Smart Finance: The clever money lies with the CFO

Modern CFOs do far more than keep a lid on costs, they play an increasingly strategic part in helping firms to grow and prosper. Here we discuss the changing nature of the role.

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Last Updated: 07 Nov 2013

In association with Barclaycard, MT sat down with a panel of experts to debate the current challenges facing finance. On the Smart Finance panel was Harold van den Broek, senior VP finance, global supply chain, Unilever;  Russell Lloyd, the FD of design agency Seymour Powell; Divinia Knowles, the COO of online gaming company Mind Candy; Dennis Bauer, MD of global commercial payments at Barclaycard; Marcus Boyle, head of finance transformation at Deloitte; Elena Shishkina, CFO, SAP UK and Ireland; Dominique Yates, CFO of office provider Regus; and Andrew Saunders, MT's deputy editor.

 

Andrew Saunders The perennial theme of our times is how to do more with less, which seems to have been top of the agenda for most people for the past few years. In particular, how is the role of the CFO and finance department changing in helping an organisation do more with less? A lot of companies are cutting costs and boosting efficiencies, but can that go on forever?

Harold van den Broek I think the easy wins have been had. Intense competition as well as the current economic climate mean everybody has already picked the low-hanging fruit. Therefore, there are two things to go for. The first one is continuous improvement - constantly generating ideas on making your operation more efficient. The second is to partner across suppliers and customers to ensure you optimise the end-to-end value chain. At the moment, two-thirds of Unilever's total innovation pipeline comes from ideas from customers and suppliers.

Russell Lloyd Seymour Powell creates value for our clients by coming up with new ideas. We made the first ever cordless kettle, for example, and created the Baby G watch for Casio. You can only cut costs so far before you start moving backwards. We liken it to a sausage: you can keep on cutting but, at some point, you get to the string at the end. For me, the future is about trying to create value for people and influence the top line.

Divinia Knowles It depends what your cost-cutting is. Mind Candy created a children's online game called Moshi Monsters, which has 70 million registered users in 150 countries. We are developing software all the time, and we have looked at outsourcing it to India, say, but you end up compromising on quality. What parents like about Moshi Monsters is that it looks safe, which means so much to us. We would rather have that quality and pay more for our development team in-house.

Dennis Bauer You need to keep an eye on growth - and to achieve that you cannot have degradation in your support services. It is a tough balancing act. Where can you get economies of scale that no one will notice?

Marcus Boyle All my projects are for CFOs, looking at how they transform their finance function internally and in the UK. A lot of them rest on making sure the face-to-face function is right. A lot of other stuff - reporting, analysis and preparation - can be pushed out now without making any service degradation. Some nine out of 10 companies are still using end-user computing, spreadsheets and other things which are completely offline. It is just not good for controls and efficiency. The more of that that can be automated and pushed offshore, the better.

Dennis Bauer The relationship between chief procurement officers and finance managers is very interesting. Finance and procurement have become much more linked.

Marcus Boyle We have seen procurement move towards finance because developments in technology have given us lots more information. There are some rich pickings for them, so it is in their interests to go towards finance, and finance has been welcoming as well.

Elena Shishkina At SAP, procurement and finance are great partners. Procurement, ultimately, is about focusing on compliance and saving costs through third-party providers. Finance involves focusing on customers and generating cash at the other end. It is a great complementary partnership.

Dominique Yates Regus operates 1,300 business centres in 97 countries. We are involved in providing what we call 'flexible workplace solutions'. Whether we like it or not, people are much more focused on cash flow than they used to be. Often, in the supplier and purchaser relationship, there is a trade-off between price, payment terms and risk. Finance and procurement have become much more closely aligned.

Harold van den Broek The increasing closeness of finance and procurement helps Unilever deliver its sustainability commitments - we are trying to double the size of the business and reduce our environmental impact at the same time. Unilever is still a commercial business but we see this as a greater good. Today, for example, only 10% of agriculture is produced sustainably. A company like ours, which is the third-largest in the world, simply cannot go on like that. Therefore, we believe we have a responsibility and a challenge to work together with procurement for that to be economically sound, risk managed and protected in the marketplace.

Andrew Saunders We are seeing an amazing take-up of smartphones and mobile technology. Are you ready for this? How are you preparing to target the mobile market?

Divinia Knowles Mind Candy is just putting Moshi Monsters onto mobile devices, but we are actually quite late to it. The take-up of children on iPhones and iPads is fascinating. It means our whole business model has shifted from being a digital website-based business to having a mobile platform.

Harold van den Broek It is amazing how emerging markets are leapfrogging technology. When I was in China, I saw a lot of shoppers checking products and comparing the prices on their phones. We found that we can deploy people in stores and, through mobile phones, bring them up to date with product specifications, the latest promotions and quality issues. Therefore, your speed to market and your control of the outlet are so much better than they were. The technology available today is just amazing and is really helping our business.

