Role: financial director
Highlights: career opportunities
HP has just made a £7bn bid for EDS that, if it succeeds, would double the size of your business.
The proposed acquisition is very exciting for HP and is expected to close in the second half of 2008. It will more than double our services revenue and create a leading force in global IT services.
Isn’t this rather a bold step in the current economic conditions?
Despite the uncertainty in the economy, the IT industry is robust and we’ve just posted results showing an 11 per cent increase in revenue year on year and a 22 per cent increase in operating profit. This will take our annual forecast revenue to £57bn. Acquiring EDS advances HP’s stated objective of strengthening its services business.
You’re no stranger to M&A activity, are you?
I’ve been through three big mergers since joining the industry. I joined Tandem in 1995 because it gave me the chance to do a role that was in effect “mini-FD”. The company sold systems used in environments such as secure government stock exchanges. These started at about £250,000, so it was a highvalue, low-volume business.
I became FD-designate just before it was acquired by Compaq in 1997, which had a completely different business model and culture. Compaq was a young, fast-moving company selling high volumes of goods through a channel sales network, rather than Tandem’s direct sales method. It also had a traditional back-office finance function. So we not only had to integrate systems and cultures; I also had to introduce the idea of a finance operation that added value to the business. It was great experience, because I had to sell our services to a business that hadn’t asked for them – and didn’t know that it wanted them.
How did you achieve that?
You have to start by offering something that the business knows it wants already. Once you’ve proved your worth and gained trust, you can develop things further. I needed to articulate what I saw about the business in its figures, simplify these and make them compelling. For me, this is what finance is all about: distilling core issues from complex data to show the state of the business, where it’s going and where it should be going.
You didn’t have much time to establish yourself, change the role of finance or finish the integration.
In 1998 Compaq made a much bigger acquisition when it took over Digital Equipment Corporation (DEC). This was a daunting prospect. Tandem was only just on board and DEC was very mature – it employed three or four times the number of staff that Compaq had. The plan was to build an organisation that could offer systems across the spectrum; it was hugely ambitious and we all struggled. The target firm was huge and culturally different. We began building a new finance team. We had to lose people, but we needed to retain knowledge. It was a massive challenge.
So how did you end up with Hewlett-Packard?
HP waited until Compaq had acquired DEC and then it took over Compaq in 2002. At the time this was the largest IT merger ever – two goliaths combining to make a £36bn company. They were poles apart on everything from metrics to organisational structure. There were significant headcount cuts and most finance staff, including me, had to compete for jobs. Having spent my career in business unit finance support roles, I saw it as a great opportunity when I was offered the role of UK and Ireland financial controller.
What made it a successful integration?
The legal issues that delayed the merger had bought HP’s integration planning teams vital time to determine priorities and, once the deal closed, we moved quickly. We established a target ratio of 60:40 for the number of staff from each firm who would remain – ie, it didn’t matter which firm had more representatives at any one level, but they couldn’t exceed 60 per cent of the total at that level. HP knew that Compaq’s integration with DEC was not finished, but it was clear about what the organisation would look like, which allowed us to focus on execution, with clear objectives at 30 days, 60 days, 120 days and so on. It was very well organised. Everyone knew who was responsible for what and they were clear about what each country should do and by when.
How did your team fare in all of this?
The integration lasted three years and nowhere was more central to this than finance. We had huge numbers of sub-systems, processes, legal entities and distributed teams, so it was a challenge to standardise these. My role as controller was the most uncomfortable position I’ve ever had. It took me to a place that I’d always associated with the side of accountancy I didn’t want to do: financial systems and infrastructure, managing everything from payroll to procurement, payables, receivables and statutory accounts. I was a long way from my comfort zone.
So what did you do?
I’ve found that as you go through different jobs you acquire knowledge and skills that are transportable across roles. I now realise that this was great experience. I would never have chosen to take it on, but I’m pleased that I did.
When did you become FD?
Simplifying the mass of duplicated infrastructure took me until about 2005. At that time HP changed the structure of its finance organisation and set up country-centric financial teams under country FDs. During this process I was asked to become UK and Ireland controller and financial director.
What does this involve?
I still have controllership responsibilities, but I’m also accountable for the provision of business-unit support areas that I’d managed before HP – commercial, planning, forecasting and reporting. I’m a member of the country management team, so I speak for other teams not represented at this level, such as IT, procurement and facilities. I am a director of all of our subsidiaries (about 30) and with this comes corporate governance responsibilities. I studied for the Institute of Directors’ diploma to ensure I was up to date on my duties. It’s a great follow-on from the CIMA qualification.
How is finance organised at HP now?
HP’s finance organisation is now truly global and organised around centres of excellence. These are dispersed across locations including India, Malaysia, Mexico, Poland, Romania and the US. They handle most transactional finance activity, which is managed under strict service-level agreements with the country finance teams. The centres manage most fixed assets, accounts receivable and payable, revaluation, VAT, expense, treasury, payroll and inter-company and inventory accounting.
Ensuring that finance support is delivered to the business units on schedule for our quarterly reporting cycle is a significant exercise in management. We have retained most of the business finance support teams in the country close to the business teams themselves – the closer these teams are to the business, the more chance they have to provide insightful support.
Finance is a service organisation and, as such, we must deliver a full range of services to internal customers, each at the appropriate cost. To maximise the resources we have available to focus on more value-added work, we need to standardise and then automate processes as much as possible.
Did you always want to be an accountant?
No. My father was one and it was the last thing I wanted to do. I took a business and marketing degree at Sheffield City Polytechnic with the intention of going into marketing. It was a sandwich course and I spent a year with Conoco, which offered me a scholarship in my final year and then a job.
I had a great time in my year out, working in Aberdeen on logistics for oil rigs, but when I finished I was sent to a finance team in London, which was a shock. I became a financial analyst, costing oil wells, forecasting and budgeting. But I still wanted to be in marketing, so I moved to a role as a commercial field sales rep. For the first time, I realised how lonely this kind of work can be. You’re given a car and told to find customers. It made me realise that I liked the analysis side of business, using data to get a wider picture.
Why did you choose CIMA?
When I moved from Conoco to insurance firm Winterthur Life, I didn’t want to take another qualification, but all my colleagues were studying and the ones getting promoted were CIMA students, so I saw it as a means to an end. But doing the course fundamentally changed my view of accountants. Until then I’d thought that they simply did corporate audits and accounts. I wanted to get into decision-making and financially based analytics, and I began to appreciate that that’s exactly what CIMA taught.
HP is a CIMA Training Partner. What does this mean for you?
I’m a huge supporter of our CIMA students. I tell them what it’s done for me and spend time mentoring individuals and talking at employee forums. We like to develop our people internally, so we tend to take on graduates and structure the roles they can take according to their level of learning and experience. We reward students with cash for passing exams and we structure promotions around qualification. HP has about 110 finance staff in the UK and Ireland and about 20 students studying at any one time.
This article first appeared in Financial Management magazine, September 2008.