There’s a long list of troubled companies, ranging from bankrupt airlines to
sluggish car companies, that have asked former CFOs to
lead them out of financial dead ends. One of them is Cable & Wireless
— the UK-based telecommunications company with extensive Asian operations
— which two years ago appointed Jim Marsh as its CEO. Marsh began his
career as an accountant with KPMG before moving to the British retailer Boots,
becoming a divisional
finance director and later its head of strategy. Since then, Marsh has moved
through roles in sales and operations with KPMG’s consulting business and with
Energis, a fiber-optic network operator. Now he’s applying his financial skills
to the biggest challenge of his career: making a struggling telecoms business
customer-focused, nimble and, hopefully, profitable. Marsh tells CFO Asia
how his financial background makes him a better CEO.
Your career has included time with a Big Four
accounting firm, a job as a divisional finance
director, and senior positions in sales. Did this
mix of experiences help you reach your current
position as chief executive?
The reason I got this job was absolutely because I have
got the finance director experience and sales director
experience. That gives you breadth. One of the things I
insist on here is that for anyone to get into the top two
levels in my business, they have to have moved across
different functions. It enables you to understand other
We’ve seen a number of CFOs become CEO
recently. Do you think a financial background
has become more important for CEOs?
I think it’s become harder and harder to compete in the
marketplace, and that squeezes financial performance.
There’s a need to deliver returns in difficult, turbulent
markets. That makes it more important that you are getting
capital investment decisions right.
It’s particularly true in my industry, since telecoms is,
from a financial management perspective, very complex.
We have very large capital costs associated with running
a telecoms business — the network infrastructure. And
from a revenue perspective, you have billions and billions
of small transactions. So there is a real complexity
around our industry.
You have shifted Cable & Wireless’s focus to
the biggest corporate customers rather than
consumers or small business. How has that
changed the company’s economic model?
When the new management team first moved in, one of
the things we announced was that we were going to exit
90 percent of our customers. There was quite an extreme
reaction from some in the press. But what they chose not
to print was that 90 percent of the customers delivered
4 percent of the margin. Imagine how liberating it is for
an organization to remove that huge volume which
enables you to focus on the big customer.
One of the legacy issues in our industry is that we
have historically been obsessed with size. So the focus
was on revenue, revenue, revenue. I’m interested in revenue
if it’s good revenue, not bad revenue. So the movement
to exit a large number of customers had a revenue
impact but virtually no margin impact.
Telecom is a capital intensive industry. A lot of the
guys in the industry, historically, have assumed that you
have to spend these huge sums of capital upfront. What
we’ve tried to do is change the focus from revenue and
gross margins to cash and pure profit. It might sound
odd to a finance professional, but for people who’ve been
in our industry all their careers, that’s very different. So
there are a lot of deals where we have an opportunity but
we look at it and say “No, actually we’re not interested.
It doesn’t make the margins that we want, so we won’t
do it.” Some of our competitors are still in the mindset
of “Buy anything you can.” We are proud of the fact that
we will say no to bad business.
Has your background in finance and sales
helped you lead this kind of change?
It’s been vital. My finance director experience has given
me a real commercial sense of what makes sense for
shareholders. And my time working in sales and retail
has given me that customer focus.
How is your working relationship with your
own CFO, given your similar backgrounds?
Maybe you should ask him [laughs]. We’ve both done
finance and sales jobs, so we both have the same level of
understanding. The difference is that he has far more
attention to detail than I do. We’re both quite intuitive
about getting the right answer, but he has discipline to
work it through the spreadsheet himself, just to make
sure it’s right. It actually works quite well.
Another thing is that because we have unusual but
very similar backgrounds, I trust him to step in on my
behalf when there’s a finance or even customer-related
matter. As a CEO, having complete confidence in your
CFO is very important. It can be a real enabler for you in
terms of getting better leverage out of your own time.
What would you tell a CFO to do to get the
most out of his relationship with the CEO?
The most important thing for me is for the CFO to be
constantly charting the course to the ultimate destination.
So very simple things, like having a proper rolling forecast
for running the business. Too many finance directors I’ve
met still run the business on the budget basis. Running it
from a rolling forecast drives a much better set of conversations.
The other thing you want as CEO is no surprises.
Was there anything about the CEO’s job you
weren’t prepared for?
You learn that in a role like mine it’s about constant reinforcement
of a small number of simple messages. You
need to do that because things get lost in translation. We
have colleagues in 40 different countries. So, for example,
we’ll randomly pick 30 junior colleagues and I’ll sit
down to see if the messages we’re trying to communicate
are actually getting through. Two times a year, I travel
the world, sitting down with colleagues and having
these kinds of conversations. What wasn’t expected was
just how much time you have to spend reinforcing the