Corporate Strategy: Growth in the Post-Crisis Era

Put two senior executives with a shared passion for finance, technology and performance optimisation in a room and an interviewer does not really need to do too much. So it was with Colin Sampson (pictured), Senior VP and CFO for Asia Pacific & Japan, and Frederic Laluyaux, Global Vice President for performance optimisation & finance LOB, both of German software maker SAP. 

 
CFO Innovation’s Angie Mak spoke to the two men – or, rather, asked a few leading questions and then let them go at it. Below is Part 1 of this two-part conversation that revolved around the role of the CFO post-crisis, talent management and other issues.
 
How do you think CFOs handled the recent financial crisis?
Colin Sampson: I think CFOs coped pretty well. CFOs are conscious about cost and profitability. When you have a downturn like that, the board usually looks towards the CFO to help guide them. Generally this is where CFOs can take a certain amount of the limelight and take an amount of control. They need to seize the opportunity and I think a lot of CFOs did do that. So they have become much more of a trusted advisor.
 
When you have huge growth, sometimes a CFO role is underplayed a little bit, because the company’s so successful and travelling a thousand miles an hour, that the view of many of the leaders and the businesses is, ‘We don’t really need a CFO. Let’s just go and do what we need to do.’
 
Then you get that reckless behaviour, you get a lot of risk that’s built into the organisation. When you then hit the crisis like we had last year, like we had in 1997 [in the Asian financial crisis], the role of that CFO becomes very prominent. The board then looks to them as this trusted advisor and looks to them to help guide through the organisation.
 
We’ve seen it in our own organisation. Our global CFO became much more prominent in the organisation running the business. Coming out of the downturn, I think you continue with that because the board looks toward returning to growth, but with some caution. Let’s grow, but you look towards the CFO to guide you through that.
 
It’s important now that CFOs can seize this opportunity to rightfully have their place at the board and rightfully have their seat at the table to guide the organisation so that, hopefully, we don’t get a lot of that very risky kind of attitude coming back. But ultimately it will come back. Human beings just don’t learn from the past. We’re very good at analysing what we should do and shouldn’t do, but we just don’t learn from experience.
 
REASON AND INSIGHT
Are we back at that point now here in Asia, which has resumed growth?  
Colin Sampson: It will be awhile before companies take a lot of risk. The customers we talk to are customers that are growing and wanting to hire people, but they’re cautious. [The economic picture] is certainly brighter than it was 12 months ago. From my perspective, talking to customers, I think things are a lot better. The job market has improved. There’s general improvement.
 
Frederic Laluyaux: Controlled growth, that’s what we’ve seen in different crises. Every time there’s a crisis, the board looks to the CFO to make sure we have controlled growth. Every opportunity that comes up for M&A, because the market is now moving there, you look at the CFO. Is it OK? Can you demonstrate to me that this is a valid opportunity in the context of the risk and the opportunity? The keyword I’m hearing a lot now is ‘controlled growth,’ one in which we don’t grow at any cost.
 
The level of expectation from the customers, the suppliers, the public, the regulators, has increased dramatically over the last five years. You could take some risks, and you could manage the risks five years ago much more easily. We’re looking at finance organisations in general to be the voice of reason in that context.
 
Colin Sampson: And insight as well. What we try to practise in our own organisation is taking the moment now, seizing the opportunity to transform the organisation and to then take it to the next level, work on making your organisation much more effective and efficient. Now is a great opportunity to do that.
 
How do you take information that you have in your company and use it in an insightful way? We have so much information coming out, but how do you take all that data and use it in a way in which you could come up with some decisions and help the board in this growth?
 
Now is a great opportunity for CFOs to be the change agent, to actually drive the organisation down this efficiency path, to save some money, so we have profitable growth. Save some money, do this transformation and really get your organisation into going up the value curve.
 
Frederic Laluyaux: There are two fundamental aspects. The first one is that, to make a decision, you need to have one version of the truth. That’s something that the CFO and IT can do together – provide one indisputable set of data or information in front of the stakeholders for them to make a decision.
 
The next level in terms of providing insights requires a lot of change management. It’s the ability to put the right tools in the hands of the users, at whatever level they are in the organisation, so that they’re empowered to make a right decision.
 
