FT Executive Dinner Forum

Transcription

1 FT Executive Dinner Forum SUMMARY REPORT The Insightful CFO: Driving Better Decisions Faster 12 May 2009 London In association with

2 SPEAKERS John Willman Former UK Business Editor, Financial Times Jules Andrew Finance Director, UK and Ireland, IBM Global Technology Services Andrew Shilston Finance Director, Rolls-Royce Group John Edwards Director General of Finance, Business Enterprise and Regulatory Reform FINANCIAL TIMES CFO DINNER FORUM Summary Report

3 FT DINNER FORUM DIGEST The Insightful CFO: Driving Better Decisions Faster Would the global crisis have been different had business leaders reacted faster? Baseball coach and sometimes philosopher Yogi Berra once quipped that predictions are always very difficult, especially about the future. However, the current economic turmoil has undoubtedly thrust the chief financial officer (CFO) into the limelight, with the evaluations they make now critical in a slowing global economy. As custodians of the present and future health of their organisations, the CFO has a key strategic role to play no longer simply responding to change, but rather the architect of it. In order to take control, however, the CFO needs to make informed decisions using readily available, accurate and effectively managed information. Speed will be the essence here, but there also needs to be a focus on the right data, as well as a keen understanding of where to find the right sources of information both internally and externally. By tapping into the intelligence of their value chain, the CFO can gain insights that will enable them to move their organisations forward while others flounder So, as enterprises generate ever-increasing quantities of data, how to move a company s disparate, non-specific and often duplicated data sources towards a more integrated and organised structure? On May , a panel of experts convened at the Pearson Building in London to debate this question and see how the CFO might begin driving better decisions faster. Speaking at the FT s Executive Dinner Forum were John Willman, former UK Business Editor at the Financial Times; Mark Readman, Business Operations Director for IBM Global Technology Services for UK and Ireland; Andrew Shilston, Finance director, Rolls Royce Group; and John Edwards, Director General of Finance, Business Enterprise and Regulatory Reform. The Insightful CFO: Driving Better Decisions Faster l 12 May 2009 l London

4 IBM s last global CFO study confirms that the highest-performing enterprises have developed integrated finance organisations that can move faster by stripping out cost and embedding controls into day-to-day processes. The challenge becomes in doing this within a global organisation that has a presence in hundreds of countries and billions of dollars turning over. The forum therefore began with a discussion how such an organisation could find the agility to transform itself. Before focusing on the right information, there needs to be the right culture in place to create consistency. When you re trying to transform into a globally integrated enterprise, said one speaker, the first thing to do as a CFO is decide to what kind of business you re going to be. When an organisation splits itself by business function but also by sector and geography there is an inevitable tension and it is the CFO s job to make this tension constructive rather than destructive. Everyone has their own corner of the organisation s profit and loss and they re very passionate about it. The CFO has to make the conversation about the balance sheet as well. The dinner forum looked at why helping employees understand the big picture is a crucial first step in gaining a single version of what s going on in the enterprise. One way of doing this could be through publishing a roadmap of an organisation s financial model that is both for internal and external consumption. Through this, the CFO can show everyone whether the vision is one of revenue hyper-growth or a more organic focus on profit. The power of this approach is that the CFO will empower their employees to understand where their business cases and client situations fit against the roadmap. Because the whole company is now geared towards this, you are judged as a country or client director on how you re performing against the roadmap. That absolute clarity in global organisation of hundreds of thousands of people is crucial if you want consistency. FINANCIAL TIMES CFO DINNER FORUM Summary Report

5 Once you ve created a common vision, how should you flow it into planning? Strong and clear direction cannot exist within a global enterprise if you take an all-inclusive, democratic approach, said one speaker. It must instead be driven from the top because you don t want a lot of internal debating, they said, pointing to the need for finance to focus on solving external problems rather than negotiate its way through internal power struggles. Central control creates common standards and a standard chart of accounts that means you know what your spending in every corner of the world. That s a very powerful tool when you re negotiating with suppliers. It s not rocket science but it s hard to do. If you want dynamic planning, said another speaker, you need to stop people from believing that gathering more information will create better plans. Long planning cycles that can take six to nine months will result in decisions that fail to incorporate changing circumstances. This is symptomatic of an inefficient management structure where there are too many accountable cost centres and too many layers of budgets all of which have to reviewed, said the speaker. This takes forever because every level puts in a contingency. By the time it gets to the board level, the information is almost useless because there is so much contingency built in. Having established a clear vision and streamlined reporting channels, the insightful CFO must then consider the best strategy for dealing with all the data pouring into the finance department. For one speaker, effective information management is as much about controlling what comes out of the finance department as what comes in. The example was given of the oil and gas sector in the 1980s and 1990s, where the focus was in predicting how much oil would be produced in a particular field. The barometer for success in those days was in your production rate. If you could say it went up by 5%, that was the litmus test of whether you were doing a good job, they said. The Insightful CFO: Driving Better Decisions Faster l 12 May 2009 l London

