129: Johnathan Dillon

Passionate About People and Making a Difference

Johnathan Dillon heads up JDCV Consult, with services ranging from corporate finance consulting to funding great entrepreneurial ideas. Through his passion for people and teaching he aims to unlock the potential that we have in South Africa from people being doers to value adders.

CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. I’m very happy today to welcome Johnathan Dillon to CFO Talks, he’s got an extensive background in academia, having served for many years as associate professor at Nelson Mandela University School of Accounting. He’s got an impressive collection of degrees, BCom, BCom Honours, MCom from the University of Cape Town, and a master’s degree in finance also from the University of Cape Town. Currently, Jonathan is managing director and principal valuators at JDCV Consult, which is finance consulting specialising in the valuation of business entities, as well as offering ancillary consulting and services. He was previously CFO at Specsavers and was responsible for corporate transactions, structuring, deal facilitation and valuations, to name a few of the tasks. He’s a past finalist in the South African Institute of Chartered Accountants Top 35 Under 35 competition. Wow, that’s impressive, Johnathan, welcome to CFO Talks, it’s good to have you on. Where are you based?

JOHNATHAN DILLON: Wonderful chatting to you. I’m based in Port Elizabeth, well, Gqeberha, as it’s now known. It’s really good be talking to you.

CIARAN RYAN: It seems you’ve got a passion for teaching. Explain what got you into accounting in the first place, and then what drew you to academia?

JOHNATHAN DILLON: Yes, you hit the nail on the head there, I am passionate about teaching, I love educating the future leaders and movers and shakers. I think what got me into it was that my mom was a teacher, and although she taught home economics and hotel management, I used to help her mark and I used to sometimes go to school and write on the board and just enjoy the school environment. But I love maths and accounting, technical number-crunching and so on. So having excelled in maths and accounting, I decided to go and study chartered accountancy. My father was an internal auditor, so that kind of led me in that direction. Then what further got me into it was I tutored when I was a student and I really enjoyed tutoring, whatever it was, stats or accounting, and just seeing light bulbs go on with students. Then when I did my articles, the university, it was then the University of Port Elizabeth, asked me to help them out, so for a month of each year of my three-year training period, I went back to university, I tutored, help set assessments and so on. Then I really was at a juncture at the end of my articles, having to decide what do I do now. I knew I didn’t want to stay in auditing, and I was very excited by the companies that I was auditing, and possibly going into business or actually going into asset management. But then the university approached me and asked me to join, there was a position there, and that’s how I really went straight from articles into academia and teaching.

CIARAN RYAN: Tell us about your current company, which is JDCV, that’s a consulting company, what does it do?

JOHNATHAN DILLON: Yes, JDCV Consult. Having spent time in academia, I developed a passion for management, accounting, and finance. That was my discipline. I then did a master’s in finance, which led me to just really enjoy valuations and corporate restructuring and the whole world of finance. Out of that place then, just by fluke, a colleague needing a valuation done and another former classmate at school who [unclear] valuations, so I started doing valuations, which then birthed JDCV Consult and that has now grown, so we offer corporate finance consulting. It started off just valuations, but we do deal structuring, due diligence, we advise clients on bespoke financial accounting. So we do IFRS 16 lease consulting, which is something that I focused on in my master’s, impairment testing, so there’s that leg of the advisory side. Then we also assist clients with capital raising and that started recently as well, which I’m also very excited about because we get to see ideas that need funding, and then we help solve problems to try and fund great ideas.

CIARAN RYAN: And what sources of funding are you tapping into there? Is it traditional banking or does it go outside of that to angel investors as well?

JOHNATHAN DILLON: The entire spectrum, from trade finance, traditional, I wouldn’t say traditional banks, but bespoke funding from institutions, all the way through to funding from family houses, private equity, and then, which is the toughest to find, is your angel funding when the idea is still in the idea stage and not yet having traction or a product that’s viable.

CIARAN RYAN: When it comes to raising funding, your credibility is on the line, if you’re going to put your stamp of approval on a project and say, we think this is good, we’ve had a look at it, the valuations look great, we suggest you go with it, is your credibility on the line there?

JOHNATHAN DILLON: It is to an extent, yes.  I think what we are always focused on doing is making sure that when we are looking at funding for a company, we need to make sure that we ourselves are convinced that this is something that can be funded and that’s viable. So we in a sense do an internal due diligence check and we walk a journey with our clients. So if we believe, and we’ll be honest with our clients as well, if we believe that they’re not going to get funding, we will tell them the reasons why. Yes, in a sense, we can’t help you to get water from a stone. But the journey that we walk is also to help the client position themselves, such that they have the greatest chance of success to raise their funding. So we often assist them in preparing investor memos, presentations to funders and so on along the journey.