The role of the CFO is now: one version of the truth, the right information in front of the end-users, not just information but data models, tools, business-enabling decision support, in the context of ultimate controls, so that people can be empowered to make the right decision. The CFO is not just a guardian of the temple. He’s making sure the information gets disseminated.
 
It’s a very big paradigm shift from how we used to work a few years ago, where if you have the information, you have the power. I’m going to retain information because I’m going to be the one showing it to the board, because I’m going to be the smart one. You still see some of that in companies today, but the more successful organisations today are the ones who are empowering people to make decisions.
 
We use [SAP software] BusinessObjects Explorer, which allows CFOs and our MDs to look at the [sales] pipeline. They can flip in on an iPad to get straight to the bottom of a deal. It’s not just, ‘So what’s the number that you’re rolling up to me?’ You have an insight immediately. I can go back and say, ‘What happened to that deal? Why did you change that number from this number?’
 
It’s something that was not possible before. When we introduced this technology at SAP in Q1, it immediately changed the nature of the way people worked. It’s a completely different dynamic. That’s just starting.
 
TALENT MANAGEMENT
Colin Sampson: We have to then move on to providing your people with the right type of technology that facilitates their ability to do all that. It’s so much dependent upon giving your people the right tools and the right devices to able to not only be there 24/7 but to have the information that is handy, to have the applications on that device that allows you to be so flexible that you can be anywhere. You can be at the back of a taxi, you can be at home. Our lives have changed so much that you need that flexibility. Young people come in, 22, 23, 24-year-olds, and that’s their expectation.
 
What about the expectations of upper management? Are they embracing this and willing to spend on it?
Colin Sampson: You have no choice but to do that. We [at SAP] have taken the view that it’s the absolutely right thing to roll out a thousand iPads across the organisation, so that a customer-facing person can take this iPad and show some customer applications. It’s a very powerful message when you get in front of a customer with a very light, easy-to-carry device and say, ‘Hey, look at what you can do, for an executive on the run.’
 
Frederic Laluyaux: It’s not just the reports. The applications themselves are available on mobile technology. You’re working from home, in a train, in front of a customer and you want to do a what-if analysis on assessing the level of profitability in the context of a discount scenario. The customer says, ‘I want to have a discount of 1% more.’ You are equipped now as an account executive with the ability to immediately measure the impact of this additional 1% discount against your targets and our KPIs and your target for profitability.
 
The technology is also very important in that whole transformation. You can transform, you can change your processes, but you need the automation and the technology to drive it as well. The younger generation, Y and X, are going to look at what are the companies that can allow me to work in an environment that I’m familiar with. From a talent acquisition perspective, [technology] is going to be a must-have.
 
I was asked this morning: ‘Does that mean we need to fire all the old CFOs and the dinosaurs out there?’ I said, ‘No, we’re not saying that. It’s not a question of age; it’s a question of behaviour, and an appetite to embrace what’s available today.’
 
Colin Sampson: Absolutely. You need a lot of that experience as well. You can’t buy experience. On the other hand, when you do get those that say, ‘All the CFOs that don’t fit into the change and don’t adapt to the change . . .’ then yes, it’s a fast-moving world. You’re going to have to go and do something else.
 
Frederic Laluyaux: Those who don’t embrace the new role of the CFO and they’re just looking at their job as bookkeeping, I think that generation is going to have to move on. Either you evolve or you’re going to be obsolete.
 
Colin Sampson: It’s embarrassing to show some information in a board meeting and someone says, ‘That’s not what I have. That’s not my sales number.’ It’s nice to have all the devices, but you also need have to go through the fundamentals of getting your organisation set up properly, with the right processes, the right automation, driving all of this. You’ve got the one version of the truth, so everyone’s working with the same information. When you extract something, you get the same information.  
 
Frederic Laluyaux: In any boardroom, you’re going to have a lot of Type A personalities who would be happy to challenge your number. It’s kind of a national sport. To be able to provide traceability on the numbers that you put in front of the board or any level of the company, it’s absolutely critical. If you don’t have the traceability and you can’t explain the number like this, then you enter into a debate of ‘my number is better than your number.’ That’s useless.

This is Part 1 of a two-part interview. Part 2 will be published on November 11.
 

Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern