The CFO's role in change

It is clearly the job of the CEO to lead change. Whether it is the formulation of strategic direction or the implementation of specific business, they all need their control and promotion. As the second-in-command of the company, what role should the CFO play in this process?

Some people believe that most CFOs tend to be more cautious and conservative than the CEO's foresight, and often play a "guardian" role in the process of change. The truth is not so simple. The three CFOs interviewed in this issue—Yu Danke from GE Infrastructure Group, Chen Weicheng from Li Ning Group, and Wu Yihong from Home Inns respectively gave some introductions to the work in the transformation based on the examples of their own companies. It can be seen that because everyone has a different understanding of the CFO, the situation of each company is different, and the main role they play in the change is also different.

Yu Danke: The coordinator of the interests of change

When did GE start to optimize its internal structure? As CFO, how do you see the business before the change?

Yu Danke: In July 2005, GE began a global business restructuring, reducing the original eleven business units to six major groups. I belong to the infrastructure group.

There are external and internal reasons for this. Externally, some departments have similar customers in nature. For example, electricity, energy, water treatment, etc. are mostly planned by the state in our country. After integrating these businesses, we can concentrate our internal advantages to face customers, which is also convenient. Customers; from the inside, the original dozen or so departments are like independent companies, each department has separate functions such as finance, human resources, procurement, production, R&D, etc., the enterprise before the change is actually just two words” complex”, it is necessary to combine related product lines to save resources.

What was the first thing you did when you took over as CFO of Infrastructure Group last March?

Yu Danke: Staffing. If we want to integrate the disparate business groups into one, we require the financial managers of all departments to have the same background and work together to consider problems at the level of the infrastructure group, instead of thinking about problems from the product line in the past. In the past, the two departments fought for orders.

Then I need to coordinate at this level, and do a lot of work on the concept of people to make them realize the benefits of integration: for example, after integration, the quarterly bonus of individuals may be less or the profit of the department may be less, but their own department will There are long-term benefits; in addition, customers see that the company provides you with a larger platform, and will give you more new projects that you never had the chance to get; in terms of personal development, everyone has seen the concessions you made, and so did the CEO When you arrive, you will have more opportunities to do things in the future.

People change is difficult, but from the CFO's point of view, compared to system changes and process changes, people changes are relatively easy to initiate. During this process, employees who are not adaptable to changes will leave voluntarily, and we will also select trustworthy people with development potential to take leadership positions. There are 12 financial managers who report directly or indirectly to me, and two resigned voluntarily in 2006. We have replaced five or six financial managers, and the financial managers of the energy and water departments are all newly appointed.

GE is a very complex organization, and many aspects need to be coordinated, and it is necessary to get all parties to agree on such a change decision to be easy to move forward. Usually I coordinate with the CEO in China to advance a decision with me. For example, the adjustment of the financial staff below me will be discussed with him. I told him my thoughts, recommended some candidates to him, and he would also do some work for me, communicate with newcomers, old people and superiors, etc.

In addition, the strength of the headquarters is also very important. Every month, I hold a conference call with the CFOs of various business departments of the headquarters. The very important purpose is to promote an alliance to support the change during the change. A good CFO should be good at building alliances, and nothing will be accomplished by desperate attempts.

Are there any conflicts between the communication parties? How did you reconcile?

Yu Danke: There must be such situations, such as between the CEO and the CFO. CEOs are generally very creative and imaginative, and their thinking is jumping; CFOs are generally more rigorous and pay more attention to risks than opportunities. When promoting change, they hope to take steady steps. Sometimes the CEO puts forward 10 ideas, and some ideas are too advanced, and the company's systems and personnel capabilities may not be able to realize his ideas. I have to spend a lot of time learning about the market, customers and competitors, using these objective data and situations to have an effective discussion with the CEO, and finally rank his 10 ideas according to importance and feasibility, and convince him to execute them in batches.

In this process, we must pay attention not to respond with a negative attitude. The CEO does not want the following people to reject their ideas without thinking.

Who do you report to on a day-to-day basis?

Yu Danke: My immediate boss is the CFO of the U.S. headquarters, but the one I deal with the most in day-to-day work is the CEO in China, who is also my boss. GE is a matrix structure, and my usual work, such as personnel changes, organizational reforms, and financial aspects, must be approved by the headquarters. Coordination on both sides of the matrix is easier than I thought. Both Chinese CEOs and American CFOs are at the level of vice presidents at GE. They respect each other's ideas and work according to the constraints of GE culture.

You used to be in charge of the business. Has anyone said that because of your background, there is an injustice in allocating resources?

