CFO India - December 2010

Page 1

FINANCE BY CHANCE CFO PROFILE: RAJ DUTTA OF QUATRRO P. 36

BENCHMARKED! WHY BENCHMARKING IS A MUST FOR FINANCE p. 20

TOP GUN THE NEW E CLASS CONVERTIBLE p.52

VOLUME 02 ISSUE 01 Rs.50 DECEMBER 2010

CFO INDIA CFO PROFILE: RAJ DUTTA OF QUATRRO 36 | BENCHMARKED! 20 | TOP GUN 52

A BANK CFO’S JOB IS DIFFERENT FROM THOSE IN OTHER INDUSTRIES. WHAT ARE THE CHALLENGES FACING THE COMMUNITY TODAY?

&)2V 2) $

',))(5(17

+8("

VOLUME

02

ISSUE

01

A 9.9 MEDIA PUBLICATION

FINANCE BY CHANCE CFO PROFILE: RAJ DUTTA OF QUATRRO P. 36

BENCHMARKED! WHY BENCHMARKING IS A MUST FOR FINANCE p. 20

TOP GUN THE NEW E CLASS CONVERTIBLE p.52

VOLUME 02 ISSUE 01 Rs.50 DECEMBER 2010

CFO INDIA CFO PROFILE: RAJ DUTTA OF QUATRRO 36 | BENCHMARKED! 20 | TOP GUN 52

Dear Mr. Murthy, Here’s wishing you a very Happy New Year! A year of fulfilled aspirations, and deep contentment. A year of personal and professional growth. A year filled with joy, leisure time, and peace of mind.

Control. Save. Grow.

ISSUE

VOLUME

02

With Nexstep Expense Management System.

01

Peace of mind assured. With Nexstep Expense Management System

Control. Save. Grow.

With Nexstep Expense Management System. www.nexstepworld.com

&)2 DECEMBER | 2010

,16,'(

&29(5 6725<

,1 35$&7,&( WHY BANKS MUST STRENGTHEN GOVERNANCE LEVELS 18 The Basel Committee recommendations should be implemented in full if financial institutions want to avoid another crisis

BEAN COUNTERS OR MORE? 26 The What, Why and How of Business Partnering

,16,*+7 THE FIRST HUNDRED DAYS 40 CFOs around the world describe their first hundred days on the job as a time when most couldn’t devote enough time to top priorities

&)2 352),/( FINANCE BY CHANCE

/($'(5·6 :25/' How to make meetings fun and productive instead of wasting time and man hours

&)2 /281*( 52 ON WHEELS | E-CABRIOLET 54 GADGETS | THE MAC PRO

&$6( 678'<

55 TRAVEL | SPITI VALLEY

46 NOT AN EASY SOP

56 ART | KOBITA SEN

Barely a month into his new job as CFO of Systime, Aloke Ghosh had to create an Employee Stock Option Plan (ESOP) for several hundred employees

58 BOOKS | BOB MARLEY

5(*8/$56

, 7+,1.

04 LETTERS TO THE EDITOR

10 HIREN ISRANI

AD INDEX

A bank CFO’s job is different from those in other industries. What are the challenges?

50 DEATH BY MEETINGS

As executive director and CFO of Quatrro, Raj Dutta ensured that the four-yearold service provider received a fresh $13 million VC funding this year

One needs to master the art of people management in order to become a true ‘Renaissance CFO’

CFOs OF A DIFFERENT HUE?

06 O-ZONE 60 NOT JUST THE LAST WORD

Edenred Inside Front Cover | Financial Executive 02 | Empronc 05 | Nexstep 17 | Ace Data 45 | Speaker Bureau 57 | Religare Inside Back Cover | ICICI Bank Back Cover

)520 7+(

0$1$*,1* (',725

'+,0$1 &+$7723$'+<$< GKLPDQ F# GRW LQ

MANAGING DIRECTOR: Dr. Pramath Raj Sinha

The ‘Other’ CFO

A JOURNALIST friend recently asked me if banks have CFOs at all. “Everyone talks money in a bank. What specific role does a CFO have?” he asked. It got me thinking – what exactly does a bank CFO do? How different is his or her job from, say a colleague in a manufacturing firm? And in a country where the industry still operates within a complex maze of regulations and controls – what are the challenges these senior finance professionals face today? Contributing Editor Bennett Voyles spent most of December posing these questions to CFOs of banks based in India as well as to academics and financial consultants. What emerged was a fascinating story of the diligent, behind-thescenes, hard working CFO who handles more transactions in a day than his peers in other industries do in a week, who spends hours on strategy to tackle complex regulations that bind the industry and who maintains a very close rapport with the government. And while Voyles argues that strict regulations have meant domestic banks grew at a slower clip compared to other sectors in recent years, it is precisely these regulations and disciplined financial planning by CFOs, he says, that protected our banks during the global economic crisis of 2008-09. There are however, new challenges on the horizon. The banking industry is expected to grow rapidly over the next few years and managing talent will be a big task. The need to learn more about risk management will also keep CFOs on their toes. Read the cover story (pg 12) to learn more. In other sections we profile Raj Dutta, the executive director of Quatrro, a Bollywood buff who wanted to be a psephologist, but became an entrepreneur! And in ‘Case Study’ – we get Aloke Ghosh, the CFO of Systime, to explain how he and his team implemented a complex ESOP scheme recently. The regular sections are there as well, including ‘Lounge’ where we test drive the new Merc E Cab for you and tempt you to visit the awe-inspiring Spiti valley. There are a lot of other ‘happy’ features in this issue, which, we hope will bring a smile to your face this festive season. On that note – here’s wishing you all a Happy New Year!

EDITORIAL EDITOR: Anuradha Das Mathur MANAGING EDITOR: Dhiman Chattopadhyay ASSISTANT EDITOR: Anoop Chugh CONTRIBUTING EDITOR: Bennett Voyles DESIGN SENIOR CREATIVE DIRECTOR: Jayan K Narayanan ART DIRECTOR: Binesh Sreedharan ASSOCIATE ART DIRECTOR: Anil VK SENIOR VISUALISERS: PC Anoop, Santosh Kushwaha SENIOR DESIGNERS: TR Prasanth, Anil T, Suresh Kumar, Joffy Jose & Anoop Verma DESIGNER: Sristi Maurya CHIEF PHOTOGRAPHER: Subhojit Paul PHOTOGRAPHER: Jiten Gandhi THE CFO INSTITUTE EXECUTIVE DIRECTOR: Deepak Garg NATIONAL HEAD: Bindu Krishna MANAGER: Shreya Pilani ASSOCIATE: Priyam Mahajan SALES & MARKETING V-P SALES & MARKETING: Naveen Chand Singh NATIONAL MANAGER (SALES): Pranav Saran (+91-9811777113) NATIONAL MANAGER (EVENTS & SPECIAL PROJECTS): Mahantesh Godi (+91-9680436623) NATIONAL MANAGER (ONLINE): Nitin Walia (+91-9811772466) 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 M Hiremath PRODUCTION EXECUTIVE: Vilas Mhatre LOGISTICS: MP Singh, Mohamed Ansari, Shashi Shekhar Singh 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 Bunglow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Silver point Press Pvt Ltd, D107, MIDC, TTC Industrial Area, Nerul, Mumbai 400706.

Copyright, All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited.

SUBSCRIBER SERVICES: Call +91-11-45069999 VISIT CFO INDIA’S WEBSITE www.cfo-india.in

/(77(56

&)2 ,1',$

'(&(0%(5

KUDOS

&)2 &ROOHFWRUÂśV (GLWLRQ

&)2 ,QGLD

since it began its journey, has been a magazine of and for the CFO community. When we started planning for the first anniversary issue, the decision was unanimous – why not make it an issue ‘by’ CFOs as well? We therefore asked many of you who have walked this journey with us, to tell us about the ‘firsts’ in your life. As Wipro’s Suresh Senapaty said, “The allure of the first is special.� Over the next 70-odd pages, CFOs and senior corporate leaders from across sectors and Indian cities have written about their colourful and exciting experiences on subjects as varied as their first year as CFO, their first M&A experience

The first anniversary issue is definitely one for my library. Well done! I thought the idea of sketching caricatures of the contributors was novel and well appreciated. I wish CFO India a bright future and hope that it goes from strength to strength in the coming months and years.

0\ )LUVW <HDU 2XWVLGH 7KH )LQDQFH )XQFWLRQ

7 9 02+$1'$6 3$, ,1)26<6 681,/ 6(7+< %,1$1, ,1'8675,(6 35$9((1 *$1'+, &$5/621 :$*21/,7 $ ' $ 5$71$0 3+,/,36 /,*+7,1*

0\ )LUVW )LQDQFH -RE

5 ' 6 %$:$ 79 5 1$7$5$-$1 +(/,21 681,/ 6$<$/ (5,&6621 1,7,1 622' ² 395 *5283

GLQJ GLDœV OHDVWVœ 25(' ,Q ¾¿U 81&(16ON DERXW WKHLU &)2V WD

0\ )LUVW %LJ &KDOOHQJH

- . -$,1 '&0 6+5,5$0 <8186 %22.:$/$ &$3*(0,1, 681$0 6$5.$5 ² $32//2 7<5(6 $/2. 0,65$ ² :16 */2%$/ 6$1'((3 %$75$ ² 3,',/,7(

or their first finance job. Many have mentioned roadblocks and how they overcame challenges while others have mentioned key takeaways or lessons learnt from the experiences. This is indeed a collector’s issue, one which, apart from providing a great read to all finance professionals and those interested in finance, will also help those who haven’t faced some of these situations yet, to pick up valuable tips. Turn the page: Happy reading! —Dhiman Chattopadhyay

* The views expressed in the articles are personal and not necessarily those of the companies the writers represent.

,QVLGH

0\ )LUVW <HDU $V &)2 5$-$1 9$50$ ² 3:& 6 . -26+, ² %3&/ 35((7 '+83$5 ² %%& 9,6+18 %+$*$7 5((%2. 0$12- 1$,. *( &$3,7$/

0\ )LUVW <HDU ,Q $ 6WDUW 8S

68'+,5 0$7+85 ² $,5&(/ 5$-(6+ 3$6$5, ² 1(7$0%,7 5,6+, *837$ ² ),12 6$1'((3 -$,1 ² 0(',$

0\ )LUVW /LTXLGLW\ &UXQFK 52672: 5$9$1$1 ² 0,1'75(( 5$9, 5$08 +27+85 *5283 583$ 925$ ,')&

0\ )LUVW 0 $

685(6+ 6(1$3$7< :,352 5$0 5$0$681'$5 -,1'$/ ,7) +(0(1'5$ 3$/,:$/ ² =,&20 9(1.$7 '(9$5$-$1 5(/,$1&( 0(',$:25.6

0\ )LUVW ,32

9,%+$ 3$'$/.$5 +')& 67$1'$5' /,)( ' 0$+$'(9$1 +$7+:$< &$%/( 5$-(6+ 0$*2: ² 0$.(0<75,3 5$9, 6 *837$ -8%,/$17 )22':25.6 5$-(6+ *+21$6*, ² 3(56,67(17 6<67(06

0\ )LUVW &KRLFH

8:( -$526&+ 0(5&('(6 %(1= ,1',$ 6$1-,9 6+$+ %0: ),1$1&,$/ 6(59,&(6 5$-(6+ 6+$50$ %$5,67$ /$9$==$ ,60$,/ '$%+2<$ 5(/,$1&( %52$'&$67 +,5$1<$ $6+$5 52/7$ ,1',$ %$'5, 6$1-((9, 3(23/( *5283 6$1-2< %+$77$&+$5<$ =85, *5283 5$-(6+ %$/3$'( %22.0<6+2: &20

Ravi Ramu, President and CEO, Hothur Group, Bangalore 8

12.10 COMPENSATION TRENDS The anniversary issue made interesting reading. In the recent past however, I do not remember reading any piece in the magazine analysing compensation trends for CFOs across various parameters like industry verticals or size of the company. I think an article on this will evince a lot of interest among readers. — R.K.Prasanna Sai, CFO, Ma FoiRandstad, Chennai

A VISUAL DELIGHT While I have been noticing the improvement in content and editorial standards over the last few months, this issue proves you people have a vastly talented team of designers as well. The anniversary issue was a visual delight, just as the articles were enjoyable to read. Why don’t you do more of such special issues? — Santosh. K. Sharma, BPCL, Mumbai

TRULY A COLLECTOR’S EDITION Thank you for bringing out such a brilliant edition on the occasion of the first anniversary of CFO India.I especially enjoyed reading about the experiences of CFOs in the My First Year Outside the

4

CFO INDIA

DECEMBER 2010

CFO INDIA

NOVEMBER 2010

NOVEMBER 2010

CFO INDIA

9

Your voice can make a change: Share your view point on what’s happening in the community and your feedback on the magazine at cfofeedback@9dot9.in or editor@cfo-india.in

Finance Function� and “ My First year in a Start up� sections. However, I missed some of the regular features such as CFO Profile and Leader’s World that you carry. Nevertheless, this issue really stands out as a “collector’s edition� — Shantharam Nayak T.R, CFO, AllGreen Energy, Bangalore

MORE ON THE TAXATION ISSUE PLEASE I have gone through the anniversary issue and honestly it is superb. I hope it will be as enriching for younger finance professionals as it was for me. In future issues, it will be good if you can have topics relevant to the role of the CFO on critical issues such as IFRS, GST and international taxation. You can also have articles on strategic management case studies which will be of immense help. — Sandip Chatterjee, CFO, DIC India Ltd, Kolkata

WANTED: ARTICLES ON STRATEGY I enjoyed reading the anniversary issue. Going forward, I would like to see more strategy oriented topics on world economy or markets, globalisation, issues on cross-border deals and expansion opportunities to be featured in CFO India. I would like to become a member of the community you have established and receive the magazine regularly. Can you please help me in this regard? — Alok Bajpai, CFO, Intelligroup, Bangalore

12.10 7+( /($'

SEBI WARNS AMCs IN AN EFFORT to curb money laundering, the Securities and Exchange Board of India has decided to start keeping tabs on mutual fund investments made by bureaucrats and politicians, including former and current state heads. Starting 1 January, all new and existing MF investors would need to disclose if they are or have been a head of state (both at central and state governments) under the revised “know your customer’’ (KYC) requirements. This will also apply to Members of Parliament, state legislative assemblies and legislative councils. According to a release from the stock market regulator, the compliance regime is being implemented by fund houses at its direction. The measures come against the backdrop over allegations of corruption in the allocation of mobile spectrum and preparations for the Commonwealth Games, among others, in which the government is caught. KYC norms currently only require investors to disclose broader occupation details such as whether they are in public or private sector service, involved in business or agriculture, or if they are professionals, retired or housewives. The new KYC norms are being 6

CFO INDIA

DECEMBER 2010

WHAT’S AROUND ZONE cfobook ................................................................. Pg 08 No Honda, still a Hero......................................... Pg 08 India high on ‘bribe’ list ......................................Pg 09 Friendly hires .......................................................Pg 09

THE CFO POLL RESULT

Do you think the current bull run is sustainable ?

