The CFO as Chief of Objectivity

Celanese's finance chief strives to take the emotion out of decision making.
Sarah JohnsonMarch 31, 2010

As the chief financial officer of Celanese Corp., Steven Sterin is much more than a numbers guy. Of course, his department has to produce timely, accurate financial statements every quarter for the $5.1 billion global chemical company. But he also views his role as providing unbiased input on the many decisions that flow through Dallas-based Celanese, which prides itself on encouraging ideas from its 7,400 employees.

In a recent interview with CFO, Sterin talked about his job, which he has held since 2007, and his company’s enviable position of being able to pursue growth opportunities this year, having set aside some $800 million in cash for “strategic purposes.” An edited version of the interview follows.

What are your primary responsibilities as CFO?
I critically challenge the business’s assumptions and plans and investments to make sure that we’re applying strict fiscal discipline, and that we’re being objective and not emotional in our decision making. I view my primary role as being the chief of objectivity.

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What is it about your personality that allows you to be successful?
I’m a CPA, but the skills I bring to the table are not necessarily controlling and accounting, which I’ve done. Rather, it’s the ability to go from the details to the big picture and back again, and knowing you can’t get emotionally attached to ideas. Everybody has a tendency to do it. Another thing is being able to see patterns and trends where others see complexity and chaos. This could mean, for example, understanding what economic conditions would invalidate 20 assumptions being made in a proposal.

Has your role evolved into becoming more of a strategic partner?
Our finance organization is already considered strategic to the company, and that hasn’t changed. That said, I’ve worked with some CEOs and general managers who view finance as a necessary evil. This might be self-serving, but I don’t see how a company can be successful unless it has a strong finance organization. We’re here to deliver financial results with integrity, and finance and money are the language of business.

Celanese CFO

In February’s earnings call, you said the company had $800 million in cash available for strategic purposes. Is this a good time for acquisitions?
There are more strategic opportunities for investment today than there were two or three years ago, when the economy was robust. There are more sellers of assets, deal valuations have come down, and there are assets available that are strategic to us but might not be core to another party. We’re preserving cash today to allow us to have the flexibility to make deals without being dependent on the credit markets.

What do you do with the cash in the meantime?
We deal heavily in Treasury securities and the types of investments that allow us and our investors to sleep at night. You don’t get a lot of yield, but there’s nowhere else to get yield anyway. And frankly, the risk you take to get the yield was proved by this latest downturn not to be a wise choice. We invest more in Treasuries for excess cash than we did a couple years ago.

How involved do you get in acquisitions?
We have a dedicated M&A team. I am frequently involved in looking at the strategic fit of a deal and the financials underneath it. Also, back to my role as chief of objectivity, I look at the risks: what are they, and how do we deal with them?

Are valuations getting more realistic?
Yes. Typically, we don’t look at entire companies. If an investment banker is out there marketing a deal, it’s probably too late to make it work for us. We’re looking for niche, strategic assets that are very close to our core.

So you rely on word of mouth that something may be up for sale?
Most of the deals we look at are not even up for sale. Once they’re up for sale, you get a competitive situation where five or six companies and a private-equity guy are bidding on the assets. Most of the deals we look at have been on our list for 10 years. This economic environment opens doors for discussions that were more difficult when things were going really well.

What are three metrics you are most concerned with these days?
To understand what’s going on in the economy, I look at macroeconomic indicators. I also spend more time with our commercial organization to understand customer sentiment. The third element is looking at our short-term order positions on a more frequent basis. We’re not necessarily able to predict what’s going to happen in the economy, but we can be more agile and responsive.

You plan to make further cost cuts this year. How are you balancing the need to make cuts without sacrificing the quality of your services?
Celanese has a long track record of driving productivity continuously and taking out cost on a sustainable basis every year. The economic recovery didn’t change that. Of course, there are opportunities to reduce costs when economic conditions and demand levels are depressed. We don’t cut salaries, we don’t take away 401(k) benefits — those are one-time cost cuts that aren’t sustainable. Instead, we try to take work out of the organization. When you take the work out, you take cost out.

Can you give an example?
We’ve cut our costs in finance services over the last four years after opening a shared-service center in Budapest, Hungary. We went from having 23 high-cost locations closing the books around the world to three hubs, one of them in Budapest [the others are in China and Dallas]. We also close faster, from 30 days down to 5 days. We’re more accurate and have fewer defects in the process. Not only do you get the benefit of centralization, you get labor arbitrage and higher-quality services, and now it serves as a platform for other functions.

What is your most significant challenge right now?
Continuing to keep the organization focused not only on doing what we have to do in the short term, but also on investing in future growth. At the same time that we’re driving cost reduction, we’re continuing to reinvest in our business through our innovation programs. Our customers aren’t telling us to stop innovating because the economic environment is weak — in fact, they need us to do more today than we did a few years ago. A lot of our products help our customers reduce the costs of making their products better and more competitive.