‘Covid has resulted in the increased difficulty to raise funding.’

CIARAN RYAN: Are you finding that there’s demand for high level CFO-type consulting and if so, is this as a result of the commercial challenges brought on by Covid, a lot of companies battling with cashflow, they’re needing a bit of external advice. Is this one of the types of engagements that you’re coming across?

JOHNATHAN DILLON: Not a lot. What I would say is Covid has resulted in the increased difficulty to raise funding. We’ve just had a client who’s looking to raise quite a bit of money and we thought it was a dead certain that we’d approach a bank in Mauritius that we usually have been pretty successful with, and they’ve just hit pause on extending further finance. So we’ve got to wait until September until they start reassessing new funding applications. So there’s that aspect in terms of just financial markets having to recover from what they’ve gone through and what they’re still going through with Covid. What I did help a client with, it was an interesting one, where it was just managing them from a strategy perspective in terms of how they get through Covid, how do they cut costs and make sure that they get through on the other side, which I’m very happy that they managed to do that. But it’s very sad to see that many companies didn’t. I think a lot of my bespoke consulting that I have done, for example, if you think of leasing, IFRS 16, and the changing standard, that just goes ahead, that’s not impacted by something like Covid. But definitely on the funding side and what I did definitely see is that the demand for valuations, deal activity, definitely hit pause initially with Covid, but it’s slowly picking up again.

CIARAN RYAN: So when you engage with a client, take us through some of the KPIs that you use to get to the beating heart of the company.

JOHNATHAN DILLON: I always listen to what the client’s asking and then I don’t just say, okay, you want this, let’s do it. I’ll consider it and try as best possible to ensure that what we as a corporate finance advisory are doing is adding value to the client. Often what I’ve found is a client may just come and ask for a valuation or ask please sort us out with the specific nuance of financial reporting, whatever it may be, and they are asking for a means to an end. But there’s inevitably value that can be added on that journey, whether it’s looking at possibly restructuring the balance sheet or how they operate their business from various aspects. So I’m not necessarily going to go and give advice outside of the realm of what they’re asking, but when a client says, get me here, they may have an idea of this is how somebody can get me there. But more often than not, there are other discussions to be had, which add value to the client on that journey.

CIARAN RYAN: I’m quite interested to pick up on this academic career of yours, and you’ve done a hell of a lot of studying over the years. Are there gaps in the traditional accounting curricula that you feel can only be filled by pursuing more general academic studies in business? You’ve done a master’s in finance, for example, you’ve also got an MCom, and we were speaking a little bit earlier about this, when you’ve done the CA, you’ve passed the board exams, you actually have some fairly good technical knowledge of accounting, but the broader business understanding is lacking. So that’s my question to you, where are the gaps and how does one fill those?

JOHNATHAN DILLON: How much time do we have, it’s a good question. I think just to give a bit of context as well, I fill another role, although I’m not at Nelson Mandela University anymore, after having been CFO at Specsavers I have gone back into academia. I’m at Milpark Education as well as subject head for management, accounting, and finance. So I’m very much involved in the educational space, training of CAs, and this is in the online space, it’s a private education provider. So the question you’ve asked is something that us as a leadership team are grappling with all of the time. We’re developing a new online BCom and we are wanting to be relevant. We know that we already are relevant in the online postgraduate diploma that we offer, which is the final year of a CA’s studies, but we know that we can still be more so because we very much need to follow still what SAICA is requiring in terms of their training requirements and preparing students for SAICA’s two board exams. But to answer your question perhaps as quickly as possible,  I think, for me, the one thing I always need to remind myself of as an academic, is that a university programme, a degree, is not just there to communicate content, it’s there to develop a way of thinking and to ensure that this individual who’s come through your programme can be relevant and add value in whatever role they assume in society going forward. Yes, it’s different for an accountant and a doctor and an engineer, and so on, but there’s this definite need to ensure that there are modules or courses, whatever the student goes through on their journey that develops thinking. So an example I remember is when I did my undergrad studies, I did computer programming and I know that having done computer programming, developed a way of thinking in me, just a very logical way of thinking, solving problems and so on. As time had gone, and when I went back to university and then started lecturing, they’d actually dropped computer programming and had to make space for a few other things. Essentially space was made to put more content in, to cover more content because the syllabus gets bigger and bigger, there are more accounting standards, auditing standards. Looking back, I just know that something was taken away by that change having been made. We’ve now fast forwarded to a place where I know SAICA and professional bodies are realising this thing of we’ve got curriculums that are overloaded with a lot of technical and we need to rethink this thing. So SAICA is on a drive of CA 2025 and revising their syllabus, and there’s a lot of good initiatives and thinking going on there. But I would definitely say there needs to be a rethink of not only what other business curriculum can be taught, but what modules or ways of thinking can be implemented to ensure that we get those graduates who are relevant to the workplace one day. So that also talks to this thing of board exams are still handwritten or at least the first board exam is handwritten, and are we really developing our graduates and our future CAs well if they’re still writing a written exam. At Milpark Education, we’re really looking at this thing within a CA connect team of trying to get students to do more on spreadsheets, type in Word. We’re hoping that the end result of this will be that board exams are also ultimately online assessments. I love the way that our programme is structured because being an online programme, our students are forced to use technology. They sign up knowing they’re going to use technologies, we’re using Microsoft Teams and there are ways of communicating on emails, which I think is very relevant and applicable to creating well-rounded individuals. The last thing I’ll say on that is just this thing of critical thinking, we can’t just produce people who know content, but we need to produce people who are able to solve problems and be critical thinkers.

