CFO India - September 2011 by Bhupinder Sharma

in practice path to the cfo suite p. 24

sonjoy anand cfo profile p. 20

htc chacha the new smartphone p. 58

Volume 02 Issue 09 Rs.50 september 2011

CFO India

Whoâ&#x20AC;&#x2122;s Next ?

Fixing the

Future Succession planning for the CFO role is critical to any business. CFOs who have mentored their successors or have emerged from such programmes, discuss why it is necessary to plan in advance and talk about best practices Pg 12

volume

Issue

A 9.9 Media Publication

CFO September | 2011

Inside

12 cover story

IN PRACTIcE 24 PATH TO THE CFO SUITE For CFO aspirants, it’s not enough to have strong professional networks, a well-crafted resume and promotions related to experience. They must also convince hiring managers they will fit smoothly into the company’s culture and structure

28 TIME TO BANK ON SOCIAL ISSUES How businesses, particularly banks, can leverage social networking for improved customer service and bottom line

WHO’S NEXT: FIXING THE FUTURE

INSIGHT 46 REMAPPING YOUR STRATEGIC MINDSET Shake-up your thinking by looking at the world from the perspective of a particular country, industry or company

CFO profile Engineering a tech-tonic change

Sonjoy Anand, the CFO of Tech Mahindra talks about his biggest challenges over the years, the Satyam acquisition and his vision for the future

Succession planning is a critical function in finance. CFOs who have mentored their successors or been part of such programmes, talk of the best practices, benefits and banes

CASE STUDY

42 MASTER OF MERGER

Srinivas Palakodeti, CFO of Hinduja Global Solutions talks about two recently concluded M&A deals and how some key challenges that these mergers threw up, were met

Cfo lounge 54 ON WHEELS | BMW X1 56 TRAVEL | FORTS OF MAHARASHTRA

i THINK

58 GIZMOS | THE HTC CHACHA

10 RAM RAMASUNDAR The Director of Blue River Capital and former ED of DLF Hotels writes about the challenges of raising capital and maintaining liquidity in a volatile market

Regulars

leader’s world 51 LESSONS FROM KILIMANJARO

04 LETTERS TO THE EDITOR 06 O-ZONE 60 NOT JUST THE LAST WORD

Pick a goal, crystallise it and take the plunge. Many such lessons from adventure sports can help CFOs IN PRACTICE PATH TO THE CFO SUITE

p. 24

SONJOY ANAND CFO PROFILE p. 20

CFO I NDIA

HTC CHACHA THE NEW SMARTPHON E p. 58

VOLUME 02 ISSUE 09 Rs.50 SEPTEMBER

2011

ILLUSTRATION & Cover design joffy jose

Who’s Nex t?

Fixin

the Futugre

Successio is critical n planning for the to any business. CFO role have mentored CFOs who their successor emerged why it is from such programms or have es, discuss talk aboutnecessary to plan best practices in advance and Pg 12

Sricity IFC | Finacial Executive 02 | Ace Data 05 | Microsoft IBC | Sodexo BC

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from the

managing editor

dhiman chattopadhyay dhiman.c@9dot9.in

Managing Director: Dr. Pramath Raj Sinha

Who’s Next?

When the role of captaincy was thrust upon the seemingly carefree and unassuming Mahendra Singh Dhoni, just a month before the inaugural T-20 World Cup, the lad from Ranchi took to the role like a fish takes to water. Sure, in hindsight he was a great choice, but why do you think he succeeded as quickly as he did? The reasons are not hard to trace. Two years earlier when Rahul Dravid took over as captain from Saurav Ganguly, the search also began for a long-term successor. The ‘Fab 5’ were ageing and the coporation called ‘Team India’ needed to groom a leader. And that’s precisely what they did. Dhoni was identified as a man with potential and natural leadership skills, someone who could, with further fine tuning (read mentoring) take on the top job. Over the next 24 months he was given leadership roles, asked to captain the team in minor matches and then given a project to head: the T-20 World Cup. Next came the ODI captaincy and the vice-captaincy of the test side, where he learnt more about administration and worked with the BCCI management to get acquainted with the organisation’s long-term vision. So when the mantle was finally passed on to him, no one, inside and outside the team, felt the tremors. The results smooth succession planning are there for all the world to see. This maybe an example from the world of cricket, but there is a lot that corporate India can learn from sports. A global Ernst & Young survey of 530 organisations, (including over a 100 in India) found that less than a third of them had a clear-cut succession programme in place for the CFO function. The result? Many of the companies that didn’t plan, suffered lack of continuity that ultimately affected performance. Those who did, fared much better. Our cover package this time talks to CFOs who have either been products of such planning or have groomed successors to find out why succession planning in the CFO role is so critical to any business and create a blueprint of best practices for organisations to follow. The accompanying survey shows what an organisation stands to gain (or lose) if it does not improve its bench strength. I hope you will find this issue a compelling read.

Editorial EDITOR: Anuradha Das Mathur managing editor: Dhiman Chattopadhyay managing EDITOR(Copy Desk): Sangita Thakur Varma SUB EDITORS: Radhika Haswani, Mitia Nath Design Senior Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: PC Anoop Visualisers: Prasanth TR, Anil T & Shokeen Saifi Senior Designers: Joffy Jose, NV Baiju, Chander Dange & Sristi Maurya DesignerS: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Prince Antony & Binu MP chief photographer: Subhojit Paul photographer: Jiten Gandhi The CFO Institute Executive Director: Deepak Garg National Head: Bindu Krishna ASSISTANT BRAND MANAGER: Nisha Anand SENIOR Manager: Shreya Pilani Associate: Deepika Sharma Sales & Marketing ASSISTANT REGIONAL manager (sales): Rajesh Kandari (+91-9811140424) National Manager (Events & Special Projects): Mahantesh Godi (+91-9680436623) Assistant Brand Manager: Arpita Ganguli Co-ordinator (Ad Sales, MIS, Scheduling): Aatish Mohite South: Vinodh Kaliappan (+91-9740714817) West: Sachin N Mhashilkar (+91-9920348755) For any customer queries and assistance please contact help@9dot9.in Production & Logistics Senior General Manager (Operations): Shivshankar Hiremath Manager Operations: Rakesh Upadhyay Asst. Manager - Logistics: Vijay Menon Executive Logistics: Nilesh Shiravadekar Assistant Production manager: Vilas Mhatre Logistics: MP Singh, Mohamed Ansari officE addrEss Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Chembur, Mumbai- 400071 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bungalow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Nutech Photolithographers,B-240, Okhla Industrial Area Phase-1,New Delhi-110020 All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited. subscriber services: Call +91-120-4010999 Visit CFO India’s Website www.cfo-india.in

september 2011

CFO INDIA

Letters

CFO INDIA

September 2011

Compliance and risks

COVER STORY

The cover feature in your August issue (Coping with Compliance) was a timely one. Some of the best practices and key risks were brought out well in your package. —SK Bose, VP Finance, Axis-T Consulting, Mumbai

09.11

As regulations and compliance pressures grow with stricter corporate governance laws, CFOs across India Inc are gearing up for the challenge so that they don’t get buried under a pile of paper BENNETT VOYLES SHIGIL N

very year, there’s more paperwork. Every year, there are greater chances that one missed signature or one missed disclosure could earn your company a fine or even hurt its chances of an important investment down the line. How can CFOs keep up with the 200+ filings that companies must make in any given year? In many cases, they simply don’t. Nitin Deshmukh, Chief Executive Officer of Kotak Private Equity Group, a major private equity investor, says that his team seldom conducts due diligence on a company with-

out finding compliance problems. “Without exception, there are almost always issues in mid-sized companies,” says the Mumbai-based investment manager. Most violations are not serious, he says, but a few end up being deal-breakers. But, as regulations are expected to keep on growing, regulatory experts say it’s important not just to dig out of your current drift, but also to look up and see where the next batch of rules may come crashing down. CFOs and compliance experts agree that an organised approach to filing and a more strategic view of rule-making can go a long way toward better protecting your company – and yourself. AU G U S T 2 0 1 1

MORE ON CLOUD

As a regular reader of the CFO India magazine I am happy to see that you cover a wide variety of services in each issue. Some of the opinion pieces that accompany large features also add great value to the overall package. As someone who has been involved with and worked closely with finance professionals over several years, I would be happy to contribute to the magazine on issues such as emerging trends in finance and becnhmark accounting standards. — Rajiv Talwar, Partner-Accounting Advisory Services, Lalit K Khanna Associates, Delhi

I enjoyed reading the latest issue (Coping with Compliance, August 2011). I found the cover package very informative and easy to read. The profile of Nishant Fadia, the CFO of Prime Focus also made for good reading. My favourite issue till now has been the June one though (Get Tech, Go!) since it dealt with technology that CFOs and the finance fraternity should know about. I sincerely feel you should come out with another tech special soon, and perhaps focus on issues such as cloud computing and other new technological tools that organisations can use to reduce overhead costs and increase efficiency in business. Cloud computing technology is being adopted by many organisations but the risks involved are worrying many CFOs. More clarity on the subject from domain experts will be of immense value to the finance fraternity. — Anirudh Bansal, AVP Finance, Jairam Textiles Pvt Ltd, North 24 Parganas, West Bengal

I enjoy reading your magazine and the excellent content it offers in the various facets that today’s CFOs have to navigate. I can be sure to relate to at least one article in each issue as it applies to my role. I also enjoy reading the profiles of CFOs who share their experiences — the CFO book is a cool addition to this area. I look forward to receiving the magazine every month. Keep up the great work! — Sathya Kalyanasundaram, Finance and Operations Director, Texas Instruments India Pvt Ltd, Bangalore

CFO india

September 2011

Your voice can make a change: Share your viewpoint on what’s happening in the community and your feedback on the magazine at editor@cfo-india.in

GREAT COVERAGE

KEEP IT UP!

CFO INDIA

SUBSCRIBER’S COPY I have not been receiving my regular copy of CFO India for the past few months. Will you kindly look into it? — Robin Banerjee, CFO, Suzlon Energy, Hadapsar, Pune

09.11 JOBS

prince antony

A hiring slowdown soon?

Hiring in India could slow down in the October-December quarter from the previous two quarters, a Manpower Employment Outlook Survey has found. However, India will continue to be among the emerging economies in which the job market will expand at a good pace. With a Net Employment Outlook of above 42 per cent, Indian employers 6

CFO india

September 2011

reported the most optimistic forecast among all 36 countries and territories participating in the Manpower survey. Indiaâ&#x20AC;&#x2122;s Outlook improved by 2 percentage points quarter-over-quarter, and by 19 percentage points when compared to Q3 2009. Job seekers in the mining & construction sector (about 46%) and the manufacturing sector (about 44%) can look forward to the most favourable hiring environment in the next three months of the year. The weakest, but still strong hiring pace was reported by transportation and utilities (24%) sector employers. Hiring intentions for the next three months are strongest in India, Brazil, Taiwan, Turkey and Singapore, while those in Spain, Greece, Italy and Ireland are the weakest with negative forecasts reported. Namr Kishore, Manpower India Head (Sales & Marketing) said Globally India has the most optimistic outlook, but it is lower than last quarter. Employment outlook is still optimistic, employers are still hiring, but they are not as optimistic in their hiring trends as they were in the last quarter. The survey polled more than 65,000 employers in 41 countries. Employers in seven industry sectors and all four regions of India reported positive hiring plans for the next 3 months. However, the outlook declined when compared to the previous quarter.

What’s AROUND ZONE Small is beautiful.................................................. Pg 08 Jargon Decoded: Hand-grenade close....... Pg 08 McD to display calorie count................................Pg 09 50 New planets found...........................................Pg 09

THE CFO POLL result

Will the US debt crisis have a cascading effect on India Inc?

25% No 10% Maybe

65% Yes

current POLL question

Should the government step in to control spiralling food prices through subsidies? Vote now at www.cfoinstitute.com/poll

CYBERWORLD

Indians most dishonest on the web

TECH

photos.com

Windows 8 coming soon For those who have been anxiously awaiting the release of the much-hyped Windows 8, there is good news. A developer preview of Windows 8 is now available. Microsoft has created a new set of APIs for creating applications on Windows 8 called Windows Runtime or WinRT. This set of APIs are available in any language, C++, C#, Visual Basic or even JavaScript, and can be used for creating Metro style applications. Web developers can use HTML 5 for the applications interface along with CSS3 and use JavaScript for functionality. The Windows Store will also be making its debut in the next version of Windows, so developers will have an official store from where they can purchase and install applications.

Cybercrime is spreading faster than you imagine in India. In fact India holds the third place in a ‘least honest nation on internet’ survey conducted by Norton Cybercrime Report (more than 7,000 adults from 14 countries including India took part in research). About a half of Indian adults polled admitted they had lied on internet on innumerable occasions. The study found that 48 per cent of all respondents globally had lied about their personal details when online, including their name, age, financial and relationship status, their appearance and even their nationality. And a third of all adults had assumed false identities online at some point in their lives. The Indian population that was surveyed spent an average of 30 hours per week online, as compared to the global average of 24 hours per week. Among those polled in India, 33 per cent admitted to using fake online identity and 55 per cent to having lied about personal details. Cybercrime has risen sharply in India as a result. It is estimated that more than 29.9 mn Indians fell prey to cyber crimes between September 2010 and August 2011 of which 17 per cent were duped through the mobile phone. September 2011

CFO india

O-ZONE cfobook

JARGON DECODED

THE PHRASE: Handgrenade close

Vibha Padalkar Wall

Info

Boxes

What’s on your mind? Attach

Share Vibha Padalkar believes there is an opportunity hidden in every challenge September 22 at 10.30 pm · Comment · Like

March 2010 to Present – CFO, Personal Netambit. Dec 2008 – Feb 2010 – CFO Zodiac: Capricorn Bothli PoliticalChemicals Views: Liberal & Mining 2006-2008 – National WORK Commercial Manager, Spencer's Retail 2008 to Present – CFO, HDFC Standard Life – Sr Manager, 1999 – 2006 2001-2007 – EVP Finance, WNS Seagram Global 1994-2001 – Colgate-Palmolive First Job: Lovelock & Lewis

Vibha Padalkar thinks Cumbria in UK is a superb holiday destination September 19 at 9.05 pm· 2 people Commented · 1 person likes this

Vibha Padalkar Hopes to take HDFC Life to new heights September 17 at 11.00 pm · 5 people commented · Like

I Read...