2% Maybe

65% Yes

33% No

CURRENT POLL QUESTION

Will the telecom scam and events surrounding it hurt India Inc.’s image? 9RWH QRZ DW ZZZ FIRLQVWLWXWH FRP SROO

7(&+12/2*< implemented to meet prevention of money laundering regulations. Recently, the Reserve Bank of India (RBI) asked banks to be extra careful while dealing with customers who could be ‘’politically exposed’’. RBI said banks will need to maintain a high level of monitoring for such persons, though it has termed salaried employees and employees in government departments, government-owned companies, regulators and statutory bodies as “low-risk’’ customers. The new KYC norms being implemented by the fund houses will also make it mandatory for all investors to furnish their Permanent Account Number (PAN), provided by the tax department, next year onwards, irrespective of the size of the investment. Currently, individual investors need to quote their PAN only for investments of Rs50,000 or more, though non-individual investors are required to quote it for all amounts. All fund houses have been asked by the Association of Mutual Funds in India to comply with the new KYC norms, which include collecting additional details such address proofs and photographs. According to industry experts, the new KYC norms would help SEBI compile a dossier on investments made by bureaucrats and politicians. This could aid its various probes and steps to prevent money laundering.

An Indian Tablet? AN INDIAN MOBILE handset company, started by an IIT graduate, is trying to take on the biggies. Notion Ink’s latest creation, the Adam Tablet, has created quite a buzz in town. Though the Tablet has been called a ‘scam’ by detractors due to delays, it may now be ready to hit the market. The launch date is early 2011 and the specs and preorders are in the news. Here are a few reasons why it may become a cool gadget for tech-savvy CFOs. #1. The Adam has an ambient light sensor to adjust the screen brightness depending on the environment. #2. The Tablet runs on arguably the fastest processor made in current times - Nvidia Tegra 2 with eight independent processors. #3. This will be the first Tablet to feature a built-in HDMI out port, which supports 1080p videos. #4. The Adam has a 3.2 megapixel swivel camera that can rotate 185 degrees. This is a good option to cut costs because you don’t have two separate cameras (at the back and the front) like the Galaxy Tab and the upcoming Apple iPad 2. #5. It has two standard USB 2.0 ports and a mini-USB port as well. This helps with charging, hooking up to a computer and charging other USB-based devices. #6. The company claims Adam should be able to offer a battery life of about 16 hours of normal usage as compared to 10 hours from the iPad. Of course, this remains to be seen. #8.The price tag is a steal. An Apple iPad 64 GB will set you back by Rs 42,000 in grey markets and the Galaxy Tab is priced at Rs 38,000. Notion Ink’s Adam is up for pre-order for Rs 25,100 and that is for the most expensive version - the Pixel Qi with Wi-Fi + 3G. DECEMBER 2010

CFO INDIA

7

2 =21( FIRERRN

-$5*21 '(&2'('

%/8( 2&($1

6XUHVK & 6HQDSDW\ Wall

Info

Boxes

+

What’s on your mind? Attach

Share Suresh C. Senapaty believes with limited social safety cover, policy makers should come up with policies that mitigate any risks that might emerge in the capital or debt markets. December 13 at 10:50pm · Comment · Like

Suresh C. Senapaty believes energy utilities, healthcare, bank, financial services and retail would be the chief growth drivers in the next four-eight quarters.

3(5621$/ Born in: 1957 Zodiac: Scorpio Married to: Neeraja

:25.

December 3 at 7:30pm · 5 people Commented · Like

Suresh C. Senapaty is seeing some amount of moderation in inflation rates - food inflation in some form showing a little bit of downward trend. Expect a take-off in domestic demand. December 1 at 1:10pm · Comment · 2 people Like this

2008 Chief Financial Officer and Director, Wipro Ltd 1995 Chief Financial Officer & Executive Vice President of Finance, Wipro Ltd 1992 Chief Financial Officer of Wipro’s IT business 1982 Chief Financial Officer of Wipro Consumer Care

('8&$7,21 Chartered Accountancy, Mumbai Bachelor of Commerce, Utkal University

I Read...

Jack Welch Alan Greenspan September 29 at 1:35pm · Comment · 3 people Like this

I Play...

Badminton October 05 at 06:20 am · Comment · 5 people Like this

RECENT ACTIVITY Suresh C. Senapaty likes CFO India and five others...

Suresh C Senapaty likes Swimming, Madhuri Dixit, Chinese and Japanese food, CFO India December 15 at 11:00pm · Comment · 5 people Like this

$872

No Honda, still a Hero THE MUNJAL FAMILY PROMOTED Hero group is planning a complete image makeover for Hero Honda Motors Ltd (HHML), the world’s largest two-wheeler company by sales, after it bought out the Japanese partner Honda Motor Co’s stake in the joint venture. As per a report in the Business Line, the Hero Group has already contracted ad agency JWT to devise a solo brand strategy to help the market leader retain its position in the domestic market even after the Honda name is dropped. Though Hero can use the Hero Honda joint corporate brand till 2014, it would go for a gradual shift to the new brand through a fresh campaign and corporate look. The Hero Group had recently announced that it would buy Honda’s 26 per cent stake in Hero Honda for an undisclosed amount. 8

CFO INDIA

DECEMBER 2010

THE DEFINITION A blue ocean usually refers to a new, untouched market where a company can potentially set up business without much competition. THE USAGE The business development head just said, “We need a blue ocean strategy; there are too many sharks in these waters,” leaving you wondering if you needed a life jacket? Now you know!

2 =21( &255837,21

INDIA HIGH ON ‘BRIBE’ LIST

61,33(76 BMW pips Merc

NOTHING MUCH THAT is surprising about this survey! Why? Because it says one person in four worldwide paid bribe during the past year while 54 per cent Indians admitted to having greased the palms of authorities to get things done. The study was released on December 10 to mark International Anti-Corruption Day. The findings of the 2010 Global Corruption Barometer, a worldwide public opinion survey on corruption by the Berlin-based non-governmental agency, Transparency International (TI) showed that in the past 12 months, one in four people paid bribe to one of nine institutions and services, from

health and education to tax authorities. The police department was named as the most frequent recipient of bribes, with 29 per cent of those who had contacts with the police reporting that they paid bribes. In India, 54 per cent of respondents said they paid bribes to receive attention from service providers. Almost half of these respondents said they paid the money to avoid problems with the authorities and a quarter said it was to speed up processes. The UN established International AntiCorruption Day in 2003 to raise awareness of graft and promote global fight against it.

-2%6

Friendly Hires HERE IS A chance for India’s young and booming community of BPO executives to do their friends and relatives a good turn. In an effort to address renewed demand for their services next year, India’s top tech firms such as Wipro and Infosys are now trying a new trick – hiring at least a quarter of their staff through an employee referral scheme. Wipro, in fact, has doubled cash incentives for each new hire joining through internal staff reference, from around Rs 20,000 to around Rs 40,000, reports The Economic Times. Infosys and Tata Consultancy Services too are promising more incentives to employees if they bring in more talent. An ET report said some firms have also started organising promotional activities such as picnics and quiz contests where employees are encouraged to invite friends. For HR heads, hiring through the referral schemes means less trouble and an opportunity to hire ready and willing talent. With attrition levels jumping up again in 2010, the race for retaining and hiring talent seems to be back in full swing.

It’s a battle between the German heavyweights. Luxury car maker BMW has regained top slot in the January to November period after a see-saw battle for numbers with rival Mercedes Benz in the Indian luxury car market. Merc was leading BMW in the January to June period with a 79 per cent jump in sales. However, according to the latest Society of Indian Automobiles Manufacturers survey, BMW has sold 5345 cars so far in 2010, compared to 5109 by Merc.

Realty over stocks

The real estate market may have hit a roadblock but most professionals in India would still rather invest in real estate instead of buying stocks, says an Assocham survey. Those surveyed found the promise of high returns on property investments far more attractive. “Over 60 per cent professionals like doctors, financial experts, company directors and executives prefer to invest their money in real estate on a long-term basis as they believe it guarantees them higher future returns,” the survey noted.

Boost for highways India may yet get its promised “1km of new highway every day” with the World Bank approving a $45 million technical assistance loan to the National Highways Authority of India. The country’s road sector will need investments between $75 billion and $90 billion over the next five years.

DECEMBER 2010

CFO INDIA

9

&)2

, 7+,1.

Facts & Trivia EDUCATION: B.Com from University of Mumbai. MBA from Washington University, Olin Business School PROFESSIONAL QUALIFICATION: Chartered Accountant FIRST JOB: Commercial banking associate at American National Bank PREVIOUS JOB: Director of Finance-Asia Pacific, AMD PASSIONS: Tech, Gadgets

AS I MUSED OVER the question of what keeps me awake at night, I naturally began to review my time in this industry. The expectations from a CFO have changed over the last couple of decades. From being simply the Chief Book Keeper, s/he is now expected to also be the Chief Strategist, Chief Economist, Chief Performance Manager, Chief Ethicist, Chief Change Manager and so on… This is enough to keep anyone up at night and for a wide variety of reasons. With this initial thought, I reviewed the question again, on what is the one key issue. I think to me it is really all about – PEOPLE! One can have the best vision, strategy, products, best business model, structure or even be able to drive change management, but to execute and to be successful, it boils down to people. From a ‘People’ perspective, we can broadly look at three areas: Organisa10

CFO INDIA

DECEMBER 2010

HIREN ISRANI

The CFO of Microsoft’s India operations feels one needs to master the art of people management in order to become a true ‘Renaissance CFO.’

tion, Culture and Climate, and Rules of Engagement as areas that have a substantial impact.

ORGANISATION To me the organisation structure is

“If the structure (of a company) is the engine, then an open, honest and secure environment works as the ‘fuel’ for the organisation.”

like the ‘engine’. Every organisation needs to have a blue print, an ‘as-is’ to the future ‘should-be’ plan to facilitate the next phase of growth. This is crucial to not only define the way an organisation operates but also to lay the foundation for hiring the right people for the right job. This structure needs to be designed keeping in mind the span of control, succession plans, career development plans, clarity on roles and responsibilities, skill set needs, etc.

CULTURE AND CLIMATE Over and above the organisation structure, it is equally important to have an organisation motivated and energised to consistently deliver high quality performance. Culture and Climate is about having the right work environment that is based on trust, transparency, team work and collaboration,

NITISH KUMAR

flexibility and work life balance, clarity on development and career plans, appropriate compensation as well as rewards and recognition. More than retention, it helps maintain the appropriate motivation and energy level in the organisation. So if the structure is the engine, then an open, honest and secure environment works as the ‘fuel’ for the organisation.

RULES OF ENGAGEMENT This then makes the Rules of Engagement the ‘oil’ that keeps an engine wellgreased. To ensure smooth functioning, it is imperative to define the basic rules of engagement. These rules essentially chalk out how the team operates, good leadership behaviour, what one can expect from others, how decisions will be made, how we respond to our customer

needs and above all the values which bind the team together. It is important to set these ground rules and hold each other accountable to the rules. In summary, I would worry about the enabling environment under which people can operate. It is this that makes the difference and will afford the “Renaissance CFO” to meet all other challenges head on. DECEMBER 2010

CFO INDIA

11

&29(5

6725<

CFOs of a different Hue?

&29(5 6725<

LARGE TRANSACTIONS HANDLED EVERY DAY, HOURS SPENT ON

CONTROLS AND REGULATIONS AND A CLOSE RAPPORT WITH

THE GOVERNMENT — A BANK CFO’S JOB IS OFTEN DIFFERENT FROM THOSE IN OTHER INDUSTRIES. WHAT ARE THE CHALLENGES THAT AWAIT THEM, POST THE ECONOMIC SLOWDOWN BENNETT VOYLES

ANIL T

I

ndia might lead the world in a number of industries, but when it comes to banking, it’s still not even on the map. Of the top 50 banks, none are Indian. Three are Chinese. However, that lack of flash may be a good thing – for the banks, and for India. The Western banks that suffered most in the crash were precisely those that were most innovative and most profitable before the crash. Thin capital reserves, thin liquidity levels, weak risk management and lax regulations all obscured their true risk profile, says James Lam of James Lam & Associates, a Boston-based risk management consultancy. Slow and steady has worked out well for Indian bank CFOs so far. They may not have made the same big deals as their western counterparts in the good times, but they’ve also dodged the subsequent recriminations, public drubbings, and shameful bailouts of the past two years. But will slow and steady win the race?

IT IS DIFFERENT AT THE TOP In many industries, being a CFO is lonely business. Whether you are the sole non-engineer in a conference room of engineers or the sole finance person in a room of sales guys, the CFO tends to be a little outside the dominant culture. While the other executives are out and about, you are Scotty down in the engine room, telling Captain Kirk that the ship cannot take it anymore. DECEMBER 2010

CFO INDIA

13

&29(5 6725< But it is different in a bank. The company speaks your language a lot more than in, say a steel firm, and the core products do not involve building cars or writing software but handling money. Consequently, there is more expertise around to rely on – large chunks of a CFO’s responsibility may even be someone else’s worry. Many banks, for example, segregate much of the capital management responsibility to a separate treasury department to handle the cash. “I would think normally a CFO of a non-bank, especially a manufacturing company, has a far more important role because he has to manage the treasury function,� says Sashi Jagdishan, CFO of HDFC Bank. But there are other concerns to replace the outsourced worries. Bank CFOs say they believe they spend much more time on controls and regulations than CFOs in most businesses. Analysing the profitability of different products at the customer level and at the transaction level is another important task. Another difference is that bank CFOs tend to work much more closely with the government than the CFOs of most industries. “From a finance professional’s perspective and a finance head’s perspective, the impact that the regulations have on what you do on a day to day basis, I suspect, is far more significant in a bank than at most other industries that I can think of,� says Anurag Adlakha, CFO of Standard Chartered Bank for India and South Asia. The sheer volume of transactions is also different, creating much more demand for accounting. Where the CFO of a software company deals with a number of transactions all year long, banks typically have huge numbers of transactions every day, according to Jagdishan. Perhaps for these reasons, most seem to come to the role from a chartered accounting background rather than an MBA. Since a large part of the function in terms of managing liquidity more efficiently or managing the interest rate 14

CFO INDIA

DECEMBER 2010

´,Q UHFHQW \HDUV DFFRXQWLQJ VNLOOV KDYH FRPH WR WKH IRUH D ORW PRUH SULPDULO\ EHFDXVH \RX KDYH ,)56 Âľ — ANURAG ADLAKHA CFO, Standard Chartered Bank, India And South Asia

´1RUPDOO\ WKH &)2 RI D QRQ EDQNLQJ ILUP KDV D PRUH LPSRUWDQW UROH WR SOD\ Âľ —SASHI JAGDISHAN CFO, HDFC Bank

risk has moved into treasury function, the work that remains is more focused on knowledge of taxation, GAAP, efficiency, and capital expenditures, Jagdishan, an accountant himself, believes the CA designation is more useful. The multiple issues related to the adoption of IFRS may also be making an accounting background more useful these days. “In recent years, I think the accounting requirements have probably come to the fore a lot more than what may have been the case a decade ago, and that is primarily because you have IFRS,â€? says Adlakha. But Abhijit Sen, CFO for Citigroup in South Asia, who came to finance with an MBA rather than as an accountant, says that in the end it doesn’t really matter. “Ultimately, whatever course you start with, you have to broaden your skills,â€? he says. Others argue that what matters is not so much the credential but a capacity for detail. “Ultimately, it is your ability to get into the nitty-gritty‌ that is absolutely essential,â€? says Jaimin Bhatt, CFO of Kotak Mahindra Bank. Of course it is not just internal detail. Bank CFOs tend to spend much more time in the front office than other CFOs. Understanding the sectors where the clients are concentrated is an important part of risk management. In addition, Bhatt says that investors typically see banks as barometer of what is happening in the economy, which means the bank CFO also needs to spend more time thinking about broad market trends than the typical CFO, Bhatt says. Bank CFOs also probably think more about risk management than other CFOs, according to Citibank’s Sen. Financial risk is an element of any business, says Sen, but it is probably more the case for banks, whose assets are volatile. Finally, although every CFO has to raise money and talk to investors, client-facing skills may be particularly important for a bank CFO, where debt and equity are usually raised on a more ongoing basis, according to Bhatt.

