Baidu CFO Jennifer Li

After a long career at GM, Li's missions in her new job are to sustain sizzling growth at the Internet search firm, and to wear a lot of hats.
Don DurfeeSeptember 8, 2008

Last December, Baidu, China’s top Internet search provider, suffered a blow — the death of its popular CFO, 40-year-old Shawn Wang, who saw the company through its 2005 Nasdaq IPO. In March, Baidu tapped another 40-year-old, Jennifer Li, the North America controller of GMAC, the financing arm of General Motors. Li had spent her whole career with GM, working in treasury in New York and Singapore before serving as CFO of GM China and later of GMAC’s North American operations. Now she’s with a young and vibrant company, but one with its own set of challenges. Among them: sustaining Baidu’s blistering rate of growth (second-quarter revenues were up 100 percent from the previous year) and managing some controversial aspects of the company’s business, including a successful MP3 search function that provides links to copyrighted music. Li explains how she intends to instill Fortune 500 discipline in an entrepreneurial company.

What do you hope to achieve at Baidu?

My predecessor did a very good job, introducing Baidu to the investor community and building its reputation in the marketplace. And now our share price has reflected a lot of the market’s expectations. My job is to work with management to deliver on that.

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What do you have to do to achieve that?

The key question for Baidu is this: How do you retain the entrepreneurial drive and sustain the growth and make sure we grow in a disciplined and orderly fashion? I have to make sure we’re efficient, drive topline growth, and manage risk at the same time.

“Disciplined” isn’t a phrase you often hear describing Chinese growth companies. How will you ensure that growth is sustainable?

Baidu has been very focused. Let’s talk about M&A, for example. We are constantly being approached with different opportunities. You can easily get distracted and move in that direction. But we are very selective about M&A opportunities. We’re a search engine company and that’s our one and only focus. We haven’t diversified our revenue sources into other areas of business.

As for sustaining the growth: the growth is there, and we believe the business is scalable. We have a set of infrastructure investments — the network and the servers. And we have the tech people who built these search engines, the same R&D people, and the same sales force. As long as we provide the best search results and continue to identify customer needs, there will be more people and businesses that come to Baidu to promote their own products. Our revenue is generated from people clicking on the links. The growth potential from my perspective is tremendous.

Also, we all know that China is in its early stage of using the Internet. The proportion of Internet users among China’s population is still below the world average. But in terms of actual users China is number one already. There is still a lot of growth from a user perspective.

What role will the finance department have in your growth effort?

In China, there’s still this perception that a finance professional is just a bookkeeper, not a business partner or business manager. But there is analytical work we can do and decision-support processes that we can put in the system.

For example, if I say that the sales force has 500 people and they generated so many new accounts in these different regions, that’s a good foundation for good forward-looking decision making. Also, if you have data from your competition, you can do benchmarking to see if you have further room for improvement. You may be improving compared to yourself, but are you good enough?

What stands in the way of achieving that?

One thing is your own capability. If our people are used to being accountants and haven’t been exposed to the business, then they won’t understand what they’re talking about from a financial analysis perspective. They need perspective and experience. The other thing is being accepted within the company by other departments. In the past, finance hasn’t been involved in decision making. Why should they be now? What value do you bring? I have to approach it from both angles.

What role does capital allocation play?

At GM and GMAC, capital was very scarce and you had to really allocate it very carefully. Baidu, to put it bluntly, is like a cash machine. We just keep churning out cash, and quarter after quarter it just keeps piling up. We’re still very disciplined, though.

In any case, it doesn’t take a whole lot of investment to do this business. In the auto business it’s a huge capital investment to build a new product line or a new vehicle model. By contrast, in this business we are launching a C2C platform. It’s a major effort, but minimal from an investment perspective. All you are investing in is just a handful of engineers to build the system.

What do you do with all that cash?

Our money is supposed to ensure we have liquidity, to help us get through whatever downturn we might be facing, and to help us support investments that are key to the company’s growth in the future. It’s not our job to make risky investments in the stock market or currency speculation.

Many Chinese CFOs take a different approach.

Last year when China’s stock markets were hot, people were saying you are silly if you don’t invest, because it seems like it’s just going one way forever. But from a risk management perspective, companies should have set policies on what investment vehicles you can use. You aren’t here to speculate on the capital markets.

Well, many of those companies have found that markets do not in fact go up forever.

Exactly. How do you go back to your shareholders and say, “Sorry I lost you so much money because I put it in the stock market?” Investors can do that themselves.

How big of a threat are the legal challenges from music companies over illegal downloads?

We have been resolving a couple of issues in that area. Baidu respects intellectual property rights and takes the matter seriously. We believe in advertiser-supported digital music and have worked with record companies to promote their artists online. For instance, we work with major record companies like Rock Music and EMI, we run music promotions, and share the advertising revenue associated with the songs that are downloaded.

What is the scope of your job at Baidu?

When I was approached by Baidu, they gave me an interesting offer letter. It said my job title would be CFO, and gave this description: “You shall perform all services appropriate to that position, and similar in nature with positions at companies with similar operations and financial positions, in similar industries, as well as other services that might be requested by the company.”

I thought, what are they talking about? When I reported work it turned out I was responsible for finance, HR, purchasing, investor relations, and contract management, which is part of legal management. It’s an industry practice for CFOs to have a very expanded scope of work.

Is it overwhelming to have so many things to look after?

It’s definitely a busy job. But on the finance side, I benefit from really knowing this area well. GMAC is a financial services company, so the finance was very complicated, having to worry about the funding and hedging and everything. I think the business model here — from a financial complexity perspective — is a lot easier to master. That gives me the opportunity to look at other strategic matters such as HR management.

If you think about the Internet business, this is a business about people. It’s not as if we have so many fixed assets. It’s all about brainpower and technical capabilities. That means making sure we get the best talent and making sure those people are in an environment where they have the opportunity to excel. Those are challenges that I’m very happy to take on.

Why does it make sense for HR to fall under the CFO?

The only connection with finance is that when I say this company is about people, then that’s predominantly where the costs are, too. The intent is this: this is a young company that has grown very fast over past few years. From having a couple of hundred people when we IPO’d [in 2005], we now have close to 7,000 employees. That poses a challenge from a people management perspective. The expectation is that I come from an established and mature corporate environment, and my experience can help us do things in a more disciplined manner.

The average age of Baidu employees is 26. You’re 40, which is still young for a CFO. What is it like working at such a young company?

This is the youngest group of people I’ve worked with. In my prior job, a lot of my colleagues were in their 50s, 60s, and 70s — well-trained professionals. Here, most people were born in the 1980s. They’re a very different but very interesting group of people. They don’t lack any desire to learn. They’re high energy and have a very positive attitude. But at same time, they lack experience and sophistication, which is natural for people of that age. So the issues we face are how to put discipline into the business operations.

China’s economy seems to be entering a more difficult period.

China has run on an extended period of fast growth, and now there are some challenges. You have to know what you’re doing. It’s like driving a car: keep your engine hot and your mind cool.