Dismal pass rate amongst black trainees

CIARAN RYAN: Just following on from that, what do you make of the recent dismal pass rate amongst black trainees in SAICA’s second board exam? That’s the South African Institute of Chartered Accountants. A 24% pass rate, something has gone wrong here.

JOHNATHAN DILLON: No, big time, very disappointing. I’m very sad. As a chartered accountant, I worked hard with SAICA, Thuthuka, and we have had specific programmes focused on ensuring that the pass rates of black candidates improve. I know SAICA is putting together a task team and they’re going to investigate this, which is good, but it’s not a quick fix. I think the problems, to my mind, are systemic, they’re from the educational system that we have, which I think with respect to primary school, high school education, do not prepare our students well, with good foundations, and they come into university and there’s a lot of this content that they’ve got to get through. So I think a lot of students get through with fifties and often you’re able to get through with fifties with just ticking the technical boxes and when you need to do better, that’s where you need to have applied discussion, linking concepts, thought critical evaluation and get to a better answer. So what we’re also focusing on is trying to develop better assessments, I think that’s needed going forward. This exam that you’re talking about with a poor pass rate, was the final exam, the assessment of professional competence, APC, that’s written at the end of the trainees’ contract, where the initial test of competence is at the beginning. So what you’re seeing here, the problem I’m trying to highlight is students are able to get through the initial test of competence, which is more technically focused, at the beginning of their training contract. They go into their training contract and then after 18 months of practical experience, they then write this assessment of professional competence at the end. That’s where the wheels have now come off because you need the ability to bring things together, evaluate, make recommendations, decisions. I think it’s very problematic that we’re seeing that the black candidates can’t do this, but other candidates can, and that problem needs to be understood. As I’ve said, I think it goes back all the way to our educational system from start to finish.

CIARAN RYAN: Right, the foundational education system, as you mentioned earlier. Okay, so they’re relooking at this, but this is a subject that has come up before with SAICA and the pass rate with black trainees. I thought they would have addressed this earlier, but it seems now that they’re going to have to do something about that, and maybe it’s not SAICA itself. It’s, as you mentioned, before, it’s the tertiary education system, it’s the early education that they’ve had, and, of course, a lot of these students are studying this in a second or third language for them, which adds another degree of complication. Here’s a question for you, to get to the senior financial executive level, which is what every chartered accountant wants to do, every accountant, I would imagine, who’s in the corporate world, there are some things that are not necessarily covered in the accounting schools, for example, team leadership and strategy and communication. Some of these softer skills, the critical thinking skills that you mentioned earlier, perhaps these are the most important functions of the modern finance exec. We understand out of Europe that a lot of the CFOs don’t actually come from an accounting background, they come from engineering, urban planning, all sorts of other backgrounds. It’s a different route in South Africa. What’s your thinking on this? With some of these things you’ve got to be thrown in the deep end and learn how to manage a team and learn how to be of value to the CEO in terms of strategy. Would you agree with that?