September 16 at 6.26pm · Comment · 4 people Like this

EDUCATION Institute of Chartered Accountants, England & Wales University of London

To kill a Mockingbird

I Listen... Old hindi songs and classic rock like Doors September 14 at 7:14pm · Comment · 1 person likes this Recent activity Vibha Padalkar likes HDFC Life, CFO India and 2 others

HDCF Life, CFO India, WNS global services - alumni September 17, 8.55 pm · 2 Comments · 7 people Like this

CARS

Small is beautiful Automakers are unveiling new models at the Frankfurt auto show as the industry heads into an uncertain year, and most carmakers are coming up with small cars that offer cool features at relatively low prices. An Associated Press (AP) report said prominent new models on display will include Volkswagen’s Up, the latest entry in the market for tiny, fuel efficient city cars and BMW’s small electric i3, which saves crucial weight with high-tech carbon reinforced plastic. Fiat has a new, slightly longer version of its Panda small car, a mainstay that has sold 6 mn since 1980, while Toyota has a new take on Prius, offering a plug-in hybrid version and a Prius+ sevenseater. Ford is unveiling the Evos, a concept car that shows design elements which will appear on Ford’s regular models soon. 8

CFO india

September 2011

The meaning: This violent sounding jargon actually refers to something that is roughly on-target, but with room for error. The Usage If a colleague says “I am trying to get those numbers hand-grenade close so the client won’t know the difference,” he is not about to bomb the client, though you should still be worried about fudged numbers!

O-ZONE HEALTH

McD to display calorie count Planning to have a quick burger and fries during a lunch meeting? Don’t be shocked if your menu comes with an accompanying card stating you have just consumed 400 calories. Indians will soon have the option of asking the exact calorie count of each of McDonald’s food items. The Indian arm of McDonald’s has decided to list calorie counts of all its foods on menus. McDonald’s India, among Big Mac’s top 10 fastest growing markets, says the calorie counts, protein, fat and carbohydrate content in its burgers, fries and puffs will be prominently displayed on its menu, leaflets on trays,

front counters and website within the next 45 days. “As customers around the world are changing, we are also focusing on healthier and more informed ways of eating. The first step, we believe, is disseminating information,” McDonald’s India (North & East) MD and joint venture partner Vikram Bakshi told the Economic Times. The move, coming 15 years after McDonald’s opened its first restaurant in the country, follows similar actions in the US and more recently in UK. It will be implemented across McDonald’s 235 stores in the country.

SCIENCE

PHotos.com

50 new planets found Astronomers have discovered at least 50 new planets beyond the solar system, including 16 that are of a size similar to Earth, reports Reuters. The biggest planet of the new batch is named ‘HD 85512 b’. It is 3.6 times the mass of Earth and can be found 36 light years away in the Vela constellation. The discovery was made by the High Accuracy Radial Velocity Planet Searcher (HARPS), installed at the European Southern Observatory’s La Silla Observatory in Chile. The findings would be presented at a conference on Extreme Solar Systems to be held in Wyoming, US. The discovery suggests that more than half of the stars like the sun possess planets. “The detection of ‘HD 85512 b’ is far from the limit of HARPS, and demonstrates the possibility of discovering other super-Earths in habitable zones around stars similar to the sun,” University of Geneva astronomer Michel Mayor was quoted saying.

snippets New CFO in BPCL

S Varadarajan has taken over as Director (Finance) of Bharat Petroleum Corporation effective September 1, following the retirement of SK Joshi. Prior to this appointment, Mr Varadarajan was Executive Director (Corporate Treasury) BPCL, and responsible for the overall treasury management, risk management, corporate accounts, taxation and budgeting.

In 2009, he led a team of 20 professionals, which put in place a value mindset across the organisation and created competitive cost structures. In addition to finance, he has handled marketing, as head of sales for retail business in the southern region.

Max Healthcare CEO Pervez Ahmed Quits

Max Healthcare CEO and MD Pervez Ahmed has quit the Delhibased healthcare chain. “We have decided to part ways after I was asked to do so. I was surprised at the speed of the development,” Dr Ahmed told Economic Times, adding he was yet to finalise his future assignment. A Max Healthcare spokesperson said the company has formed an interim task-force to conduct day to-day operations and manage the transition. The company is evaluating options to get a new leadership structure and Dr Ahmed remains available to facilitate a smooth transition, the company said in a statement.

September 2011

CFO india

cfo

i think

Facts & Trivia PROFESSIONAL QUALIFICATIONS: MBA from IIM-A, CA FIRST JOB: At Hindustan Lever, 1978 PREVIOUS JOB: ED, PepsiCo India; MD & CEO; Electrolux Kelvinator; President & CFO; Ranbaxy Labs, Group Director, Finance, Jindal ITF

Having spent more than three decades in a variety of corporate roles, both as CEO and CFO, I decided to call it a day and end the demanding routine of quarterly results, analyst meets and conference calls; and instead take the advisory, consulting and private equity roles to SMEs and mid-cap organisations. Little did I realise that I would end up with as many sleepless nights as I did during my corporate career. More than ever, today’s times require companies to cope with uncertainty virtually on a daily basis. The environment is so volatile that every company in India is struggling with multiple dilemmas. The issues are far more challenging for smaller companies who have limited access to capital and debt markets. PostSeptember 2008, the world economy has not remained the same and the financial markets keep throwing new challenges virtually on a daily basis. I would like to share my own recent experiences with the 10

CFO india

September 2011

Ram S Ramasundar The Director of Blue River Capital and former ED of DLF Hotels writes about the challenges of raising capital and maintaining liquidity in a volatile market

real estate industry, which is passing through a very tough phase. No doubt the real estate industry is not exactly what you and I would call professional in its management practices, but the fact is that most of the companies are passing through major liquidity and

“How do you raise money to complete existing projects and finance new ones? This is the million dollar question”

funding issues. Consider the following: • There is significant oversupply vis-à-vis demand. Newspapers and our mobile phones get flooded with advertisements and SMS messages looking for those elusive buyers. • Despite the proclaimed land banks, there are some issues or the other with the lands, the latest issues related to land acquisition being an example. • Most importantly every real estate company, big or small, is reeling under a cash crunch, with many projects either stalled or delayed due to want of funds. The bigger the real estate company, the larger the debt burden. • So how do you raise money to complete existing projects and finance new projects? This is the million dollar question. Banks do not finance real estate projects and even if they do, the rates of interest are prohibitive. As it is, in general, the interest rates are high and keep moving north. But the penal rate for the real estate industry is indeed back-breaking, with companies

Nitish Sharma

trying to raise funds at 25 per centplus. In addition, there are severe end use restrictions on these funds, which restrict financing and operational freedom. Private Equity funds fight shy and a few funds who do invest in this industry expect returns and IRRs which are extremely high. Unfortunately, the industry and its

operating management are not known for their execution capabilities, with the result that working capital rotation is probably worst in this industry. Net result: every night you keep gazing at the stars and wonder how you are going to manage the cash flows tomorrow — be it the payment to vendors or salaries to staff or the tax payments…

and you break into a cold sweat. There is only one solution: the industry should be more pragmatic; less greedy and not thinking all the time about land banks. It must be more balanced and professional in execution — taking a leaf out of the books of the best manufacturing and service companies. September 2011

CFO india

Who’s Next:

Fixing The

Future

cover story

Succession planning is critical for the CFO role. CFOs who have mentored their successors or been part of such programmes, discuss why planning is so important and talk about best practices Tejeesh NS Behl joffy jose

HEN SK JOSHI, the much-respected Director of Finance, Bharat Petroleum Corporation (BPCL), retired in August 2011, Executive Director, Treasury, S Vardarajan became the new finance chief. As if on cue, his deputy took Mr Varadarajan’s old job. No recruiters were called and no panic button was pressed. In a systematic manner, each executive is groomed for the next job as part of the PSU petroleum giant’s succession plan. Examples of such seamless transitions for the CFO function, however, are few in India Inc. Exceptions such as Larsen & Toubro and Infosys, which have set benchmark standards in succession planning, notwithstanding. Thankfully, the importance of grooming internal candidates to succeed the CFO, is dawning on many Indian corporations today. Which is why boardrooms are increasingly beginning to pay attention to the guardian of a company’s financial health, who occupies, what has become, the number two position in the corporate hierarchy.

WHY INTERNAL SUCCESSION PLANNING? CFO succession planning, says S Durgashankar, Executive Vice President, M&A, Mahindra and Mahindra, and former CFO at Mahindra Satyam, is crucial to ensure that relationships with the company’s stakeholders are not destabilised. “If you look at the position of a CFO, various people look up to him – the board, external shareholders and investors, all of them depend on his word and trust him to give a true picture of the company’s financial health. So planning for a successor to the CFO is important to maintain continuity and stability in fiscal management,” he says. Typically therefore, opine industry leaders, a CFO should be groomed from within the ranks, instead of foisting someone from outside the organisation. As with the evolution of the term, a CFO’s role too has evolved over the years – from being perceived as a glorified cost accountant to a fund manager for the company and a business partner to the CEO. The next logical step was becoming part of the company’s business strategy September 2011

C F O in d ia

cover story formulation team.“A CFO is directly involved in corporate governance, in the US GAAP certification for instance, two CXOs are asked to certify the financial statement, the CEO and the CFO,” Mr Durgashankar says. The self-certification, he elaborates, indicates that the CFO takes responsibility for wrongdoing if any. Consequently, he adds, a CFO needs to demonstrate strong ethics and set the standards – a benchmark which an

internal successor will value and understand much better than an outsider.

STILL EVOLVING However, succession planning is generally still an evolving science in India Inc, save for a few large business groups and organisations. Deepraditya Datta, Managing Director of the Mumbai-based executive search firm Venator, says in large business

“Succession planning requires a certain degree of selfconfidence in the incumbent – how secure he feels to groom his successor” —S Durgashankar,

A.PRABHAKAR RAO

Executive Vice President, M&A, Mahindra and Mahindra, and former CFO at Mahindra Satyam

groups, the sheer abundance of talent means there are usually two to three contenders for any C-suite position. “There are examples like that of L&T, Infosys and the Tata Group where succession planning always seems to be clearly defined. Then there are some large groups where the bench strength is so good that at any point in time there are one or two people who can step into the CFO’s shoes should the incumbent leave,” he says. But by and large, says Datta, whose firm makes several CXO level hirings for large and midcap companies every year, most Indian companies do not have any clear succession plan in place. “Of course if they all had succession planning programmes in place, search firms would go out of business,” he jokes. The trend however, is catching on even in family-run firms, even if it means an external hire. He cites the example of a recent hire his firm did for a mid-size manufacturing firm. “Their CFO is due to retire early next year. So in May they hired a deputy CFO through us, so that the new joinee gets about eight months to work side by side with the existing CFO and learn not just how the company’s finances are run but why certain decisions were taken and who the important clients and customers are.” Mr Durgashankar points to another reason why the trend is still evolving in India. Succession planning requires a certain degree of self-confidence in the incumbent – how secure he feels to groom his successor. “It took us 15 months to correct all the back accounts at Mahindra Satyam that included 6000 bank reconciliations. My successor (Vasant Krishnan) was working side by side with me for the last three quarters of my tenure. We ensured he knew every aspect of the role he would take over one day, before he actually stepped into my shoes,” he recalls. When such confidence is lacking, succession planning often runs into

Jiten Gandhi

cover story

“Even at RCF, when we are planning for succession, a person is identified and through the rotation system in our company, he is provided exposure in other areas to update his knowledge” —gautam sen, Director, Finance, Rashtriya Chemicals & Fertilisers

rough weather. “The person in the job is often not interested in talking about succession, because he or she wants to stay there and doesn’t foresee leaving till he retires,” Sharon Allen, Chairman of Deloitte & Touche, USA, recently told the website cfo.com in an interview. An impending CFO job change would obviously jump-start the process. But to formalise succession, says Ms Allen, the first step involves encouraging executives to think about what would happen to their companies if they couldn’t do their jobs for some reason. “People then start thinking about the good of the organisation as a whole, rather than the protection of their own position,” she says.

BEST PRACTICES Mentor the understudy: Ideally, says Gautam Sen, Finance Director at Rashtriya Chemicals and Fertilisers, understudies should be mentored for at least two years before being elevated to the CFO role. “Succession planning for any post requires identifying the person and putting him through the paces to give

him exposure. A CFO does not just need to know about the company’s financial planning and strategy but also other areas such as marketing, operations, planned shutdowns and how much effect it would have on the company’s profitability,” he says. Teach him to say no when needed: Potential successors, once identified, should also pass a ‘managerial courage test’, says Shailja Dutt, Managing Director of Stellar Search, based on her interactions with several CXOs. This trait is more pronouncedly required in a CFO, she says. “You don’t want the CEO to run a company like a fiefdom,” Ms Dutt says. Even so, more critical than the courage to say no, is the ability to understand the business, feels SK Joshi, former Director, Finance at oil marketing major BPCL. “A CFO needs to remember that he may not be the top guy but he has to work with that person (the CEO) and there may be times when a plan may not look feasible on paper but could be imperative for the company’s long-term evolution in the marketplace. He needs to understand the investors’ perspective as well and

act as a balancing partner to the CEO,” he points out. Check and develop risk-taking ability: This is where, opines Yogesh Dhingra, COO and CFO at Blue Dart, a company’s finance honcho needs to have a calculated risk-taking ability and he or she has to make sure this skill is passed on to the successor over time. “Most CFOs nowadays are also chief risk officers of their companies and that ability can only be honed if the CFO has a commercial sense of the business of the company. When grooming a successor or potential successors, the CFO needs to help them develop a deep understanding of the company’s business,” he says. It’s a team effort: More than being a purely functional head, a CFO needs to be able to manage people and be an energiser of talent and a business enabler, believes Mr Joshi. “At BPCL, being a public sector company, the task of appointing a successor is carried out by the Public Enterprise Selection Board (PESB). However, there is a corporate leadership pipeline comprising senior staff of General September 2011

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cover story mechanism is in fact, one of the key ways in which successors are identified in firms across the world. Central to this way of life is the rotation of high performers through different jobs in and outside finance to broaden their perspective and expand their skill sets. Rotations also help finance chiefs assess whether their instincts about a particular employee are right.

TACKLING EXPECTATIONS While hand-holding may not be required at that level, executives and management consultants agree that mentoring and ensuring that one is transparent with team members about expectations, is definitely needed. Both the CFO and the HR team, they say, need to have their ears to the ground and interact with younger talent within the organisation to spot and nurture potential leaders. Mr Sen cites the instance of a young chartered accountant in his organisation, who despite good reviews for his work, was stagnating in his career. “Since his growth was not up to his recognised potential, we discovered that he was not getting proper exposure in different departments. As soon as the problem was rectified, he started progressing,” he recalls.

