By Julie Barker
The product, first conceived in 2010, was so simple it was outlined on a single piece of paper. To develop it would involve more than three years and all the capital Fran Shammo, then the president of Verizon Communications’ Wireline segment, could squeeze out of his budget. But he felt it was worth doing. After six months of consideration, he knew it was worth doing.
It was a technology platform that would — without time-consuming manual intervention — deliver video and digital media content from, say, a Hulu streaming service to viewers using any device, whether laptops, mobile phones, or tablets.
Shammo liked the idea because he believed that in coming years there would be explosive growth in video delivery and because the product used the underlying assets of Verizon, a fixed cost. He saw that if it worked, it would expand the margins Wireline delivered to the company. But a software platform that would allow Wireline to engage in a non-core business? Was that a wise investment? Shammo took the idea to Verizon Communications’ then-CEO Ivan Seidenberg and said, “I think we ought to do it.” According to Shammo, Seidenberg answered, “Well, it’s your capital… It’s your risk, but it will also be your reward if it pays off.”
Shammo got the idea funded. It was named Verizon Digital Media Services, and over the past year the fledgling business earned validation when Verizon acquired three companies to further support the concept: EdgeCast, upLynk, and the assets of Intel Media. The big idea that Shammo championed is beginning to earn back his invested capital. Users are not just the streaming video sites of the Internet, but also ABC and Disney and corporate customers broadcasting live presentations for viewing by employees worldwide. Customers distributing video like its simplicity: When Verizon Digital Media Services “ingests” a video from a client, its software can also add closed-captioning, handle pay-per-view transactions, store the video securely, and even ensure that the video is cached in enough places to avoid slowdowns in cases of high demand from viewers.
Shammo’s bet paid off, not just for Verizon but for Shammo, now 53 and executive vice president and chief financial officer of Verizon Communications. For career finance pros, wagering that big goes against the grain, so this one decision defines Fran Shammo as a highly unusual CFO. (With wry humor he says, “Let’s face it, the characteristic role of the CFO is the Dr. No position. We’re the ones who always say, ‘No, can’t do this. No, can’t do that.’”) His years in an operations role, however, gave him a deeper grasp of customer needs. This understanding enters into daily decision making in a very real sense. He looks at the financial metrics when presented with a decision, but he also balances the customer aspect of the equation. Sometimes, a particular choice is “not financially palatable, but you have no alternative because that’s where the customer expects you to go,” he says.
Seeking a Better Way
In the technology world, the ambition is always to make complexity simple — to take difficult problems and resolve them with an elegant product or interface. New York City-based Verizon Communications, originally a marriage of telephone companies, pursued the technology path and has been an innovator, a leader in wireless and broadband with an additional focus on providing integrated solutions for the digital age. But internally, the company that grew by merging with other mega-corporations needed to tackle the complexity and simplify the processes of its many financial systems. Fran Shammo accomplished that.
When he was appointed CFO in November 2010, among his first tasks was to commission an independent study of the Verizon finance organization, benchmarking it against others around the globe. To his chagrin, he discovered that his organization was not world-class. At best it was two years behind; at worst, five. He put a three-year horizon on his objective to raise Verizon finance to the top level. “Keep in mind that in those three years these other companies will be continuing to mature, so we actually have to leap ourselves,” says Shammo.
One goal was to consolidate the more than 200 finance locations by 50 percent. With six months to go on the original three-year timeline, Verizon is nearing its goal, resulting in 21 percent improvement in overall efficiency, says Shammo. “That figure is based on the actual cost of running finance before any changes were made, and it includes savings from consolidations and process improvements.”
A second goal was to think about and continually improve the manner in which financial processes were handled. Verizon created two centers of excellence — in Tulsa, OK, and Lake Mary, FL — and gave them all the functions that could be consolidated. The impact of these improvements was not, in the short term, entirely beneficial. Closing and moving departments affected people personally and professionally, and that has been the primary challenge, Shammo says. “We decided we wanted to tell people well in advance so they could plan their lives or join the journey with us.