&29(5 6725< COMFORTABLE FINANCIAL OFFICERS Within the wider world of bank CFOs, those running banks in India are also a breed apart. Perhaps the biggest difference is that they sleep a lot better than their western counterparts. By and large, the 2008 financial crisis was a tsunami that rolled over someone else’s beach . Restrictions on foreign capital and high reserve requirements may have kept the banking sector from growing more quickly before 2008, but they also saved Indian banks from being destroyed by the crash – and spared CFOs from all the subsequent parliamentary drubbings and government bailouts. Part of the reason for the success was tough reserve requirements. For example, the capital to risk weighted asset ratio (CRAR) required by the Reserve Bank of India is now 9%, one percentage above the Basel II requirement. Public Sector Banks are even tougher, requiring a 12% ratio. Today, the Indian banking system is considered among the world’s soundest -- number 25, according to the 20102011 World Economic Forum ranking, just after the Czech Republic and just before Sweden. That is well behind Brazil, which rates 15th , but a whole lot more sound than the United States (111), Germany (112), or the United Kingdom (139). The market’s internal inefficiencies may serve as another source of protection. Where Western banks faced a high degree of systemic risk because of extensive cross-investment, Indian banks were somewhat more protected in that regard, even within the country. The currently erupting micro finance scandal, for instance, may end up hurting Indian banks less than say the sub prime scandal hurt the West, simply because the market is less integrated, says Raghavendra Rau, a professor of finance at the Cambridge Judge School of Business, USA. “Integration is good when everything is going well – it reduces transaction costs and increases

7$.($:$<6 )520 7+( &5$6+ The contrast between the performance of Western banks and Indian banks presents some important lessons to bank CFOs – and other industries too. Know thyself. In a number of cases, the offbalance sheet liabilities were a big part of why institutions didn’t survive the crash. In good times, honesty is the best policy, but if you want to survive the bad times, it’s the only policy. Draw the lines clearly. Confusion over responsibilities was a key cause of the collapse. In large, complex organisations it’s easy for problems to fall through the cracks. What matters most, says KPMG’s Briault, who directed the monitoring of the ill-fated Northern Rock for the UK Financial Services Authority, is “not where you draw the line but drawing the line clearly so that each individual knows where the responsibilities begin and end.” Pay drives performance – for better or worse. “Bankers do what they’re paid to do, not what they are told to do,” says Lam. “It really does not matter what the board members or what the regulators tell the bankers they ought to be doing relative to risk management. If the incentives are to grow the bank, increase profits, and innovate without risk management, what are they going to do?” he asks.

economic efficiency. When things go bad, unfortunately, being integrated really hurts you,” says Rau.

SPEED BUMPS AHEAD This however, does not mean Indian banks do have reasons to worry. The four concerns that are top-of-the-mind for Indian bank CFOs are: Regulation. Indian banks’ success through the crisis has been a vindication to regulators – and a fresh source of trouble for bank CFOs. Since the crisis, regulators have added more regulation still, figuring that if tight requirements were good, even tighter requirements will be better. On top of that, CFOs working for units of Western banks or for banks that have listings and dealings with other markets, now have a deeper pile of paper to go through than they once did. ‘The heightened scrutiny is definitely here to stay. I don’t see it disappearing in a hurry,” says Adlakha.

One advantage for Indian banks, however, in complying with international rules, is the fact that the current Reserve Bank of India regulations are turning out to be good preparation for some of the Basel III accord’s more stringent requirements. “Some of the things that Basel III is talking about are already a part of the Indian regulations as they now stand,” Adlakha says. Better risk management. Stress-testing is a much bigger task now – assessing the risks the bank faces from both a liquidity and a capital perspective. There is also a greater awareness now within the industry worldwide about the importance of risk management. One emerging best practice in risk is taking it out of the CFO’s portfolio, making risk the particular focus of a separate risk advisor who reports not to the CFO but to the CEO or the board, according to Clive Briault, a senior advisor for KPMG in London. James Lam of James Lam & AssociDECEMBER 2010

CFO INDIA

15

&29(5 6725< ates, a Boston-based risk management consultancy. too favours the move. He argues that so much of the CFO’s work is focused either on past performance or current needs that the perspective is not right for risk management. CFOs tend to focus more on the past, the current budget and expected performance, “whereas the risk management function really needs to look forward, think outside the box, and prepare for the unexpected,� he says. “Within banking .. an enhanced understanding of risk management, I think that is becoming an absolute imperative from a CFO’s perspective,� Adlakha says.

RETAINING TALENT. Retaining talent is also emerging as a key issue. With some surveys forecasting a rapid expansion of the banking industry over the next few years, largely to serve the growing middle class and finance the infrastructure campaign, the supply of experienced bankers on the subcontinent is likely to be tight. Solving the problem will not be easy, even with big bonuses. Making it even more difficult is the fact that latest research suggest that money may not be as much of a motivator as previously imagined – or rather, as a motivator to do the right thing. One study by Rau found a strong link between high incentive pay for CFOs and performance. Unfortunately, not the right kind of incentive: Rau found

´2QH HPHUJLQJ EHVW SUDFWLFH LQ ULVN LV WDNLQJ LW RXW RI WKH &)2¡V SRUWIROLR DQG PDNLQJ LW WKH IRFXV RI D ULVN DGYLVRU ZKR UHSRUWV WR WKH &(2 Âľ —CLIVE BRIAULT Senior Advisor, KPMG, London

firms that pay their CFOs in the top ten percent of pay in their industry earn negative abnormal returns over the next five years of approximately -13%. What’s the solution, if money doesn’t work? “It’s not straightforward, Rau says. “As long as there is a disconnect between the job of a CFO and the eventual outcome (several years later), it is tough to think of a compensation scheme that will motivate the CFO correctly.� Other measures seem to work better. A 2010 study of 900+ finance professionals all over the world by the Corporate Executive Board, a Washington, DC - based consulting company, found that 30 percent were looking or thinking about another job. Top reason? A low opinion of their manager. Second, was the prospect of a better career opportunity. Compensation was actually far down the list, says Mike Griffin, a banking and finance consultant for the Corporate Executive Board.

´:KHQ WKLQJV JR EDG XQIRUWXQDWHO\ EHLQJ LQWHJUDWHG UHDOO\ KXUWV \RX DV EDQNV LQ WKH ZHVW IRXQG RXW LQ Âľ — RAGHAVENDRA RAU Professor, Cambridge Judge School Of Business, US

16

CFO INDIA

DECEMBER 2010

Globalisation. Despite the temporary advantages of living within a separate kingdom in the last crisis, CFOs of domestic banks are facing the same question as many fast-growing businesses in other industries: what is the best way to reach a global scale? Right now, India’s banking sector is still much smaller than many other markets, creating a risk for domestic banks as the country opens up to the world – and an opportunity as well. But they are not alone. Globalisation is clearly on the minds of many banks right now, both in the East and the West. “I think people are both licking their wounds and thinking to themselves where are the big opportunities in the future? India is clearly an area of growing importance and increasing opportunity,� says KPMG’s Briault. So is there a Mittal in the ranks of Indian banks? It is not clear yet. Fastgrowth can change corporate cultures rapidly, particularly with a CFO pushing the enterprise to take on more risk. Yet there remains something of the old school humility about the Indian banking sector, and its CFOs. As HDFC’s Jagdishan wrote in an email setting up an interview for this story, “All I can say is you may be disappointed not to carry a great story. To be a bank CFO is nothing great at all!� It is a kind of self-effacement that does not suit a buccaneering Master of the Universe, but at this point, the world may have had its fill of that kind of banker.

In business, as in life,

control is everything.

Take Control

With Nexstep Expense Management – the only tool for total expense control. Travel Management • Employee Reimbursements • Procurement • Utility Payments • Budgeting

Control. Save. Grow.

With Nexstep Expense Management System. To take control, call now. Mehul Vora @ 91672 42471 / 022-3088 5668 email : nexstep@nexstepworld.com | website: www.nexstepworld.com

,1 35$&7,&(

&25325$7( *29(51$1&(

WHY BANKS MUST STRENGTHEN THEIR GOVERNANCE LEVELS The Basel Committee recommendations should be implemented in full if banks and financial institutions want to avoid a crisis like the one that brought many of them down in 2008-09. KUNTAL SUR

PHOTOS.COM

T

he recent turmoil in the global financial markets and the subsequent collapse of many banks and financial institutions in western economies has highlighted the importance of corporate governance, which is now the key agenda for both stakeholders and shareholders. A good governance framework enables a financial institution to make efficient use of its resources and involves accountability for the stewardship of those resources. Corporate governance also emphasises the balance between economic and social goals. The Basel Committee on Banking Supervision, an international grouping of bank regulators drawn from the G20 countries, has published a guidance for better corporate governance of banks, following the global economic meltdown. In October 2010, it issued a set of 14 Principles for Enhancing Corporate Governance in Banks. Many of the principles set out by the Basel Committee are good practices and 18

CFO INDIA

DECEMBER 2010

,1 35$&7,&( can be implementable in firms across industries. It would perhaps be helpful to discuss the relevance of a few of them. First of all, with respect to board practices, the Basel Committee states that the board has overall responsibility for a bank, including its business, risk strategy and financial soundness in governance. This might appear to be obvious, but it is worth looking at what this implies for the board. The board must pay attention to the long-term interests of an institution and to those of stakeholders, including depositors and creditors. In other words, good corporate governance means not focussing on short-term returns to shareholders, but concentrating on what is in the best long-term interests of the company. This will often involve taking into account not only the interests of the owners, but also those of creditors, employees and other stakeholders. The Basel Committee also recommends that there should be a clear distinction between the responsibilities of the board and those of senior management. While the board takes overall responsibility for the direction of the business, the senior management should ensure that a bank’s activities are consistent with the business strategy, risk appetite and policies approved by the board. An especially important responsibility of the senior management is to ensure that there are appropriate systems for managing risk, including a comprehensive and independent risk management function. The importance of an independent risk management function is something clearly underlined by the financial crisis. Prior to the crisis, many banks did not give the risk management function the stature and independence that it needed. Rather than being treated as an integral part of the business, risk management and compliance were seen as overhead costs which were a distraction from profit generation. Risk managers lacked direct access to the CEO/board, which would have given them the ability to challenge some of the front-office decisions. The

Basel Committee recommends that banks appoint a Chief Risk Officer who should be a senior executive with independence and authority, in overall charge of risk management function. He or she will report directly to the CEO or equivalent. Sound corporate governance is evidenced, among other things, by a culture where the senior management is expected and encouraged to identify risk issues as opposed to relying on the internal audit or risk management functions to identify them. This expectation is conveyed through bank policies and procedures. In this regard, internal controls play a key role. Internal controls help to ensure process integrity, compliance and effectiveness. In other words, it provides comfort that financial and management information is reliable, timely and complete and that the bank is in compliance with its various obligations, including applicable laws and regulations. The other issue which has been given considerable attention is the compensation practices for executives. One of the major contributory factors towards the financial crisis was that the staff at many top financial institutions were rewarded for their short-term risk-taking behavior. The incentive structures created by bonuses paid over a limited time horizon, encouraged traders to focus on short-term profitability and financial engineers to design financial instruments that generated immediate profits, while risks were pushed off to an indefinite future date. The other complex issue, which has been highlighted during the crisis, is the creation of a number of legal entities to offer different products, regulatory and fiscal, for product-offering purposes. This increases the complexities through interconnections and intra-group transactions among such entities, which in turn can lead to challenges in identifying, overseeing and managing the risks of an organisation. As part of corporate governance, the board and senior management should understand the structure

%$6(/ $'9,&(

• The Committee came out with 14 Principles for Enhancing Corporate Governance in Banks in October 2010. • The board will have overall responsibility for a bank, including its business, risk strategy and financial soundness in governance • Banks should appoint a Chief Risk Officer who will be a senior executive with independence, in overall charge of a bank’s risk management function, reporting to the CEO • Senior management and staff are expected to identify risk issues as opposed to relying on internal audit or risk management functions to identify them • The practice of rewarding staff who bring in short term profits, in effect pushing away long term risks to a future date, should not be encouraged

of the group, i.e. the aims of its different units and the links among the entities. Transparency in disclosure of these links assists in implementing the principles of corporate governance. Good corporate governance makes for excellent business sense. It increases the confidence of both shareholders and stakeholders in the company. Successful businesses are those that plan for the longer-term, understand the risks of their industries, and which invest and build for the future. High standards of corporate governance are an essential mechanism to ensure the longer-term viability of an institution.

The author is Director, Financial Risk Management Advisory Practice, KPMG. The views and opinions expressed here are personal. DECEMBER 2010

CFO INDIA

19

,1 35$&7,&(

675$7(*<

SHIFTING TO GROWTH: TIME TO THINK FINANCE TRANSFORMATION Transforming the finance function is a daunting task, particularly as companies shift from retrenchment to growth. Adopt these strategies to overcome the challenges of thinking “transformationally.”

SAM SILVERS

A

sk a gathering of chief financial officers what “finance transformation” means, and you are likely to get as many definitions as there are finance chiefs in the room. One executive may want to redefine the finance operating model. Another may want to close the books in a more timely manner. Yet another may want to revamp the entire finance operation. Regardless of the scope of the definition and the priorities attached to it, finance transformation can become overwhelming to even the most seasoned CFO. But it need not be so. Targeted initiatives can, individually, be transformative. Any one of them can increase the value the finance organisation provides, so long as it is focussed on supporting the business in achieving growth, improving efficiency and managing risk and compliance. There are 10 key challenges facing today’s CFOs and finance organisations as businesses shift from retrenchment

20

CFO INDIA

DECEMBER 2010

to growth. Understanding these challenges and adopting proven strategies to address them can help finance fulfil its ever-expanding role in supporting business strategy and operations, as well as do a better job of handling traditional transaction-oriented responsibilities.