Once a successor has been identified, providing him with enough challenges to sustain his interest in the position on offer becomes imperative. “If you pick a talented guy but put him in a job where his intelligence is not fully utilised, he will leave,” Mr Joshi says. Recalling the economic slowdown of 2008-2009, Mr Joshi says they formed a committee headed by his then deputy (and current Director Finance, S Vardarajan) to manage cash flows and they were able to release funds to the tune of Rs 1500 crore for working capital needs. Involving the understudy in such a challenge, helps him prepare for the job better. At the same time, succession planning can mean losing talent. As soon as the next CFO is identified, a company may run the risk of creating consternation among the other players one level down. India Inc is full of instances where just after a person had been identified for a CEO or a CFO position, a few of the other contenders left. The example of ICICI bank where the appointment of Chanda Kochhar as MD led to an exodus of the other top contenders from the bank, is fairly well documented. How does one address this challenge? Commitment to communication, says the HR head of one of India’s top manufacturing firms, helps retain talent and defuse the tension that often

“If you pick a talented guy but put him in a job where his intelligence is not fully utilised, he will leave” —SK Joshi, Former Director of Finance, Bharat Petroleum Corporation (BPCL)

Jiten Gandhi

Manager (GM) level and above, each of whom are monitored and reviewed by peers, subordinates and superiors on their leadership style,” he discloses. In the finance department, there are five GMs and two Executive Directors (ED) and the final selection comes down to the EDs, which are below-board level positions. In this case Mr Varadarajan succeeded Mr Joshi. Use the rotational system: Agrees Mr Sen of RCF (who mentored his successor in his previous assignment as Director of Finance at Gujarat State Fertiliser Corporation). Such planning, he says, is not just left to the incumbent CFO but is a joint planning by the organisation. “Even at RCF, when we are planning for succession, a person is identified and through the rotation system in our company, he is provided exposure in other areas to update his knowledge,” he reveals. The rotation

cover story accompanies succession planning. But such communication, she says, “has to be carefully managed”. The director HR of a private bank, who did not want to be quoted on record, added that one needs to communicate not only with the people who have been identified for rotations, but also with those who have not been included.

EXPECTING THE UNEXPECTED There is, of course, a chance that an efficiently run succession plan will go awry. What if the person being mentored as CFO gets a lucrative offer and quits? Tata Motors for instance, was caught off guard when their MD, Carl-Peter Fosters quit suddenly in September 2011. Surprised by the departure, the company is now conducting an internal and external search for his successor. But because such a surprise can be a problem for a company, many management teams plan for that contingency. At some organisations in India multiple candidates are groomed, so that if one leaves, another can take his or her place. For instance when the finance department at a well-known pharma company began its planning a few years back, they found no one they could identify as a possible successor. Now, after three years of careful planning, there are at least three people in line for the CFO role, should the need arise, according to the HR head at the organisation.

“Then there are some large groups where the bench strength is so good that at any point in time there are one or two people who can step into the CFO’s shoes should the incumbent leave” —Deepraditya Datta, Managing Director, Venator

Of course not all finance teams can boast of such bench strength. At most small and mid-sized Indian companies, even rotation programmes can be difficult to achieve simply because they do not have enough senior level talent that they can borrow from one department and put in another for a year. So what should they do? Mr Sen says in such organisations employee development is more informal. After the CFO assumes new duties, he del-

THE BLUEPRINT Have a formal succession plan programme Identify employees who have potential to handle responsibility and have talent Assign such managers a mentor such as the CFO Ensure such employees are posted for some time in another department or function, to broaden his skill and understanding of the business Be prepared to manage and tackle the expectations that come once these employees realise they are being ‘groomed’ Have a plan B ready in case a potential successor quits Communicate to both chosen ones and other candidates often, precisely, and discreetly

egates more responsibilities to his staff as necessary, so that if the CFO quits or is on leave, at least the two next-incommands can jointly handle the job till a replacement is found. Developing a seamless succession planning system is indeed easier said than done and often is a time consuming process. But companies with the know-how and the willingness to implement such a programme, usually end up better-off, not only in orderly transition and avoidance of outside search costs, but also in the retention of their top talent. As Mr Joshi says, having the support of a team of skilled and capable colleagues always makes the CFOs job that much easier. Clearly, there is a lot of wisdom in putting a succession plan in place for the top job in finance. September 2011

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cover story

Planning

The Pipeline Companies risk endangering growth plans because they are leaving the developments of future CFOs to chance, finds an E&Y survey of 530 group CFOs

t is not a problem unique to India after all. Few companies across the world have a formal CFO talent development programme in place, despite new research suggesting a link between strong company performance and succession planning for finance executives. A global survey by Ernst & Young in March 2011 (Finance Forte: The future of finance leadership) found that while businesses looking for strategic acquisition opportunities to capitalise on growth particularly in emerging markets will increasingly require strong finance skills in their top teams, most companies haven’t planned ahead. The study, which tracked 530 companies including most in the For18

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% Stakeholder management (customer, investor relations)

% Deep experience within the same industry

% Wide range of finance roles

% Experience across a range of industries

% Management of business unit operations

% International experience

% Managing large and diverse teams CHART 1

% Major strategic change project (M&A, IT, cost restructure etc)

How important is it for Future Group CFOs to have Experience in the following areas?

CHART 2

Developing Skills and Experience

Question asked of Group CFOs: In which areas do your direct reports most need to develop their skills to progress to a CFO role? Question asked of non-CFOs: In which areas do you feel you most need to develop your skills to progress to a CFO role?

45% 38% 36% 26% 25% 25% 24% 22% 9% 3%

19% Executive business strategy to manage 33% Skills upwards (CEO/Board) and 41% Communication presentational skills

insights into our 25% Deeper organisation’s market 24% Designing overall business strategy 19% Analytical and advisory skills to lead people in and 21% Skills beyond finance function 21% Change management skills

understanding of how technology 21% Better can support finance function 31% Networking and profile buildings

CFO/Finance Directors Non CFOs (Controller/Treasurer)

cover story CHART 3

CHART 4

Which of the following statements Best Describes your view of the role of the CFO in succession planning?

CFOs should not be involved other than as a role model

CEO of other divisions

CFOs should have a formal mentoring role

CFO Non CFOs

CFOs should mentor and guide potential successors but in an informal way

Stepping Stones: where did they come from?

Which of the following statements best describes the CFO Succession Planning Process in your organisation?

Route To The Top: How did they get there? Group CFO

30 Same

Held positions in one country

Non finance role

External Hire

Changed sector

Sector

Held positions in more than one country

Finance role

0 Company does not have a formal sucession programme 0 Company has a broad pool of candidates but no specific shortlist of succession 0 Company has identified and started mentoring several candidates 0 Company already has a specific candidate in mind for succession 0 Don’t know

Dy CFO at same or

%another company

CEO/Partner at another company

10 VP/Dy CEO

13 CFO at a

CFO of a smaller at same or 12 division other company

37 MBA

different company

Head of other 24 divisions finance oriented %

Head of operations 26 (strategy, oriented divisions M&A etc) %

CHART 6

Hired from within

Interestingly enough, while 34 per cent of the companies admitted that they did not have any formal system of identifying and grooming successors and 73 per cent went on to add that their organisations did not even have anyone fit for the CFO role in case they left, the E&Y survey showed that as many as 57 of these CFOs themselves were a product of succession planning, having risen up the ranks and internally groomed as successors.

CHART 5

22 3 15 26 CA MBA PHD OTHER & CA

tune 100 list, revealed that companies that had reported growth of 5 per cent or more in the past year had all developed internal candidates up through the ranks to CFO. Answering a question, 72 per cent of respondents agreed that the breadth

43 From a %

different company

% Within the company

and profile of the CFO role makes it a more attractive career aspiration. Yet there were also concerns that the pool of individuals with the appropriate skills and experience to succeed in the position was not sufficient. In fact 73 per cent of respondents agreed that very few people in their current finance organisation have the broad skills required to succeed as Group CFO. However, some leading CFOs the E&Y team spoke to did not believe that there was a lack of talented finance professionals. Instead, a number of them pointed out that structural changes within the finance function might have limited the opportunities for talented candidates to develop the right experience for the top job. In view of this, they argued that formal identification and development of talent was critical to ensure a strong pipeline of candidates with the right credentials for the role. September 2011

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cfo

Profile SONJOY ANAND CFO, TECH MAHINDRA

Engineering a

Tech-tonic Change The CFO of Tech Mahindra talks about the thrills of an IPO, the drama around the Satyam acquisition and some valuable lessons he picked up over the years DHIMAN CHATTOPADHYAY

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Sonjoy Anand enjoys playing golf. And both on the greens and off it, he likes to land a birdie and win every time. While his golf handicap may not quite compare with Nick Faldo yet, his success rate in the field of finance is quite outstanding. For the past 25 years he has been devising winning financial strategies at work, the last eight of them as the Chief Financial Officer in Tech Mahindra. Growing up in Delhi where his father was a senior bureaucrat, Anand says he decided pretty early that he would prefer working in the private sector as opposed to being a government servant. He did well in school (St Columba’s) and then took up economics for his graduation in Hindu College. “I was fairly good in my studies but I also took active part in outdoor sports,” he says as we sit in his corner office in Tech Mahindra’s well spread out campus on the foothills of the Western Ghats in the outskirts of Pune. He drifted into doing his chartered accountancy (CA) since, as he says, “in those days the only options you considered were engineering, an MBA or a CA. I happened to know a few success-

Milestones First Job ICI Big Break GM Finance, ICI India A Ha! Moment “Hole in one” or “TechMahindra IPO” Little-Known Fact Enjoy running Dream Work with/start a NGO

September 2011

CFO india

cfo Profile ful CAs and also some of our seniors in college had enrolled for the CA training. It was a viable choice for me after a course in economics.” Thereafter, Anand’s career has gone one way – up. Interestingly, for a man who has worked in almost every aspect of the finance field, concluded high profile M&As, led the finance function of a company in UK and even donned the CEOs hat for a while, Anand has only worked for two organisations in his over 25-year-long career. “My first job was with ICI, where I worked for 20 years. Thereafter I joined Tech Mahindra where I have been the CFO for a little short of a decade now,” he says. As he sees many of his colleagues and juniors jump ship frequently to further their career or improve their pay cheques, does it ever strike him that he may have lost out a bit by not moving jobs more often? “Not at all. I joined ICI because it was an eminent organisation and had a great work culture. After 20 years I moved to Tech Mahindra. Looking back I can honestly say that I have never regretted my career decisions,” he shoots back with a smile. The two decades at ICI, taught him a lot, “I handled every conceivable role in finance across locations, became a GM and then took over as CEO of a portfolio of businesses for ICI (Speciality Materials) in 1999,” he recalls. A few years later in 2001, ICI found in him the right man for the job and sent him to UK as Director-Finance of Synetix, Plc one of its global businesses. In 2003 after two decades at ICI, Anand decided to move on, a decision he says was made because he wanted to return to India with his family. ICIs loss was Tech Mahindra’s gain. As CFO, Anand has taken the company from strength to strength over the past eight years. As we talk about his current stint, I probe about some of the high points in his journey. The IPO in August 2006 predictably tops the list. “It was a moment which we all savoured, particularly satisfying because we debuted on the stock exchange (BSE/NSE) and were oversubscribed by 70 times,” he recalls. With Anand at the helm of finance, Tech Mahindra’s revenues and profits have also grown dramatically over the years. “Between 2005 and 2009, before the economic slowdown, our revenues grew by 4.5 times and our EBITDA , 9 times. We went from being a $210 mn company to a $985 mn one in revenue terms, in this period,” he says. 22

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Favourite

Picks NEWSPAPER

TOI/ET MAGAZINE

Economist FILM

Casablanca BOOK

Urban Warriors

With nearly THREE DECADES OF EXPERIENCE BEHIND HIM, ANAND IS TAKING TECH MAHINDRA TO NEW HEIGHTS

HOLIDAY/DESTINATION Dalhousie, Goa

In 2009 two things happened. The downturn hit and then, the Satyam scandal engulfed India in January. “Call it luck or fate, but at the time from a strategic point of view we needed to look beyond telecom and diversify in order to grow. When Satyam was put up for sale, we saw a compelling strategic rationale to pursue it,” he recalls. The acquisition of Satyam was a high point no doubt, but Anand admits to several nervous moments. “Frankly there was limited information available on Satyam, significant legal issues and customers and employees were leaving the company. After detailed discussion with their interim management and consultation with advisors, we

cfo Profile

Yusuf Khan

“Remember one basic principle: to succeed in business you must be strong in strategy, operations and in the people department. Ignore any one of these at your own peril”

had a broad assessement of the risks and opportunities involved and decided to go ahead. In hindsight it was a wise decision,” he says. The acquisition meant TM graduated from being a top player in the telecom technology sector to one with a comprehensive footprint across industry verticals and geographies. Financially too the acquisition was transformational. Between 2009 and 2011, as a combined entity, Tech Mahindra more than doubled its revenues (compared to 2009 figures). “The merger (of M-Sat with TM) is next on the agenda, post which we will be a true tier-I company for customers, verticals and services,” he says.

His vision is to “leverage and catapult Tech Mahindra” from this new base. “In the next few years the challenge will be to deliver rapid growth,” he adds. The heady success and the respect that comes with it however, hasn’t made him forget the basic rule: stopping every now and then, to pick up valuable business lessons. The most important lesson, he says, is that it is critical to have a good team. “If you want to win, surround yourself with great people, with winners. Have the confidence to give your colleagues space and help them grow. Delegate work and authority but monitor progress and step in when course correction is needed,” he advises.

He also feels many of us forget early learnings as we go up the ladder. “It is good to remember that to succeed in business you must focus on three core processes: strategy, operations and people. Ignore any one of these at your own peril,” he smiles. Finally, having lived through the boom years of 20042008, survived the economic downturn and the dramatic Satyam acquisition, Anand has come to believe that during good times, one needs to be aware of the pitfalls of exuberance and in bad times, to remember that “this too shall pass.” And when a man with nearly three decades of experience in finance tells you so, it makes sense to believe him. September 2011

CFO india

in practice

CFO NEXT

PATH TO THE CFO SUITE For CFO aspirants, it’s not enough to have strong professional networks, a well-crafted resume and promotions related to experience. They must also convince hiring managers they will fit smoothly into the company’s culture and structure Cynthia Waller Vallario

job description for a chief financial officer position typically begins something like this: “The CFO provides primary day-to-day operational support to the organisation and assumes a strategic role in the overall management of the organisation and its financial objectives. The CFO is a key member of the management team, reports directly to the president/CEO and is responsible for all aspects of the organisation’s accounting and finance functions.” CFOs might also think it useful to possess X-ray vision and the ability to expand the 24-hour day. Businesses today require financial executives with personal leadership traits and wellrounded technical skills beyond traditional accounting and finance credentials. One more thing individuals who want to occupy the CFO chair must have is unquestioned integrity and candour and also learn to be a good listener. There will always be more than one

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way to negotiate the finance executive ladder, and a look at the career paths of four successful finance chiefs reveals they share certain experiences, traits and skills and have all used important career-building strategies to become key leaders in their organisations.

