Steven Sterin has been transforming the finance function at Celanese almost continuously since 2005. But he thinks the challenges that lie ahead for his team may be greater than anything they’ve yet experienced.
That’s saying a lot. In 2004 and 2005, when the Fortune 500 chemicals company, then based in Germany, was bought by private-equity giant Blackstone Group and then taken public in the United States, the finance department faced a bizarre confluence of major priorities.
Count the challenges, any one of which would have been a fair-sized undertaking on its own: Working with a private-equity owner. Switching from German GAAP to U.S. GAAP. Complying with Sarbanes-Oxley for the first time. Curing two material weaknesses. Reducing the quarterly close process from an unwieldy 45 days (eventually, it fell all the way to five days). Opening a new headquarters site in Dallas. Executing a small handful of acquisitions and divestitures. Planning for a forceful entry into China and building a big new facility there. And, of course, issuing the IPO.
“We were doing all of those things at the same time,” says Sterin, who was the company’s controller at the time, before moving up to CFO in 2007. “Typically you would sequence them along some kind of logical timeline. To have all of that thrown at us at once required a total change in thinking.”
Despite the pain involved, Sterin says private-equity ownership and all the team went through were absolutely the right prescription for an ailing finance function. “It forced us to move. The operating costs for finance were in the fourth quartile, and the quality of our close and the accuracy of our financials were poor.”
In part, the new mindset that was necessary involved applying to the finance function much of what the company had learned about making the manufacturing process more efficient while immersed in a Six Sigma effort in the first half of the 2000s. “We brought into the organization some Six Sigma Black Belts who knew how to drive variability out of processes,” Sterin says.
Secondly, Sterin and the company’s head of manufacturing pored over the records of projects undertaken over the previous few years. Comparing successful projects to unsuccessful ones, they found three traits that were common to the former: the project leaders were among the company’s top performers; project goals were “stretch” but achievable; and progress against the goals was constantly monitored.
For a major transformation project, the people component is the most important, according to Sterin. “You’ve got to have your best people on the project, and they’ve got to be dedicated to it – they can’t be doing their day jobs and trying to transform the company at night,” he said.
Accomplishing the lengthy list of goals encompassed just the first wave of transformation for finance at Celanese. A second wave involved moving the function away from a solely inward focus on finance processes and integrating it with the company’s business lines. “Our support for the businesses was nowhere near where it needed to be for a $6 billion company,” says Sterin.
The new focus was tested mightily just as it was getting under way when the financial crisis exploded in 2008. Amid the treasury and corporate finance activities that were needed to minimize the impact, Sterin’s team was challenged to support the company’s rapid growth in China. The company “built several new units during that period, expanded joint ventures, and started up a new division, Advanced Fuels Technology,” he recalls.
In a third transformation wave, finance became a more global function and one that was focused on delivering services. It gained more expertise at going into new countries and understanding the local systems and policies. To support that expansion, large shared-services facilities were opened in Budapest, Hungary and Nanjing, China.
Finance staff at the company’s Europe center provides accounts-payable, treasury, and cash-management services for Europe and North America, as well as bookkeeping for Europe. Order-management, human-resources, and IT services have also been consolidated into the unit, now called Global Business Services. The China facility is moving in the same direction, although it’s newer and half the size of the Budapest operation.
The intent, in part, is being able to serve customers more flexibly, which Sterin expects to be a dominant theme for finance as the next few years unfold and to form the backdrop for a fourth transformation wave.
“Looking at the market going forward, we think our biggest challenge lies ahead of us,” he says. “Our new customers in Asia talk about getting new product in days. In fact, I think this is the future of the finance function: being agile enough to meet a new customer, have them credit-qualified and in your system in days, and shipping product within a week. That’s the pace at which the world is going to operate.”
For Celanese, to date that shift is taking place mostly in China and India, but it will happen in other countries too. Celanese now has businesses in Thailand, Malaysia, and Indonesia. Those are harder to crack than China, where entry was smoothed by the huge size of the Chinese market. And with so many U.S. companies expanding in China, there was a lot of common knowledge about how to operate there. “If finance is not involved on the front end with the businesses, we could become a hindrance to the company’s growth,” the CFO says.
That means capitalizing entries into such markets, some of which have strict regulations on the use of foreign capital, so the businesses can focus on commercializing product rather than tending to such finance needs. It also means helping design a supply chain in each new market.
A current project for the finance team is working with Celanese businesses in Asia to improve sales efficiency. That doesn’t mean selling more effectively, which is what sales teams routinely focus on, but rather reducing the administrative load for sales staff, such as for creating new customer accounts.
A number of efforts are under way to reduce the time salespeople spend on that, as well as on tracking late shipments, delayed orders, and credit-check processes. “We think we can free up 30% to 40% of our salespeople’s time,” says Sterin, not only in Asia, but worldwide.
Today, more than 75% of Celanese’s business is offshore. “We’re able to take the learnings we had back in the mid-2000s and deploy processes, controls, and systems outside the United States to support business growth,” says Sterin.