CREATING A GLOBAL FINANCE OPERATING MODEL Finance organisations grow as the businesses they serve grow. It is com-

mon for this evolution to produce different finance operating models for various regions and lines of business, especially when growth comes through M&A activities. The resulting inconsistency increases costs and fosters duplication of activities. Finance organisations of leading companies are developing a common and consistent global finance operating model that standardises both transactional and business support services across geographies and business units. These organisations

$ JOREDO DSSURDFK PD\ LQFOXGH H[SDQGLQJ WKH XVH RI VKDUHG VHUYLFHV DQG FHQWUHV RI H[FHOOHQFH WR GULYH HIILFLHQF\ ZLWKRXW VDFULIFLQJ TXDOLW\

conduct the appropriate activities and deliver the right mix of services based on cost, location, in-house staffing and outsourcing resources. A global approach may include expanding the use of shared services and centres of excellence to drive efficiency without sacrificing quality or control. Common financial planning and analysis resources can be established to support business decisions, accompanied by consistent application of processes. Leading organisations also leverage a global talent pool, going offshore as

appropriate both for commodity services and to fill leadership and management roles. An organisation’s business operating model should define the degree to which finance centralises its processes. Standards then spell out responsibilities and establish service levels to provide consistency.

MANAGING FINANCE TALENT Talent management is not a switch that can be flipped on or off depending on

the hiring and retention environment. It is essential for the finance organisation to determine whether it has appropriate strength in the competencies needed to align finance with the business and to support strategic goals. Leading companies are identifying workforce segments critical to finance meeting its responsibilities. They are recognising and embracing generational differences as they undertake programmes and initiatives to develop, deploy and connect with key talent. Moreover, moving finance personDECEMBER 2010

CFO INDIA

21

PHOTOS.COM

,1 35$&7,&(

,1 35$&7,&( nel through business unit assignments can help top talent add value and grow. Aligning compensation packages to results can foster motivation and loyalty.

IMPROVING BUSINESS DECISION SUPPORT Fundamentally, finance has two traditional roles: Stewardship of the business through controller and accounting functions and business partnering, which supports business decision making. To fulfil the business partnering role more effectively, finance leaders need to be engaged as strategists and catalysts, especially when driving corporate growth initiatives. The finance organisation needs to make more meaningful and actionable information available to the business through conventional processes like management reporting, forecasting, planning and analysis. It can be a struggle to understand business drivers, what needs to be measured and whether results are accurate and insightful. Finance can deliver a clearer picture with better business decision support. Defining information needs based on decisions that need to be made rather than the reports finance is expected to deliver is essential in improving decision support. Leading finance organisations incorporate strategic planning, budgeting, variance analysis and management reporting as part of an integrated cycle rather than independent financial cycles. They drive global, consistent performance measures throughout the organisation, integrate those measures into all elements of the management process and ensure compensation is linked to forecast accuracy. But finance alone can’t improve business-decision support. The information technology organisation is a critical partner that can enable finance to take ownership of the collection and governance of financial data, including standardisation of data definitions, systems and processes across the organisation. 22

CFO INDIA

DECEMBER 2010

:KLOH PDQ\ &)2V URXWLQHO\ RYHU ORRN WKH WD[ IXQFWLRQ LQ WUDQVIRUPD WLYH LQLWLDWLYHV LW LV FULWLFDO WR NHHS SDFH ZLWK OHJLVODWLYH GHYHORSPHQWV WKDW DUH FRQVWDQWO\ FKDQJLQJ WKH WD[ ODQGVFDSH 8S WR KDOI RI FRU SRUDWH SURILWV DUH YXOQHUDEOH WR DEVRUSWLRQ WKURXJK WD[DWLRQ PRIORITISING CAPITAL INVESTMENTS Many organisations wrestle with how to effectively identify, fund, implement and measure the results of new investments and ultimately improve shareholder value. Finance can play an important role in streamlining the process by helping business unit leaders and C-suite executives cut through the clutter of information around investment opportunities. Implementing a value-based investment approach can translate both hard and soft benefits into a common shareholder value measure that allows management to compare investments and make trade-off decisions. Ranking capital investment options by their after-tax benefit-to-cost ratio can help prioritise capital allocation. Quantifying the relative urgency of investments can help management

explore alternative decisions for each project presented — fund now, partially fund, reject or defer. Capital investment involves not only equipment and facility investment, but also channel development and entry into new markets. Taking a programme approach to capital planning that identifies and quantifies project interdependencies upfront can help identify synergies, and is an important factor in helping business leaders understand how investments were prioritised.

RATIONALISING FINANCE ACTIVITIES Finance will often do whatever any decision-maker asks, always pleased just to have a seat at the table for critical business decisions. But a “throw bodies at the problem� approach to addressing service requests does not

,1 35$&7,&( necessarily add real value, and puts added stress on finance organisations that have been trimmed during the economic downturn. Finance can increase its value by educating business leaders on the “cost to serve�, challenging them to focus on activities that add the most value. Building on the creation of a global finance operating model, a CFO can drive a cultural shift from an “on-demand� service mentality to a model focussed on the best use of finance. Take a hard look at the generation of various nonstandard and other internal reports that offer questionable value, yet increase demands on finance. The same is true for standard financial planning and analysis activities such as data consolidation, data reconciliation and report compilation, which can be shifted from different geographies and business units into a common centre of excellence.

CONSIDERING TAX IMPLICATIONS Tax plays an important role in a company’s profitability. Potential bottomline, tax related benefits can be found in virtually every area of an organisation, including logistics, procurement, capital projects and corporate development. While many CFOs routinely overlook the tax function in transformative initiatives, it is critical to keep pace with legislative developments that are constantly changing the tax landscape. Up to half of corporate profits are vulnerable to absorption through taxation. Partnering with and leveraging the knowledge of the tax function can help identify potentially significant value creation opportunities. Including tax expertise in corporate and operational strategic decisions — at the beginning of the process — can boost bottomline impact, even to the point that investments pay for themselves in tax savings. Encouraging the tax organisation to suggest opportunities such as tax-aligned supply chains,

legal entity simplifications and “green� initiatives can catalyse change and organisational improvement. Configuring business processes and related systems to capture accurate tax relevant data can improve analytics to support decision-making, as well as respond to savings opportunities, legislative changes and corporate events such as mergers and acquisitions.

STRENGTHENING FINANCIAL RISK MANAGEMENT Integrating a risk perspective into the formulation of finance’s strategy, governance structure and operating and talent models can contribute to understanding the effectiveness and completeness of an organisation’s risk management approaches. This entails designing integrated and sustainable finance risk management programmes with necessary controls and processes. Important programme components include identifying and assessing risks, defining risk ownership, implementing formal policies and procedures, defining risk mitigation plans and activities and establishing communication protocols to deliver consistent finance value. Automation technologies and staffing with appropriate technical skills can enhance control quality. Vendor risk assessments can aid in validating the ongoing effectiveness of process, system, compliance and service delivery controls. Companies can

also gain a risk-adjusted perspective on the expected returns from planned projects by applying risk analysis to prioritisation of finance initiatives.

ADDRESSING REGULATORY SHIFTS Regulatory changes are sweeping across the business landscape — from healthcare reforms and tax changes to strengthened anti-fraud enforcement. Regulatory interpretation and adherence to demands will likely increase over time, a burden compounded by reduced staffing levels. Leading finance organisations are using these challenges as transformative triggers. They are establishing systems and processes that sustain agility and flexibility to respond to inevitable future changes. Assessment of in-place controls for anti-money laundering and Foreign Corrupt Practices Act requirements can help in identifying and re-mediating risks intertwined with the business model. Organisations implementing International Financial Reporting Standards (IFRS) should consider establishing a global centre of excellence for statutory reporting and other necessary requirements.

CAPITALISING ON CASH MANAGEMENT The consumer spending collapse, financial services meltdown and credit

9HQGRU ULVN DVVHVVPHQWV FDQ DLGH LQ YDOLGDWLQJ WKH RQJRLQJ HIIHFWLYHQHVV RI SURFHVV V\VWHP FRPSOLDQFH DQG VHUYLFH GHOLY HU\ FRQWUROV IRU D FRPSDQ\ DECEMBER 2010

CFO INDIA

23

,1 35$&7,&( crisis added to the cost of capital and the difficulty in obtaining it. Predictably, this resulted in finance organisations putting a greater focus on cash. Getting organisation-wide ‘buy in’ to the value of cash is difficult for companies historically focussed on revenue and profit and loss. Understanding the substantial breadth of cash productivity opportunities can help get everyone on board. Opportunities will vary for different organisations, but finance needs to push the organisation to understand the framework and different component drivers of cash, including: * Generating cash through cost reduction, revenue maximisation, tax strategies and financing and funding. * Liberating cash through global cash management, working capital reduction and asset management. *Deploying cash through capital investments, performance management, treasury and risk and asset management.

TARGETING FINANCE TRANSFORMATION INVESTMENTS Finance has multiple investment priorities, including improving the close, investing in new finance systems and processes, redefining the finance operating model and enhancing finance talent management. Realistically, finance cannot do all this at once. Leading companies leverage finance maturity models to assess gaps between performance and objectives. They develop a finance strategy that supports the business’s overall strategy and operating model, and then develop a long-term, holistic finance roadmap that addresses finance strategy, processes, organisation and systems requirements. A key to getting solid results from such efforts is sequencing the roadmap to combine larger strategic efforts with “quick-win” initiatives. It is also vital to keep executive leadership engaged and dedicate full time resources throughout the process.

THINKING TRANSFORMATIONALLY Finance needs to grow — in focus, capabilities and contribution — in order to add business value while fulfilling its ever-more complex roles and responsibilities. At the outset, be sure to determine which initiatives will deliver the proper level of sophistication, structure and alignment with the broader organisation. Then define what finance transformation means for the company and pursue projects that address the most pressing priorities. Taking such an approach will produce a more satisfying, enriching and valueadded venture.

SAM SILVERS (SSILVERS@DELOITTE. COM) IS A PRINCIPAL WITH DELOITTE CONSULTING LLP IN PHILADELPHIA AND THE U.S. PRACTICE LEADER FOR THE FINANCE TRANSFORMATION PRACTICE, AS WELL AS THE LEADER OF FINANCE TRANSFORMATION FOR THE AMERICAS REGION

,1 35$&7,&(

23,1,21

CORPORATE FINANCE: BEAN COUNTERS OR MORE? The What, Why and How of Business Partnering. NISHANT SAXENA

A

full 15 years after the advent of ‘business tralia and Thailand), the stakeholders for finance (typically partnering’, finance continues to be called bean counters! So heads of other functions like Marketing, Sales, Supply Chain where did we go wrong? etc.) lamented that finance: While the traditional roles of finance - treasury, account1.Often sees a problem purely from a cost point of view. ing, management reporting, audit, etc. - are generally being 2.Needs more business knowledge to ask the right questions. accomplished well, unfortunately, the higher role of value cre3.Is mainly involved in accounting and reporting. ation – finance engaging with other functions to help make 4.Is generally risk averse (often overlooking opportunities). the right choices - often takes a backseat. The CFO may per5.Is largely internal focused. sonally be convinced of the need, but how many Level 2 and 3 6.Does analysis that is often only a post-facto number crunchfinance managers actually influence real business decisions? ing paper exercise. We are not talking of simply punching numbers in an excel 7.Has a limited impact on real business decisions. sheet to get NPV. But going in depth on the reasonability of assumptions, pushing back where required, modelling the future uncertainty using insights on key value drivers, identifying risks and mitigation plans and then giving a business recommendation as a Venture Capitalist? In a survey of more than a dozen Fortune 100 firms (Asia offices – India, Singapore, Hong Kong, Malaysia, Aus— RECENT RESEARCH BY ONE OF THE BIG 4 FIRMS

´,Q PRVW RUJDQLVDWLRQV MXVW DERXW SHU FHQW RI ILQDQFH )7(V DUH LQ EXVLQHVV SDUWQHULQJ UROHV DQG LQ SHU FHQW RI WKH FRPSDQLHV ILQDQFH ZDV SULPDULO\ SOD\LQJ D UHSRUWLQJ RU UHDFWLYH DQDO\WLFDO VXSSRUW UHDG QXPEHU FUXQFKLQJ UROH ¾

26

CFO INDIA

DECEMBER 2010

,1 35$&7,&(

inter-linkages between departments. Indeed the correlation between high performance business and high performance finance organisation is 84%! A good business oriented financial analysis brings objectivity in decision making. Often Marketing, Sales, R&D or Supply Chain tend to be over optimistic, not because of (mal) intent but because the project owner may be too involved to take a distant look.

Most business partners expect finance to help them make choices by providing clear decision rules and benchmarking. “Help me to invest better; don’t just tell me to stop spending”. “Tell me something I don’t already know”. Junior and middle finance managers tend to grow frustrated with the transactional nature of their role. They aspire to get involved in main

DECEMBER 2010

CFO INDIA

27

PHOTOS.COM

8.Has limited influence on business partners through knowledge based decision making. This is such a waste! For four reasons: Finance is uniquely positioned to influence some key business decisions. They know the entire P&L from top-line to bottom-line and generally know the expectations and constraints of the GM well. Theirs is an all encompassing role with knowledge of the

,1 35$&7,&( business. Business Partnering adds to job satisfaction. So what specifically can finance managers do better? Jeff Emmelt, CEO of GE, outlined the work plan for his CFO: There is a dual role to be played. The first is the obvious oversight/controllership role (bottom-line stewardship). But the other, at the higher end of value add, is business partnering that helps achieve growth (top line stewardship). The latter may include: Strategy Formulation: Making the business look outwards through insightful competitive and industry analysis. Analysing the company’s right to win and then putting a trajectory of profitable growth, with clear targets for each function. Playing the portfolio game by recommending which new segments to get into, which segments to exit etc. Strategy, fundamentally, is making a choice, and financial analysis should help the business in making a better choice. Initiative/Investment Analysis: Better modelling of future cash flows with probability based analysis and sensitivity on key input drivers. Kotler found that 60% of all marketing initiatives are generally a failure! Understanding the key drivers of top line and bottom-line, objectively assessing whether volume forecast is too good to be true, decoding the value of each channel and consumer segment, checking if the investment is too front loaded, whether we have adequately built in potential competitive reaction, are we doing post launch monitoring/analysis etc. Developing comfort in the qualitative section of analysis much like an external Venture Capitalist would do. Cost Structure Optimisation: Doing benchmarking externally with competition and internally with the best manufacturing locations, to find the right cost structure. Competition should be defined as “whoever the consumer may prefer versus our product”, and so, in a developing world, say, could

28

CFO INDIA

DECEMBER 2010

CASE STUDY

21( 2) 7+( :25/'·6 /$5*(67 &21)(&7,21$5< *,$176

T

he newly appointed Asia CFO of this firm lamented that his finance people were mainly focussing on ‘reports, reports and reports’. There was limited analysis and impact on real business decisions. He first impressed the Asia CEO and got the mandate that finance can and should get involved in business strategies. We interviewed all his key business partners to get an honest assessment of ‘strengths and opportunities of finance employees – and based on that made an action plan. Parallely, through outsourcing, rationalisation of reports and automation, he freed up time of his 100+ staff. He also started hiring a mix of top Bschool MBAs and CAs at the entry level in finance. He then articulated the ‘VC mindset’ through a ‘House of Finance’ action plan, where finance was expected to drive Jedi-style, helping predict the future (versus rear view driving where you only focus on what has already happened). A series of 3 day workshops were organized in major cities within Asia, coaching on commercial (e.g. how exactly does consumer research forecasts volume for a new product and therefore what are the limitations of such a calculation), financial and softer skills needed for partnering. Specific action plans were then aligned with each finance resource and a date set to review progress. They were told clearly that promotions may be difficult if their business partners do not find value add from their analysis. Regular mentoring and coaching was provided as new and middle managers undertook this behaviour change. After one year of efforts, the Asia CEO publicly congratulated the finance community on how he had seen a significant change in their output and influence. The Global CFO also pitched in saying this was probably the best-in-class and supported the roll-out of similar workshops beyond Asia.

