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How do you build a strong finance department? Motivate, stimulate, and innovate.
Roy Harris, CFO Magazine
November 1, 2002
Companies often pause to digest a giant merger. But after Kraft Foods North America combined its cheeses with Nabisco's crackers in December 2000, the company realized that internal reporting needed an antacid.
"It was overload," says Greg Oster, vice president of Kraft's cheese, meals, and enhancers division, which is responsible for such products as Velveeta, Stove Top Stuffing, and Miracle Whip. Regular monthly reports had swollen to 20 single-spaced pages, and in preparing for divisional reviews, he says, "we were spending all our time trying to consolidate information to be shared in a 50-minute meeting."
Enter a Kraft "work elimination team," one of five small groups of employees assembled by Ralph Nicoletti, CFO and senior vice president of finance. Their mandate: to simplify the processes of all finance staffers in the wake of the Kraft-Nabisco combination. One four-person squad, for example, analyzed "the gymnastics the organization has to go through to prepare monthly updates and estimates," says Oster. After intensive analysis and recommendations, the team pared these updates to seven pages, supplemented by three more of system-generated data, "with key messages distilled down to the areas of greatest importance."
Other work-saving projects have improved productivity elsewhere within the $21 billion-a-year unit of Kraft Foods Inc. By streamlining the planning and budgeting process for new-product introductions, for example, the Northfield, Illinois, company shortened the time it takes to stock new items on store shelves.
Such victories over inefficiency explain why Kraft North America has been recognized — along with Chicago-based CNA Financial Corp. and The Vanguard Group of Malvern, Pennsylvania — for overall performance in the 2002 Best Workplaces for Finance Professionals program.
Now in its second year, the Best Workplaces program, a joint effort of the Association for Financial Professionals (AFP), The Hackett Group, and CFO magazine, helps companies uncover strengths and weaknesses in their workplace management by letting them benchmark themselves against other finance departments.
At the same time, the program identifies companies with well-managed finance functions, and the best practices they employ. Mutual-fund giant Vanguard, for instance, surveys finance (and other) staffers regularly, then acts on the issues revealed. And CNA's focus on job mobility and flexible work arrangements has helped it reverse years of organizational rigidity while allowing younger employees to advance.
Further, the companies identified share a strong conviction that investing in finance talent eventually yields bottom-line results. CNA executive vice president and CFO Robert Deutsch, whose mandate in recent years has been to help lead a financial turnaround, says that "driving change in financial results means creating an environment that supports being smart insurance people, and handling claims right. They really go together." And Kraft's Nicoletti points out that in any company, "poor processes, difficult systems, and a lack of training" often inhibit finance progress. By fixing those problems, he says, the "finance organization can focus on what is valuable to the company as a whole."
Such viewpoints transform the old philosophy that "human capital management" means warm and fuzzy things like pleasing workspace interiors or giving workers their birthdays off. Today, leading finance departments don't overlook the amenities. But the overriding goal is to increase productivity and profitability.
This is especially true since the economy is dictating fewer new hires, and getting more out of current employees. The result, says AFP president and CEO Jim Kaitz, is that "the focus of the finance department has shifted from a recruiting to a retention mode."
Indeed, retaining finance talent emerged as an overriding theme in the Best Workplaces program, which ranked companies in five specific areas through questionnaires, employee surveys, and executive interviews. Kraft North America led other companies in two areas: innovation and personal and professional development. Vanguard was specifically cited for achievement in work-life quality. The FedEx Express unit of Memphis-based FedEx Corp. demonstrated sophisticated use of technology and tools, and Metropolitan Mortgage & Securities Co., of Spokane, Washington, was recognized for employee job satisfaction.
This year's benchmarking started before the latest wave of accounting scandals broke. But those scandals promise to affect the program going forward. Next year, Hackett managing director Richard T. Roth says, questionnaires will cover "more ethical issues, as they pertain to recruiting, performance reviews, and training."
Observes Kaitz: "You can't minimize the impact of the accounting scandals," but you can't paint the accounting profession with a single brushstroke, either. The top workplaces "represent the best of finance, and we need to reassure ourselves that such companies are out there."
CNA Financial: Stodgy No More
When CFO Robert Deutsch arrived at $13.2 billion CNA Financial in 1999, he immediately hit rough waters. Morale in the finance department was abysmal. An internal survey had revealed that the 900-person department considered itself "at the tail end of the whole company," he says. In focus groups, says Pam Thomas, now head of human resources for finance, "we heard things like, 'Management is a figment of my imagination' and 'Nobody cares what I have to say.'"
The new CFO's plans to reform the work environment were complicated by the soft insurance market and CNA's related financial turmoil. In response, CNA laid off about 10 percent of its 16,600-person workforce, reducing the number of finance jobs to 800. In addition, it restructured, eliminating redundant positions and flattening the hierarchy. The result: fewer advancement opportunities among remaining staffers — a challenge for a finance chief eager to correct low worker morale.