6 The dinner forum discussed why giving such forecasts without a range of possible outcomes is a mistake. It is extremely difficult for an oil company to accurately model what will come out of a rock 100 miles out in the North Sea and 8,000 leagues beneath. The industry made this fatal mistake of saying they would increase production by, say, 5% compounded over five years. In year one it could be -5, however, and +10 in year two. The oil companies learned a huge lesson learn about evaluating the risk and modelling the different outcomes. When it comes to managing information, CFOs therefore need to avoid the temptation of feeding the market with the information it wants to hear. The market wants precision when most businesses cannot give it. Don t make the mistake of confusing a possible barrel of oil with an actual barrel. The forum touched on the challenges the CFO faces in the public sector compared to the private sector when trying to introduce change. While the public sector shares many of the same characteristics, such as management boards, business plans and accounting procedure, said one speaker, the role of the CFO is far more focused on managing the finance function. Being a CFO of a private company can mean several jobs, from after the chief executive to acting as a barrier between them and the chairman. In government, it s just being the finance director you tend to get stuck between the accounting officer and the treasurer. The CFO can drive change in the public sector but the political landscape means that they have to be highly reactive to demands at board level. The ministers do a lot of work so decision making for the CFO is about how to deliver, rather than come up with new ideas, said the speaker, pointing to the current financial crisis as an example of a high-level policy imperative. For an insightful CFO in the public sector, driving better decisions is all about protecting the economy while identifying opportunities for growth. We want to build a varied economy and this is something that is driven by the ministers, all of whom have very strong views. FINANCIAL TIMES CFO DINNER FORUM Summary Report

7 As the evening drew to a close, the forum reflected on how the role of the CFO is becoming more complex. Whether public or private, large or small, forward thinking organisations are embarking on extensive business model innovations with CFOs at the centre. Risk is a constant and change should be embraced as a continual process. The CFO must marshal all the financial information they hold to ensure that the right messages are being communicated and decisions being made. The Insightful CFO: Driving Better Decisions Faster l 12 May 2009 l London

8 BIOGRAPHIES John Willman Former UK Business Editor Financial Times John Willman was appointed UK Business Editor of the Financial Times in April 2006, with responsibility for a 15-strong team of specialist industrial reporters and the FT s unique network of British regional correspondents. Joining the FT in 1991, he has held several positions, including chief leader-writer, banking editor, consumer industries editor, features editor and public policy editor. His first jobs in journalism were on Which? magazine and Assessment. Before that, he was an economics teacher. In the Business Journalist of the Year awards in March 2002, John was named the winner in the banking category. He was Financial Journalist of the Year at the 2001 British Press Awards and winner of the Norwich Union Healthcare/Medical Journalists Association Awards in John has written and contributed to several books, including the annual Lloyds TSB Tax Guide, The Which? Guide to Planning and Conservation, The Major Effect and A Better State of Health. He has extensive broadcast experience and has appeared frequently on BBC TV and radio, Sky and CNN. Jules Andrew Finance Director, UK and Ireland IBM Global Technology Services Jules joined IBM in 1992 in the US having completed an MBA at Purdue University. She has recently been appointed as the Finance Director for IBM's UK and Ireland Global Technology Services Business covering Strategic Outsourcing, Technology Services and their Maintenance business. She has held financial and operational positions in pricing and deal construction, contract management, corporate finance and accounting. She has worked with a broad range of IBM's largest clients across Europe and the US on strategic outsourcing and business process outsourcing deals and management. FINANCIAL TIMES CFO DINNER FORUM Summary Report

9 BIOGRAPHIES Andrew Shilston Finance Director Rolls-Royce Group Andrew is a graduate of Oxford University and has an MA in Engineering Science. He trained as a Chartered Accountant before working in BP and Abbott Laboratories and joined Enterprise Oil plc in 1984 at the time of flotation. He became Treasurer in 1989, and Finance Director in After the sale of Enterprise Oil to Shell in 2002, he joined Rolls-Royce as Finance Director from January Andrew has served as a Non-Executive Director on the Boards of AEA Technology plc from 1998 to 2003, and of Cairn Energy plc from 2004 to John Edwards Director General of Finance Business Enterprise and Regulatory Reform John Edwards joined the Department as Director General of Finance on 1 July. He came over from British Nuclear Fuels Plc (BNFL) where he has served as Group Finance Director since July John brings almost 30 years experience gained in a number of respected and high-profile companies. He has been the main Board Director responsible for Group Finance at Jaguar, Northern Electric, Meyer and BNFL. He has worked closely over the last eight years with the Shareholder Executive developing and delivering BNFL s Strategic Plan. He has also played a leading role in the sales of Westinghouse, BNFL Inc, Reactor S. The Insightful CFO: Driving Better Decisions Faster l 12 May 2009 l London

10 IN ASSOCIATION WITH At IBM, we strive to lead in the invention, development and manufacture of the most advanced information technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide. Locally, IBM UK has a long-standing business, technological and social heritage. We are committed to innovation and helping clients to seize competitive advantage by transforming themselves into on demand enterprises. In addition, we are proud to be a progressive employer. IBM Global Business Services has business experts in more than 170 countries and provides clients with deep business process and industry expertise across 17 industries, using innovation to identify, create and deliver value faster. We draw on the full breadth of IBM capabilities, standing behind our advice to help clients implement solutions designed to deliver business outcomes with far reaching impact and sustainable results. IBM Global Business Services Financial Management Consulting focuses on enabling enterprise innovation and performance through improved Finance organisation efficiency and effectiveness. With more than 4,000 practitioners, Financial Management has a full suite of end-to-end capabilities to address a client s challenges. Our capabilities include Finance Transformation, Finance Operations Improvement, Business Performance Management, Business Risk Management and Finance Enterprise Applications. To find out more about IBM or to speak to a Financial Management leader, please contact: Ian McMillan Financial Management Consulting Leader, UK and Ireland IBM Global Business Services ian.mcmillan@uk.ibm.com +44 (0) Visit: ibm.com/gbs/uk FINANCIAL TIMES CFO DINNER FORUM Summary Report

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