mean the local player with a lean and mean cost structure. Pricing should be led by consumer demand and then finance needs to lead the work backwards to find the cost structure that can afford that pricing. Cost savings can also come in tax by better utilisation of various government schemes and incentives and by newer (but legal) corporate structures. Outsourcing is another option. So how can we bring this behaviour change? In our consulting with compa-

nies like J&J, Kraft and Cadbury, we use a holistic 7 step process: Mandate from CEO: The CEO needs to provide a clear mandate that finance will get involved in decision making. This requires the CFO to have a personal credibility where the CEO feels ‘yes this person can be trusted to give good business inputs’. Time Out from Transactional work: An effort to free up time from transaction processing by adopting technology and standardising processes. 20%

,1 35$&7,&( time to be kept aside for thinking, analysing and recommending. According to a survey with over 100 respondents from the corporate finance community, the #1 reason for not doing enough business partnering is that CFOs are overburdened with transactional work. The Country CFO of a Fortune 50 FMCG giant recalled how his analysts saved 25% time just by mastering Microsoft excel (pivot tables, vlookups, linking etc.). Boeing, for example, reduced its Chart of Accounts from 15,000 to 1,000 and its spreadsheets/ reports by 75%! Venture Capitalist Mindset: Especially the entry and middle levels finance managers have to see themselves as a Venture Capitalist. A VC does not blindly accept what the entrepreneur says. A VC knows how to ask the right questions. A VC will look at industry and competitive data (external orientation and benchmarking) to arrive at his position. While the entrepreneur may be the better subject matter expert on that particular opportunity (just as the marketing person in an FMCG may know about the consumer and market potential much better), it does not stop the VC from taking an independent data based stand. A VC is a partner in helping the entrepreneur grow, not just in keeping the accounting right. Both go down if the top-line targets are not met. Developing Business Acumen: Understanding the key drivers of business and risk. Developing comfort with the qualitative part of the analysis including consumers, customers and competitors. For example, the analyst in a prestige cosmetic company explained how he always thought lipsticks were a drag to financial profitability till he understood that lipsticks provided the all important footfalls to the counter and almost always enhanced the sales of other (more profitable) products. Understanding the ‘Right to Win’ of your offering and developing insights on the business. Learning Analysis Tools: Analysis of a business opportunity requires a

´+RQHVWO\ PRVW ILQDQFH SURIHVVLRQDOV DUH DW WKH EDFN HQG RI WKH SLSHOLQH VWLOO DQDO\VLQJ ZKDW RWKHUV KDYH GRQH 7KH FKDOOHQJH LQ WKH IXWXUH ZLOO EH WR KHOS GHYHORS WKH SLSHOLQH UDWKHU WKDQ UHSRUWLQJ RQ WKH SLSHOLQH DQG RQ WKH LGHDV RI RWKHUV ¾

— GLOBAL CFO OF A FORTUNE 50 FIRM (2010)

holistic assessment of the 7Cs: Category, Customer, Consumer, Competition, Communication, Capability and Cash Flow. Most often finance gets involved at the tail end focussing only on (projected) cash flows. But we need to bring such qualitative aspects like: whether we have the first mover advantage in the category, whether the consumers will require a habit change, how the competition is expected to react etc. Similarly, within the cash flow analysis, we can incorporate a more probability adjusted assessment that models reality more closely. Mastering Soft Skills: Mainly Influencing skills, Business Communication and Time Management. Learning the art of influencing in a knowledge economy by balancing between Advocacy of their point of view and Inquiry of the other person’s point of view. The cross functional team should feel, “my proposal becomes better after discussing with my finance resource�. Communicating with clear analysis of risks and commensurate rewards. Being aware of the forest as well as trees – the larger business context and impact of individual building blocks. Providing simple ‘rule-of-thethumb’ to non-finance business partners (e.g. “a new telecom tower okay

as long as it attracts 800 subscribers in 3 months�). And doing all this while managing Time - carving out slots for ‘important but not necessarily urgent’ activities: capability development, analysis, strategic thinking, relationship building, benchmarking etc. Redefining KRAs: Finally, including metrics on superior business partnering in assessment of finance employees. Ask: “What would the multi functional team leader not have done but for the analysis by finance?� In Procter & Gamble, for example, a specific gold standard exists for every finance role, identifying what behaviour and actions are expected from a top performer. Promotion to a Business Unit CFO is almost impossible unless there is strong evidence of business partnering. Unfortunately, many companies hurriedly focus on just 1 or 2 of these steps, and then complain that behaviours have not changed even after many years. Like many things in life, there are no short-cuts!

NISHANT SAXENA is CEO, Elements Akademia and a Guest Faculty at IIM Lucknow. DECEMBER 2010

CFO INDIA

29

,1 35$&7,&(

(9(17

THEY HAVE ‘IT’: INDIA’S BEST-RUN BUSINESSES AWARDED The 2010 SAP ACE awards honour companies who have leveraged Information Technology (IT) to dramatically improve their performance in 2009-10.

I

t was a glittering evening at Mumbai’s Grand Hyatt hotel, with representatives from more than 50 of India’s best known corporate houses in attendance. The lure? The much awaited fourth edition of the SAP ACE Awards for Customer Excellence that honoured 24 winners for their innovative use of IT. “Information Technology plays a significant role in an organisation’s success and growth. Nominations for the SAP ACE awards came in from a wide profile of companies, across diverse sectors including public sector and charitable organisations, large private-sector companies as well as small and mid-sized enterprises (SMEs), demonstrating how they are driving business value and leveraging IT to achieve their business goals,” said Peter Gartenberg, Managing Director, SAP India. Gartenberg added that SAP ACE had become an industry benchmark to recognise businesses that have achieved excellence. “The award brings together marquee SAP customers in the country on a common platform to share best practices and celebrate their success amongst peers,” he said. Over 200 project nominations brought unprecedented participation to the awards series. Among the new cat30

C F O

DECEMBER 2010

,1 35$&7,&( PETER GARTENBERG, MANAGING DIRECTOR OF SAP INDIA (C) PRESENTS A PLAQUE TO JURY MEMBER AND MANAGING DIRECTOR OF 9.9 MEDIA, DR PRAMATH RAJ SINHA (R)

Categories

Winners

Best Run Award in Automotive

TVS Suzuki Ltd

Best Run Award in Chemicals

Paradeep Phosphates Limited

Best Run Award in Consumer Products

Mother Dairy

Best Run Award in Engineering, Construction and Operations

Larsen & Toubro Ltd

Best Run Award in Metals & Mining

The Singareni Collieries Company Ltd.

Best Run Award in Retail

Spencer’s Retail Limited

Best Run Award in Utilities

National Thermal Power Corporation Ltd

Best Run Award in Customer Relationship Management

Blue Star Ltd

Best Run Award in Finance

Jet Airways

Best Run Award in Human Capital Management

Bharat Petroleum Corporation Limited

Best Run Award in Procurement

Haldia Petrochemicals Ltd.

Best Run Award in Supply Chain

Dabur India Limited

Best Run Award in Compliance

Bharat Petroleum Corporation Limited

Best Run Award for User Adoption Initiatives

Dexler Information Solutions

Best Run Award in Business Intelligence

Mahindra & Mahindra Ltd

Best Run Award in Testing Center of Excellence

Holcim Services Ltd

Best Run Award for Non-Profits

Rural Development Trust

Best Run Award for On-Demand Implementation

Genotypic Technology Pvt.Ltd.

Best Run Award in Other Industries including Services

Godrej Agrovet Limited

Best Run Award in Medium Enterprises – Manufacturing

Sudarshan Chemical Industries Ltd.

Best Implementation Partner

Siemens India

Best Run Award in Small Enterprises – Manufacturing

Gala Precision Technology Private Ltd

Best Run Award in Public Sector Undertaking

Indian Oil Corporation Ltd

Best Run Award for Conglomerate

Mahindra & Mahindra Ltd

egories introduced this year was an award for the best ondemand implementation. “Cloud computing is seen as a fundamental change that is helping companies realise the benefits of information technology to expand rapidly and gain competitive advantage.” said Alok Goyal, Chief Operating Officer, SAP India, explaining the addition of such new categories. Those who attended and those who were recognised for their efforts, appreciated the approach of a systematic and DECEMBER 2010

C F O

31

,1 35$&7,&(

WINNERS ALL: THE 24 AWARD WINNERS WITH MEMBERS OF THE JURY AND THE SAP TEAM

(BELOW): THE AWARD CEREMONY IN PROGRESS. (BELOW LEFT) ALOK GAYAL, COO OF SAP INDIA MAKES A POINT

´7KH DZDUGV EULQJ WRJHWKHU PDUTXHH 6$3 FXVWRPHUV LQ WKH FRXQWU\ RQ D FRPPRQ SODWIRUP WR VKDUH EHVW SUDFWLFHV ¾ ³ 3HWHU *DUWHQEHUJ 0' 6$3 ,1',$ 32

C F O

DECEMBER 2010

rigorous evaluation comprising a diligent three-stage process that included performance benchmarking, customer interviews and a detailed jury discussion. The final jury decision was made by three jury members: Anil Kumar Sardana, Managing Director of Tata Teleservices, Manish Choksi, Chief of Corporate Strategy and CIO of Asian Paints and Dr Pramath Raj Sinha, Founder and Managing Director of 9.9 Media. “It feels great to be recognised for what we feel has been a very successful year for us. Implementing SAP has helped our business tremedously,� said S Varadaraj, CFO of Godrej Agrovet. The firm won the ‘Best Run Award in Other Industries including Services’ category. Once the main ceremony was over, many of the guests, well over 400 in number, were seen in animated conversation with each other, exchanging notes and sharing their feedback on SAP while relaxing over cocktails and dinner.

%,* 3,&785(

%(1&+0$5.,1*

RELUCTANT TO

COMPARE? An SAP-ISB-CFO India survey indicates that a majority of Indian firms have not benchmarked their finance functions yet. DEEPAK GARG

T

he 2010 SAP-ACE awards revealed one happy trend: more and more Indian companies are using benchmarking as a tool to improve productivity and instill discipline within the organisation. The only worrying picture that emerged following a survey conducted by SAP in association with the Indian School of Business (ISB) and CFO India was the fact that nearly 60 per cent of the CFOs polled admitted that their finance function had never been benchmarked. Over the past decade and more, CFOs and their entire finance functions have struggled to add a strategic dimension to their day-to-day operations. In today's challenging economic conditions, CFOs are charged with prioritising work that impacts the achievement of a company's goals for

&+$57

+DYH \RX HYHU %(1&+0$5.(' \RXU FRPSDQ\" Yes

Not sure

In a limited manner

14%

No

33%

2% 51% DECEMBER 2010

CFO INDIA

33

%,* 3,&785( &+$57

&+$57

+DV \RXU FRP SDQ\ V ILQDQFH

:KDW EHQHILWV RI EHQFKPDUNLQJ GR \RX

IXQFWLRQ HYHU EHHQ EHQFK

PDUNHG" Yes

VHH IRU D FRPSDQ\" Become more aware of own standing vis- àvis the industry Help set strategic direction

Not sure

58%

82%

42%

76% 92%

Identify focus areas for improvement

&+$57

profitable growth. To achieve financial excellence, CFOs admit that they must effectively answer key strategic questions: Is cash available for acquisitions or to fuel innovations? Are the right controls in place to ensure compliance? Is the company efficient and strategically effective in the right areas? Is growing costing too much? “It is essential that companies get their finance functions benchmarked to ensure that they follow global best practices. Even after getting our finance function benchmarked, we continue to keep a close watch on details to make sure we maintain the standards we have set ourselves,” says Rajesh Ghonasgi, CFO of the Pune based Persistent Systems. (See Chart #1) Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. It can help organisations assess their strengths, uncover areas for improvement, and identify best practices and IT strategies that can generate clear and tangible value. The survey team, which spoke to 50 CFOs across India to understand 34

CFO INDIA

DECEMBER 2010

+RZ GR \RX DYDLO RI HVWDEOLVKHG EHVW SUDFWLFHV IRU WKH ILQDQFH IXQFWLRQ"

58%

Research reports Industry specific trade shows/conferences

26%

Forums/communities/ social networks Industry/function specific websites Industry/function specific magazines General business magazines Peer advice (word of mouth)

48% 28% 46% 42% 54%

2QO\ SHU FHQW RI WKRVH VXUYH\HG VDLG WKH ILQDQFH IXQFWLRQ RI WKHLU FRPSDQ\ KDG EHHQ WKURXJK WKH EHQFKPDUNLQJ H[HUFLVH

%,* 3,&785( &+$57

,V \RXU FRPSDQ\ WDNLQJ

DGYDQWDJH RI DOO WKH HVWDEOLVKHG EHVW SUDFWLFHV IRU WKH ILQDQFH IXQFWLRQ LQ \RXU LQGXVWU\" Yes

Not sure

45%

how performance benchmarking can be leveraged by Indian companies (See Chart #2) found that over 80 per cent of the respondents had ensured their firms had been benchmarked in some form or the other. However, only 42 per cent of those surveyed said the finance function of their company had been through the same exercise. The heartening news was that over 80 per cent of the respondents agreed that they saw the benefits of understanding their position vis-Ă -vis the industry once they did a benchmarking, while 76 per cent confirmed that benchmarking would guide them to set new and better strategic directions. “No one likes it if a mirror is held to his face. This could be a reason many firms haven't yet benchmarked their finance functions. However, the advantages of benchmarking are obvious and it should be done.

55%

0DQ\ &)2V LQGLFDWHG WKH\ SULPDU LO\ DYDLOHG RI EHVW SUDFWLFH LQIRUPDWLRQ IURP UHVHDUFK UHSRUWV SHHU DGYLFH DQG VRFLDO QHWZRUNV One can also take help from external consultants to gauge industry best practices and how his company fares in that regard,� says Sandeep Batra, Director, Finance of Pidilite Industries. (See Chart #3)

*HW \RXU ILQDQFH IXQFWLRQ EHQFK PDUNHG Participate in SAP's benchmarking survey and compare your finance function’s performance with other global companies as well as companies in the similar industry, geography and size. To participate in the survey, send an email to benchmarking.india@ sap.com with your contact details (Name, designation, company, mobile, and email address), and SAP will quickly revert with the online survey details and instructions. Shortly after you submit your responses, you will receive a customised and comprehensive report indicating how you compare with your peers. To date, more than 10,000 companies globally have realised value from SAP benchmarking and best practice survey. Your participation will also allow you the benefit of receiving thought leadership insights and whitepapers from the Indian School of Business (ISB), Hyderabad, who will be tracking all the responses to highlight India’s finance function's trends and anomalies.