Some stayed. Some left. Knowledge transfer from departing employees and training of new hires had to occur in “the overall control environment, so nothing fell through the cracks,” says Shammo. The entire task, this finance transformation, has been “a pretty challenging effort.”
Although much has been accomplished, Shammo’s finance team continues to look at efficiencies that can be wrung out of the operation’s provisioning and logistics. The consulting group that benchmarked Verizon’s finance efficiency is doing a follow-up study, with results due before year’s end. Meanwhile, “With just the progress we’ve made from where we were to where we are, I would be very surprised if we had not caught up with some of the best of the world’s finance organizations,” says Shammo.
Shammo worked closely with multiple departments to achieve finance transformation, including real estate, human resources, and IT. By the way, “transformation” truly describes what has occurred. The finance organization delivers services to the front line faster. This is essential for the efficiency of a company with more than 100,000 internal customers and more than 100 million external ones. In addition, the CFO himself has important customers: investors. As the top salesman to investors, a CFO must gain and maintain credibility with that community, Shammo says.
Partly to accomplish that goal, Shammo says he borrowed an idea from IBM and GE: Get all of your data in one area of finance so you can have decision-support extremely fast. He figures the task is about halfway complete now, but eventually, “we are going to have all of our data sitting in one place in the cloud, so any question that is asked, we can get that data in a matter of minutes.”
He describes the effort as seeking one truth. When he first became CFO, he would ask for something and would get six different numbers from six different people. “Finally, we said, ‘This isn’t working anymore. We are going to go with one form of the truth, and everybody has to use that same form.’” He says that with help from IT, stringent controls have been set up around data. Finance now uses that platform for external reporting, because “we know that what’s coming out is absolutely controlled and it’s the one form of the truth.” In addition, the data is there for all decision makers to tap, not just the CFO.
Risks and Gains
Shammo differentiated himself early in his career by returning to graduate school for a CPA and MBA, the latter from La Salle University. (His wife, Donna, whom he met when both worked at Arthur Andersen in the 1980s, is also a CPA and has a masters in tax accounting. The couple has two children, one who has a degree in mathematics and works for a consulting firm, and the other who is studying to be a mechanical engineer.) Shammo says he has climbed the executive ranks much higher than he ever expected he would. He looks back over a career of more than 25 years at Verizon, and points to two risks he took to bring him to the CFO spot at this $120 billion company.
First, he took a leap of faith and joined the wireless company, then Bell Atlantic Mobile, which in 1989 had 188,500 customers and questionable profitability. But it was an incubating company, and all it needed was time. Today Verizon Wireless is highly profitable, with approximately 105 million customer connections and the largest 4G LTE network in the country. At that small company, Shammo was an early evangelist for the power of wireless technology, and he was able to make contact with senior leaders who saw his potential and gave him opportunities when positions opened up.
The second risk came in 2003 when he accepted the role of president–West area for Verizon Wireless, responsible for operations in 13 states. Verizon Communications’ current chairman and CEO, Lowell McAdam, was COO of Wireless at that time and tapped Shammo, whose resume was purely financial, to pick up and move west for three years to take over a key operational role. “I knew that if I didn’t turn the operation around I probably wouldn’t continue to be with Verizon. And, I was also putting my family a little bit at risk,” he says. “But I felt strongly enough in my capability that I decided to move my family to get that job done.”
Shammo used the opportunity to surround himself with a strong team, people who knew more than he did about specific areas. He is still working with many of them today. “You absolutely want people reporting to you who know more than you in their area. That helps you be a better person who learns,” he says.
Using both his background in finance and his operational experience, Shammo is ensuring Verizon is among the best-run companies in the world. Return on invested capital gets a lot of focus; every product is assessed in that regard. But nothing stands still. “Technology is changing so fast, you have to look at, ‘Where do you think you’re going to be in two years?’ and ‘Where’s technology going to be in two years?’ And those two things may be very different,” he says.
Shammo will be asking a lot questions, talking to people externally and internally, and developing his own view of the strategy that Verizon should pursue. At the same time, he’ll be making sure that financially, the organization can support the shape-shifting it needs to undergo in the future.