There are some businesses for which the infusion of those funds just delayed the inevitable. They will not recover, or it will be very difficult for them to recover. In most cases, businesses have taken the challenge as cause to look backwards and ask themselves how they could have been better prepared or have managed their operations and finances more effectively.

CEOCFO: What is your vision for Qorval going forward?

Mr. Fioravanti: I want to continue to be able to provide excellent service and high impact tactical services and corresponding results, for our clientele. I also want to work with great people that share the same core values that Qorval has. The name Qorval actually comes from the phrase Core Values. When Jim Malone started the firm in 1996, he set out with four core values which are profit, growth, integrity and fun. The way he always describes it, and I very much believe in this – is that a company that is not profitable is not sustainable. Obvious but so true. The organizations and businesses exist to generate profit. Growth is critically important because if business stays status quo, that’s really passive stagnation; eventually over time they will struggle, so they have to continue to find new ways to grow, new ways to innovate. Integrity is critical - both in the integrity that we provide as counsel to these organizations, but also in the need for client companies to commit to their own integrity. Do they have a code of conduct? Do they have a mission, vision, and their own core values? and be forthright and direct with their stakeholder and also forthright and direct with us so we can better do our job. We were in a situation recently where the principal of the business was not very forthright and not very truthful about the challenges that were surrounding the business. We did a great job to continue to work on that engagement and to provide a high level of service and responsiveness despite the challenges of having to pry for information. We uncovered an enormous set of issues that needed mitigation. The reluctance of a principal to let anyone in can create enormous challenges for advisors – in this case, the CPA firm, law firm, senior managers all experienced the same dynamic. Fearful managers often revert to careless and childish behavior patterns.

The last core value is Fun, and my partner Jim Malone always reminds us that when we are working, we ought to be having fun. Fun should be a core value because working hard and creating results is fun for most people driven by success, accomplishment, positive relationships and making sure their hard work positively impacts all of the organization’s and stakeholder critical core values.

CEOCFO: How do you reach out, so people are aware of Qorval?

Mr. Fioravanti: We have conversations with wonderful people like you Lynn. We obviously like to share our success stories. We do a lot of writing and we share a lot of case studies. We have a great website that has a lot of very helpful information on it. In the near future we’ll be freshening up our brand and web site. We are fierce networkers and we are very much involved in trade associations. We maintain relationships with our clients even after they are clients. Some of my best clients have become some of my best friends.

Some of the associations that we work in and around and network in that are excellent are the Turnaround Management Association which is an excellent trade association for what we do. Scott Stuart who runs TMA and his team do a stellar job. The Association for Corporate Growth or ACG, is another one that is excellent. I am personally involved in an organization called The Private Directors Association, and I am one of the founding members of Tampa Bay Chapter; executive director Robert Courtney is himself an experienced CEO and runs the chapter well, providing exceptional experiences for members and stakeholders. LinkedIn is a fantastic resource and I have developed thousands of connections for fruitful dialogue, networking, referrals, and understanding. Over the years I’ve been a fierce networker and I’ve never approached network to “get something,” but rather to give something. At Qorval we’ve always worked hard to help people when they are struggling or, for example, when their bank is pressuring them, or they’ve found themselves out of work, and we’ve always made it a priority to pay it forward up front, with no expectation of anything in return. I think most professionals in my craft and all of the ones in Qorval are those kinds of individuals. Life isn’t easy, and business isn’t either – so it seems logical that we should all support each other, be communicative, respectful, and encouraging. Our job at Qorval is to help people, to drive results. We provide clients access to leadership, expertise and experience they need in order to improve and transform their companies. Often if we can’t help them, depending on their unique challenge or need, odds are we can refer them to someone who can. Our network is immense, and it’s gotten that way by treating people with respect, compassion, and care.

What we do as private directors is provide governance and guidance to privately owned companies in order for them to have objective advice and counsel, which is very important. A board has to be balanced, it cannot be, for example a two-person board, isn’t a board, it’s two guys who think they have all the answers. I’ve seen that movie. Try supporting a chair or a table with two legs. We prefer that a board has an odd number so that you can vote on something, whether it is three, five, seven, nine, or eleven. It is important to follow things like Roberts Rules of Order and follow parliamentary procedures so that the business can be governed properly. We also recommend every organization get directors and officers insurance to protect the directors and officers should there be litigation in the organization. More importantly, I cannot stress the importance of good governance and I also cannot express enough how often the companies that are struggling that we find ourselves working in and transforming, how often that poor governance led to creating the situation that they are in, that challenging situation.

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“Over the years I’ve been a fierce networker and I’ve never approached network to “get something,” but rather to give something. At Qorval we’ve always worked hard to help people when they are struggling or, for example, when their bank is pressuring them, or they’ve found themselves out of work, and we’ve always made it a priority to pay it forward up front, with no expectation of anything in return. I think most professionals in my craft and all of the ones in Qorval are those kinds of individuals. Life isn’t easy, and business isn’t either – so it seems logical that we should all support each other, be communicative, respectful, and encouraging. Our job at Qorval is to help people, to drive results. We provide clients access to leadership, expertise and experience they need in order to improve and transform their companies. Often if we can’t help them, depending on their unique challenge or need, odds are we can refer them to someone who can. Our network is immense, and it’s gotten that way by treating people with respect, compassion, and care.” Paul Fioravanti, MBA, MPA, CEO & Senior Managing Partner, QORVAL Partners LLC (www.qorval.com)

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