A CFO’s Strategy: Verticals Within Verticals

Lawson Software's Rob Schriesheim keeps the focus on six customer markets, allocating capital where growth prospects are strongest, and slashing costs with aggressive offshoring.

At the time, I was sitting on three public boards and was a partner at a venture firm. Several board members called me up and asked if I would consider being the CFO, because I had developed a very good relationship with Harry. We worked together very well, and we had complementary skill sets. His background is in sales and marketing, rising up in the ERP industry itself. My background is in strategy, deal making, capital markets, and public enterprises.

So now you’re the CFO of a company that’s selling products to chief information officers, but also CFOs. Do the product-development people run things by you?
Not usually, no. They’ve been at the business a long time. We’ve got user groups. But we tend to use an expression, “we eat our own dog food.” One of the issues we had after the merger, which is not uncommon, is that we didn’t have a common financial system throughout the company. That’s one of the reasons we had an inherent weakness that we had to remediate. So over the past year and a half we implemented the latest version of Lawson’s ERP products companywide — the HR system as well as the financial system.

So you’re a living test.
Yes. Believe me, we gave them a lot of feedback when we were going through the implementation because we were living through what our customers live through. ERP implementations are not a panacea. You don’t implement it and voilà, you can just press a button to get more timely and more accurate access to insightful information. It often requires organizations to change their behavior in addition to implementing new software. And we had to do a lot of that internally at Lawson.

How so?
The biggest challenge we faced was to continue the company on the path we had chosen. Three-and-a-half years ago, Lawson had 3% operating margins and hadn’t introduced a new product in a few years. There was a holistic set of issues that had to be addressed — strategic, product, cost structure, culture. It’s always the most difficult thing for a CFO, or a CEO or division head, to get the entire organization on the same page and aligned towards the same goal. Sometimes you have really good people who for whatever reason don’t buy in, and you have to part ways with them.

Cultural change is hard. We had to get the organization to buy into the notion that we are a customer-centric company that can make money. That it is possible to be customer-centric but still have a good economic profile. And that’s the way we ought to run.

So before that the customers led the company around by the nose?
I wouldn’t say that. I think a lot of technology companies fall in love with their products and don’t pay enough attention to what the customers are saying they want and need. I think that we are now much more focused on that. It’s the first thing we do. And then we think about how we are going to provide that in a way that is profitable. At the end of the day, we’re very focused on profitable growth. Those are the two most important words we live by now. The only way we can do that is by focusing on the needs of our customers.

What would be your biggest nightmare as CFO?
Well, I’ve been through liquidity crises and taken companies through bankruptcy — I did that for a living. But the biggest nightmare for me would be a fraud issue. Anything can be remediated, and I’m someone who welcomes any surprise. Tell me everything that’s wrong. I just want to know about it. The sooner I know about it the sooner we can figure out how to fix it. But for someone to come and tell me that we’ve got a fraud issue, that would be the thing I would dread the most.

Why, exactly?
Because a fraud issue indicates something is wrong with the institution itself. Integrity in the CFO position, and the CFO organization, is extremely important. Investors have to feel that you’ve got a lot of credibility. It’s nice if you’re really smart and hard working, but integrity is the most critical attribute.

You know, you’re in business to manage challenges. There’s always going to be situations where you’ve misjudged, you’ve made mistakes, you’ve got to downsize. I certainly don’t look forward to having another credit crisis or liquidity crisis. But you can manage your way through that, so it’s not the thing I dread the most.

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