JOHNATHAN DILLON: 100% agree, the question is how do you teach those things. I think there’s definitely an overemphasis on technical, so that’s the one thing that needs to be addressed. Then there’s, okay, if we’re not going to teach technical, what do we teach and how do we teach it, which is what you alluded to. Historically, and this is the rethink with SAICA CA 2025 because historically CAs have been technically competent to the T and that’s recognised the world through, for South African chartered accountants, that they’re technically strong, they know what they’re talking about. There’s been this ability of chartered accountants to transcend from being these technical experts, to also being leaders in business, which we don’t see in other countries. But now and I don’t know if this also links with this thing of our educational system, because it has changed, but yes, that’s a deeper question, I won’t go into that. But I think there’s definite merit over here, I have been very involved with CIMA’s qualification as well, [unclear] student management accountants. When I was at Nelson Mandela University I did a lot of work there, I developed short courses, programmes aligning with CIMA, in addition to the work I did on the CA programme. A little story I’ll share over there, which just highlighted this to me, in the position that held, there was a former professor, many years ago, Professor Les Simpson, who was in the position, teaching, heading up management accounting and finance at what was then University of Port Elizabeth, and he was a CIMA-qualified accountant, he wasn’t a CA but he was teaching on the CA programme, management accounting and finance He used to encourage the students to also study CIMA after having done CA, and one of his students was Peter Counihan. The reason I know this is Peter contacted me many years later when I was at the university, because he wants to honour his former professor, Professor Les Simpson. So I got to chat to Peter and his story is very interesting because he qualified as a CA and then because of Professor Simpson’s encouragement to go further, he then studied CIMA on top of his CA. He did really well in the CIMA exams, I think he came top in South Africa, whatever it may be. Eventually he found himself in the USA and he ended up purchasing a struggling forklift company, which he turned around into one of the leading logistics companies in the world and that’s Fortna. So his story, if you ask him and say, Peter, how did you do so well, you went to the USA, you bought this struggling company, you turned it around, you’re so successful, and he will attribute almost all of his success to his CIMA studies. He’ll say that CA helped me to be technically competent but I want to honour Professor Les Simpson because he’s the one who encouraged me to study CIMA, and CIMA made the difference. So I am not saying that CIMA is better than CA, there are strengths to both of them, but if you look at what CIMA is teaching with respect to strategy, project management, leadership, people skills, that is critically important, and they are doing something right there in terms of teaching those skills to help business leaders be effective in their roles. Peter Counihan is retired now and I think he still sits as the chairman at Fortna but it did really well.

CIARAN RYAN: This is kind of the thinking behind the South African Institute of Business Accountants and their CFO (SA) designation, it really is to recognise people who’ve gone through this journey, where they’ve built themselves up. They might’ve gone through the CIMA route, they might’ve gone the CA route or a completely non-conventional route, maybe they’ve done an MBA, but have ended up as a senior finance exec or a CFO. Some of those skills and the real difficult part of that, they all tell us the same thing, is how do you manage and motivate a team, how do you communicate these numbers, how do you tell the story to the guy who works on the factory floor in a way that he can understand it. So you have these different audiences that you have to communicate, not talking down to them, but explaining to them the story of the company in numbers. So communication is an incredibly important skill, I think for accountants, and it’s a very unacknowledged skill. Maybe you agree with that, maybe you don’t?

JOHNATHAN DILLON: I 100% agree.

Accountants in the backroom are ancient history.

CIARAN RYAN: This traditional view of the accountant is the guy who sits in the backroom, doesn’t really want to talk to anybody and pours over figures and spreadsheets all day. That’s gone, that’s ancient history, right?

JOHNATHAN DILLON: Yes, maybe I’m speaking out of turn here and I don’t know if other accountants will label me as a rogue or whatever it is, but what I say to my students is, if you want to be at the heartbeat of the company, if you want to be somebody who is not asking for a pay raise, but whoever your boss is, is coming to you and saying, you deserve a pay raise or how much would you like as an increase. You want to be operating within this discipline of management accounting, and finance. The reason I say that, I biasedly say that, but – and we need accountants, we need auditors, we need tax specialists – but in the realm of management accounting and finance, financial management, you’re making decisions, whether it’s investment decisions, financing decisions, and that’s adding value to the company, it’s moving the needle, it’s taking the company forward. Out of that, yes, you need to report on the figures, and yes, there is an agency problem, so the auditor is needed to just corroborate that everything is fine, and there are tax consequences to everything. So those things are all important and what I find is that when you not sell it, it’s truth, if you’re in business, you know this is true, when you talk to students and they understand this thing, they embrace the discipline because historically, students haven’t liked this discipline of management accounting and finance because it’s difficult. They like to do one plus one equals two, it’s difficult to transcend into why does one plus one equal two, and understanding the why behind everything, because in management accounting and finance we don’t have the standards to go back to. We work on principles, logic and critical thinking, problem solving as I have previously said. When the students understand this, and they embrace this thing of actually I need to struggle a bit because when I struggle and I think, I am better on the other end, and they don’t push against the struggle because often we find management accounting and finance is taught in a traditional way, like maths is sometimes taught and perceived by students like, man, I’ve just got to study this thing, and they don’t understand why they need to study this thing and the value that it brings to their life. Ultimately, that is going to change mindsets and how people operate in business. So I hope that’s talking to what you’re asking.

