IBM CFO Summary Report

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FT ExecutiveDinner ForumSUMMARY REPORT

The Insightful CFO:Driving Better Decisions Faster

12 May 2009 | London

In association with



FINANCIALTIMES CFO DINNER FORUM – Summary Report

S P E A K E R S

John WillmanFormer UK Business Editor,

Financial Times

Jules AndrewFinance Director, UK and Ireland,

IBM Global Technology Services

Andrew ShilstonFinance Director,Rolls-Royce Group

John Edwards

Director General of Finance,Business Enterprise and Regulatory Reform



The Insightful CFO: Driving Better Decisions Faster l 12 May 2009 l London

F T D I NN E R FO RU M D IG EST

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 ofthe 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 12 2009, 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.




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 tomake 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.’




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 cyclesthat 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 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.’




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.




B I O G R A P H I E S

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 1998.

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 appearedfrequently 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.




B I O G R A P H I E S

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 1993. After the sale of Enterprise Oil to Shell in 2002,

he joined Rolls-Royce as Finance Director from January 2003. 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 2008.

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 2000. 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.



I N A S S O C I AT I O N W I T H

At IBM, we strive to lead in the invention, development and manufacture of the most

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In addition, we are proud to be a progressive employer.

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full breadth of IBM capabilities, standing behind our advice to help clients implementsolutions 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

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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

[email protected]

+44 (0) 1926 880845

Visit: ibm.com/gbs/uk


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