Indeed many CFOs the survey team spoke to, indicated that they primarily availed of best practice information from research reports, peer advice, forums, social networks and industry magazines. (See Chart #4) The fact that they were missing out on setting higher standards for themselves and their colleagues, however, was not lost on the CFOs. As many as 45 per cent of them agreed they were not taking advantage of established finance function best practices (See Chart #5). This, they admitted, leaves a lot of scope for improvement. DECEMBER 2010

CFO INDIA

35

&)2

352),/( 5$- '877$

(;(&87,9( ',5(&725 $1' &)2 48$7552

)LQDQFH E\

&KDQFH (QWUHSUHQHXU E\

As executive director and CFO of Quatrro, Raj Dutta ensured that the four-year-old service provider received a fresh $13 million VC funding this year. A keen student of global affairs, he is now hoping Western economies finally bounce back from the downturn, opening up new areas of growth for Quatrro DHIMAN CHATTOPADHYAY

36

CFO INDIA

DECEMBER 2010

RAJ DUTTA wanted to study political science and become a psephologist. Or don the gown as a civil rights lawyer. ClichĂŠd as it may sound, fate, however, had other plans for this Bollywood buff from Guwahati. Today as a successful financial professional who has been CFO of several firms before becoming an entrepreneur, Dutta looks back at his over two-decade-long career with some degree of satisfaction. Setting up systems and processes, leading the strategy team to discuss new growth opportunities and other areas of finance are his bread and butter after all. But Dutta says he came into the world of finance quite by accident. “I went to Don Bosco School and then to A V College, both in Guwahati. In college I did Economics and Political Science and then came to Delhi to study law at Delhi University’s Law Faculty,â€? recalls Dutta. That is where he met an old school buddy, who was studying to be a chartered accountant. The friend introduced him to the books he was

SUBHOJIT PAUL

&KRLFH

&)2 352),/(

0,/(6721(6 FIRST JOB With Vam Organics, just after I became a Chartered Accountant BIG BREAK When I became CFO of the Network-Picker Joint Venture. This job gave me a chance to look at different areas of a business. A HA! MOMENT When Wipro acquired our first ‘baby’ – Spectramind. It showed us that in less than two years we had created a brand that even the giants were attracted to. LITTLE KNOWN FACT: I had come to Delhi from Guwahati in the early ‘80s, to become a lawyer or a political scientist DREAM To go back to college and study psephology DECEMBER 2010

CFO INDIA

37

&)2 352),/(

studying and after a quick read, Dutta figured he was game for giving it a crack as well. “It was as simple as that. Some of my friends and relatives did try and talk me out of it, warning me that few passed the tough CA test, but the more I studied for the tests the more I liked the subjects. Guess what? In three-and-half-years, I had become a CA,” he laughs. Life thereafter has moved at a fast clip for Dutta. He did his articleship at V Shankar Aiyer and Co and then joined Vam Organics, a Delhi based firm. Initially thoughts of going back to his home town and working there did cross his mind. But here again, fate intervened. “Firstly, I realised there did not exist too many opportunities in Guwahati. More importantly, it was at this time that I met the woman in my life. She was based out of Delhi and had a successful career. There was no question of going anywhere else after that,” smiles Dutta. His career took a turn for the better in 1992 when, Dutta, still just 30, joined Network and became CFO of Network’s joint venture with the Picker Group, a British pharma company. During this stint, he also tried his hand at sales, taking charge of sales for the eastern zone operations for a few months. The big break for him though came in 1995 when he joined GE Capital as VP Operations and then, in 1997, became CFO of GE Capital International Services, soon to be re-christened ‘Genpact’. Two years later, he was instrumental in setting up Genpact’s Hyderabad office. “The first decade of my career really gave me a chance to work in diverse areas, learn about various aspects of the finance function, and about other areas of a business. In GE I managed the entire back operations and in Picker, I handled sales as well. So as the new millennium approached, I sensed I was ready for a fresh look at life,” he says. That new beginning happened in April 2000, when Dutta, along with Raman Roy, acknowledged as the father of the Indian BPO industry, quit Genpact and started Spectramind. “Spectramind was a big success and established our credentials as entrepreneurs. By 2002 it had become one of India’s largest BPOs, and successful enough to come under the radar of Wipro. Funny as it sounds, my ‘A Ha’ moment came, not when we launched Spectramind but 38

CFO INDIA

DECEMBER 2010

)$9285,7(

3,&.6

NEWSPAPER Economic Times MAGAZINE Time, India Today MUSIC Bollywood, film music MOVIE “Peepli live” BOOK Who moved my blackberry DESTINATION Mediterranean islands

EAGLE EYE: AS AN EXECUTIVE DIRECTOR AT QUATRRO, DUTTA LOOKS AT OTHER VERTICALS AS WELL, APART FROM THE FINANCE FUNCTION.

BELIEF Travel, work, see and learn from around the world, but be faithful to your roots.

when Wipro acquired it! It proved we had built a company worth buying. The offer that Wirpo made us was amazing,” says Dutta.. In 2002-03 Wipro-Spectramind was born and by the time Roy and Dutta finally exited in 2005, it had become one of the most profitable BPOs in India.”The acquisition still remains the high point of my career,” admits Dutta. But there was

&)2 352),/(

“What we have done is re-look at the way we work and spend. With new cost rationalising measures in place, we are setting ourselves up for a highly profitable year ahead.”

no time to relax now. The entrepreneurial bug had well and truly bitten Dutta. Around the end of 2005 the duo, backed by a few other Spectramind colleagues, launched another start-up – Quatrro. “Quatrro has been a growth story all the way. Here I have an expanded role, not only the CFO. I am a member of the board and I look at several areas of the company,” says Dutta who is now executive director and CFO. Doesn’t he find an overarching role too taxing? “Well, behind my back, I am called ‘Aloo’ by some colleagues, because like the humble potato that goes into every dish, Raj Dutta has his finger in every pie. But honestly, I do not mind the nickname since I revel

in knowing about different parts of the business,” says Dutta. The last two years though, have not given him too many reasons to smile. The downturn affected the US market badly and like other service providers, Quatrro felt the heat too. But now, 24 months after Black September, things are back on track. “What we have done is re-look at the way we work and spend. With new cost rationalising measures in place, we are setting ourselves up for a highly profitable year ahead. Honestly in 2011, every dollar we earn will be a profit for us,” says Dutta, with some confidence. He also hopes Quatrro will establish itself as the ‘most-preferred’ brand in the high-end service and solutions provider

business. “Quite simply, the aim is to become the best,” he says. Away from his director’s cabin though, Dutta is a man of simple pleasures in life. He loves watching Hindi films and will happily forego heavy metal and jazz for a Kishore Kumar or a Shreya Ghosal rendition. At other times, he remains a voracious consumer of current affairs, reading books and periodicals that talk about world politics and political economy. What’s next on the agenda? “There is no point getting too far ahead. As of now it is Quatrro’s growth that excites me. But yes, one day I want to go back to college and study psephology,” he signs off. DECEMBER 2010

CFO INDIA

39

,16,*+7

0$1$*,1* 35,25,7,(6

THE CFO’S FIRST HUNDRED DAYS Chief Financial Officers around the world describe their first hundred days on the job as a time when most received guidance, but couldn’t devote enough time to top priorities. A McKinsey global survey. SUSAN COCKER, ANDER RASMUSSEN AND KEVIN ZANDER

PHOTOS.COM

N

ew Chief Financial Officers may not be spending their time where it is most needed, according to a recent McKinsey survey of CFOs. Finance chiefs, globally and across industries, report spending most of the first hundred days on budgeting, management reporting and financial reporting. By contrast, they think that the most crucial activities during that time are understanding the drivers of the business, providing input to corporate strategy and building the finance team. Why are there such differences between what they do and what they regard as important? A possible answer was suggested by a CFO’s response to a question about what, in hindsight, respondents would have done more or less of. This CFO pointed out: “There is no simple answer to this. One cannot put the clock back. Every day the situation changes, and the responses and actions will have to be tuned to the situation. CFO[s] must be able to assess the business needs and act.”

40

CFO INDIA

DECEMBER 2010

,16,*+7 Fortunately for new CFOs, as they respond to their fluid situations most have strong support from the CEO. More than three-quarters of the respondents say that they received explicit guidance from the CEO in the first hundred days on the job, and 46 per cent say that the CEO was a mentor. CFOs also are more likely to name the CEO than anyone else as having been helpful in making big decisions early on. Almost twice as many CFOs credit the CEO with playing that role compared to those who thank their finance staffs. A majority of CEOs strongly support the CFO’s involvement in strategy; more than half of our CFOs say that the CEO expects them to challenge the company’s strategy, though CEOs see other activities as more important. Nearly 90 per cent of CEOs encourage their CFOs to be active members of the senior-management team. This is good news for CFOs, given the ongoing evolution of their role, the increasing visibility of their statutory responsibilities, and their considerable interest in corporate-wide strategic initiatives. Indeed, nearly three-quarters of the CFOs reported that they would like to be involved in strategy, and those who wished they had spent more time with the CEO say that they wanted to talk about strategy more than anything else. Finally, relatively few CFOs say that the finance staff would explicitly articulate their expectations to a new CFO. However, when staff members did provide explicit guidance, the CFOs say, their priorities differed from those of CFOs and CEOs. This makes a CFO’s communications with the finance team all the more crucial. A CFO is more likely to communicate with the team ad hoc and in person than in any other way.

ALIGNMENT OF EXPECTATIONS Nearly four-fifths of the CFOs report that the CEO provided explicit guidance about expectations from the new CFO; CFOs in private companies were significantly more likely to report getting

([KLELW

'LYHUVH H[SHFWDWLRQV % of respondents who said CEO or finance staff gave them explicit guidance on expectations1 What was expected of CFOs

88

Being an active member of senior management team

40

By CEO (n=128) By finance staff (n=35)

84

Contributing to company’s performance

34

Ensuring efficiency of finance organisation

70

Improving quality of finance organisation

68 74

80

52

Challenging company’s strategy

29 29

Bringing in a capital markets perspective

14 7

Other 3 Respondents could select more than 1 answer.

1

such guidance than those at public ones. CFOs, overall, say that the activities the CEO most often describes as important are being an active member of the senior-management team, contributing to the company’s performance, and ensuring that the finance organisation is efficient (Exhibit 1). Furthermore, more than two-thirds of CFOs say that the CEO expected them to improve the quality of the finance organisation, and more than half said that the CEO expect-

ed them to challenge the company’s strategy. CFOs say that members of the finance function were much less likely to give explicit guidance about their expectations but that those who did had expectations strikingly different from those of the CEO. The finance function staff, for example, was less than half as likely as the CEO to see the CFO as an active member of the management team, contributing to the performance of the company or challenging its strat-

1HDUO\ SHU FHQW RI &(2V HQFRXUDJH WKHLU &)2V WR EH DFWLYH PHPEHUV RI WKH VHQLRU PDQDJHPHQW WHDP 7KLV LV JRRG QHZV IRU &)2V DECEMBER 2010

CFO INDIA

41

,16,*+7 ([KLELW

:DQWHG PRUH WLPH ZLWK WKH ULJKW SHRSOH If you could change the amount of time you spent with each of the following individuals or groups during your first 100 days as CFO, what changes would you make?

% of respondents,1n=164

More time

Business unit heads

61

CEO

43

Finance staff

43

Executive committee

38

Board of directors

36

No change Less time Don’t know

10

21 5

52 9

48 52

2

46 52

11 15

1

8 4

56

26

External investors or analysts Former CFO

35

5

17 23

Figures may not add up to 100%, because of rounding.

1

egy. CFOs say that finance staffers were most likely to expect the CFO to play a more traditional role: ensuring the finance function’s efficiency. CFOs seem to think they generally received enough advice during the first hundred days. Business unit heads are the only group that a majority of CFOs wish they had spent more time with during that period (Exhibit 2). Several respondents commented that they would like a better understanding of the needs and priorities of this group. CFOs of private companies are significantly less likely to say that business unit heads gave explicit guidance on their expectations of the CFO role — and also the most likely to want more time with these managers during the first hundred days Notably, while relatively few CFOs were involved in strategic initiatives so early in their tenure (Exhibit 3), those who were are more likely to say that they are satisfied with their performance during that time. A large majority of CFOs say that they would now like to be engaged in corporate-wide 42

CFO INDIA

DECEMBER 2010

&)2V RI SULYDWH FRPSDQLHV DUH VLJQLILFDQWO\ OHVV OLNHO\ WR VD\ WKDW EXVLQHVV XQLW KHDGV JDYH H[SOLFLW JXLGDQFH UHJDUGLQJ WKHLU H[SHFWDWLRQV IURP WKH &)2 strategic initiatives, as opposed to more traditional CFO activities.

KEY ACTIVITIES Aside from understanding the company’s business drivers, CFOs generally report that their most critical activities during the first hundred days were functional, such as providing input into the business strategy, and organisational, such as setting up the core finance team and upgrading capabilities (Exhibit 4). Only half of the CFOs responding to this survey recall being required to come up with a formal plan of action during the first hundred days. The priorities of those who did have a plan were the inverse of those without

one: providing input to business strategy was the most crucial of their top three priorities, while understanding the company’s business drivers came in third. Setting up the core finance team was the second most crucial priority for both groups. Not surprisingly, CFOs hired during or just after a turnaround were more likely to have been required to create a formal plan of action than those hired in other circumstances. CFOs overall showed little propensity to make fundamental staffing changes during the first hundred days (Exhibit 5), though CFOs of private companies were more likely to do so than their counterparts at public ones. (CFOs of private companies are also significantly

,16,*+7 ([KLELW

&UDYLQJ FRQQHFWLRQ WR VWUDWHJ\ % of respondents,1n=164

Top 3 activities that took most of your time in your first 100 days as CFO, regardless of importance

Top 3 activities on which you currently would like to spend most of your time

Financial planning, budgeting, analysis (FP&A)

56

34

Management reporting, performance management

56

35

Financial accounting, reporting (including audit, compliance)

13

42

Management of finance staff

21

38

Coordination with executive committee, board

29

Corporate-wide strategic initiatives

29

Finance IT systems

37 72

16

Investor communications, other external relations

9

13

Mergers, acquisitions; other business development activities

19

11

Tax, group capital structure, treasury, including risk management

45

9

13

Respondents who answered “other” are not shown.

1

more likely to have fewer than 50 people employed in the finance organisation.) CFOs who planned fundamental changes in financial accounting and reporting or financial planning, budgeting, and analysis (FP&A) were significantly more likely than not to have had formal plans to do so. Overall, FP&A and accounting are two out of the three areas that demand most of a new CFO’s time, as well as the areas where CFOs made the most fundamental changes (Exhibit 6). CFOs hired during or after a turnaround are more likely to report that redesigning the finance organisation was crucial.

BUILDING RELATIONSHIPS Most CFOs tell us they communicated widely during the first hundred days, holding regular in-person meetings

([KLELW

FULWLFDO GD\V Critical opportunities to address during your first 100 days as CFO % of respondents,1n=164 56

Understanding company’s business drivers Providing input for business strategy

46

Setting up core finance team, upgrading capabilities of finance staff

46 37

Redesigning finance organisation, processes

34

Engaging CEO/Board Assessing strengths, weaknesses of finance IT systems Communicating with investors

23 9

Respondents could select more than 1 answer.

