It’s unusual to come across debt issues, dividend increases and share buybacks much these days. And even more unusual to see a company doing all three. But that’s what Dutch telecom group KPN has been up to in recent months.
“Our consistency is a great value,” claims its CEO, Ad Scheepbouwer. That said, the decision to maintain pre-recession practices during deepening economic turmoil hasn’t been easy. Two years ago, when “you could get money at any moment you wanted it,” Scheepbouwer recalls, approving such actions was relatively routine. Now, the CEO spends a lot more time with Marcel Smits, KPN’s finance chief, devising strategies to steer the company through the downturn. “I see him more often, because there are so many more issues to talk about,” notes Scheepbouwer. “As the news gets more grim, the role of the CFO grows in importance.”
Already enjoying a close relationship, Sheepbouwer and Smits aren’t the only CEO-CFO team getting closer in hard times. While every CEO reacts to adversity differently, there is one thing every finance chief can be sure of: they will be spending a lot more time in the corner office in the coming months.
What this entails depends on the CEO. For Scheepbouwer, the key is “fast, correct and detailed information.” He cites cash flow, margins, taxes and other basic financial data as the information he now tracks most closely. “In hectic times, the basics become more important,” he says. Patrick Kron, chief executive of French engineering group Alstom, acknowledges that the traditional metrics are important, but he expects his finance chief, Henri Poupart-Lafarge, to keep him abreast of macroeconomic and capital-markets information as well. In a fast-changing world, such a perspective is as critical as an internal one, he notes. For Ben Noteboom, CEO of Randstad, a Dutch recruitment firm, his conversations with Robert-Jan van de Kraats, Randstad’s CFO, are “the same as in the past, only a bit more.” Though his priorities have not changed, he says, “execution has become a lot more complicated.”
It’s a good thing that his office is right next door to the CFO’s, jokes Noteboom. Since taking over similarly sized Vedior last year, Randstad must now service nearly €2 billion of debt. “The short-term worries are obvious,” the CEO says. The long-term prospects for the temporary staffing market, particularly in Europe, are good, but to ensure that Randstad can take advantage of them, Noteboom is relying on his finance chief to engender cash-consciousness throughout the company. “We have to make sure that we save costs without killing growth opportunities,” notes the CEO. “This requires a sophisticated system where we delegate cost-cutting and investment decisions to as low a level in the organisation as possible.” The finance function is a critical partner in this exercise, as the information it provides helps to “make sure that we do what we have to do fast,” Noteboom says.
Amid volatility and uncertainty, comments about boosting the frequency and speed of information generated by finance are common to all CEOs at companies of all sizes. The chief executive’s readiness to delve into the nitty-gritty of cash management, including details of working capital processes, is also a sign of the times. In reporting for this story, it was sometimes difficult to tell if CEOs were describing their relationships with their CFOs, treasurers or supply chain managers.