Beyond counting the beans
A really good fast-moving consumer goods (FMCG) brand has at least three key characteristics. First, the product is more or less the same wherever you go; second, it flies off the shelves in many countries; and third, consumers feel some sort of sense of ownership of the brand.
So much for Marketing 101. But what if you apply these brand principles to finance? Two finance professionals at HJ Heinz’s European headquarters in Hayes, Middlesex, a few miles north of Heathrow, have been taking a leadership role in doing just that. Jon Fenwick, European head of scalable services, and Richard Gosling, senior finance manager, have helped transform the finance function since Heinz’s $28bn debt-and-equity buyout in June 2013 by Brazilian private equity group 3G Capital and Warren Buffett’s Berkshire Hathaway.
Fenwick and Gosling don’t explicitly say they’re branding the finance function. But they have been working to standardise transaction processing and get more information out to the company more quickly, with a view to improving everyone’s engagement with the business’s financial performance. That sounds like a parallel with traditional branding strategy that’s too good to ignore.
Catalyst for change
Founded in 1869, Heinz seems never to have put a marketing or product foot wrong – Buffett says it will still be ‘prospering a century from now’. But as » good at catering for consumer tastes as Heinz may have been, its inward focus on its own processes – and people – was less sharp. The buyout was the catalyst to change all that.
Gosling remembers feeling ‘shock’ when the deal was announced. ‘To a certain extent you felt you were too big to be bought,’ he recalls.
Top management changed not only at board level but across the regions. ‘People suddenly had different line managers,’ says Fenwick. ‘They started reporting to a guy they’d never met before.’
For some finance people across Europe, Fenwick was that new guy. He had been leading the roll-out of the SAP IT suite across the continent and had just two countries left to do when Heinz was acquired. Fenwick was put in charge of a new European ‘scalable services’ division.
‘We’re the ones who turn the wheels,’ Fenwick says. ‘We do the transactions. Everything from handling all the incoming invoices from suppliers to the outgoing invoices to customers.’ From raw materials to finished goods would be another way of putting it, with all the intra-group transactions to sort out as well.
Fenwick had met many but not all his new direct reports during the SAP project, so he set about meeting them, ‘to give them the reassurance that we weren’t just going out to change their world but to try and make it better’.
It took until the beginning of 2014 to achieve that, Fenwick says. ‘But now we’re working together as a team.’ The initial top management changes may have been unsettling, but ‘there have been a huge number of internal promotions, giving people a chance and empowering people. That in itself drives more ownership.’
In Fenwick’s scalable services unit, the changes are about standardising processes. Before the arrival of 3G and Berkshire Hathaway, each country where Heinz operated had its own accounts payable and accounts receivable, managed its own fixed assets and inter-company dealings, and had whatever key performance indicators (KPIs) the country FD was most enamoured with.
Some FDs might only have been concerned to ensure that invoices were sent out and bills paid. In some countries, a purchase order was needed before an invoice could be paid; in other countries, a PO would be nice but invoices could still be paid without one.
Now, all the reporting lines go into Fenwick, who leads a team of more than 100 across Europe. PO compliance is over 90% – not just because of rigid adherence to new processes but because accounts people have been sitting down with people in procurement or factory spares to train them and explain the benefits of the new procedures.
Today, people can’t begin to imagine how they used to cope when 30% of invoices had to be handled manually, Fenwick says. But this wasn’t a ‘fix and forget’ operation. ‘We’re getting innovation,’ Fenwick says. ‘I’ve told my people, if you can come up with an idea each, no matter how big or small, and we adopt 50% of those ideas, we’re going to move our processes forward. And we’ve now got people talking to each other who never spoke to each other before. The accounts payable person in Poland had never spoken to the AP person in Spain, and now they’re speaking almost daily because they’re coming across the same problems.’
Getting that sense of ownership across the whole business is a challenge that Gosling rises to in his role too. He heads up business budget planning (BBP) and planning performance management (PPM). BBP is a financial planning and analysis function that looks at the medium and longer-term horizons, while PPM takes care of weekly and daily reporting to make sure the business is on track to achieve its goals. Gosling offers an analogy: ‘The BBP guys say, “Okay, we’re going to the supermarket to do our shopping,” and the PPM guys say, “We’re going at two miles per hour, the supermarket is two miles away, so we’ll be there in an hour.”’
PPM is another innovation that’s been triggered by Heinz’s takeover. This begs the question, how on earth was Heinz managing itself before? ‘We had and still have commercial finance teams within each of the countries in Europe,’ Gosling explains, but they are reporting more quickly, more often and to a common set of KPIs.
Everyone’s an owner
Like Fenwick, Gosling reports to the European CFO but has a much bigger audience: ‘We’re trying to embed the new culture: everybody is an owner of the business, and so everybody should know how we’re performing. It shouldn’t just be the sales guys knowing how well sales are performing. Someone sitting in payroll should also know how we’re doing against our targets for sales.’
Daily – yes, daily – reports go out to almost everyone and are posted on staff notice boards, making it quite clear in red, yellow and green which parts of the business have performed well against targets, and which haven’t. Other information is released weekly and monthly.
So what has faster reporting brought? ‘I think it’s a faster pace of business, full stop,’ says Gosling.
But the person in payroll doesn’t own the business – 3G Capital and Berkshire Hathaway do – and is hardly in a position to do anything about sales to supermarkets in Poland, say. So how is that information helpful?
‘It makes you feel part of that business, like you own it. If you truly owned the business, you would be interested to know what your colleague across from you was actually selling and if they were meeting their targets,’ Gosling explains. ‘It also drives an element of accountability because they might turn round and say, “What is going on in Germany? I don’t understand why we’re not performing as well.” Or the other way round: “How come we’re doing so great?” It brings everybody together with that same level of understanding and knowledge of our own performance as you would do if you ran your own business.’
Gosling puts his finger on the cultural shift that’s taken place. ‘As opposed to being a cog previously, now you’re a cog that can speak out a lot more,’ he says. ‘The whole company has the mandate to go out and change something if they think it isn’t working.’
One of the biggest changes has been the introduction of zero-based budgeting (ZBB, with the Z pronounced the American way to rhyme with BB). Now, instead of this year’s budget line items being, say, 2% more than last year because of inflation, ‘We start with a blank sheet of paper and say, “What do I really need to spend this year to achieve everything I want to?”’ explains Gosling. ‘It’s back to this ownership piece: what if it was my dollar coming out of my pocket?’
Communication is now a more highly prized competency than ever at Heinz. ‘One of the first CFOs I worked for here at Heinz said he would surrender two good accountants for one good communicator,’ Fenwick recalls.
‘When you’re managing teams in different countries in different languages, you have no choice but to be a good communicator,’ says Gosling. He adds that the ACCA Qualification that both he and Fenwick have earned, coupled with years of experience, means that ‘the finance piece is second-nature – like driving a car – so that allows us the freedom to be able to change and take on the new approach and the new expectations of the owners’.
Fenwick says of their ACCA Qualifications that the perception of people coming into the business is that ‘you’re completely commercial, completely tapped into the business, forward-looking, analytical’. And not, dare one say, just a pair of fast-moving, branded beancounters.
Andrew Sawers, journalist
This article was first published in the UK edition of Accounting and Business magazine in April 2015