Deutsch's previous work in specialty-insurance shops had taught him the importance of acting quickly to improve attitudes and efficiency. In that entrepreneurial world, he says, finance can be "as easy to turn as a speedboat, rather than the huge steamship that CNA represented." With nothing to lose, he decided to apply the speedboat approach.
One of his first steps was to move closer, literally, to finance staffers, working in various vacant cubicles around the finance department. "It astounded people at first," says Thomas. "He'd sit down at a desk next to them, plug in his computer, and start working." Explains Deutsch: "My predecessor was a hell of a nice guy, but he stayed up on the 40th floor. And that's the last place you want to be if you're going to understand the company and get anything done among the finance teams."
CFO visitations were just the first shots of the revolution at CNA. Next came targeting worker mobility, which Deutsch did with an emphasis on lateral moves. Encouraging job rotation "was a matter of making it a priority, and part of every manager's job," says Deutsch.
Increased mobility didn't come without resistance from some individual managers and employees. Maggie Westdale, who had risen in CNA's mergers-and-acquisitions area from analyst to department head, for example, ran into a roadblock when she sought a transfer. "I wanted to round out my skill set, but there was some desire not to let my skill set go," says Westdale, now senior finance officer for property/casualty. That past frustration brings a laugh now, as she recalls Deutsch's emphasis on mobility suddenly opening things up for her. "When you're really good at something," she says, "people have a hard time seeing how you can translate that into something different."
The mobility project was especially strong in internal audit. "We had 45 percent of my officer team rotate out last year from audit into the operating area," says Bill MacDonald, senior vice president and director of internal audit, who likes audit acting as a "feeder" area spreading its expertise throughout the company.
Such career development is not purely a 9-to-5 proposition. Deutsch, in fact, encourages flexible employee hours and work arrangements, and makes no apology for his own out-of-the-office schedule, which lets him spend 20 to 30 percent of his time at his Farmington, Connecticut, home office. "The fact is that I'm available," he says, "and my assistant is phenomenal at finding me any time, any place."
Victor Hugo Celis, a recent University of Illinois--Chicago graduate hired in a special CNA rotational accounting program for high-potential recruits, found himself matching his schedule to his customers' hours in his eight-month corporate-accounting stint. "During a two-week time block, for 9 of the 10 days I would work 45 minutes additional, and then I'd be off the 10th day," he says. "It was great."
Despite CNA's higher mobility, concerns from employees about limited promotion opportunities did come up in the Best Workplaces benchmarking report. It's a situation caused by the reduction in the number of job classifications, which Deutsch says he is seeking to improve. Another criticism was that not enough time is spent with orientation of new finance staffers. "We hear that these are issues, and we'll address them," says the CFO, who has also built departmental identity with an "employee communication team" that gives him unfiltered feedback from the rank-and-file.
Progress since 1999 has been astounding, though, says Westdale. "We have gone from a stodgy old-boy insurance company — with people in positions for long periods of time simply because they'd been in positions for long periods of time — to a company that is really based on recognition and rewards. That has really given morale a good boost."
Kraft: "A Plan on a Page"
Kraft North America takes pride in the work-elimination-team approach that helped shorten its monthly divisional reports. But there's only so much one initiative can do in an organization with 1,800 finance staffers. (The unit's total employment represents 60 percent of Kraft Foods Inc.) And in Ralph Nicoletti's 18 months as CFO, the teams have been just one element in a drive encompassing career planning, recruiting, training, mentoring, work life, and networking.
For most finance employees, the individual development profile (IDP) may be the most meaningful innovation. To create these IDPs, employees and managers together structure a one-page snapshot that expresses career advancement and planning in a way understandable by everyone at Kraft. "It's an entire plan on a page," explains Oster, the divisional finance vice president.
With 55 finance staffers reporting to him, Oster likes the way the IDP summarizes employees' technical skills and leadership competencies for quick analysis during semiannual reviews. The profile is used as part of the finance department's unusual "one over one" conference system. In the one over ones, held at least twice a year, employees meet directly with their bosses' bosses, reducing the likelihood that a single immediate supervisor could misinterpret a staffer's plans or block advancement.
But there's more to it. In Oster's case, excluding his direct reports and their staffs, 20 individuals jump a level to meet with him. "After the one over one, I can be a stronger advocate for these individuals," he says, "and they feel that if there were any discomfort with their direct managers, they could be open with me."
Ellen McDonough, finance director of the enhancers division, meets with Nicoletti himself, providing some insights into his leadership. "It's of critical importance to Ralph that [the IDP and the one over one] become institutionalized, and that employees take a critical role in their own development," she says. As for her own IDP, she adds, "I have total ownership for what it says, and I have every ability to modify it if that's needed." (The one over ones, Nicoletti says, may take another year to reach the entire finance department. He hopes that the IDPs will eventually be adopted outside finance.)