Yu Danke: It seems that leadership positions in different departments are now being occupied by employees in the energy department where I used to work. Traditionally, this has caused a lot of dissatisfaction. Fortunately, GE is a results-oriented company, and arbitrary cronyism is out of the question. In fact, I also consider the performance of the employees I am familiar with to other departments. I recommend them not because I know them, but because they each have done a lot of great work in their original roles and have core values that are closely integrated into the GE culture.

After one year, can the effect of change be quantified?

Yu Danke: In the past 2006, China Infrastructure Group has saved 3.5 million US dollars in cost. This benefit comes from many aspects. The first is localization. In the past, the headquarters had to send the CFO to the country. After I came, I saved the cost in this area. The second saves on site costs and factory management expenses. Now some business-related departments, such as the oil and gas department and the energy department, can share factories, which will bring about 600,000 annual benefits. The third one comes from the procurement side. It turns out that our buyers are relatively scattered. After the integration, the purchase list is unified, which brings us high benefits.

The immediate benefits of integration depend on the long-term. We hope that through the integration, the group's performance will grow from the current US$240 million to US$400 million to US$500 million.

Chen Weicheng: Driver of Change

Before you came to Li Ning, you participated in and led a number of changes during your 18 years at Reuters. How do you understand the topic of CFOs in change?

Chen Weicheng: I don't quite agree with the term "CFO in change". A CFO is mainly a driver of change and is strategic and proactive, while "CFO in change" sounds passive.

CFOs help companies maximize shareholder value. Many companies value net profit. In my theory, a high net profit value does not represent the maximization of shareholder value. The maximization of shareholder value depends on the profitability of the company, such as product research and development capabilities, brand effect, management team, governance structure, distribution network, social responsibility, etc. The responsibility of the CFO is to drive these aspects to develop in a benign direction.

For me, I am both the CFO, the company secretary, and the executive director. I am responsible for investor relations, internal audit, and also to promote IT systems, branding, and other aspects.

When I first arrived at Li Ning in 2003, Li Ning should still be extensive. You have achieved success in international companies before, why did you choose Li Ning?

Chen Weicheng: I have two ideas. One is to help Li Ning develop local employees; the other is to bring Li Ning to the international track by relying on his years of work experience in multinational companies.

After I came to Li Ning, I saw that the company had many capable employees, but lacked a higher and farther vision. Generally, Chinese accountants are very strong in financial accounting, but relatively weak in management accounting, capital accounting, and strategic accounting. I have launched a series of training programs in the company, such as taking employees out to participate in some relevant forums, letting them listen to speeches outside, and inviting executives from the Big Four accounting firms to come over for training. Sometimes in internal company meetings, I also do some ideological indoctrination to employees.

I initiated the Li-Ning Company Financial Managers Meeting. Including subsidiaries, Li Ning has more than 100 financial managers. I called them together, and I also introduced some international ideas and practices during the meeting. For example, I tell them that the finance department is not the back-up department of the company, but a forward-looking department. We must be proficient not only in finance, but also in the operation of the company's business and industry. In this way, the financial department can become the puller of the company's change.

What do you mean by "pull" or "look ahead"?

Chen Weicheng: The development of the financial department has changed from the previous function of accounting and analysis to decision support. For example, if the decision of the CEO or other executives is wrong, the financial department has to adjust and speak with data. And for me, that's already behind the curve, we're doing forward-looking analysis, we're going to be a partner to other executives.

For example. A certain strategy of the company is being implemented. After reading it, we thought that there might be some problems, so we analyzed the relevant data. The data confirmed my idea, so I convened a meeting with executives and told them, "I'm sorry, we don't think it's right for you to do this, you have to change it."

You just tell other people "We don't think it's right, you want to change it"?

Chen Weicheng: Speaking with data, there is no place for data to be theoretical.

Do executives and employees support you as you push for change?

Chen Weicheng: It depends on the method of promotion. Because I am more experienced, it is relatively not difficult for them to accept. When communicating, I will consider the other party's work situation and ideas, and find a way to persuade him. For example, I attach great importance to the contribution of brand equity to the maximization of the company's shareholder value, and I will encourage every employee to build their own brand, which combines company goals and personal goals in this way.

In addition, my performance is very important. Within a month of taking office, I started a change in inventory management. The change helped the company save $30 million in cash, shrinking from an average inventory turnaround of 161 days to just over 80 days. After this achievement was put out, everyone saw it, and they recognized and supported me in my future work.

Will you leverage the power of the CEO or other executives to drive change?

Chen Weicheng: Usually I don't use power to push, I think the most important thing is logic and selling point. I only use the power clapper when it's critical.