Katie Scherping, CFO, Red Robin Gourmet Burgers Inc. Katie Scherping is the finance chief at Red Robin Gourmet Burgers Inc., a chain of 400 casual dining restaurants headquartered in a Denver suburb. She grew up in Aurora, Ill., and her decision to take several accounting courses while in high school became the foundation of her future career. Finding she had a real interest in and aptitude for accounting, Scherping landed her first job out of college as an auditor with Arthur Andersen

in Denver. She earned her CPA designation while at Andersen, specialising in the oil and gas industry. Approximately 20 years ago, Scherping worked at a security alarm monitoring company where she navigated its finance team through a Chapter 11 bankruptcy to emerge as a publicly traded company on the American Stock Exchange. Then in 1999, while working as treasurer and director of finance for Tanning Technology Corp., an IT consulting firm, she guided Tanning through an Initial Public Offering and listing on Nasdaq. Shortly afterwards, Scherping was named CFO of Tanning, which was subsequently sold to a private equity buyer a year later. In 2005, she was named to the top finance spot at Red Robin, a result of using an executive recruiter along with her well-established business network in Denver. “The experiences of guiding one

in practice

Photos.com

One more thing individuals who want to occupy the CFO chair must have is unquestioned integrity and candour and also learn to be a good listener company through a bankruptcy situation and directing another through an IPO are excellent examples to showcase your leadership and planning skills to an employer,” says Scherping. “These are opportunities that give you a unique skill set to build your brand and differentiate yourself among all the other talented CPAs and finance executives competing to get noticed by hiring managers.” Scherping has been a member of FEI for eight years and serves on the Editorial Advisory Board of Financial Executive. She feels strongly about maintaining relationships with her extensive professional networks. This has indeed paid off for her in many ways. In 2006, she was awarded the Jean Yancey Award for Outstanding

Women in Business by Denver’s chapter of the National Association of Women Business Owners, and in 2008, she was named Denver’s CFO of the Year for a medium-sized public company. No stranger to the expanded role of finance, Scherping is ultimately responsible for her company’s investor relations and interfaces frequently with the public relations department of Red Robin. Asked what she finds to be the most challenging aspect of being a CFO, Scherping says it is “understanding how to balance your responsibilities to your shareholders while fitting in with the company’s culture and the board’s expectations. At the same time, it is very rewarding to share values as head of the finance team and work with other executives to achieve objectives.”

William Grammaticas, CFO, Implementation Specialists for Healthcare Inc. Bill Grammaticas has been the CFO at Implementation Specialists for Healthcare Inc. in Fairfield, NJ, for nearly 10 years. The company, which employs 100 people and 30 outside contractors, provides human resources programmes, business process-management solutions and information technology implementations to health care providers, primarily hospitals. Grammaticas says that as CFO, it can be difficult determining how to prioritise between what may be important versus what is most urgent. “Being successful as a CFO encompasses the September 2011

CFO india

in practice challenges of the position, which are to balance the needs of your internal and external customers while juggling the many assignments that make up your day,” he says. “It’s critical to be both a good listener and a good planner.” As a high school student growing up in Massachusetts, Grammaticas invested money in the stock market with his father’s assistance and thought he would become a stockbroker. After graduating from Syracuse University with a degree in finance and an MBA in accounting, he found himself working in Manhattan as a financial analyst for Paramount Pictures in charge of television planning. He recalls that job as interesting and sometimes exciting — with ridiculously long hours. Since then, Grammaticas has had a varied career, holding financial roles with increasing responsibility with several different companies. He became skilled in international transfer-pricing issues, inventory and cash management and also led a corporate turnaround. Grammaticas emphasises that anyone who wants to become a CFO should consider two things to bolster his or her career prospects: actively pursue ongoing education credits and take on volunteer leadership roles in the community and nonprofit organisations. He has been active in scouting as his church’s board of trustees and was a fundraising chair for United Way. “The rewards for helping others through volunteerism are enormous, and it is also a very positive way to develop your leadership skills,” says Grammaticas. In his volunteer role, he has also been involved with FEI for 15 years and is the incoming president of FEI’s New Jersey Chapter. It’s notable that Grammaticas found his present employer through FEI’s Career Services department. “People need to realise their current job is always temporary. That’s why networking is so important,” he says.

Sharon Ellis, CFO, Texas Scottish Rite Hospital Sharon Ellis, the finance chief at Texas 26

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The experiences of guiding one company through a bankruptcy situation and directing another through an IPO are excellent examples to showcase your leadership skills to an employer —Katie Scherping

CFO, Red Robin Gourmet Burgers Inc.

Being successful as a CFO encompasses the challenges of the position, which are to balance the needs of your internal and external customers while juggling many assignments —William Grammaticas CFO, Implementation Specialists for Healthcare Inc.

A hospital’s CFO must learn about and address numerous and constantly changing federal regulations. I find this probably the greatest challenge of my job —Sharon Ellis CFO, Texas Scottish Rite Hospital

Scottish Rite Hospital for Children in Dallas, truly loves her job. When she took on the CFO role two years ago at this top pediatric orthopedic centre (founded in 1921 by the Scottish Rite Masons of Texas), she had the unenviable task of replacing someone who had been the CFO for nearly 40 years.

Ellis was urged by colleagues in her extensive business network to pursue the position, which was advertised only by word of mouth. “I knew the board wanted an executive with the right personality fit for the hospital. I’m always mindful that I represent this hospital to every person I meet every day,” says Ellis.

in practice As a child in Albuquerque, NM, Ellis spent hours playing with a silver piggy bank that her parents had given her and enjoyed counting and stacking the coins. Maybe not a surprise then, that upon obtaining an MBA in international finance from the Thunderbird Graduate School of International Management, she was hired into a credit analyst training programme by a major bank in Dallas. For the next 10 years she received a series of promotions, helped by two female mentors at the bank who, dismayed at the bank’s inability to retain talented women, identified her as a ‘high-potential female employee’ and steered her onto her career path. Ellis maintains close contacts with her early mentors at the bank, and returned the professional favour with her involvement in an executive mentoring programme at Southern Methodist University’s graduate business school. She also teaches MBA students about corporate governance, corporate finance and business investment strategies as a guest lecturer at the University of Houston and the University of Texas-Dallas. She believes one way to be successful, “is to closely observe other successful people whom you respect and care about.” One unique experience in her background bears telling. She and a partner became internet entrepreneurs in 1999 by creating the world’s largest internet portal for the furniture industry. After three years, the duo sold the business to a group of investors. “The opportunity to own a company whose life cycle changed seven times a year was just tremendous from a financial executive’s perspective,” observes Ellis. Ye a r s b e f o r e c o m i n g t o t h e orthopedic centre, Ellis gained significant leadership experience and insight into dealing with various stakeholders by serving on health care foundation boards. “A hospital’s CFO must learn about and address numerous and constantly changing federal regulations. I find this is probably the greatest challenge of my present job,” says Ellis. She says she

Networking is critical to anyone’s career, but particularly so to finance executives...No one gets ahead and stays the course simply by working hard —Michael A Simons CFO, Blauer Manufacturing Co

is particularly grateful to have a strong local network, which includes many health care executives.

Michael A Simons, CFO, Blauer Manufacturing Co. Perhaps no one can speak about the importance of mentoring and networking for finance executives better than Michael A Simons, CFO for 16 years of Boston-based Blauer Manufacturing Co., a privately held business with about 300 employees that produces protective apparel for public safety personnel. Simons proudly counts as one of his mentors Gorham Brigham, one of the first inductees into FEI’s Hall of Fame. Simons says that Brigham (now well into his 90s), who was instrumental in creating the FEI chapter in Boston, “is a giant among giants and an instinctively good networker who understood the necessity of exchanging ideas among peers.” Simons notes that he frequently finds people in career transition are without networks and “have been so busy investing in their current jobs they’ve forgotten to invest in themselves. Networking, Simons says, “is critical to anyone’s career, but particularly so to finance executives. Besides, the dividends in knowledge one obtains from participation in a professional support group are huge to both you and your company. No one gets ahead and stays the course simply by working hard.”

Most would agree with Simons that two essential traits of a good finance chief are being decisive and knowing how to listen. But that’s just one side of the coin today, he says. ”A CFO’s functions have expanded as society and businesses grow increasingly complex, making the problems of financial management ever present and ongoing.” A native of Providence, RI, Simons holds CPA and MBA credentials and did a stint at Price Waterhouse early in his career. Recruited for the CFO position at Blauer by a human resources executive in his network, he also has a corporate turnaround situation on his resume. In his volunteer activities, Simons has been a trustee for Financial Executives Research Foundation (FERF) and is in line to be the next board chairman. For each of the superior financial executives profiled here, pertinent work experience, a well-developed and supple professional network and a thirst for continuing their career education and advancement have proven to be a recipe for success — and a ticket to that plum financial position in the C-suite. Cynthia Waller Vallario, JD, (cwvall ario@comcast.net) is a freelance writer who writes for Financial Executive ©2011 Financial Executives International | www.financialexecutives.org September 2011

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opinion

Time to Bank on Social Networks How businesses, particularly banks, can leverage social networking for improved customer service, and bottom line Chandramouli Kundagrami

Not banking on it…yet

acebook, Twitter and LinkedIn are the undisputed poster children of the social computing phenomenon. What’s more, their popularity shows no signs of abating. With users of social media numbering hundreds of millions, most large organisations have factored these important tools into their marketing strategies and, any of those who haven’t, are probably considering doing so. Organisations are engaging with their customers within both closed and open social communities, hoping to influence their interactions and eventually their decisions. They are also using these platforms to seek customer input on a variety of issues — right from clients’ opinions of existing services to their expectations from future offerings. Now, organisations are also leveraging social interactions to probe the minds of employees and external partners, gaining insight into what makes them tick in order to proactively address their needs. 28

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That being said, the business world is still coming to grips with the seemingly limitless potential of social computing. They have barely scratched its surface till date. While the automotive, retailing and telecom sectors are surging ahead with social media, barring a few exceptions such as First Direct, Citibank, Bank of America and Wells Fargo, the typically conservative banks and financial institutions are taking a ‘wait and watch’ approach, assessing how the phenomenon can be used to enhance business value. There are some strong reasons for this caution, not the least of which is a concern about ensuring compliance and data security in an area which is not governed by an established regulatory framework, and lack of clarity about how social technologies will evolve. Consequently, banks have merely dabbled in the social space (if they’ve gone near it at all!), doing little other than conducting an advertising campaign or delivering marketing messages. However, the industry will not be

able to deny the social imperative for long. We foresee them embracing social computing sooner rather than later, in order to stay competitive as well as relevant to their customers. The following section explores ways in which banking institutions can leverage social media to reap a range of benefits.

Influence customer activity A study conducted in February last year showed that consumers trusted product reviews by other users 12 times more than the claims of manufacturers! In another survey, more than 80 per cent of respondents said they took advice from their friends in online social networks with regard to a product purchase; and about 75 per cent of these people said that the advice influenced their final purchasing decision. This indicates how deeply the social element is ingrained into consumers’ buying processes, with community recommendations doubling up as a

shigil n

in practice

shortlist of products to choose from. Even when consumers decide on their own to buy a certain product or service, they go back to their peer group to validate their choice. Since these trends have also made their way into financial decision-making, it is imperative for banks to be out there in social media – monitoring, engaging and, where possible, influencing customers in their favour. Once they gain traction within the community, they then need to get their advocates to spread the good word around. The ability to harness the viral power of social networks to sell financial products and improve customer experiences will be a key competitive advantage in future. Feedback from the online community serves many purposes. First of all, it is the acid test of performance. Negative feedback highlights areas for improvement; positive reviews swing community members in favour of the product or service.

By encouraging and acting upon customer input, a bank can not only enhance its performance, but also gain a reputation as a financial institution that listens and cares. In return, they must reward their customers for their feedback, to keep them motivated. Unfortunately, recent studies show that banks are not using feedback from social communities to improve customer service. A mere six per cent use social media to deal with customer queries, and only another one per cent plan to do so between this year and next. This is another area that merits attention.

Innovate When it comes to consumption, today’s customers have high standards. These expectations are finding expression in co-creation, which is becoming part and parcel of product development and innovation at an

increasing number of organisations. Banks, which conduct extensive market research to understand customer need prior to product development, now have a faster, simpler and cheaper alternative in social co-creation. What’s more, they can extend the involvement of influential customer segments beyond the ideation process by testlaunching products to the group before exposing them to the world at large. This serves a dual objective – confirmation that the new offering is in tune with market expectations, and favourable word of mouth from influential community members, even before the product is formally announced. These advantages could help co-creative banks emerge as future leaders, as the following example shows. A few years ago, Malaysia’s Alliance Bank bet big on social media while launching a new credit card, at a time when domestic card usage had been badly September 2011

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in practice hit by the imposition of a new tax. They unveiled their card, called You:nique, exclusively on certain social network groups before making it available to the public. Next, they sought the involvement of a set of influential bloggers by inviting them to a special preview and setting up a demo micro-site on which they could express themselves. These measures enabled the card to achieve an enormous online presence; the success of You:nique contributed to Alliance Bank being recognised as one of Malaysia’s most valuable brands in 2009.

customer by recommending a trusted retailer as well as offering an attractive financing option through their credit card. A timely and relevant offer of this nature is likely to be well-received by the customer, rather than one that comes with a hard sell. It also strengthens the engagement with the customer, who appreciates the bank’s efforts to understand and fulfill his requirements. In return, the customer advocates their services within his or her own community.

Find new opportunities

Similarly, banks can also leverage the intelligence gathered from social communities to enhance their members’ ability to manage their personal finances. They can do so by sharing and com-

Social forums afford banks new opportunities, such as a chance to facilitate P2P lending. Although banks only act as intermediaries in social lending,

Spread financial education

While the retailing and telecom sectors have taken to social media with gusto, financial institutions have been hesitant; concerned about compliance and data security they render their customers a service by bringing their expertise to the table to help secure a good deal at a competitive rate. In this way, banks can come to be regarded as ‘good middlemen’, an image that will bind the loyalty of their customers in the long run, and open up other revenue opportunities.

Offer contextual services When community members share their current location and recent activity with peers, they open the door to location-based or contextual offerings. Take the example of a member seeking inputs about a piece of electronic equipment from his peer group. A bank can seize the opportunity to serve this 30

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paring goals among community members and supporting them with ideas and funding. Wells Fargo has hit upon a novel way to spread financial awareness through ‘Stagecoach Island’, a virtual world in which people connect with each other and learn money management in a gaming environment. While these are great ideas, it is not enough to merely point people in the right direction. In order to close the loop, banks need to make the right kind of ‘personal financial management tools’ available to their social communities; those which not only empower users to arrive at a good financial decision but also enable them to consult the banks’ advisors over various social platforms in a seamless manner. By doing so,

they create a win-win situation for their customer as well as the organisation. It is anticipated that such services, which leverage customer-centric business intelligence gathered from social media, will become a tool for customer acquisition in future when more members from the digital Generation Y enter the banking fold.

