After the $2.35-Billion IPO: Hilton’s CFO on Becoming a Strategic Partner

In less than seven years, Hilton Worldwide transformed itself from a company with a strong foundation of brands, assets and talent, but one in need of global alignment, into a leading global hospitality company. Its 2013 initial public offering on the New York Stock Exchange, which raised US$2.35 billion, was the largest-ever in the hospitality industry.

Today the company is one of the largest hotel companies in the world, with industry leading brands and a consistent growth strategy driving continued strong performance.

“I think that having a strategic role in addition to the traditional controllership role of a CFO has helped me to be better at aligning things like business objectives and compensation with the company’s overarching strategy”

Hilton CFO Kevin Jacobs (pictured) discusses his role in helping to reorganize and transform the business and explains how having non-financial roles with the company has helped make him a more effective strategic partner to the CEO and the business.

Speaking to Deloitte, he also discusses how heading finance, strategy and information technology has helped him drive company innovation and performance.

Before becoming CFO in 2013, you held several non-financial roles at Hilton. How has that influenced how you operate as a CFO?

I joined Hilton in 2008 in a corporate strategy role at the early stages of transforming the company. I was essentially the project manager for the reorganization of our business, working with the board, our CEO and the heads of our lines of business to transform what had been a largely siloed collection of nine brands, put together through various M&A transactions, into a unified organization with a strong culture aligned around a single vision, mission, values and key strategic priorities.

I went on to become the treasurer and the CEO’s chief of staff and also oversaw our real estate business before moving into the CFO role.

The combination of a strategic and organizational development role and helping to make decisions about the people and reporting structures needed to help achieve our objectives gave me a good understanding of how the different parts of our business fit together. Taking a non-traditional path from a business generalist to CFO, I think, has made me a more effective partner to our CEO in driving strategy as CFO.

I think that having a strategic role in addition to the traditional controllership role of a CFO has helped me to be better at aligning things like business objectives and compensation with the company’s overarching strategy. Participating in the creation of the strategy makes it easier to set business objectives and hold people accountable for achieving those objectives.

What are your priorities for finance?

The first 18 months of my CFO tenure were focused on preparing for our IPO filing in parallel with restructuring our US$14-billion-plus balance sheet. We ultimately raised over US$20 billion of capital in the public markets over that time period, as well as making sure we had the proper control environment and financial systems and processes to effectively run a global public company.

Going forward, my vision for finance and for IT is to be a world-class partner with the business to drive business objectives.

Capital allocation is one place where the value and the challenge of business partnering show up quite a bit.

Our company’s objective is to be at the forefront of serving customers anywhere they might want to be in the world, for any travel need they may have. Achieving that objective manifests itself in a number of investments in innovations and initiatives that have to be prioritized and then executed. 

The challenge is finding a balance between being the score keeper and being a facilitator to the business. If the pendulum swings too far toward the traffic cop role, finance becomes the group that is always telling the business “No,” and that stance can keep the business from innovating and, in turn, from achieving its objectives.

“I try to lead by example. I think the best way to articulate your vision to your team is to have them see you constantly interacting with other parts of the business and living our values”

But if the pendulum swings too far to simply being a facilitator for the business, we risk losing discipline from a capital-allocation and prioritization perspective.

What are you doing to position finance as a business partner?

First, I try to lead by example. I think the best way to articulate your vision to your team is to have them see you constantly interacting with other parts of the business and living our values.

I also encourage our finance team to immerse themselves in the business and embed themselves with their business partners. Many of our finance staff members attend their business partners’ team meetings, and they become part of the leadership teams they support. That connectivity with the businesses helps finance to evaluate the business case for each project, using financial metrics and analytics, and helps the business make better, faster decisions.

We also encourage connectivity to the business organizationally, for example, through our Executive Immersion Program, which puts executives on the front lines with our hotel staff. Our CEO established the program several years ago, and I think it is one of the best things we’ve done to drive our cultural transformation.

It brings the front line operations of our business closer to the corporate part of the business. For our corporate team, it’s a powerful lesson that Hilton is a customer-facing business and that the hotels are living and breathing things that literally are always open.

There’s no better reminder of the importance of achieving our business objectives to serve the customer than to be the person standing behind the front desk, listening first-hand to our guests.

Risk management is another area where it’s critical for finance to partner with the business. In my opinion, risk management should be elevated as a strategic function, which we’ve done by establishing the role of chief risk officer, perhaps one of the few CROs in the hospitality industry, if not the only one.

Our CRO works closely with people in each line of business to think about not only the obvious risks, such as cybersecurity, but also about enterprise risk in the context of potential disrupters to company strategy and future competitiveness. That means asking: “What’s out there that could compete with us, commoditize our business or disintermediate us with our customers?”

It also means integrating enterprise risk management into our planning process so that we can anticipate disruptive risks and take steps before they impact the business.

How are you using technology innovations to support the business?

A lot of the innovations we’re pursuing are in digital and mobility, with guest-facing technologies that can be a differentiator for the business. For example, our HHonors app allows customers to use their mobile devices to check-in and choose their room across more than 4,100 of our hotels. 

Soon, our guests will be able to use their mobile devices to unlock their hotel room door on arrival, by-passing the front desk. To support these next-generation technology innovations, we spent more than US$500 million during our time as a private company, building a strong, unified, global IT infrastructure.

Because of this, today we can implement our digital tools quickly and efficiently on a global scale.

How has leading both IT and finance helped you drive those innovations?

I think that having our finance and IT functions aligned has helped us in pursuing our business objectives because a significant portion of what we’re doing to drive our strategy and to innovate is enabled through technology.

I think that in today’s business environment the question will come down to which companies get disrupted by technology and which ones turn disruptive technologies into enablers of their business objectives.

That makes it very important to be prioritizing and investing in the “right” IT projects, the ones that do the most to drive the enterprise strategy. That’s a process that can easily fall into a “first at the trough” scenario – whoever gets their business case and capital approvals first gets their project done first.

Having IT and finance both report to me has enabled me to help create more connectivity between the two functions in executing our capital-allocation strategy and to prioritize our technology initiatives according to which ones are most important to achieving our strategic objectives.

Deloitte’s note: This article is part of an ongoing series of interviews with CEOs, CFOs and other executives. Mr. Jacobs’s participation in this article is solely for educational purposes based on his knowledge of the subject, and the views expressed by him are solely his own. This article should not be deemed or construed to be for the purpose of soliciting business for Hilton Worldwide Holdings, Inc., nor does Deloitte advocate or endorse the services or products provided by Hilton.

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