CIARAN RYAN: Okay, we’re running out of time here, but a couple of quick questions. You’ve spoken a little bit about how you got into accounting, but just tell us a bit about yourself, where did you grow up, where did you go to school and then how you ended up where you are now.

JOHNATHAN DILLON: Born and bred where I am now in Gqeberha, formerly Port Elizabeth, I went to Grey High School and university here. I have travelled but I’ve come back here and I’m really loving Port Elizabeth. I’m passionate about people and making a difference. I don’t like seeing poverty and unemployment, we’ve got so much potential in this country and that’s why I know education can change this. So it breaks my heart to see the pass rates for black candidates is 24%. Something can change and be done to address that. In my time and in academia and in corporate, to talk to one or two of things that you alluded to previously, is I know that culture within an organisation is key to success, a healthy culture. In addition to that, and it touches on how accountants need to evolve as well, because computers are taking over, you need to also be able to analyse data, and then there’s this whole domain of business intelligence, which is critically important. But before we get to business intelligence and computer automation that’s happening, I believe that there is more work and thinking that needs to be done because automation doesn’t need to mean that people lose their jobs, because a lot of people are scared of automation, I think if we can be creative, automation can just move more and more people, and this is the unlock potential that we have in our country, from being doers to being value adders. I want to do that in my local environment here in Port Elizabeth, in my online teaching environment and wherever I am. I am passionate about that.

CIARAN RYAN: Now, what do you do in your downtime?

JOHNATHAN DILLON: Well, I love my family, love spending time with them. I’ve run Comrades and done a few crazy things in that regard. So exercise is important to me, reading as well, although I prefer not to read too much because I do a lot of reading of textbooks. I love acquiring knowledge and I love people, spending time with people.

CIARAN RYAN: Right, you have a family?

JOHNATHAN DILLON: I do indeed. I’ve got two young boys, three and five, and a loving wife who has supported me in all of my expeditions. We’ve actually just made the difficult decision as to where my boys are going to go to school, and my heart was happy when he said, I want to go to Grey, dad. So he’s starting at Grey next year.

CIARAN RYAN: Does Grey have a primary school?

JOHNATHAN DILLON: Yes, they do.

‘I read biographies for relaxation, my wife thinks I’m crazy.’

CIARAN RYAN: Good, following in his dad’s footsteps. Okay, final question, Johnathan, are there any books that you would recommend?

JOHNATHAN DILLON: If I was to recommend books, I’d probably recommend books that have stood out for me in terms of struggles I’ve had, and that have helped me, and also what I learned from Peter Counihan, who I previously spoke about. Peter introduced me to Peter Drucker, and I’ve read his books and I think they are phenomenal books. He’s got a number of books but on my bookshelf I’ve got The Essential Drucker and The Definitive Drucker, which is just a lot of his thoughts and teachings that are brought together. Then there’s The Five Dysfunctions of a Team – A Leadership Fable by Patrick Lencioni [unclear] on to the ideal team player because I’ve seen it in the academic sphere, corporates that I’ve been in that this thing of team, it’s not only leading a team but having a team where people understand their roles and their functioning, which is something else that I’ve also read up recently and I really enjoy, is a book called StrengthsFinder 2.0 by Tom Rath, that you know what the strengths are of your team players and you have a team that functions optimally, that is critical.

CIARAN RYAN: So a lot of that seems to be focused around teams, Peter Drucker as well, the hard won lessons of success in business. Interesting, okay, and for relaxation do you read anything?

JOHNATHAN DILLON: I read biographies for relaxation. My wife thinks I’m crazy. I just love learning from other people’s lives. One of my favourites is Bear Grylls, all the things that he’s done and pushing your body to the limit.

CIARAN RYAN: He’ an interesting guy. Great, let’s leave it at that, Johnathan. That was fantastic, I really enjoyed the conversation. Thank you so much for your insights and we’ll be staying in touch, we definitely want to get you back and share some more of your insights and maybe we can zero in on some of these areas like the failings of the accounting education system, which we touched on here, but that probably does need a bit more exploration. So let’s pencil that in for a few months now.

JOHNATHAN DILLON: Happy to do that, that would be great, and it was great talking to you, thank you.

CIARAN RYAN: Fantastic. That was Johnathan Dillon, who is, well, he’s got a huge CV, but he’s currently managing director of JDCV Consult, and he’s also in academia.

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