LOOKING AHEAD The influence of social networks in the buying decision is now beyond debate. It is believed that the average consumer makes 90 mentions of specific brands every week while talking with family, friends and peers. Today, social groups exert a strong influence over all types of consumption, including that of financial services. However, banks have not yet plunged into social media. Analysts predict that social media technology will mature in two to five years. At that time, we can expect the grey areas that are currently of concern to banks – such as regulation and security of transactions – to become clearer. That being said, the penetration of social computing into financial services will be influenced not only by the evolution of social technology itself, but other supporting ones – like mobile banking, for example. This is because, with the arrival of smartphones, an increasing number of people are using their mobile devices to network. Banks will have to make social networking a seamless, integrated component of their delivery mechanism, so that users can switch effortlessly between channels to complete a socially enabled transaction, irrespective of location or time. The time is now ripe for them to lay the foundation for the social banking of the future.

T he autho r is Industry Principal, Finacle

in practice

technology

Data Centre As it Should Be An insight into how power, cooling, network and private cloud can be best managed inside the data centre SANJAY GUPTA & VARUN AGGARWAL

photos.com

he data centre is the backbone of any enterprise today and is also a major contributor to the IT budget. The increased storage requirements, high power computing devices and technologies such as private cloud are pushing organisations to take a closer look at their current data centre infrastructure. Companies need to analyse if their data centre is capable of handling the increased bandwidth pressure, heat density and real estate requirements. Some of the key issues that organisations often face in the data centre space relate to power, cooling and network management. CFO India brings to you the best of breed case studies that give an insight into the crucial areas of power, cooling and network management. Also, as more and more organisations try to find out how a private cloud can benefit them, we feature one of the largest private cloud deployments in the country, to give you an idea. September 2011

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in practice

Cool & Jubilant Jubilant Life Sciences Ltd (formerly Jubilant Organosys Ltd) is an integrated pharma and life sciences company. It is the largest Custom Research and Manufacturing Services (CRAMS) player and a leading Drug Discovery and Development Solution (DDDS) provider out of India. With 10 worldclass manufacturing facilities and a team of about 5,700 people across the globe, Jubilant provides a wide spectrum of life sciences services to customers in 60 countries.

With rapid growth in both CRAMS and DDDS businesses, Jubilant wanted to have a robust, dynamically flexible, secured and high uptime data centre that would cater to changes required in IT. That’s why Jubilant decided to build a new Tier 3 data centre that could not only host its present servers but also take care of growth for the next five years. According to Umesh Mehta, CIO, Jubilant, “As per the industry best practices, we decided to move all the servers to the new data centre and keep the existing data centre for hosting WAN and LAN devices along with EPABX. Moving all the applications to the new data centre was difficult as it involved different cabling infrastructures supported by different partners that do not support servers. Hence, it was decided to move the servers alone to the new data centre. This arrangement took better care of our security as well.” For any data centre today, power and cooling not only contribute significantly to the overall costs, they are also key factors in keeping the applications running smoothly and without too many glitches such as surges, outages, fire damage and other problems. According to a study by 32

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Subhojit Paul

The Challenges

“The designs for various packages like electrical, CCTV, fire alarm systems, etc., were studied for ease of operations and maintenance” —Umesh Mehta CIO, Jubilant

Gartner, the heat density or the power consumed by a typical rack in the data centre has grown from less than 5 kW in the year 2000 to as much as 15-20 kW in 2009. And due to even denser and powerful blade servers being used today, this power consumption is only going to increase. For its power and cooling needs, Jubilant carefully drafted a vendor selection criteria, which included: the design proposed, past experience of the vendor, OPEX reduction, i.e., the green initiative, optimised CAPEX, and the local/national standards

in practice followed. “The designs for various packages like electrical, fire-rated civil and interior, CCTV, fire alarm systems, etc., were studied from the points of view of ease of operations and maintenance,” says Mr Mehta. The next step was to invite a couple of vendors to present their solutions and then create techno-commercial comparisons to finalise one. At the end of the selection process, Emerson Network Power was chosen. The solution was also implemented by Emerson in the course of about four months.

Learnings and Benefits One of the key learnings from Jubilant’s implementation of power and cooling solutions, in the words of Mr Mehta, was the need to study the completed solution from “ease of operations and maintenance points of view.” Thanks to the due diligence and provisioning for future growth undertaken by Jubilant, the power consumption in the data centre is less than what it estimated. This is because ample buffer capacity was planned right from the beginning. So, what measures or criteria were adopted by the company to identify its cooling requirements? Says Mr Mehta, “We calculated the heat load against the number of servers and derived the cooling capacity required, i.e., BTUs (British Thermal Units) for individual servers.” As a result, Mr Mehta says, the power and cooling solutions are geared to meet the organisation’s requirements for the next five years or so. Any forward-thinking data centre, says Mr Mehta, should properly measure its cooling requirements using the formulae available with respect to the heat load. “Generally, rated power figures are used but one should use the running load ratings which are lesser than rated power figures on power supplies. Redundancy in cooling should be maintained and, if possible, variable compressor technology should be used,” he adds.

NOTED • With rapid growth in both CRAMS and DDDS business, Jubilant wanted to have a robust, flexible and secure data centre • For its power cooling needs, Jubilant drafted a vendor selection criteria, which included the design proposed, past experience, green initiatives from the vendor and other data • The next step was to invite vendors to present their solutions • Thanks to due diligence and provisioning for future growth, the power consumption in the data centre is less than what was estimated • As a result, power and cooling solutions are geared to meet the organisation’s requirements for the next five years

Mr Mehta advises, “For power, one source should be from the dedicated UPS unit and the other can be from the shared UPS bank. Both supplies should come from different routes and have independent circuits. Redundancy and contingency plans need to be in place in the event of a crisis.” However, despite achieving its initial goals in power and cooling, Jubilant doesn’t seem in a mood to rest on

its laurels. One ongoing challenge for the company is to keep a tab on power consumption on each rack and SNMP monitoring of PACs. “We are talking to vendors regarding both the issues. We are also talking to them regarding server-level real-time power consumption,” says Mr Mehta. Evidently, Jubilant wants to ensure it remains as cool and power-efficient as technology would allow it. September 2011

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in practice

IT companies are not just followers but often leaders in global technologies. With all the excitement surrounding the latest buzzword – cloud computing – and despite the wary wait and watch policy of most peer companies, Pune based KPIT Cummins Infosystems Limited, decided to lead the latest technology from the front. KPIT Cummins is a global IT consulting and product engineering partner focussed on co-innovating domain intensive technology solutions for manufacturing companies (with special focus on automotive, hi-tech and industrial verticals). The company currently partners with more than 100 global manufacturing corporations including over 50 original equipment manufacturers (OEMs), semiconductor and Tier I companies. It helps its partners globalise efficiently and bring complex technology products/systems faster to their global markets. In order to set up a highly optimised data centre, KPIT decided to opt for private cloud deployment. After going through a rigorous proof of concepts (PoC), the company decided to go for the VBlock technology from VCE. VCE, the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel, accelerates the adoption of converged infrastructure and cloud-based computing models that aim to reduce the cost of IT. VCE, through the VBlock platform, delivers an integrated IT offering with end-to-end vendor accountability. “The PoC went on for three months with multiple vendors and we finally decided to go for VBlock, which includes servers from Cisco, storage from EMC and virtualisation from VMWare. The solution seemed as 34

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jiten gandhi

Private Cloud, Raining Benefits

“We have started migrating our corporate applications to the private cloud including SAP, Microsoft Exchange and Active Directory” — Shrikant Kulkarni Sr VP & CIO, KPIT Cummins Infosystems

though it was preconfigured for our needs,” says Shrikant Kulkarni, Sr VP & CIO, KPIT Cummins Infosystems.

A Phased Approach KPIT Cummins wanted to take a phased approach and decided to first test the water with Virtual Desktop Infrastructure (VDI) for its support functions. “We were deploying VDI for the first time and wanted to find out how VBlock can support it. Since this was the first time that we were trying out the solution, we didn’t want our core functions to be the testing ground. We, therefore,

in practice started out with HR and Finance, and gradually expanded to include other departments,” Mr Kulkarni added. The company has till now deployed over 575 virtual desktops and will implement another 1200 by October. By November, the IT major expects to migrate even its SAP servers to the cloud. “Apart from these, we have also started migrating our corporate applications to the private cloud including Service Desk from CA Technologies for infrastructure management and console management tool — SVN, Microsoft Exchange and Active Directory. We’re also migrating other corporate applications like SAP to private cloud, in a phased manner, so that the business is not impacted and the process is completed as planned,” Mr Kulkarni informed.

Multifaceted benefits According to Mr Kulkarni there haven’t been any major challenges with the private cloud so far. “While, enterprises are concerned about security on the cloud; private cloud ensures that there are no such challenges like those faced with public cloud. The problem that we may face in the future could be with regard to finding experts to work on private cloud. There are not many professionals available currently who have the required expertise. However, this is a challenge with any new technology and can be taken care of through trainings,” Kulkarni says. The advantage of virtualisation is manifold. Firstly, with virtual desktops, employees can work from anywhere in the office and KPIT doesn’t need to assign workstations to each person. “Moreover, you don’t need a one to one ratio of employees and desktops, with the same desktops available for use to employees working in different shifts. There are also no worries about sharing data or desktop settings. Even if an employee is travelling, he can access his desktop from wherever he is,” he says. “Earlier we used to go for the best

NOTED • To set up a highly optimised data centre KPIT decided to opt for private cloud deployment • They decided to first test the waters with a Virtual Desktop Infrastructure (VDI) • The company has till now deployed more than 575 VDIs • There are no worries about sharing data or desktop settings. A travelling employee can access his desktop from wherever he is

possible desktop hardware, whether required or not. Now we can optimise the memory and compute capacity and also curtail the storage space assigned to each employee. Moreover, it used to take at least one to two days to prepare a desktop for a new employee. Now it is done in just a few hours,” Mr Kulkarni said. “With VDI, we also have much better security, as it is a highly controlled and protected environment. The most important gain from VDI is the energy saving. Previously a desktop used to consume about 150 W of power, including the energy consumed by the monitor and the desktop. Now with VDI, it is down to 60 W since there is no CPU in the VDI,” he added.

Lessons learnt Mr Kulkarni feels CIOs need to ensure that they undertake a comprehensive PoC for private cloud. Also, he says, CIOs need to be sure of what they want to move to the private cloud and whether it is possible to move those applications to it at all; otherwise it may lead to disappointment. “You also need to carefully size the storage and compute for the private

cloud so that you do not face any performance issues. Once all the applications are migrated to common servers and storage, there would be immense pressure on the network and therefore, it is also important to size the network requirements. And in case you’re not already using a network management tool, you would be required to do so once you deploy a private cloud. But beyond that, you don’t require anything additional for the private cloud,” Mr Kulkarni advises. There is often a difference between what the customer wants and what the vendor delivers – maybe because of the expectation gap or a communication gap or because of the over-expectations set by the sales team. For a successful private cloud deployment, Mr Kulkarni feels it is important to ensure that the consulting partner, the equipment vendor, and all other stakeholders are in sync with the customer’s requirement. “It is very important that the consultant and the implementation partner have a clear understanding of what is required, else it could lead to various problems,” cautions Mr Kulkarni. September 2011

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in practice

VIEWPOINT

E窶的NVOICING: NEXT STEP FOR NEW AGE CFOs Automating the entire invoicing process would not only rationalise costs and save time but also drastically cut down accounting errors Prasad Devatha

he role of the CFO has changed far beyond traditional tasks such as accounting, auditing, cash flow, and reporting that dominated the priority list earlier. New age CFOs have realised the tremendous benefits that Information Technology provides in enhancing the effectiveness of the finance function. The CFO today has become the top technology decisionmaker in about half the business concerns around the world. They have invested in a superior financial ERP and the next step in this evolution could be e-invoicing. Given the opportunities for business development in India, business will grow manifold and much faster. In this new world, there is a need to review the existing processes by implementation of e-invoicing treasury module and shared services.

CFO india

September 2011

Charu Dwivedi

in practice why choose a vendor portal? Is there any way to avoid the task of each officer processing the invoices, risks of errors being made in data entry, reduce invoice approval time, and the average turnaround time from receipt of invoice to payment? Today, many companies, small or large, understand the potential benefits of electronic invoicing in terms of administrative efficiency and cost reduction. Maintaining paper documents is an expensive proposition for a variety of reasons. If accounting staff is still using paper documents, it takes time to file the documents and then retrieve them, disrupting productivity. Secondly, paper documents require a manual archive process and can be misfiled. If a document cannot be located to substantiate a transaction, then the organisation could be subjected to fines and legal actions. Thirdly, an organisation must allocate staff resources to locate and manage these files. From the mere standpoint of storage, organisations must devote both physical space and maintain a secure location for these files. Accounts Payable (AP) is focussed on managing payment terms, capturing discounts earned, avoiding duplicate payments and maintaining a vendor master file. Invoices are submitted via paper or electronically and then are verified, assigned a General Ledger (GL) number, reviewed against the existing prescribed payments system, and processed for payment if approved. In some organisations, the number of approvers increases as the dollar value of the invoice increases, resulting in a lengthy approval cycle. The processing of each invoice ends with a payment decision. Many organisations realise that they have a strong business case to streamline and ultimately automate their accounts payable process and achieve the following benefits: reducing the cost of transactions, improving vendor satisfaction, and the productivity

Invoice automation with a capture and workflow system would lower overhead, speed up payment process and effectively reduce human errors of AP staff members. In addition to SAP for Accounts Payable, the mere act of moving invoices from a paper-based to an electronic-based system can trigger significant savings. Organisations can increase the efficiency and consistency of the business processes in the AP process using digital images and workflow. By enabling digital imaging and workflow for the process, AP cycle times can be reduced, late payments can be eliminated along with the corresponding penalties. The objective is to implement e-invoicing which will provide online exchange for vendor-supplier communication which is integrated with SAP data. This e-invoicing will facilitate the entire purchase and pay process by automating procurement, logistics, finance and accounting processes with vendors.

HOW IT WORKS E-invoice technologies are now available from several companies. For instance, KaarNet, a vendor portal developed by Kaar Technologies can help in seamless communication with vendors. KaarNet is an extended supply chain portal that works smoothly with SAP. It works as an effective and efficient collaborative tool between customers and their partners This kind of a vendor portal allows organisations to quickly set up new ven-

dors, automatically request mandatory data, document that information and routinely demand updates and renewals of information to guarantee vendor acquiescence. Such vendor portals offer an on-demand consolidated platform to manage complex vendor information globally and give organisations realtime visibility into the vendor information management process.