1

DECEMBER 2010

CFO INDIA

43

,16,*+7 ([KLELW

+ROGLQJ FRXUVH % of respondents,1n=164

To what extent did you change (or develop a plan to change) the finance organisation’s staffing in each of the following areas during your first 100 days as CFO? Little or no change

Fundamental change 76

Release significant number of current staff

72

Eliminate functional positions Relocate core team or other staff

71

Hire significant numbers of new staff

70 48

Change membership of core finance team Add new functional positions

Moderate change 10

14

11

17 15

14 9

21

18

34

41

22

37

Respondents could select more than 1 answer.

1

with the core finance team and the broader finance staff and (in many cases) making themselves available for ad hoc discussions as well. Interestingly, CFOs who report being satisfied with their performance during the first hundred days, are far more likely than those who are not satisfied, to report having held in-person meetings with both the core finance team and the broader finance staff. They also report having more communications overall. CFOs at large companies tend to report communicating across every channel (except broadcast e-mail) more than CFOs at smaller companies do. CFOs hired at companies during or just after a turnaround are much more likely to report having used ad hoc communications — probably a result of the fast pace and high uncertainty common in such situations. These CFOs are also more likely to have held in-person meetings with the finance staff. Relatively few CFOs — just over a quarter — report not having enough resources and support to make the transition a success. However, that figure rises to a third among CFOs of public companies. CFOs who wanted 44

CFO INDIA

DECEMBER 2010

([KLELW

7DNLQJ DFWLRQ In which of the given areas did you initiate (or develop a plan to initiate) fundamental changes during your first 100 days as CFO? % of respondents,1n=164 Financial planning, budgeting, analysis (FP&A) Management reporting, performance management

79 73

Financial accounting, reporting (including audit, compliance) Finance IT systems Tax, group capital structure, treasury, including risk management

53 34 32

1 Respondents could select more than 1 answers; those who answered “none of these” are not shown.

more help most often said they would have liked three things: better access to internal information, more time with the CEO or the board, and the ability to bring new people into the finance organisation. Also, more than 60 per cent of CFOs overall report that they would have liked to spend more time with business unit heads. Of the two-thirds of respondents who were external candidates for the CFO

role, a majority report that the major challenges during the first hundred days were building credibility and understanding processes. — SUSAN COCKER IS A CONSULTA N T I N M C K I N S E Y ’ S L O N DON OFFICE; ANDERS RASMUSSEN, AN ASSOCIATE PRINCIPAL IN COPENHAGEN; AND KEVIN ZANDER, A CONSULTANT IN HAMBURG

&$6( 678'<

127 $1

($6<623 Barely a month into his new job as CFO of Systime, Aloke Ghosh had to create an Employee Stock Option Plan (ESOP) for several hundred employees spread around the world. Here is how ‘Team Systime’ did it within eight months. DHIMAN CHATTOPADHYAY

THE CHALLENGE Imagine joining a new office as the CFO and before you have even settled down, being told to lead an extremely sensitive project to determine the quantum and value of stock options to be given to employees of the firm. “I have faced many challenges in my career but none which involved so many departments, people, countries and emotions, apart from the obvious financial complexities that this case offered,” says Aloke Ghosh, CFO of Systime, the global solutions provider and a part of the CMS group.” I had just joined Systime in mid-2009 when I was told by the promoters that we needed to get a global 46

CFO INDIA

DECEMBER 2010

ESOP plan in place within the next eight months,” he says. The challenge before the finance team was to implement this globally. The company was going through a growth phase and back in 2007 itself, the owners had promised employees an ESOP plan. The downturn had delayed plans but now it was essential that the company deliver on its promise. The problem was, that both Ghosh and the COO were new to the company. “I knew it would be tough to match not just the expectations of employees but also those of the promoter, since the latter was diluting his stake in the company,” Ghosh recalls. In terms of getting different teams

on the same page too, things became a stretch since expectations of employees in different countries varied significantly. It needed a lot of interaction with colleagues across all functions, especially the HR department, to successfully implement the plan.

THE PROCESS Ghosh and his senior colleagues realised early on that this project would need perfect teamwork. Right at the beginning therefore, the core committee met the promoter (CMS group chairman, Ramesh Grover) to understand his expectations. All channels with HR were also kept open to get inputs about

&$6( 678'<

352-(&7 0$3 THE CHALLENGE Launch an ESOP scheme for employees across all Systime offices in different countries THE TEAM The core committee that included

the CEO, the COO, the CFO (Ghosh) and the global HR head along with the entire finance team PROJECT COST A little over a million Rupees

END RESULT: Retention of key employees. Also in the process, a new culture of financial discipline was instilled into the company’s philosophy.

DECEMBER 2010

CFO INDIA

47

&$6( 678'< employee expectations in different countries. “At the same time, we identified a merchant banker as our external valuation authority so that we could arrive at the right valuation for stock options. Finally, we created a special message for employees, where we told them that they would get good value for their stocks but to get that everyone would have to work towards meeting and even exceeding targets, so that we were financially stronger and able to provide a better ESOP,� he says. Throughout these eight months there were many bottlenecks and shortcomings that the team came up against, but the core committee members with the help of colleagues across functions, always ensured these challenges were successfully resolved. “For instance, when you make an ESOP valuation, you need to make a financial forecast. Unfortunately while we had historical data, we had never made a forecast! Thankfully we managed to solve this problem in time, to the satisfaction of the bankers. The next issue was deciding on the quantum of stocks to be given to each member. Who gets how much is always a contentious issue. To resolve this without a hitch, we held a series of counselling sessions with staff in different locations. We had taken a decision that those who had worked less than a year at Systime, would not be eligible for the ESOP, irrespective of his or her designation. This meant talking to several people, especially senior executives who expected some gains. I guess it helped that I was less than a year old in the organisation as well!� laughs Ghosh, as we sip our coffee, sitting in Systime’s spacious office in Navi Mumbai. Ghosh admits there were many benefits that this project brought about. For instance, as they went about trying to meet the deadline, they started looking at competition to see who had adopted ESOPs and how they had fared thereafter. “It helped us benchmark ourselves against the best. We also set up a 48

CFO INDIA

DECEMBER 2010

´:H KDG WDNHQ D GHFLVLRQ WKDW WKRVH ZKR KDG ZRUNHG OHVV WKDQ D \HDU DW 6\VWLPH ZRXOG QRW EH HOLJLEOH IRU WKH (623 LUUHVSHFWLYH RI KLV RU KHU GHV LJQDWLRQ Âľ detailed revenue forecasting process at Systime,â€? says Ghosh. Of course, there were a few hiccups. “The scene I remember most vividly is three of us, committee members, attending a late evening meeting on the eve of the launch, furiously signing away hundreds of ESOP contracts. In fact till 48 hours before the gala launch, we were still making changes in the contract, with both grammatical and technical corrections being carried out! We had 250 letters, each of them 15 pages long, to be signed, on February 19, the day before the launch. I think we made it just in time for the champagne uncorking at 1.30 pm – having finished signing the contracts around 1 pm,â€? he laughs. Today, almost a year after the ESOP project was implemented, Systime has managed to retain most key employees. “Attrition rates were never high at the

CMS group, but post ESOP we have fared even better,� he says.

THE LEARNING As we step out for a quick lunch after the chat, I ask Ghosh about his key learnings from the challenge. “There were many,� he admits, “not all of them related to finance.� “I learnt that one should treat any big task as a project and set specific deadlines. More importantly, one should always keep concerned stakeholders updated about all developments – so that rumour mills are kept at bay. The lessons in man management and tackling different kind of individuals opened a new world to me, as I have mentioned earlier. And finally I also realised that when undertaking a project of this size, there is no substitute for planning well in advance,� he concludes.

advts.indd advts.indd advts.indd 54 54 54

12/22/2009 12/22/2009 12/22/2009 2:54:15 2:54:15 PM2:54:15 PM PM

/($'(5·6

:25/'

'HDWK E\ 0HHWLQJV How to make meetings fun and productive instead of wasting time and man hours. 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

50

CFO INDIA

DECEMBER 2010

YOU HAVE just had a great weekend. Then on Sunday evening you start to make some mental notes for a crucial Monday morning meeting. That is when all those warm, fuzzy feelings you might have harboured about returning to work the next day, fly out of the window. You think of the idlers at the meeting, the numerous side conversations; and worse, after it is over, about the ‘real’ meetings that continue in the pantry or next to the office water cooler as staff discuss nuances of what the boss said, speculate about future developments, or simply vent their frustration if things are not going their way. Would you like to save 20 minutes at all those weekly meeting you have? In a year, that works out to 1000 minutes of time saved! A not-so-new field is the science of meeting technologies. No, these do not refer to high-tech gadgets, but to how meetings are structured, facilitated and participants made accountable. Here are some of the best ideas we have used with our clients to make meetings more effective, memorable and where everyone feels they have been heard. 3$5.,1* /27 In large meetings, have a “parking lot” system. Each participant is given a few colourful post-it notes to write down questions they may have for an upcoming meeting featuring a speaker or senior staff member. As these get left on a large board or whiteboard, designated participants get a better feel of the pulse of the meeting by scanning these questions. In many Asian

/($'(5·6 :25/' societies where subordinates are reluctant to question those in authority in public or to be a lone voice regarding a topic, the parking lot system engages everyone in a ‘safe’ method of submitting issues and questions. The notes can be collected at various intervals and sorted out by meeting facilitators to maximise the quality of a Q&A session. ),67 ),9( in small meetings of around a dozen people or so, use the “Fist Five” technique. Where issues and proposals posed to the group are open-ended, you can use this method to quickly estimate the strength of feeling behind the ideas. On a count of 1-2-3, participants show their hands and fingers. On a scale of “Fist to Five”, participants show a fist, or a number of fingers to show the strength of feeling or opinion about a particular matter: What each sign means: Fist: This is a bad choice/decision, and if you support this, I might leave the meeting or the group 1 finger: Bad move/performance/idea 2 fingers: I am against this; so do not count on me for a lot of energy 3 fingers: OK 4 fingers: Good idea/performance/move 5 fingers: This is such a great idea/move/performance that if you do not support this, I will leave the meeting/group The trick in using this technique well is to make everyone commit to not changing their show of fingers after the count of three. The meeting leader can thus see where there are pockets of resistance to some ideas, and thus tackle these head on, or the depth of support his meeting group is giving a particular idea. We have taught organisations to use the “Fist Five” technique when deciding on anything, from picking a luncheon site to assessing the team’s performance 020(17 2) 5()/(&7,21 Much practiced in Japan, you can use this technique to help your team digest a set of complex data or a proposal. After people have spoken or made a presentation at a meeting, conduct a moment of reflection when no one in the meeting says a word. Instead, invite them to have a minute of reflection on the proposal or ideas presented BEFORE speaking. The outcome you usually get from this is often of a higher quality. 0,1' 7+( *$3 The length of meetings is often in proportion to the length of time elapsed since the last meeting. So it is important to ensure the gap between two meetings on any issue that needs to be followed up is not too long. Meetings can be made far more productive if held frequently, with everyone focussing on the topic. The longer you leave things, the longer you have to spend when you meet again.

In a ‘parking lot’ system, employees write the questions on ‘post-it’ notes and stick them on a whiteboard. This works well, since most are wary of asking questions in a public forum.

9,68$/ &+$1*(6 Change the meeting venue and seating arrangements if possible. The usual boardroom format is highly hierarchical and does not lend a collegial air to proceedings. Consider having meetings around roundtables, and have people move between tables to discuss different matters as mini meetings. Usually at any given meeting, only 20 per cent of those called are actually affected or need to take action on any point being discussed. Others sit around wasting their time. Try having 10-minute meetings standing up. For starters your brain gets 20 per cent more oxygen when you are standing up, and people will not ramble on and on during such meetings. $&7 21 ,7 Have an action plan, follow up and make people accountable. Many meetings do not lead you anywhere as there is no accountability as to who does what and by when. By creating a structure to what happens AFTER a meeting, you win better buy-in to such meetings. 67$57 ($6< In a meeting, ensure that matters that can be resolved or decided upon easily, are discussed first. Tackle the tough issues last as these tend to run on for quite a bit. If you cannot get a resolution and have to agree to meet once more, at least the earlier part of the meeting would have seen some headway being made in deciding a number of smaller, clear-cut issues. So there you are, seven ways to increase the effectiveness of your meetings and do better as a leader.

DECEMBER 2010

CFO INDIA

51

/RXQJH

12.10

&)2

7KLV LV WKH VHDVRQ WR EH PHUU\ 6R JR DKHDG WHVW GULYH WKH QHZ 0HUF VQDS XS WKDW 0DF %RRN RU LI PXVLF LV \RXU WKLQJ JHW LQVSLUHG E\ WKH ZHOO UHVHDUFKHG ELRJUDSK\ RI PXVLF OHJHQG %RE 0DUOH\ $QG LI \RX QHHG D EUHDN VWDUW WKH QHZ \HDU E\ YLVLWLQJ WKH EUHDWKWDNLQJ 6SLWL 9DOOH\ +DYH IXQ

MERC E-CABRIOLET

She’s Got the Look The attention-seeking E-Cabrio is a true luxury convertible, says smitten Anoop Chugh CONVERTIBLES ARE NOT an Indian phenomenon. Well-insulated cabins and good climate control systems are two reasons why we all own a car in this part of the world. So, when Bavarian automobile majors line-up their luxurious convertibles in India – BMW 6 Series, Merc SL Class, Prosche Boxter and the Lamborghini Gallardo – it has to be either for a green cause or because many Indians yearn for prestige symbols.

52

CFO INDIA

DECEMBER 2010

Behind the wheels of the latest convertible in the town, the E-class Cabriolet, we decided to traverse the streets of New Delhi to see how practical it would be to own a plush convertible for the day-to-day city commuting.

Looks If you are driving a convertible (with the top down) in India, you tend to feel like a naked

',' <28

.12:"

The E-Cabriolet was introduced as a replacement to the iconic CLK Cabriolet. The new E Cabrio (dubbed A207) takes the new E-Class’ successful design and brilliantly adapts it to the underpinnings of the C-Class

H

&)2 /281*(

21 :+((/6 man in Antarctica. If looks could kill, the E-Cabrio would be a prime suspect. The continuous attention made me wonder - what is attracting the swooning stalkers? The elegant opentop silhouette with its long arrowshaped front, the rising rear portraying dynamic motion, the classic fabric top giving it the epoch look or the air of sporty refinement? Probably it was nothing but the sheer splendour of a desirable topless creature passing you by. The three-pointed star, in the centre of the radiator grille, flanked by the newly conceptualised twin headlamps, basked in whatever little sunshine Delhi winters could manage. The E Cabrio is being pitched as a four-seater for four seasons. Perhaps, north-Indian winters are the best time to put the “four season” claim to test. Firstly, with top-down, the four occupants in the Cabriolet do not lose a bit of their hair gel (even at a speed in excess of 100kmph), courtesy the aerodynamic and the much talked about AIRCAP system. The system blocks wind inside the cabin, ensuring reduced air turbulence. Just in case you want to be completely isolated from the external environment, you can retract the fully-fabric top within 20 seconds. A radio remote control, built into the key, makes it easier.

