“The arrangement has brought huge benefits,” says Sampson. “There’s a lot of knowledge-sharing. Everyone gets a better understanding of the business and how different strategies feed through into financial performance. This is the way I want our finance team evolving, towards adding value and having more input into strategy.”
Like many other CFOs, Sampson concedes that governance and regulatory issues are a bigger burden these days than in the past. Nonetheless, he notes, by building a regional shared services center, that extra burden has been shouldered relatively easily. “The greatest benefit of our shared service center isn’t cost, it’s standardization,” he stresses. “Processes take less time to manage and you get better governance.”
The Right Medicine
A third example of a CFO successfully playing a strategic role can be found at Hong Kong’s Quality HealthCare Medical Services (QHMS), a HK$780 million-a-year ($100.4 million) chain of clinics and medical centers. Dennis Tam, the firm’s finance director, joined QHMS in 2000 shortly after it had formed from the merger of three different companies. As Tam recalls, QHMS was in poor shape. “We were losing about HK$2million-a-month, 60 percent of our debts had gone bad, and the finance department was still operating as three different teams.”
For the next three-and-a-half years, Tam concentrated on fixing his immediate problems. He streamlined his team, consolidated financial reporting onto one accounting system, cleared up the firm’s accounts receivable — now only 4 percent of debts are bad — and introduced strict controls over pricing. Automation was important too. He has replaced much of the manual slog of managing accounts payable by introducing a computerized banking system to issue checks and handle wire transfers. Results have been impressive: today the firm is making a profit of around HK$4million a month.
Now that Tam is confident his finance team is operating smoothly, he has turned his attention to what he feels are more “value-adding” tasks. Indeed, Tam estimates that only 25 percent of his time is currently spent on routine finance work. A further 25 percent is spent on “managing, supervision, and administration”. As for the remaining 50 percent, it’s devoted to formulating strategy and growing the business. Much of Tam’s time is spent “communicating,” by which Tam means talking to doctors, hospitals, suppliers, medical insurance companies, corporate clients, and the like. “Networking is vital,” Tam suggests. “By building relationships I’m building opportunities for the company.” For example, Tam recently used his contacts to create a new maternity package for expatriate workers living in Hong Kong. The package combines the pre- and post-natal services of his chain of clinics with the delivery services of several local hospitals.
On a bigger scale, Tam is attempting to restructure Hong Kong’s medical laboratory landscape. The market currently has eight large players and several hundred small family outfits providing laboratory services. By combining some of the big players and creating economies of scale, Tam reckons he can build a single company offering round-the-clock services at cheaper prices than are now available. Dubbed “super lab union,” Tam is exploiting his relationships with these laboratories to try to forge a profitable new venture for QHMS.
“The most important job of a CFO is to handle the regular tasks properly,” explains Tam. “But once you have your financial infrastructure in place, the CFO then needs to be creative and innovative and to be intimate with the industry so that he can see where his company can create value.”
For Barker at Cisco Systems, and many others like him, that day can’t come soon enough.