E-INVOICING E-invoicing, or electronic invoicing, is the process by which a supplier can send an invoice electronically directly into SAP system. The vendor can also attach the scanned image of the invoice while posting. Later the AP department can verify the invoice and change the status if required, in SAP. KaarNet for example, is delivered via SaaS Model.Â Software as a Service (SaaS) is a software distribution model in which applications are hosted by a service provider and made available to customers over a network, typically the Internet. Suppliers can seamlessly connect to SAP data via KaarNet using any web browser from their laptops or PCâ&#x20AC;&#x2122;s. A secured RFC connection will be established between the portal and company SAP data for posting e-invoices.

WHY IT IS BENEFiCIAL No Capex: The most obvious one is September 2011

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in practice zero capital expenditure in SaaS as compared to heavy capex in on-premise applications. With SaaS you pay a monthly fee and need not buy expensive servers, earmark space for keeping the servers, hire database administrators to maintain servers etc. Move from license to subscription: With SaaS, you do not need to buy expensive licenses from enterprise product vendors, as this is taken care of by the service provider. Hence the ROI increases for you. In SaaS you subscribe to the service much like you subscribe to a magazine or a cell phone service, which can be started and stopped anytime. Flexibility of change: SaaS ensures that you do not have to worry about

shifting to a new and better product from another vendor. Just close your subscription and move to the new one almost immediately. No support infrastructure required: Normally, after implementation at your premise, you would engage a product support team that will help resolving the bugs in the application and helps users to get over them. This means a lot of cost and often it is difficult to retain the talent in this high demand category. In the case of SaaS, the service provider will not only provide you all the functionality but will support your application so that the operations are seamless and without break. Ease of implementation: On-prem-

HOW IT HELPS:

Benefits of e-invoicing • Automated transaction with all vendors, purchase order, book management • Reduces lead time and inventory levels • R educes the dependency on DMS and simplifies work of SSC • S ubstantial reduction in manpower at various sites • Better value for money, higher productivity and higher savings • Tight controls across the spend process • Speeds up all process in the supply chain • E-invoice technologies are now available from several vendors • E lectronic invoicing is the process by which a supplier can send an invoice electronically directly into SAP system

ise implementations take long time and involve the business as well as IT resources completely for a substantial period. With SaaS, the level of difficulty as well as period of deployment is reduced considerably.

DOES IT HELP THE CFO? E-invoicing helps the accounts department to be more efficient and improve invoice processing accuracy and efficiency. It also allows the organisation to pay suppliers across the country more efficiently and strengthen ties with them. To be able to synchronise deliveries with billing, it is vital to have real-time visibility over both the order and invoice handling processes; managing these processes manually on paper leaves room for errors, which eventually slows down invoicing as well as payment. Reduced costs: no postage costs and reduced staff time re-keying data. Real-time data delivery: quicker insight to incoming invoices enabling the finance team to pay suppliers on time. Eliminates errors and bottlenecks: it can deal automatically with issues such as missing purchase order numbers. Environmental responsibility: e-invoicing could help reduce your carbon footprint and the impact of your business on the environment. Security: This system allows the CFO to ensure that a file has not changed since it was sent, while clearly showing who actually sent it. Accurate management information: It gives the CFO a true snapshot of his incoming documents to SAP system, which he can use to plan cash-flow strategies. Prasad Devatha is Sr Vice President, Finance & Accounts, Essar Projects

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in practice

TELECOM SOLUTIONS

MANAGED SERVICES: A FRIEND IN NEED CFOs and CIOs across India Inc tell us how managed services and data centres help organisations, especially from a finance perspective deepak garg

aising capital, ensuring smooth M&A deals, devising strategies to bring a business unit out of the rut or refinancing a debt – the CFO of a company tackles an increasing number of ‘core challenges’ today. However, the smooth functioning of a number of these core areas depends heavily on one other factor: a state-ofthe-art and efficient IT infrastructure. One of the most beneficial IT solutions that telecom service providers such as Airtel and others offer business enterprises today, is in the form of managed services. To put it simply, a managed service provider (MSP) provides delivery and management of network-based services, applications, and equipment to enterprises or other service providers. Managed service providers can be hosting companies or access providers who offer services that can include fully outsourced network management arrangements, including advanced 40

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features like IP telephony, messaging, virtual private networks (VPNs), managed firewalls, and monitoring/reporting of network servers. So how do managed services or solutions such as data centres help make operations more efficient and assist the finance function? To an extent, the importance and relevance of such telecom solutions depend on the nature of the work an organisation does. For instance, for some CFOs, data centre, VPN and similar telecom solutions make operations easier so that the finance

team can focus on core areas. “They are crucial for the smooth functioning of the organisation. The biggest advantage of managed services is that they allow us the freedom to focus on the core values and areas of our business,” says Anil Saxena, CFO of Religare. A g r e e s P r a s a d D e v a t h a , Vi c e President, Finance, Essar Projects. “Managed services or shared services is an evolved business model, where a very focussed team carries out all accounting for an organisation, thus reducing the chances of data error, enabling the finance team to focus on

An efficient data centre service means no capex and no need for hiring skilled technical staff. It is also easy to scale up as needed and provide 24x7 operations

in practice core functions of the organisation. It also gives them an opportunity to think more on strategic lines. This enables quicker consolidation of accounts of the company. Managed services also reduce training needs and manpower costs across the multiple sites.” Devatha’s colleague and CTO of the Essar Group, Jayantha Prabhu, talks in some detail about such solutions: “We have an in-house data centre which addresses our requirements. We use the services of Airtel and some others, and honestly, these services have helped tremendously from a financial point of view as well.” How so? Mr Prabhu says small and medium companies have a lot to gain by opting for collocation as there is an enormous amount of money to be saved on infrastructure, technology and human resources allowing enterprises to be free to concentrate on their core business areas. He also points out that companies can create disaster recovery sites. “In the event of a snag with the primary server, the entire network automatically switches to an alternate mirrored site within a few minutes. So outsourcing disaster recovery also costs much less than what it would to set it up inhouse,” he explains. His organisation also uses Airtel’s IP services, which he says has helped consolidate the financial systems at a single location. this has also reduced the time taken to complete the financial reporting. “IP services allow for a cost-effective mechanism for an organisation which is spread across a large number of locations,” he adds. Prasad CVG, the CIO of ING Vysya Bank, too feels that managed services and data centre solutions help a company become both, technologically and financially efficient. “It gives an opportunity to host the data centre infrastructure in a more robust facility that comes with all the modern facility management tools/processes. At the same time, it also brings in other process overheads when clients want go for incremental additions to their exist-

“managed services lead to improved connectivity and efficiency for the finance function” —Aloke misra group cFO, wns global

“Managed services also reduce training needs and manpower costs across the multiple sites” —prasad devatha VP, FINANCE, ESSAR PROJECTS

ing infrastructure, resulting in delays coupled with lack of transparency in running costs,” says Mr Prasad whose bank uses the services of solutions providers such as Airtel and others. VPN services are another product that excite him. “We found it really beneficial as it reduced the cost of communication between different units of the bank by using closed user group calling, which obviously results in lower telephone costs making the finance department happy. It lowered costs, increased efficiency and led to better collaboration.” Aloke C Misra, the group CFO of WNS Global, smiles when posed with this question. “Of course we swear by managed services and data centre solutions. We run our own data centres and provide this as a service to clients along with hosting application and services,” he says. WNS uses the services of multiple telecom firms for various functions such a mobile technology, PRI systems, IPLC networks, and hosted telecom solutions. He too feels that “managed services lead to improved connectivity and efficiency for the finance function” as also for the company in general. Another beneficial aspect of telecom solutions is explained by Maneck Kalyaniwala, EVP Finance of Blue Star Ltd, when he says, “An efficient data centre service means no capex and no need for hiring highly skilled technical staff. It is also easy to scale up as needed and provide 24x7 operations seamlessly.” Some CFOs also speak about managed services such as Airtel’s Business Ready Branch solution, as a perfect example of a telecom solution helping efficiency. “This is an end-to-end solution to set-up, manage, support and look after the data communication technologies for the business,” explains Vardhan Dharkar, the CFO of KEC International. With leading solutions providers in this space constantly striving to come up with even more state-of-the-art solutions and services, CFOs and CIOs can expect greater operational efficiency and financial benefits from such services in the near future. September 2011

CFO india

Case

Study

Master of

Merger Soon after Srinivas Palakodeti became CFO of Hinduja Global Solutions, the BPO giant concluded two challenging M&A deals in India and Canada, where the CFO needed to understand the nature of the businesses, integrate contrasting work cultures and keep a check on costs Dhiman Chattopadhyay

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September 2011

clients in North America. In 2006, we acquired a US call centre which today has an annual turnover of $86 mn. And last year, we acquired the British firm Careline and entered the European market. We now have call centres in Hamburg and one more will open in Italy in October,” reveals Srinivas Palakodeti, the CFO of HGS. Given this history, one would imagine that M&As would be a walk-inthe-park for the HGS management. But when the organisation inked two back-to-back M&A deals in August 2011 — one with a Mumbai-based payroll processing centre and another

with a Canadian call centre — there was a collective sigh of relief from the HGS management. The reason? Even though both the deals were signed without any hitches in the end, it took almost a year to finalise every aspect of the Indian M&A. The process took considerably less for OLS (the Canadian firm), but the dialogue between the two parties went on intermittently for over three years before they finally settled the deal.

THE CHALLENGE While there are many points of difference in the two deals, Mr

Jiten Gandhi

lmost since the time they entered the BPO space, Hinduja Global Solutions (HGS) had depended extensively on their US operations, which accounted for 75 per cent of their revenues. The BPO arm of the Hinduja group had also grown much faster in the international market, with revenues from India operations being negligible in comparison. “We have grown largely through M&As. In 2003, we acquired our first overseas company in Philippines and today have four centres in that country, servicing

Case Study

Project Map The challenge: Concluding two tricky M&A deals

People Involved: Entire finance and M&A team

Time Period: August 2010-August 2011

Key Takeaways: Understand the nature of the business you plan to acquire. Hire a local legal team when planning an M&A abroad

September 2011

CFO india

case study

“Almost as a rule, we acquire only those companies where we are confident that the existing top management is capable of running the day-today affairs” Palakodeti says working on both the deals gave him and his team a few sleepless nights. “In case of HCCA (the Indian firm) we needed to first understand their business since payroll processing required a totally different organisational and structural set-up. Also, there were cultural differences. For instance, at HGS our office rooms are huge with over 400 seats on each floor where our employees work. They are actively encouraged to bond over work. But in payroll processing, different sets of employees process payrolls of different companies and therefore, it is imperative that they do not interact with each other. We 44

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realised that this huge difference in work culture needed to be tackled and this would require more work than we initially thought,” he says. The nature of the work done at HCCA was also such that it took the CFO and his team quite a while to fully figure out the systems and processes and to feel sufficiently confident that the acquisition would benefit HGS. “We spent more time understanding their business compared to the time we spent negotiating the deal amount!” laughs Mr Palakodeti, adding, “The overall challenge was to integrate the two companies and its people and to ensure that the merger helped

us tap into HCCA’s 35-strong client base as also provide our existing clients the payroll processing service – a key service which we could not provide them so far.” The acquisition of OLS at around the same time posed a challenge of a slightly different kind. “We had a clear deadline to meet as the exiting PE had clearly told us that the deal would be off unless we met the deadline. And in Canada they mean what they say,” he jokes. And while he knew that most other things would be in place by August 2011, Mr Palakodeti says it was a huge challenge to get the legal, IT and finance teams to conduct due diligence in all 10 centres of the firm, spread across the length and breadth of Canada, a country three times the size of India. “Physically it was a challenge to get through all the due diligence work in 45 days in far flung places, specially since most OLS offices are based in small towns,” recalls Mr Palakodeti.

HOW THEY ARE TACKLING IT Pala, as his colleagues refer to Mr Palakodeti, admits straightaway that much of the post-acquisition challenges are still being tackled. “A lot of it is workin-progress. For instance the entire OLS, HGS and HCCA teams are going through a 100-day integration session to ensure they are in sync with the group’s work culture,” he says. But there is no question that the two deals, both of which provided enough worries, were concluded successfully. “In case of HCCA, we figured that the best way to meet the challenge of understanding their business was to spend as much time at their office talking to the staff as possible. By doing so, we realised that if we acquired HCCA, we would be able to venture into the F&A and HR outsourcing sectors, where we didn’t have any expertise of our own,” says Mr Palakodeti. Thanks to this acquisition, HGS now can offer voice and data services to the 400-odd

Case Study

“I learnt how important it is to understand the business you propose to acquire, and assess the existing management’s capabilities and reputation” clients that HCCA brought with it. The icing on the cake: existing HGS clients can now get payroll processing and related HRO and F&A services from them instead of another vendor. Challenges such as streamlining of process are also being dealt with on a war footing by the MIS, finance and legal teams. “There are still some niggles. Do we need to change the documentation system? Should we streamline the MIS format for both the companies? These are issues which will take a few more months to resolve,” he says. The other obvious drawback in the deal was that no one in HGS had the expertise to lead an HRO firm such as HCCA. This challenge however, was dealt with swiftly and without too much increase in capital expenditure by retaining the existing top management of HCCA. “Almost as a rule, we acquire only those companies about which we are confident that the existing top management is capable of running the day-to-day affairs. Continuity has its advantages. Clients prefer dealing with the same people, investor sentiments are not affected and the best workers do not fear job cuts,” he says. The challenges posed by the OLS deal were different. “The due diligence process was our biggest challenge here since OLS offices were spread across Canada, and in each of the nine or 10 offices our team had to run specific checks on the technology being used, the status of licenses, and rule out the possibility of any technology solutions providers filing claims later. I think the way we tackled this challenge with the

help of our colleagues in the US, was a big achievement,” he says. The way OLS ran its business was also unique to us. HGS is a $240 mn business with over 130 clients of its own whereas OLS had revenues of around $60 mn and had only five clients. We knew we couldn’t afford to lose even a single client post the M&A. So we spent quality time with each of the clients, convinced them that neither the management nor the way of functioning would change, and spoke to them about our vision for the Canadian operations and the added services they would now be able to get thanks to HGS taking over OLS. In the

KEY ISSUES • W hen

the HCCA acquisition was being considered, the HGS team first needed to understand the business since payroll processing meant a totally different cultural and structural set up • I n case of OLS one of the big challenges was conducting due diligence across nine or 10 locations spread across Canada • P o s t a c q u i s i t i o n , HC C A s t a f f are undergoing an integration programme for 100 days so that both sides understand and respect each other’s work culture • To better integrate all acquired firms with the parent firm, all HGS companies across the world now have a common email ID

end, our hard work paid off. None of the clients has left us,” he says.