Dennis Bauer Leapfrogging happens a lot. I was in a small village in Africa, doing microfinance with them. A woman approached me and said: 'It's nine miles to the nearest bank. Do you have a way?' and she reached into her pocket and pulled out a mobile phone, 'that I can move my money on this?' They have skipped the whole infrastructure of being wired. They are completely wireless in everything they do.

Dominique Yates I don't see the workplace ever becoming completely mobile. I recently went to an investor roadshow in the US, travelling everywhere from Toronto to Chicago. I would have loved to stay in one place, using video conferencing, but there is still a need for face-to-face interaction and there always will be. The challenge is to do it in an effective way.

Marcus Boyle Some people go to real extremes on this. A couple of our clients have less than 10% of their people onshore, so there is hardly any face-to-face stuff. It does not work for every organisation, but some can get away with quite a limited amount of face time, which surprised me.

Elena Shishkina That is an interesting point. At SAP, we looked at the numbers and found that 30 people out of 300 are out of the office at any one time. It changes the way you approach office space and facilities management.

Dominique Yates Regus has done surveys and, on average, 55% of desk space is empty. In an average western city, it is costing you at least £12,000 a year to have a workstation. More than half of that cost is wasted because no one is sitting there. There is also a big waste of space. There is a huge opportunity to look for further savings by supporting your workforce to work more effectively, but that is dependent on technology and what it will allow you to do.

Russell Lloyd At Seymour Powell, I think people would be upset if they had been away on a piece of research in Holland, came back to the office and found they did not have a desk.

Divinia Knowles I think it would work very well for some disciplines. Most of our community team is remote. They are based in the States and the UK. But for our creative teams, it would not work at all. As Russell said, they would be really sad if they could not talk to each other all the time.

Andrew Saunders So where is growth coming from at the moment?

Harold van den Broek Cost saving and efficiency programmes are there for a reason. It is not only to pay more to the shareholder, but to find ways to grow. Even in today's climate, that is the job we have to do, and we have to stimulate that. That is where the role of the CFO is very important. We do not only look at the risks, but also at the opportunities, even in difficult markets like this.

Divinia Knowles We initially focused on English-speaking markets, but we still have an enormous localisation opportunity elsewhere. The US is huge and we have only just scratched the surface there. We are a VC-backed, high-growth start-up. Our backers are expecting us to keep reinvesting in our growth and leverage more opportunities as we go. We have to decide which are the best opportunities and not spread ourselves too thinly. We look at addressable markets, how many kids we are targeting and which brands are going to be the big, blockbusting ones, rather than small bets.

Dominique Yates Regus has a similar issue. We have so many potential opportunities. The main job is to decide what we are not going to pursue, rather than what we are, even when some of the things we are not going to pursue in the short term are actually quite attractive. Ultimately, it comes down to how easy they are, and what the cost, risk and return are.

Russell Lloyd You learn by making mistakes. We are now part of a much bigger organisation, which is extremely supportive. It has been very helpful in our investing in new areas, which we probably would not be able to do as a standalone business. It has given us encouragement to grow into things that we would not necessarily have done as a separate business.

Dennis Bauer The art is execution. That has been Barclays' theme for the entire year. When you secure these numbers, and this just quantifies it, you have to go out and execute in the right areas. Where you can say 'no', be comfortable saying it, then execute and get the penetration rates that you need to grow. You have to be able to do that and feel comfortable doing it.

Andrew Saunders What is life as a CFO like in a smaller organisation?

Divinia Knowles I was the first finance person at Mind Candy. It is great for me, because I was there at the very beginning and I feel comfortable with the way things work. As the CFO at Mind Candy, I have been across every single business function and I am now moving into more of a COO role. I have found being in the finance function enormously helpful, because it has allowed me access to everything.

Russell Lloyd In a smaller business you gain more varied experience because you can drill down and see everything happening in front of you. It is a more hands-on role, which I enjoy.

Andrew Saunders What about the other side, for the corporate people? Do you hanker for the days when life was simpler and when, if you pulled the lever, something happened?

Dominique Yates I am not sure I can remember this simpler life. It is not that long ago that we were struggling to get hold of data. Changing anything was difficult because none of our systems were properly integrated and all the interfaces needed to be changed every time we did anything. I do not think it has ever been straightforward.

I certainly think that the larger your organisation, the more you can rely on experts rather than needing to be an expert across all areas. Clearly, in a smaller organisation where you do not have that support structure, you need to be in more places at the same time.

Andrew Saunders If there was one single thing you would change, what would it be?

Marcus Boyle We need a proper finance talent programme. That pays for itself so many times over, because it engages the finance people, teaches some of the things we are describing about value and creates a good sense of wellbeing, a shared vision and purpose among the finance group.

Divinia Knowles There definitely needs to be easier access to funding for businesses like Mind Candy. Mind Candy nearly ran out of money and, at the time, we really struggled to find anyone to re-fund us. There are companies with a lot of promise going out of business too quickly. It is still a very big problem.

Readers can join the debate by taking part in our Smart Finance survey. Visit www.managementtoday.co.uk/go/smartfinance for details

 

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