FORM MEETS FUNCTION TO CREATE AN ERGONOMIC MASTERPIECE IN BOTH THE FRONT AND REAR SEATS. THE BOOT IS NOT SPACIOUS COURTESY THE RETRACTABLE TOP

( &/$66 &$%5,2/(7 Price

Rs 64.5 lakhs

Engine

272bhp

Max Torque

355Nm

Gear Box Wheelbase Top speed Cylinders Fuel efficiency Turning circle 0-100kmph

Performance The 2011 E-Cabriolet offers a choice between a V6 or a V8 engines. But, that’s the story in the US and the UK. Here in India we only get the less brawnier of the two engines, but not less efficacious by any stretch of imagination. The E350 boasts of a refined engine and a potent performance, even on the Indian highways. Surely, on a 6-lane no-limit expressway beyond 5000 rpm you end up missing its superior sibling (5.5l V8), but you ought to be overwhelmed with 272 horses the engine produces. Unless, your present automobile is running on

3498cc

Max Power

7speed AT 2760mm 250kmph V6 9kmpl 5.5m 6.9sec

POSITIVES

Drop-dead looks, blood-pumping performance, great pedigree, reasonably priced for a Cabriolet from the Merc stable NEGATIVES Little cramped at the rear, open-top not ideal for extreme Indian summers VERDICT You might miss the grunt of a V8, nonetheless the V6 is no damp squib especially on Indian highways. It brings together the best of the E and the C Class in Cabrio form.

performance tuners you would probably find the E350 Cabrio too hot to handle in Indian conditions. The engine is mated with the faultless seven-speed automatic transmission. Such self-inspired transmissions make paddleshifters absolutely obsolete. Once you experience the technology that forms the basis for the drive system in the E 350 -- 4 valves per cylinder, variable intake and exhaust camshaft adjustment, a two-stage intake manifold and a balancer shaft – you will envy chauffeurs who get paid to drive the magnum opus around.

Comfort Despite being a sport, the E-Cabrio hasn’t compromised on comfort. The newly developed seats combine seating comfort with ergonomics, safety and sportiness – both in the front and in the rear. Though, the room at the rear wouldn’t be sufficient for you to call it a limo, but trust me if you own this car you would like to be at the driver’s seat.

DECEMBER 2010

CFO INDIA

53

&)2 /281*(

*,=026 1(: /$81&+(6

+27 6327

Canon SX130 IS

The Sleek Mac The improved Apple Mac Book Pro 15-inch costs a bundle, but still gives good value for money. Anoop Chugh IF YOU ARE looking for a notebook with a reasonable display size that manages to retain compactness and keeping its weight down you should look for Apple Mac Book Pro 15inch. The notebook offers the right mix of portability, performance and size. Although this is true of most 14 or 15 inch notebooks, Apple’s design is a bit sleeker than most, even though its not that light (owing to the use of aluminium). The Pro 15 design is revolutionary in that nobody has been brave enough to try such a design before. There are a couple of minor niggles such as the all-metal body which may warm your hands too much in summer or the sharp edge of the palm rest, that may cause some discomfort during prolonged use. Though, Apple fans would ignore such minor issues. What Apple has got absolutely right is the track pad. This is one of the most important parts of any notebook and many manufacturers get it wrong. 54

CFO INDIA

DECEMBER 2010

But, not the Mac. The display of the Mac Pro would keep you glued to the screen. The resolution is 1440x900 pixels – with a 16:10 aspect ratio. This one does cost you a packet, but the ‘super performing’ specifications of the Mac, somewhat justify the price tag. Like its earlier version, the new Pro 15 also supports dual graphic solutions that can be switched. The OS however, can now switch between both GPUs automatically, depending on the application being used, unlike the previous version. The biggest boost comes from the CPU, although the Core i7 620M is deceptively named, especially for someone used to desktops. It is not a quad core part, rather a dual core. The performance is nonetheless, exceptional and arguably this CPU is better than any Core 2 Duo around. If you are looking for a Mac Book, and have deep pockets, we recommend the 15-inch version over the 13-inch version. Price: Rs 1,29,000

It’s a feature rich compact camera that provides good performance in well-lit conditions. The 12x zoom is a plus for casual clickers. Specifications: Sensor: 12-mp, ISO 80-1600; zoom: 12x optical; LCD: 3-inches, Rs 14,995.

Aperture 3.0

Aperture 3.0 is not a cheap imageediting-cum-photo-management software. For photographers using Mac systems, Aperture 3.0 is definitely worth checking out. System requirements: Mac OSX 10.5, 10.6; 2 GB RAM; Price: Rs 11,000.

Micromax’s Android phone

Micromax has released its first Android 2.1-based mobile phone in the same class as the Samsung Galaxy 5 and Spice Mi-300. Specifications: 600 MHz processor, 2.8-inch resistive touchscreen; Price: Rs 6,999. POWERED BY

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

&)2 /281*(

75$9(/

63,7, 9$//(<

The Valley of Awe A holiday in these ice cold terrains is not for the fainthearted. Anoop Chugh AFTER MONTHS OF industrious grinding in the vicious circle called work I was ready for a quick escape, preferably to a location where I had only nature for company with no trappings of the modern world in my vicinity. We nearly found such a place around 200 kilometres from Manali, a tiny hamlet called Kaza, the headquarters of the Spiti Valley. The valley is probably the financial capital of the Lahual and Spiti region. We noticed the great pride with which locals told us about the only bank in the valley and of course, the sole fuel station, just in case you decide to drive further up to Tabo and Sumdo. The drive (Rohtang La-Kumzum La-Losar-Kaza-Tabo) is not the smoothest of rides, but the almost non-stop views of snow capped peaks kept our minds away from the bumpy earth below. There were those worrying moments though, when those dramatic curves and the ‘just-cleared’ landslide debris attracted gasps and shrieks from co-passengers in our SUV. Even then, the biggest gasps, this time of awe, were reserved for a few hours later. A little over 20 kms after Rohtang La, the car took a right turn from Gramphoo and almost like a dream, a whole new world opened up in front of our eyes – a panoramic view of the Bara-Sigri glacier, the second longest glacier in the world. By now we had realised that this particular holiday was not really about the destination but about the journey. We stopped every time we spotted a PWD resthouse, a fuel pump, a village or a tea stall, if only to recharge ourselves and learn about the road ahead from locals. Once in Kaza though, we were instantly rejuvenated. Though, Kumzum La is the gateway to Spiti Valley, the best of Spiti’s landscape is visible from Kaza. We thought of spending a day each at the villages in the valleys around Kaza. The idea worked as each village (and the valleys) presented us with a view that was different from the other and hospitality that was as warm and friendly as the last one.

ABOVE: THE WORLD’S HIGHEST AND SECOND HIGHEST VILLAGES – GETTE AND KHYIPUR RESPECTIVELY ARE A GREAT SIGHT LEFT: KUMZUM LA, THE GATEWAY TO SPITI VALLEY

Day 1: The World’s highest and second highest villages – Gette (4270m, above sea level) and Khyipur (4205m) – respectively were a real trek. Collapsible canopies and sleeping bags served as our night shelter. Villagers offered us buckwheat for dinner, locally known as kathu. Day 2: Dhankar village, erstwhile the capital of Spiti Kingdom, is situated east of Kaza. It is the biggest town in the valley and is known for friendly lamas and its monastery. Day 3: We crossed the Spiti river to reach Kungri Monastery (around 25 kms from Kaza). The Pin Valley is known for snow leopards.

BUDGET STAYS: PWD guesthouses, home stays at Kaza; carry

sleeping bags and tents NEAREST AIRPORT: 250 kms at Kulu DECEMBER 2010

CFO INDIA

55

&)2 /281*(

$576

$57,67 2) 7+( 0217+

In the Name of the Goddess Artist Kobita Sen uses charcoal, oil and clay to capture the many moods of nature and humans. By Anoop Chugh

Kobita Sen is a sculptor and painter who has been exhibiting her work internationally since 1989. She was born in New Delhi and moved to Ontario, Canada where she studied and did her intense studio work based on the figure. In 2001 Sen joined ‘Xchanges Gallery and Studios’, Cananda’s oldest artist run center at Victoria and served on its board of directors for four years. At present she lives and works between studios in France and India. She recently exhibited her works at the IHC in New Delhi.

56

CFO INDIA

HER WORK COMBINES MATERIALS SUCH AS OIL PAINT, CHARCOAL, CLOTH, AND CLAY WITHIN THE CONSTRAINT OF A CURVED SEMI-CIRCULAR FORMAT

SHE CALLS HERSELF a ‘multi-national artist’, having grown up in Canada, France and India. Travelling and seeing the world has helped Kobita Sen find rhythm and harmony in her art. An artist who has been painting and sculpting for 25 years and that too without much formal training, Sen says she draws inspiration from the varied exposure she has had in the last fifty years, growing up in Canada, living in France and travelling the world. Her four-part exhibition, ‘I Kon I Kali’ (named after the goddess Kali, as she considers the deity her icon) is inspired by various landscapes from Australia, Vancouver Island and the Pyrenees as well as by people in her life . The first part of her work includes landscapes that capture the trees, rocks, skies, canyons, spaces and colours of the nature. The second part ‘The Nude Renewed’ has a series of female forms. Sen also does portraits and the third part of the exhibit has a series of portraits under the title ‘Personally Present’. Here many portraits mirror herself and her relationships with people in the past. She uses charcoal on paper and oil on canvass to sketch faces and characters underlining their self. Sen is not shy to even put her own image on the canvass using charcoal and oil colour. She takes requests for sketches if she finds someone’s personality interesting. Arguably the best part of the exhibition, and her work, is the fourth part, titled ‘All Points

DECEMBER 2010

MANY OF HER PORTRAITS MIRROR HERSELF AND HER RELATIONSHIPS WITH PEOPLE IN THE PAST

to One’ – where she has tried to capture ever changing orientation in human life. This work combines materials such as oil paint, charcoal, cloth, and clay within the constraint of a curved semi-circular format. Why semi-circular? It has no face, no up, no down and no sides. You can see it the way it suits you. Also, it depicts the life in motion, a wheel in motion. Nothing in life, reaffirms Sen, is constant!

&)2 /281*(

%22.6

1(: 5(/($6( 3,&. 2) 7+( 0217+

One Love, One Heart Read this biography of Bob Marley to know about the leadership skills of the music legend. By Anoop Chugh BOB MARLEY WASN’T quite the regular Jamaican-born, dread-locked reggae musician, guitarist and a Rastafarian -- a way of life that most Jamaican youth were falling for in the 1960s. In the 36 years that he lived, Marley rose above all precedents one would associate with a free soul musician like him. Chris Salewicz is a man who had the opportunity to observe Marley from close quarters during his highs (late 60s) and his lows (late 70s). Probably, that is why this biography on Marley is the most evocative of all books written on the legend. The author bases his book on a few interactions with the musician, backed by first-hand accounts from Marely’s relatives and friends, resulting in an insightful and intriguing story of a man whom we could never fully understand. For me the most refreshing part about the book is how his life and music influenced Jamaican culture, the island’s politics, its youth, the Rastafari movement and his impact on the world music stage. Apart from music, one of the major contributions, Marley had made was to unite the Jamaicans in particular and blacks in general through the way of life called Rastafarianism. The book cites how Marley made dreadlocks ubiquitous not as a fashion statement but as an emblem of religious beliefs. He often is seen, rather looked upon, as the colourful prophet of black self-determination.

Book: Bob Marley: The Untold Story Author: Chris Salewicz Price: Rs 455 58

CFO INDIA

DECEMBER 2010

Wrong OUR INVESTMENTS are devastated, blue-chip companies circle the drain and popular medications turn out to be ineffective. What happened? ‘Wrong’ reveals the dangerously distorted ways experts come up with their advice, and why the most heavily flawed conclusions end up getting the most attention.’Wrong’ spells out the means by which we can do a better job of unearthing the ‘right’ from the avalanche of misleading pronouncements.

Publisher: Hachette Price: Rs 595 27+(5 5(/($6(6

The art of choosing COLUMBIA UNIVERSITY professor Sheena Iyengar sets herself the Herculean task of helping us become better choosers. She asks fascinating questions: Is the desire for choice innate or created by culture? Why do we sometimes choose against our best interests? Ultimately, she offers unexpected and profound answers, drawn from her discipline-spanning research. The book illuminates the joys and challenges of choosing, showing us how we build our lives, one choice at a time.

Publisher: Little Brown Price: Rs 499

The leader who had no title FOR MORE than fifteen years, Robin Sharma has been quietly sharing with many of the super-rich, a success formula that has made him one of the most sought-after leadership advisers in the world. Now, Sharma makes his proprietary process available through this book, so that you can get to your absolute best while helping your organisation break through to a new level of winning in these uncertain times.

Publisher: Jaico Price: Rs 195

127 -867

7+( /$67 :25'

,VQ·W LW DOO DERXW MXGJHPHQW" Good corporate conduct is an issue that demands, perhaps, more than one issue of CFO India to be dedicated to it. However, for us to not comment on it at all, right now, would leave this issue incomplete – given the surrounding environment. Full of scams and inappropriate behaviour – more than legality and compliance – the need of the hour seems to be sound judgement. I recall, very clearly, reading an article by Rosabeth Moss Kantor some months ago talking about why judgement fails and the mighty fall from grace. And I will draw, humbly but handsomely, on her insights to provoke thought on this issue. She uses several examples: Michael Hurd, HP’s high-performing CEO who was removed from his position on account of charging personal expenses of roughly 2000 USD to the company; General McChrystal’s casual remarks to a magazine; a number of high-tech senior professionals who were charged with insider trading more due to casual exchanges than wilful intent. And then wonders – what were these people thinking? She offers a few explanations. One is simply embarrassment. It begins with one mistake and then the fear of exposure results in a series of cover-ups – ending in discovery and disaster. In her words, “we all know intellectually that the cover-up is always worse than the crime, but that doesn’t stop people from compounding the original error by hoping no one will notice”. The second is carelessness. When people become senior and powerful, they leave the details to others and then plead ignorance for pardon. They expect to be forgiven because they were busy doing bigger and critical things. A third important reason is a sense of invincibility that comes with success. And the list could go on. The human mind can rationalise anything and that’s where the problem lies. We can convince ourselves that several things are too small to matter – but the devil is truly in the detail. Ignoring it can lead to serious lapses of judgement. 60

C F O

DECEMBER 2010

Kantor says something else that is striking – “signs of character are most visible when they are least visible — that is, demonstrated by what people do when they think no one is watching, such as following the rules or taking the moral high ground with no audience observing them. That’s why the signals of a leader’s judgement lie in the small things. That’s why we don’t want to entrust national security, corporate finances, or leadership of a major enterprise to people who can’t put institutional interests above personal indulgences or turn in an honest expense report”. As CFOs, these rules apply to us – in greater measure than to many others. So, is the safe response to this situation that we become even more avid ‘naysayers’ than we are accused of? In my view, absolutely not. It would be the most alarming take-away from this learning. The answer lies in finding a way to deliver outcomes while operating within the realms of sound judgement. So then, can sound judgement be taught? Do we need to train ourselves to think about things with greater wisdom and wits about us than ever before, given the vulnerabilities we face? My take: yes, and this one character-building attribute will differentiate the winners from the rest. Amidst all the math and accounting, isn’t this worth spending some thought on? Anuradha Das Mathur, Publisher CFO India

Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.