THE LESSONS The two deals, separated by many thousand miles, have brought home quite a few truths to Mr Palakodeti. “I learnt how important it is to understand the business you propose to acquire and assess the existing management’s capabilities and reputation in detail before the takeover,” he says, adding, “if possible, always retain at least the top management and the key employees of the firm you are acquiring. Continuity helps.” The value of integrating the people of an acquired company with that of the parent company is another lesson he would want to pass on. “People must feel they belong to one organisation and that they are all equal. Otherwise the feeling of being a second-class citizen might never leave people in the acquired firm. That is such wastage of time and money,” he says. This is exactly why HGS has insisted that the entire OLS and HCCA staff undergo the 100-day integration programme. “We are also creating one common email id now for all our companies globally, so that the staff at Careline, OLS, HCCA or others at USA and Philippines feel they are part of the same HGS family,” he says. Finally, he says, when conducting a deal abroad, it is important to gather as much knowledge as possible on the regulations and laws of that country. Still, his advice is, “hire and work with local legal and IT teams, because they know best.” September 2011

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insight

STRATEGY

Remapping your strategic mindset Shake-up your thinking by looking at the world from the perspective of a particular country, industry or company .y ...............................

Pankaj Ghemawat

enior executives need better mental maps to navigate our unevenly globalised world. Although a wide variety of metrics show that just 10 to 25 per cent of economic activity is truly global, executives disproportionately embrace visions of unbounded opportunities in a borderless world, where distances and differences no longer matter. In several articles and books, I’ve tried to describe the true nature of globalisation and suggest ways for executives to structure their thinking about distance and difference effects (see sidebar, “Understanding the world and measuring distance”). Here, I want to focus on the potential for a special kind of map — one I call a ‘rooted map’ — to help leaders enhance their intuition about the opportunities and threats inherent in our semi-globalised world. Rooted maps correct a misperception reinforced by conventional ones: that the world looks the same regardless of the viewer’s vantage point or purpose. 46

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In the real world though, geographic distance and differences in culture and policy, matter. To better reflect this reality, rooted maps depict the world from a specific perspective and with a particular purpose in mind. They do so by adjusting the sizes or positions of countries in relation to a specific home country, while otherwise maintaining familiar shapes and spatial relationships, which help us fit these maps into our existing mental models. Saul Steinberg’s famous depiction of the world, as seen from New York City is a humorous example. But more

data-driven versions, particularly those drawn at the industry or company levels, have serious business applications. Fortunately, the technology for creating such maps has improved substantially in recent years, so executives can now have custom ones generated with minimal time and expense.

Using rooted maps to understand opportunities The distances depicted in rooted maps represent vast untapped opportunities

Rooted maps depict the world from a specific perspective and with a particular purpose in mind

insight

to create value across borders, in ways that recognise differences instead of trying to obliterate them. The starting point is creating a reference map that depicts your industry environment but doesn’t yet reflect your own company’s or country’s unique place in it. An executive at a film studio, for example, might begin with a reference map that sizes countries according to their total box office revenues and colours them based on the market share of their domestic films (Map 1). Thus, it

indicates both — the potential theatrical market for movies, as well as how the strength of local competitors varies around the world. By comparing the reference map with rooted maps, executives can identify the impact of borders, distances, and differences. Rooted maps in the accompanying exhibits depict the worldwide revenues for US (Hollywood) versus Indian (Bollywood) films. Like all rooted maps, they reflect what I call the ‘law of distance’: the pattern of decreasing

international interactions with increasing distance or differences between countries. Not surprisingly, people prefer to watch movies made in their own languages. The largest markets where US films dominate are all English-speaking countries (Map 2). More interesting is the fact that linguistic similarity at the level of language families (English is considered a Germanic language within the broader category of Indo-European languages) increases box office revenues even when audiences need subtitles or dubbing to understand a film. This finding helps explain why Europe is so big in the Hollywood map, and the pattern also holds for other industries, making language a useful proxy for cultural distance. A common language — English — might seem at first also to help explain the export patterns of the Bollywood map, but the language spoken in these films is actually Hindi. The best predictor of Indian film exports is an even deeper cultural link: the size of the Indian diaspora in a given country. (The correlation between these two figures is 0.67. Map 3 depicts this cultural link visually.) The maps also reflect administrative distances spurred on by the extensive interventions of many governments in the film industry: limits on the proportion of foreign films that can be screened in cinemas, censorship, regulations about dubbing foreign films, subsidies for local movie production, and so on. Administrative barriers help explain why China is so much smaller in Map 2 (the view from Hollywood) than in the reference map. China allows only about 20 foreign films to be released in its cinemas each year, a trade restriction that prompted the World Trade Organisation to rule against it recently. Piracy also constrains film exports to China, where sales of pirated DVDs are estimated to be four times larger than cinema box office receipts. Finally, the maps underscore how much geography still matters. Film exports decline as distance from the September 2011

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insight United States increases. This power of proximity is evident in Hollywood’s success in the markets of its hemispheric neighbour Latin America — despite linguistic and other cultural differences. Many have the impression that geography is irrelevant for products that don’t have to be shipped physically across borders. That couldn’t be further from the truth. Even for digital products and services, geography almost always matters. The comparison between reference maps of theoretical opportunities and rooted maps reflecting real differences, can highlight important misalignments between the goals of companies and their capacity to achieve them. Executives can go a step further in understanding their own companies’ sensitivity to distances by creating internal rooted maps that show how assets or management are deployed, and by overlaying those maps with rooted external ones. How, for example, does your leadership team or your mix of R&D sites map against where you intend to generate the bulk of your sales growth? For many companies, such exercises underscore how the growth of large emerging markets is creating a need for targeted efforts to reduce sensitivity to distance. Hollywood studios, for example, have reduced their sensitivity to distance in various ways in recent years: they have cast foreign stars and produced more action films, instead of romantic comedies, for which cultural distance matters more. They have studied how certain themes would probably get a film censored in key international markets, while building up relationships with foreign governments. To bridge geographic and economic differences, they have filmed in overseas locations, varied price and distribution models across countries, and forged international joint ventures. Of course, the impact and nature of sensitivity to distance varies dramatically across industries. Movies are more sensitive to linguistic differences 48

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Executives can go a step further in understanding their own companies’ sensitivity to distances by creating internal rooted maps to show how assets and management are deployed but less sensitive to geographic ones; as opposed to large home appliances like refrigerators, whose bulk-to-value ratio usually precludes shipping them between continents. That’s why executives seeking to build their intuition about what it will take to seize opportunities in unfamiliar global markets can often benefit from looking at a range of rooted maps drawn at the level of their industries and companies.

Clarifying threats Rooted maps also can help strategists detect looming threats — competitive ones, as well as broader external risks. For starters, consider the ability of rooted maps to portray the world from

the perspective of key competitors. As a leader, you should examine what your rivals are doing to reduce their sensitivity to distance, and be realistic about where you can gain an advantage versus where you need to take steps to match their moves. As the maps indicate, Hollywood is generally less sensitive to distance than Bollywood, implying both greater competitive challenges for Bollywood in the near term and a much larger export growth opportunity if it can reduce this sensitivity. And while we can’t see it in the maps selected here, another good rule of thumb for thinking about competition and distance effects is that often competitors from small home countries are more adept at responding

to cross-country differences. Companies from large countries are typically better at leveraging crosscountry scale economies. Mapping can also provide insights into how the competitive environment may change over time. The economic distance factors embodied in the cinema maps, for instance, are more complex than one might initially assume. Of course, film ticket sales grow in step with economic development, as consumers can devote more of their income to discretionary spending on entertainment. But as economies grow, more of them reach the minimum efficient scale to support a quality national film industry that can thwart outside competitors by catering to local interests and sensibilities. (Notice how the reference map shows a strong relationship between market size and domestic market share.) Growth, however, may also lead to a rise in movie screens per capita (distribution infrastructure) and to greater sophistication among viewers, ultimately enlarging the total pie. So economic development, as in many industries, creates opportunities for film exporters but also strengthens local competitors. Rooted maps can also allow you to better visualise risks that may be clouded by received wisdom. The idea that capital knows no boundaries, for example, becomes questionable when a mapping perspective is applied. The exposure of foreign banks to the PIIGS countries (Portugal, Ireland, Italy, Greece, and Spain) has been a major concern recently. Together, these five are only a minor part of the global banking system. But when this issue is viewed through two rooted maps, drawn from the perspectives of Germany and the United States respectively, we can see how much more exposed Germany is to these countries (Maps 4 and 5). Capital is more comfortable with nearby markets. Finally, rooted maps can illuminate global energy and supply chain risks. Maps 6 and 7, for example, portray September 2011

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insight

Understand the world & measure distance

ooted maps are a tool for understanding the economic environment. I have described it in my new book, World 3.0: Global Prosperity and How to Achieve It (Harvard Business Publishing, May 2011). That book, and a May 2011 Harvard Business Review article, The Cosmopolitan Corporation, contrast World 1.0 (where commitments to national borders are strong) with World 2.0 (an ideal globalised world with unregulated markets) and World 3.0 (a world in which both the barriers and the bridges between countries must be taken into account). Underlying World 3.0 are the enduring effects of distance, whose characteristics I have previously tried to clarify through the CAGE framework, which categorises salient differences into cultural, administrative, geographic, and economic factors.

starkly different profiles of import dependency for the world’s two largest oil consumers, United States and China. Meanwhile, Map 8 reveals how the direct effects of instability in Libya, rather than being global, are concentrated on that country’s neighbours in Europe. By using rooted maps, senior executives can make their perceptions of the business environment more accurate. As they remap their mindsets, they should boost the odds of making good decisions that lead to strong business results. 50

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Pankaj Ghemawat, an alumnus of McKinsey’s London office, is the Anselmo Rubiralta Professor of Global Strategy at the IESE Business School, in Barcelona. This article was originally published in August 2011 on The McKinsey Quarterly, www.mckinseyquarterly.com. Copyright (c) 2011 McKinsey & Company. All rights reserved. Reprinted by permission. Sources For film industry maps: Box

Office Mojo; Reliance Entertainment; Screen Digest; Screenline, EntGroup; press reports; analysis by Pankaj Ghemawat For banking maps: Quarterly Review, Bank for International Settlements (BIS), March 2011, table 9D: Consolidated foreign claims of reporting banks—ultimate risk basis For oil industry maps: United Nations Commodity Trade Statistics Database (Comtrade)

leader’s

world

Lessons from Kilimanjaro Pick a goal, crystallise it, decide on a set of values to govern the project and take the plunge. Many such lessons from adventure sports can help in business as well David Lim

ABOUT THE AUTHOR David Lim, Founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http:// theasiannegotiator. wordpress.com, or david@everestmotivation.com

With a few final gasps of the rarefied air, you haul yourself up a final set of rocks to have your head torch light up a faded wooden sign that simply says, ‘Gilman’s Point, 5681m’. Just below that, another set of neatly painted words state: “Tanzania — Welcome and Congratulations.” Anyone climbing one of the more common routes to highest mountain in Africa will remember this signpost. But the hard work isn’t over yet. Over a swig of hot ginger tea from a thermos, and a quick, chewy bite off an energy bar, you know that the worst of the climb is over — six hours of clambering and plodding up scree, and endless zig-zags on the path to the crater rim. As the sun bursts over the darkened edge of the horizon, you look west and see the whole crater rim lit up. Close at hand, and across the silent volcano’s rim are the blockish ice fields and about 200 vertical metres and about another hour and a half’s hike away is Uhuru, the summit of Africa, at 5895m. You look around at your team, and the dozen other climbers who lurch forward and hike up in the perfect weather to the top. So what, if any, lessons can be learnt from subjecting your middle-aged body to a week-long expedition to climb Africa’s highest mountain? I’ve spent half a lifetime September 2011

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leader’s world gleaning leadership and resilience lessons from mountains far harder and way higher than Kilimanjaro. In 2004, I led a climb comprising alldisabled mountaineers up one of Kilimanjaro’s hardest flanks, the Western Breach route, and that was harder. But even on the simplest climbs, you get to learn something about yourself and others; so here are some of these lessons.

Without any significant mountaineering goals, life outside work and family became dreary and less motivating than it should have been. With the goal to climb Kilimanjaro with my wife and two old friends, a date set for the trip meant a workout and preparation schedule had to be created, and embraced. Few goals are always crystal clear at the outset. But by working at actions that support its accomplishment, the goal gets clearer by the day.

Decide on a set of values to govern the project or plan

“Nothing of value is ever gained easily, and perhaps this is why many people are drawn to climb mountains...to see what they are made of”

Any leader knows that the values that govern a project will set the tone, as well as the kind of culture that will be created. For Kilimanjaro, my own personal summit plans would be subservient to preserving long friendships, as well as helping get my team to the top. Of course, it helps if you’ve already submitted on a prior climb. Developing a highly competitive set of values will engender a spirit of one-upmanship and competitiveness, sometimes to the detriment of a team.

Points to Ponder ¨ Even on the simplest climbs, you get to learn something ¨ ¨ ¨ ¨

about yourself and others Few goals are always crystal clear at the outset By working at actions that support its accomplishment, the goal gets clearer Developing a highly competitive set of values will engender a spirit of one-upmanship and competitiveness, sometimes to the detriment of a team Ultimately, a climb or a project is often decided by a key decision, attitude or moment in time

Encourage behaviours that support the goal This includes freely discussing concerns, anxieties and even hypothetical situations. On Kilimanjaro, I raised the issue of someone needing to turn back on the summit day. It was unanimously decided that that person would be supported sufficiently well by one or more of our excellent Tanzanian trek guides, and the rest would carry on. In reality, many teams are fearful of raising their concerns, and managers fail to create a ‘safe’ environment to discuss these matters. Other behaviours could include consideration to each other during the stressful run-up to summit day, and includes matters like excessive snoring, hygiene and health issues. Men and women are simply not created to spend long periods in close proximity to each other under stressful conditions without something giving way. How well you manage your temper, develop a sense of humour around mundane discomforts and so on, go a long way towards supporting goal-getting behaviours.

Bite the Bullet Ultimately, a climb or a project is often decided by a key decision, attitude or moment in time. Very often, that decision

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photos.com

Pick a goal, and crystallise it over a set time-frame

leader’s world has to be accompanied by a decision to press on despite hardship or difficulty. Think of a time when you thought of giving up. Oddly, success is often met not long after you persevered. On a similar note, our climb was not marked by any dramatic events. But at Gilman’s Point, a key landmark of the summit climb, everyone felt good, and was motivated to press on to the summit, which looked very far away. Smiles, jokes and encouragement are what are needed in the workplace, as often as it was needed on the mountain that morning. Ironically, so many people climbing Kilimanjaro give up at Gilman’s Point that Kilimanjaro National Park Authority (or KINAPA) actually issues a green coloured certificate celebrating your attaining this point on the mountain; as a consolation to many who may have travelled far, climbed hard, but given up at the last part. Considering two of the members of the team, Juliana and Maureen, had never climbed anything like Kilimanjaro, it was to their credit that they kept plodding on, no matter what. Maureen put it this way: “No green one for me, only the gold one!” referring to how she wanted the gold certificate issued to people who attain the true summit of the peak.

