On Edge

What emerging Europe's CFOs know about the downturn that others don't.

That’s not to say his team isn’t under pressure. “More than ever, you need finance leaders who are comfortable in their roles and competent in their communication,” he says. “Some handle this a lot better than others. It’s a time when you see the difference between great finance directors and good finance directors. And it’s not only the person, but the organisation behind them.”

But building up a razor-sharp finance organisation is as hard, if not harder, than it was during the region’s boom years. The downturn might have reduced the wage-inflation pressures, but supply still isn’t satisfying demand. “The war for talent is not over,” asserts Kolff. “In eastern Europe, it’s still hard to find people who are good technically, but also good at communicating.”

Dietz of McKinsey agrees, and reckons there’s no quick fix. “It’s a generational issue,” he says. “If you want a 40-ish, experienced executive who speaks English, there are very few. And the guys older than that will not have had the education and the guys younger than that won’t have the experience.”

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Yet as CEE CFOs find themselves explaining the region to head office, the importance of on-the-ground knowledge outweighs any skills gaps, at least during the downturn. “If you lose the local ownership of the decision, it’d be very difficult to motivate managers,” asserts Kolff, who notes that Danone continues to be relatively decentralised. “You could have a central policy that says we cannot ship to distributors with X amount of days overdue payments,” says Kolff. “But if you do that, you’d never be able to come up with creative solutions such as [arranging with the distributor to] send 70% of our goods while receiving 100% of the payment, so its debt is reduced little by little.” Coming up with such a solution, “is our role,” he says.

Pricing decisions also cry out for on-the-ground know-how, say local CFOs. Concerned about margin erosion, many multinationals are reacting by exerting pressure on subsidiaries to keep margins up, even if this means boosting prices when consumer confidence is sinking fast.

It’s a tricky balancing act and depends on the actions of local competitors as much as the needs of head office to defend profitability, says Yavuz Zaman, finance director of Kraft Foods Turkey, an Istanbul-based unit of the $42.2 billion American food group. Because Turkey was a hyperinflationary market until about five years ago, increasing prices was “quite usual and expected,” he says. “But in recent years, we were hesitant to increase prices, though commodity and labour costs were higher. We had to work around other instruments to maintain profitability.” Pricing, he says, is one of the biggest issues for all companies in Turkey.

This Time it’s Different
Despite these and other issues, CFOs in CEE are confident in their abilities to cope with the downturn better than they would have in the past.

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