Wisdom from a Finance Factory Graduate – CFO

7 months ago Comments Off on Wisdom from a Finance Factory Graduate – CFO

To land a CFO job at a large, publicly traded company, you don’t have to be the finance chief at another such firm, the internally anointed successor, or an investment banker or public accounting partner with a history of dealing with the company.

Amit Singhi

Amit Singhi

Another tried-and-true path: get in while you’re young with one of the so-called “finance factory” companies — Ford Motor, General Electric, Honeywell, Johnson & Johnson, and Pepsico are among those often cited as such — and let your employer groom you to one day win a plum finance-chief slot elsewhere.

Among the latest cases in point is Amit Singhi, who last August came to FLIR Systems, a member of the S&P 500 with a $4.5 billion market capitalization and $1.6 billion in revenue, as its finance chief.

During 21 years at Ford, Singhi did what best-and-brightest staffers at the finance factories usually do: rotate through almost every possible financial leadership role in operating and functional units alike. In his case, accumulated expertise from stints in engineering, purchasing, manufacturing, marketing, sales, and corporate culminated in a divisional CFO post with Ford South America.

FLIR is in a most modern business: the manufacture of advanced sensors for use in such technologies as thermal imaging systems, visible-light imaging systems, locator systems, measurement and diagnostic systems, and threat-detection solutions. But Singhi is instilling some wisdom soaked in from his decades at Ford.

Singhi recently spoke with CFO about the transition from his career in the auto industry (which started with five years as an engineer at General Motors before he got his MBA and joined Ford) and his efforts to enhance discipline within FLIR’s 175-employee finance organization. An edited transcript of the discussion follows.

What gave you the confidence, after all those years in one industry, to move to a different one?

Having had all of the roles at Ford, those foundational elements are pretty transferable to any business you would go to. It’s a neat thing that Ford finance offers a very broad view of the overall business value chain.

Obviously the technology and the products are very different, and there are some different processes, but there’s a lot of similarity in terms of product development, manufacturing, marketing, and sales.

Also, my engineering and technical background allowed me to go to a technology company. Understanding physics, electrical engineering, and so on allows me to better understand the technology that is being applied, the process that the engineering team goes through, and the manufacturing and the processes behind that.

It allows me to be more engaged going into R&D projects, to ask the appropriate questions, to challenge appropriately, and to understand that it’s not just about dollars and cents but also the physical aspects of the business.

What are you trying to accomplish during your first year on the job?

Ford finance was very strong on people development, and as I came into the FLIR finance organization, I saw a number of opportunities around that. It starts with recruitment. We don’t yet have a very consistent recruitment process, going out to specific universities and having that pipeline flowing.

Another opportunity is around identifying key talent. I’ve put in place a process where myself and my direct managers, and their managers and supervisors, look at the strengths and weaknesses of each finance employee and where they are on the talent grid. From that we create specific development opportunities for each individual, whether in leadership, technical areas, cross-functional rotations, etc.

In that process we’re identifying the top 10% of our talent, the future leaders of finance, and then having a very focused discussion about each of them in terms of accelerated development plans, mentoring opportunities, and special projects.

When you contacted me, you said FLIR’s finance organization has been on a “re-engineering journey” since you arrived. What needed to be re-engineered?

FLIR was already a well-run organization, including the finance function. There weren’t big issues or warts. They didn’t need a fixer-upper, if you will.

But I’ve come in with a fresh perspective on consumer companies at a time when FLIR is trying to move more to consumer and commercial applications. It’s a different set of muscles. Military applications represent about half of our business, but with the U.S. Department of Defense budget going down the last several years, our defense-related business has gone down commensurately.

I had some initial observations on opportunities. In addition to talent development, those included working capital and cash flow improvements, optimizing the capital structure and its deployment, enhancing risk management, better integrating IT with operating units, and enhancing financial planning and analysis.

None of those are broken. Rather, with my fresh perspective, I’m looking at how to continue taking the business to the next level.

Which of those efforts has had the most substance so far?

We had done quite well on generating operating cash flow, but there were opportunities to do even better, by better managing working capital.

There is no rocket science here. We haven’t come up with some sophisticated model for improving our payables, receivables, and inventory. It’s just focus: a very thorough process, follow-up, and paying attention.

Among all those priorities you have, why does working capital rank so highly?

Working capital is cash not being used. It’s not like we’re short of cash, but cash flow generation is a key element of shareholder value improvement.

On the payables front, a key is that whatever payment terms we agree to, we pay on time. There is frustration in the supply chain when we don’t have a tight process that delivers on those commitments. So we’re working to ensure that if we said we’re going to pay in 60 days, it’s 60 days.

At the same time, [where we have 30-day terms and want to go out to 60 days], we can say, “Listen, we have a fair amount of business with you, we’re a long-term, loyal customer, and we have an investment-grade credit rating.”

A lot of companies try to work it both ways on working capital, trying to lengthen their payment terms with suppliers and at the same time squeeze their own customers’ terms. What are you doing with regard to receivables?

Once we ship goods and send and invoice, as it gets close to our 30-day receipt terms, we have a follow-up with the customer. If five days after that there still isn’t a payment, there’s another level of escalation. And beyond that our sales managers interface with the customer to see why we are not getting paid.

Again, it’s not rocket science. It’s staying with the process, monitoring it closely, and following up with escalations.

Same thing with inventory: look across our segments at what our safety stock is, what sales are in the pipeline, and how good our sales forecasts have been. And then, some complexity reduction. It’s all to make sure we have the optimal level of inventory that’s a balance between trapped cash and [what we need given our] sales.

Wisdom from a Finance Factory Graduate – CFO}