“I was young and didn’t know any better. I said, ‘I’ll go and do it.’” Thus, in 1993, a 26-year-old Carolyn Bresh boarded a plane from London to New York with five days’ notice to become acting US CFO of Blenheim Exhibitions, an events company where she had been group accountant.
With no local finance chief or controller, Blenheim’s Stateside business was falling apart, and Bresh’s task was to turn around its struggling finance team. “There was a tax investigation with the IRS, the team was in disarray and we had massive debt that no one had even tried to collect,” she recalls. Sorting out a mess like that calls for focus, particularly for a finance executive who hasn’t been involved in a turnaround before. “You make it up as you go along,” she says. “But the next time you have to [handle that kind of situation], you have more things in your tool kit.”
Bresh’s own tool kit has served her well in the years since Blenheim. She spent more than 12 years at news-data provider Reuters, holding various finance roles to eventually end up as global head of finance under CFO David Grigson in 2003. By that time, the company’s share price had fallen to less than £1 from more than £16 in 2000 as the company suffered in the aftermath of the dotcom crash. Cutting costs and restructuring were a key part of turning around the company, before Reuters agreed an £8.7 billion merger with Canadian rival Thomson in 2007.
Now running her own consultancy, Bresh hopes to spread some lessons from the last downturn to finance professionals struggling to survive today through her new chairmanship of the Finance and Management Faculty, a training and information service run by the Institute of Chartered Accounts in England and Wales (ICAEW), an accountancy body with more than 132,000 members.
Many CFOs won’t have been through anything like the current downturn. How have you seen finance chiefs respond?
This idea that nobody’s seen it before is slightly overhyped. There are people around who’ve been through it. And the things they’re focusing on now are basic issues that are not too different to what they should have focused on anyway—cash, working capital and having good relationships with banks. But they’re probably being asked to do it with a smaller team. At Reuters, as well as taking the number of people in the business from 15,000 to 12,000, we took the finance team from 800 to 600, although nobody suddenly took away 25% of the work. It’s about being more efficient.
You say CFOs should already have been on top of a lot of these areas. Was there complacency from finance chiefs during years of growth?
I’m not sure it’s CFOs who have taken their eye off the ball, maybe more that they previously had less say in the business. When business is going well, you can become a bit more relaxed about your management of working capital and how much stock you’re sitting on. Then management may have thought, ‘Why do we need to plan for [worse] scenarios when revenue is growing at x%?’ Now the topline isn’t growing that way, the cost base is under a lot of scrutiny and people are closer to the wire in terms of bank covenants. The situation has changed quickly.
Does this require a different type of finance chief?
Yes. Some CFOs are more comfortable out of the spotlight, running the spreadsheets and the numbers. But you can’t be in the back room anymore. While cash is tight, you have to make sure that you spend it on the right things. That means saying no to some things and helping the CEO to take some hard decisions. When we restructured Reuters, I wasn’t about to win a popularity contest, but it was about saving the business, not making people happy.
How do you maintain morale in the finance team during difficult times?
The way I’ve managed that in the past is by saying that while it’s hard at the moment to be in the finance function, it’s also a fantastic opportunity for the CFO, the controller and the team to shine. When the business is doing well, maybe finance can be seen as a bit of baggage. But when the business is in trouble, it’s very reliant on finance, be it to produce management information or to give them the early warning signs. So while you might not always be giving the best messages, you are undoubtedly listened to.
Is there a danger of causing panic?
The best policy is to communicate clearly. Explain what’s going on, explain how you’re trying to deal with it, ask people to support you. It’s better to say, “We don’t have all the answers but this is what we think.” The chances are your employees are by the water cooler anyway, speculating about a scenario that’s eight times worse. If you say to somebody, “I’m not sure if we’re going to lose 10% or 20% of the workforce,” that’s better than not telling them anything at all-because then they think it’s 30%. By the time they talk to someone down the corridor it’s 50%.
When you help finance teams in your role as a consultant, are there common mistakes you see them making?
They don’t produce the correct management information. There can be a lot of 60-page documents filled with numbers, but you can often boil them down to six or eight metrics and scrap the other parts, which no one outside of finance looks at and which others on the management team don’t understand. Sometimes I think the bigger reports are produced for legacy reasons. Another mistake is for the CFO not to have a good second-in-command. Sometimes people who are attracted to finance roles are good on details and number crunching, but less good at challenging a sales director on a forecast that he’s never going to hit. Getting both skills in the same person isn’t easy. So you need a good number two as well as the right number one.
When the upturn comes, how would you like to see the CFO’s role having changed?
Hopefully, because they’ll have been instrumental in helping their business get through the downturn, they’ll continue to have a seat at the top table. And they’ll be better CFOs—the restructuring experience is some of the best I’ve gained. And plenty of CFOs are already handling this downturn well. They’re taking costs out cleverly. In 2000 companies did some emergency cost cutting across the board. Now they’re trying to do it more intelligently, maybe using things like sabbaticals or reduced hours. If you can be more flexible and send someone who wants a sabbatical off but look to rehire later, you’re going to be able to react to the upturn more quickly than if you cut hard and deep. Then, the recovery time is so much longer.