Using the IDPs and one over ones not only facilitates career advancement for finance staffers, says Nicoletti, a 23-year Kraft veteran, but also serves as "the foundation for succession planning." Routinely, when jobs open up he uses a bench chart created at the end of the review process. "If I want to look at our next division controllers, I know who's ready at any given moment," he says.
The finance department also makes provisions for career interruptions. When Kathy McKenna, assistant controller for financial reporting and accounting, felt a need to cut back to part-time in 1997 (one of her children developed a serious illness) she convinced Kraft to start a "financial resources group." Made up of formerly full-time, primarily management-level employees interested in internal consulting work, the current group of five now assigns staffers to work on such short-term efforts as a postmerger divestiture or a particularly tricky quarter-end close.
The work-elimination program, though, may be the clearest example of a workplace initiative touching the bottom line. Troubled by slow product introductions in recent years, Kraft had one team search for unnecessary steps in the finance procedures that support new products. "We moved up the target analysis earlier, and aligned the processes so more insight is brought in," says the CFO. "Now we have much better agreement about new products that we're going to launch at the beginning of the year. In the past, we'd be homing in on that, but it wouldn't be agreed to until we finished our budgets."
Vanguard: A Crew's Views
Employees sail into Vanguard's Malvern office complex — its buildings are actually laid out in the shape of a ship — knowing that they are part of a crew. In Vanguard's nautical world, the cafeteria is the galley and the company store is the chandlery.
But while corporate themes may not be a new device, the binding influence at Vanguard works well in finance. In these tumultuous times for mutual funds, for example, managing director and CFO Ralph Packard does view his department's more than 500 people as having to weather constant squalls. And he makes sure they have good navigational tools for the job.
Finance staffers — about 60 percent of whom work in mutual-fund financial services, while the rest work in the corporate finance division — get regular market updates from Packard and chairman Jack Brennan over their "CrewNet" Web site. They mince no words about the challenges, but promote Vanguard's advantages. "Our business is strong, and we can ride out some rough times more easily than others," says Packard.
Employees say they'd stay at Vanguard even if times were tougher. One reason is the availability of desktop "dashboards" that help staffers track their contribution to corporate performance and their status in achieving incentives. "We try to ensure that all crew members have their jobs' expected results linked to dashboard measures," notes Packard, and that forms "the basis for their annual merit review or salary increase." The dashboards also let employees track the Vanguard Unmatchable Excellence (VUE) program, a Six Sigma-like system that Packard says "strives for virtually error-free business performance."
Glenn Booraem, a principal in fund financial services, says VUE "really makes a difference in focusing folks on critical measures" in their jobs. One of Booraem's own indicators shows "process accuracy and efficiency," since pricing data for his trades measure how well he is doing. He compares a fund's net asset value to "a car coming off the assembly line," with many workers contributing to the final product. VUE measurements "deconstruct this end output into its component processes" and let the workers see their contribution for themselves.
Despite the success of the dashboards, the area of technology and tools wasn't a strong suit for Vanguard in the Best Workplaces benchmarking. Packard acknowledges that the company is still working to automate some systems, and to link more individual dashboard readings to results across the company, for example. "But we've made a big advance since the survey," he says, noting that "our CrewNet site now has divisional dashboards."
Vanguard had the highest score in the work-life quality category. While the nautical theme may have nothing to do with this, it does reflect the company's team spirit. Fernanda Antunes, a service administrator, says the motif "at times can seem overdone," but she has no problem saying "welcome aboard" to a new recruit. Moreover, she notes that the "Crew's Views," the employee surveys that are done every 18 to 24 months — covering topics that include workplace issues — are famous for getting results. Once, for instance, the company created lactation areas for nursing mothers because of a point that was raised on a survey, Antunes notes.
Sharon Koop, a senior manager in institutional program accounting, is even more encouraged by the responses she sees whenever a survey asks employees about their ethical standards. The high integrity level reflected there has convinced her "that Vanguard is doing the right thing" at a time when other companies are not, she says. "It's something to be proud of."
Roy Harris is a senior editor at CFO.
Measuring Good Work
For benchmarking "human-capital management," the second annual Best Workplaces for Finance Professionals program used a methodology developed by The Hackett Group. The program rated companies on personal and professional development, quality of work life, innovation, tools and technology, and job satisfaction.
Individual companies — 140 began the process — used the Web to complete a 100-item questionnaire. Then salaried and hourly finance employees were randomly and confidentially sampled, forming the job-satisfaction component. Next, corporate ratings in the five areas were charted on a "radiating pentagon" graph with a 4.0 scale for each, and the top quartile scoring 3.0 or above.
Hackett and the Association for Financial Professionals, which along with CFO magazine are program sponsors, will accept entries starting this month for the 2003 program (see www.bestworkplaces.org). This year's participants are being acknowledged at the AFP annual conference in New Orleans, November 3--6. —R.H.