Transcript of Harald Henn’s Speech at the CFO Studio Reception on July 17 at the Upper Montclair Country Club
To me leadership has a lot to do with providing a service to make your team successful. That has always been my guideline. For me it started in a sports environment. I grew up in Germany. Soccer is the sport that’s number one there. You have tall guys, you have skinny guys who can run, you have massive guys that can shoot far. You have to bring them together as a team. And when you do, you are much stronger.
I always believed in that and that was a strong message.
Later I volunteered to be a soccer coach myself, for four year-olds and five year-olds. I find children sometimes teach one little lessons in leadership that you can directly transfer into the office and into the boardroom. For example, they taught me when you have a group of 10 kids and you let them shoot on a goal, it’s way too many. You have to split the group because otherwise, the last half of the group gets totally bored. They look at the duck sound there or they stare at the sky for airplanes, half the group size is right, an important management lesson.
We are providing a service, but how do we provide this service? It would not hurt if you know your competitive environment. You need a little bit of a plan and a tactic. Otherwise, the competition can roll over you.
My best parallel there in sports is … I don’t know if we have any tennis players. You have the U.S. Open, we also happen to be one of the sponsors there. It is an exciting event too.
If some of you have ever watched some of these games, you might find that about 90 percent of all shots in tennis are hit cross-court. They are not hit along the line, they are hit cross-court. Does anybody know why that is? Obviously, these players have a plan, they have a tactic. And I want to demonstrate to you how important that is.
There are three reasons. The net is six inches lower in the middle than on the sides; that’s half a foot and that’s substantial. The court will be eight feet longer if you hit diagonally than along the line. Your margin of error to left and right is also quite significantly higher than when you hit it along the line.
Lengthy introduction, but I think you understand. I just experienced it myself when I got a different tennis coach and he taught this to me. I improved my ability of play by two classes in one year. It makes a difference. Have a plan, have a tactic how to attack the competition; very, very important.
Lastly on the leadership topic, you need enough diversity. I always enjoyed getting outside of the silo. Andy touched upon this in his introduction, and it’s very true that CFOs are usually more stuck in the office, doing those spreadsheets, staying internally. You don’t go out very much. I’m sure we have a very interesting angle to communicate about the brand and we should probably do more of it.
I always believed in this diversity. This is also why I said yes — of course, I had to ask my wife first before we went to Japan. I wasn’t sure; she said “no” to a few other countries before, but she surprised me when she said “yes” to Japan.
We went there. It was a great experience for me. Experiences that you would not believe from a Western mindset, how team- and group-oriented people are there.
I was part of that Fukushima event there, as you remember, on March 11th, 2011. First the earthquake, and then the tsunami, and then the atomic contamination. We had to close down the company for two weeks. Well, we tried to, but our employees didn’t let us. Eighty percent of them would come back anyway and tried to rebuild everything. We told them, “Stay home and take care of your family.” They would still come there. They felt this strong commitment and need to rebuild everything.
We had car dealers. We suspended their payment terms. They would still pay on time. We had customers that had lost cars in the tsunami, they would still make monthly payments on cars they didn’t have anymore. Where does this come from? Where do I want to go with this?
Obviously, these people have something in their mind that’s beyond an immediate financial gain or personal advantage. It comes from the inside, it’s an internal value. I do think in this country, absolutely, and all over the world, if you visit and analyze the best service benchmark companies, you will find attitudes like that. They will hire people for attitude, not for skill. There is a saying, “You can hire nice people and teach them how to be salespeople, but you cannot hire salespeople and teach them how to be nice.”
Anyway, that’s a little bit my personal roller-coaster journey.
I think as CFOs we are all in a very interesting position. There’s probably no other function within the company that has such a great understanding of the value chain from the beginning to the end. We know exactly where the levers are. If you touch this area, you can influence the cost there, or the profits that way. Nobody else has the overall view.
That puts us in a prime position to be the strong partner working in tandem with the CEO. I always saw my role like is. I worked with a number of CEOs of different nationalities. Sometimes it takes a few months to get used to their different styles, but I always had this role, I claimed this role. I think CFOs are in the best position.
It is important that you understand your business partners. Sometimes, we have to be controllers, sometimes we have to be financial experts. Sometimes, we have to be administrators. That’s part of our job.
I think mostly, we need to be a valued business partner, which means you have to take responsibility for the overall success of the company. You have to not just set a budget target and then walk away from it. No, you have to make a proposal how to reach that budget target and how to implement it. It will be much more accepted then. I think the highest-performing companies will understand that. They will actually measure that.
Some of you will know The Hackett Group. Hackett is the world market leader of benchmarking studies. They have found out that roughly 70 percent of your perception should be that you are a valued business partner. The other 30 percent should be to be financial experts, administrators, controllers, gatekeepers, and all that. You can measure yourself and see where you are.
In that sense, I’d like to summarize the role of the CFO. There should be not the feeling we are just doing a numbers business. We are in the people business. Many people think CFOs are finance people, are in the numbers business only. No, absolutely not.
You’re in the people business. You have to translate it, you have to explain the numbers that announce this to your customers. Otherwise, it is often worthless. They don’t consider how imiportant it is, and it will go right in the trash. “These finance guys, they just hold me up. They’re a bottleneck.” You all know that. But you can turn it around and become part of the solution.
Anyway, those are my ideas on business that I wanted to share. Andy wanted me to share something on the product. At Mercedes, we are 127 years old now. One of our early founders, Karl Benz, said “the best or nothing.” That was how he, in the 1880s, built up a company. That was his guideline. We decided last year it was time for us again to stress that a little bit. I do think we probably get a certain amount of credit for our engineering, but we also want to move that (“the best or nothing”) into the customer experience. So from the customer care, customer experience aspect, the best or nothing.
We had a huge program with our dealer network. We invested $50 million plus. Also to help them, to incentivize them, we have a training program.
We have roughly a thousand people in Montvale, a few more in the field. We have 24,000 independent dealer-employees, and that is the challenge for us to get that message home. Some dealers do a brilliant job, they are benchmarked. They are absolutely at the top, but then of course, there are some dealers out there, they don’t get it yet. It’s a mom-and-pop shop often. The only training course these guys have ever been to is with their mom or their dad-in-law or something like that. We’ve been trying to develop that and bring that up to a world-class level.
Your competition is not always from your direct competitors. Go to the best in the industry. Go to the top-line hotels, go to whatever the top airlines are, go to a Starbucks, go to a Nordstrom, whatever. How do they do customer service? We are open, if you want to go to school, to the best brands in the world. There’s always possibly an aspect that you can learn from.
That’s our journey we have been on. The three cars [parked outside for anyone at the event to sit in if they want]. We have the top-of-the-line S class that will be launched in September this year, have a look. See especially the interior; it is quite updated. I think you will enjoy it. That’s the car you probably know us for. The E class, sort of the middle of the line, also have a look. And the CLA: We have a new entry point. We want to grow at the top of the portfolio but also the bottom.
We currently offer 22 models in total. The new entry point is also outside for you to look at. Some of you might have watched the Super Bowl in February. We launched it there, the CLA. It will bring the entry point below $30,000 for the brand. We think we will get a lot of new and younger customers into the brand. That’s very much the purpose of that car. Please have a look.