Nothing of value is ever gained easily, and perhaps this is what draws many people to climb mountains; an opportunity to see what they are made of. At 7.37 am on August 21, I reached the summit — for the second time in seven years. But more importantly, everyone else on the team made it. Summit photographs are a lie. They never reveal the long physical and mental commitments to get there. And even then the job isn’t over until you are safely down the mountain. Getting to the top is just the halfway point. In that light, I wish you the best of efforts (not luck) in reaching your own Uhuru Peak, and not give up at your Gilman’s Point. David Lim is a leadership and negotiation coach, best-selling author, and two-time Mt Everest expedition leader. David has helped organisations like TATA Steel, Maruti and DTZ improve through his leadership consultancy, Everest Motivation Team. Contact: david@ everestmotivation.com

Lounge

09.11

CFO

There is no better time to buy that set of wheels. It’s the festive season after all. Read our review of the BMW X1 to see if this is the car you want. Also check out the new HTC ChaCha. Or, if it’s a quick holiday you need, why not spend the weekend at a five star heritage fortress in Maharashtra? Read on.

BMW X1

As X-clusive as it gets

Does the X1, the entry point for premium cars in India, offer enough luxury and performance? We found out with a 800 km drive Amit Chhangani The X1, with its relatively small price tag, has spoilt the party for premium and mainstream carmakers alike. A SUV selling for a little over Rs 20 lakh isn’t a new phenomenon in India. But for some Indian car buyers, a BMW at Rs 20 lakh plus is almost like buying a cake for the price of a pastry. So has the product been compromised, or is it really a dream come true?

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Design & Exteriors First things first: The X1 isn’t a SUV. It’s a crossover, and a compact one at that. So it doesn’t quite have the presence of its X3 and X5 siblings. However, the BMW design genetics are amply evident in every line of this neatly packaged machine, including the Hofmeister’s kink. The prominent kidney grille flanked by

DID YOU

KNOW?

The concept version of the X1 wagon was unveiled at the 2008 Paris Motor Show. The BMW X1 is a compact luxury station wagon manufactured by BMW. The X1 is positioned as an affordable entry.

cfo lOunge

on Wheels those sharply styled ‘twin-ring’ headlamps lends the X1 an air of wickedness — exactly why we want a BMW!

while the panoramic view from the sun roof is clearly a big draw, the x1 also boasts of great safety features and is a real pleasure to drive

Engine & Transmission The X1 is available with two engine options: a 2.0-litre petrol with 150 bhp/200 Nm and a 2.0-litre diesel with 177bhp/350Nm of torque. BMW claims that the X1 can accelerate from 0-100 km/h in 8.3 seconds flat. While the real world time would be marginally higher, a sub-10 second timing is a surety. Coming from the best engine makers in the world, the X1 promises real fun once you cross the 1800 rpm mark on the tacho.

Driving Dynamics, Ride and Handling The moment you climb into the driver’s seat of the X1, its crossover genes start making themselves obvious. The seat is reasonably high, with a good view of road ahead. The steering is heavily weighted and adds to the feeling that the product you are driving is sturdily built. Since we were driving the top of the line sDrive Exclusive, our car had the Nevada leather upholstery in beige colour, which looked great. The wood inserts, the quality of plastics, the solidity with which the whole equipment is built adds a premium feel to the interior. The instrument panel is easy to read and understand. The once notorious iDrive too has been sorted to be intuitive enough for an eight year old. The quality of the front seats, the support, both for back and thigh is great. Over our drive of more than 800 km, we never felt fatigued thanks also to the auto transmission. But the one feature that would win your family’s heart is the huge panoramic glass roof. It gives a spectacular view of the sky and enhances the feeling of space and airiness. The back bench is however,

BMW X1 Price: X1 sDrive 18i Rs 22.4 lakh (ex-Delhi) X1 sDrive 20d Rs 24.2 lakh (ex-Delhi) X1 sDrive 20d Exclusive Rs 30.4 la Delhi) Engine: 2.0-litre petrol & 2.0 litre diesel Power: 150 bhp & 177 bhp respectively Torque:

200 Nm &

a squeeze for three, especially with the transmission tunnel troubling the centre occupant’s foot position.

350 Nm respectively Positives Great safety features and lots of tech toys. Easy to handle and drive. Sturdy car, ideal for Indian roads. Negatives Doesn’t quite match up to the X3 or the X5 in speed or in presence. Back seats are not as big as similar sized big cars. VERDICT In the Rs 20-25 lakh budget, perhaps one of the best cars to buy. Not for large families though.

Safety and Security The X1 clings to the road as a thirsty leech would stick to your skin for blood. Apart from driver and front passenger airbags and the head airbags for front and rear, the X1 comes with a crash sensor to disengage central locking and shut off the fuel pump, an electronic Vehicle Immobiliser, a ‘runflat’ (low tyre pressure) indicator and a side impact protection system.

Summing Up All in all, the X1 makes for a great all-rounder which delivers on almost every front, while also presenting itself at a tempting price. We love it for its relative affordability, versatility and of course its performance. Go grab the keys to one if you love to drive yourself. September 2011

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cfo lounge

travel

forts of maharashtra

A FORTIFIED HOLIDAY

The forts of Maharashtra are delightful places to visit in the post-monsoon months when their ramparts and bastions offer stunning vistas of the Western Ghats. Maharashtra now has a hill fort resort, like those in Rajasthan and Himachal, offering spectacular accommodations with views to match. The drive from Pune airport took us through the city centre to Hadapsar, after which the road climbed gently up the hill to the 25-acre Jadhavwadi estate, about 2500 feet above sea level. Our destination, Fort Jadhavgadh makes an imposing spectacle with its high stone walls pierced by arched gateways, and a backdrop of rolling hills. At the entrance to the fort, the watchman dressed like a Maratha soldier, complete with mock weaponry, received us with a bow and directed us to the reception, which has fire-lit torches hung along the walls. After the reception, the pathways took us through courtyards and corridors to our corner room. The highlight of the room was the view from the balcony over the fort grounds to the hills. We went for a dip in the swimming pool, checked out the poolside spa and then went for lunch at Payatha, the ‘Foothill Restaurant,’ where the buffet spread included Maharashtrian, North Indian and some international fare. At lunch we met the General Manager, Biswajit Vishwas, who explained that the fort was built in the 1700s by Pilaji Jadhavrao who was the army general of Chhatrapati Shahuji. Converted a few years ago, this fort is now a popular weekend resort. 56

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The next morning, we started out for Pune after an early breakfast in order to avoid traffic. We quickly went around the Shaniwarwada, the 1736 AD palace built by Peshwa Baji Rao, the Visramwada which is an imposing mansion with fine woodcarving and the Raja Dinkar Kelkar Museum in an old three-storey building of Shukrawar Peth. This museum has

DINESH SHUKLA

Stay at the Jadhavgarh fort and visit Singhagarh & Pratapgarh, near Pune Anil Mulchandani

cfo lounge

travel

BELOW: a view from the balcony of a suite at the jadhavgarh fort. THE FOOD AT THE FORT IS ALSO SUPERB

clockwise from below left: fort jadhavgarh lit up at night; the pratapgarh fort offers a birds-eye view of the area; a luxury suite inside the jadhavgarh fort, which is also a heritage hotel.

an outstanding collection of sculptures, wooden toys, utensils, narrative scroll paintings, carved doors and rich textiles. We lunched on Peshwai food at the Mystic Masala, the signature restaurant at Vivanta by Taj Blue Diamond, which is packed to capacity at night when corporate executives and their guests arrive to sample the rich variety of traditional Maharashtrian cuisine. After lunch, we headed 30 km from the city centre to Sinhagad, to the fort which commands a formidable location on a cliff. This fort has many stories to tell, including

my favourite of how Tanaji Malusare, a general of Shivaji, scaled the fort by throwing a rope tied to a monitor lizard. This reptile clung to a crevice so tightly that the soldiers could climb the rope. We roamed around the two historic gates, the military stables, a Kali temple, a Hanuman statue, and memorials to Tanaji and Shivaji’s son, Rajaram, both of whom died here. We returned to Jadhavgarh in time for a weekend programme of regional music and dance, including Lavani. The next morning, we started early for Mahabaleshwar which looked beautiful in the post-monsoon greenery. About 18 km from the crowded hill station we came to Pratapgarh, the majestic fort commanding splendid views of the surrounding countryside. GETTING THERE: Pune is well-connected by air and rail to most major cities of India. PLACES TO STAY: Fort Jadhavgadh is a heritage hotel with a variety of rooms ranging from tented cottages to heritage suites. If you prefer to stay in the city, Vivanta by Taj Blue Diamond is Pune’s iconic hotel since decades. OTHER SITES: From Sinhagad, you can continue to Rajgad, 4620 ft above sea level, to visit the awe-inspiring Raigad Fort. September 2011

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cfo lounge

Gizmos new launches

Hot Spot

Toshiba Qosmio X775

HTC ChaCha The phone with a Facebook button Vishal Mathur It is true that the HTC ChaCha sings a completely different tune — mid range Android smartphone offering a touchscreen and physical QWERTY keypad. We have the Samsung Galaxy Pro for the lower end of the market, while the HTC Desire Z caters to the higher end. Straight off, the looks of the phone will catch your attention. While there is nothing very different, there are these little things that make a difference. The slight banana curve makes typing a lot more comfortable. The little ‘F’ button lets you post on Facebook with just one click. However, while this phone essentially shows off the social networking capabilities, the real value pack is the touchscreen and physical keypad combo. The dual capabilities will appeal to those who want a touch device, and also to those who want a physical QWERTY keypad for their mails and messages. The ChaCha is built well. Despite the plasticky looks, the phone does feel very solid. No creaks or rough edges anywhere. What is really impressive is the typing experience offered by the keypad.

No problems with the key size – they are adequately big and well spaced out. Keypress is quite soft, so much so that even the keypad of the phone you are used to will start feeling a little uncomfortable! The ‘F’ button, for all its hype, lets you only post to Facebook, and not much else. To read the timeline, comment on posts or chat, you will still need to use the official Facebook app. Call quality offered is okay, but the phone does tend to lose some grunt at high volumes, both for the earpiece and the speaker. No problems with the quality though. The battery life however, is a huge disappointment. With just a few calls, SMS and FB chat running in the background, the ChaCha barely lasts a day. Absolutely no doubt that this phone needs a higher capacity battery. Specifications: Platform: Android 2.3.3; Processor: 800 MHz; RAM: 512 MB; HVGA capacitive touchscreen 480x320 display; Keyboard: Full QWERTY; Memory: microSD slot up to 32 GB; Camera: 5 MP; Battery: 1250 mAh . Price: `15,990

Latest arrival from the Toshiba stable, the new Qosimo laptop sports a 17.3 inch display with full 1080p HD capability. Integrated is the NVIDIA 3D vision that makes it 3D ready. It also comes with a Bluray drive and GTX 560M graphics card, all for the tag of `85,590.

Pentax Q

Pentax has launched the world’s smallest interchangeable lens camera for `35,955. Featuring 1080p HD recording, this tiny camera sports 12.4 MP. A wide variety of lens can be attached to this little guy, including fisheye, telephoto and zoom. Hugely impressive.

BlackBerry Bold 9930 The new Bold on the block by RIM. 9930 features OS 7. The smart phone has 1.2 GHz processor with dual cameras capable of recording in 720p HD. Available for `32,900. powered by

CFO india

September 2011

ad Re Y st OG Mo L E ’s NO ZIN dia CH GA In TE MA

not just

the last word

Optimism: the most enduring ingredient of them all

ewspapers are full of worrisome news. Whether it is politics, or society or indeed, the economy and the environment – the overall mood is grim. Inflation is the highest, while Foreign Direct Investment at its lowest. Companies are willing to borrow to finance their growth, but interest rates climb every quarter. Problems abound, but – thank God – so do opportunities! This ‘never-say-die’ spirit and the ability to spot the star and rise to catch it – is what attracted me, personally, to entrepreneurship. The possibility of ‘learned optimism’ seems ever so critical when everything is collapsing around you. This is the learning I am keen to share with you. Business cycles are a reality as is changing luck, attrition and bad judgement. These will manifest themselves in different ways during our work life and we must come out on top, despite the odds. Ten years ago, when things weren’t that rosy, the all-pervasive Indian entrepreneurial spirit charged on, spotted opportunities and wrote India’s growth story. I was left wondering what makes them tick – day after day. At that time, my day job required me to work with established corporations and their top management. Intuitively, I knew there was a difference in what I saw in management behaviour versus the entrepreneurial style exhibited by India’s rapidly-growing mid-sized space. But without enough evidence to back 60

CFO india

September 2011

my gut – it remained just that. Today, as an entrepreneur, I understand that the game-changer is ‘unrivalled optimism’ and, in fact, live that distinction. Which is why I was delighted when I read an article in the February 2011 edition of Inc. (the parent magazine for Inc. India) titled ‘How Great Entrepreneurs Think’. The article is based on research carried out by Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business. She carried out an experiment with a group that had at least 15 years of entrepreneurial experience, and had taken at least one company public. She asked the same questions of senior management in established corporations such as Nestle, Philip Morris and Shell to hypothesise the big differences. Saras has some insightful findings which I rephrase below based on my own experiences and beliefs: • Entrepreneurs rely on ‘effectual reasoning’. They often don’t start out with concrete goals. Instead, they constantly use their personal strengths

and available resources to develop goals as they progress, and react creatively to contingencies. By contrast, corporate executives set a goal and diligently seek the best ways to achieve it. • That is not to say entrepreneurs don’t have goals, only they are in a hurry to get to market as quickly and cheaply as possible, a principle Sarasvathy calls ‘affordable loss’. • Expert entrepreneurs learn the hard way that having even one real customer on board is better than knowing 10 things about a thousand customers. They invest in getting started with that one and view him as their best ‘salesman’ too. • They are focussed on ‘not limiting themselves’ and therefore continuously watch for opportunities. This attitude is an expression of entrepreneurs’ confidence in their ability to recognise and respond to opportunities as they develop. However, it is not always ‘ready, fire, aim’! As entrepreneurs scale up – both planning and worrying about competitors gain in importance. But what stays the same amongst us is ‘unrivalled optimism’. Are there lessons for CFOs in the entrepreneurial mindset or are entrepreneurs a CFO’s worst nightmare? Write in and share your thoughts. Anuradha Das Mathur, Publisher CFO India

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