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You Can’t Be Blind To Important Information

As Seen in CFO Studio Magazine Q4 2015 Issue

A CHANGING BUSINESS MODEL DRIVES CHANGING DATA NEEDS

BY MARTIN DAKS

Gary Piscatelli, Senior Vice President and CFO of Hunter Douglas North America, tackles his job using a holistic approach, which is exactly how the company, the worldwide market leader in window coverings, established its prominence. The Netherlands-based company —with its North American headquarters in Pearl River, NY— stands out from competitors with its commitment to creating innovative product designs that fuse form with function to meet the evolving needs of the marketplace.

Piscatelli oversees the organization’s finance, technology, and human resources groups. Among other projects, he is helping Hunter Douglas to improve its data-gathering, reporting, and analytical systems in a way that enhances the company’s business operations. That means establishing more standardized information and systems without detracting from the magic that has driven so much success.

Looking at Information Anew

“Historically, operations were run in a somewhat decentralized manner,” he says, “but we are now moving toward greater centralization when it makes sense. We need a common language to ensure that metrics and measurements align, so when we talk across departments and functions, everyone is using the same definitions.”

Piscatelli joined the company a year and a half ago, following stints with Gillette Co., Nestle, and Timex Group, where he was involved in a comprehensive array of operations. Today, Piscatelli draws deeply on his previous experiences.

“The CFO is seen as a custodian of the company’s assets,” he says. “That reaches across many functions, and combined with the responsibility for business operations, means you’re basically connected to almost every part of the company. So you look for commonalities, ways that you can standardize and simplify functions and operations, not for the sake of standardization, but to help accelerate a company’s ability to achieve.”

Recently, Hunter Douglas converted the fabrication segment of its business from one that relied on a combination of independent and company-owned services, to one that is now entirely owned and operated by the company, bringing complete control of the manufacturing, assembling, and wholesale distribution aspects of the business under one umbrella. The increased vertical integration has helped to drive a change in the way the company looks at its data.

“When you’re tying together so many operations, it changes the way you gather and utilize your data,” says Piscatelli. “Ensuring that your data is accurate, and that you’re able to get at it, becomes a high-priority imperative. And it’s not a simple one. Among other challenges, it means gaining consensus on common standards, common hierarchy of information, and common goals.”

He sees the strategy to build a robust data architecture as both a logical and emotional journey. Building a comprehensive interconnected data set that links all the dimensions of a business at a level that drives understanding and decision-making without being overly complex is not simple. Getting it done with companywide consensus can be even more challenging. As challenging a task as this may be, capturing the right data is a critical enabler of strong business partnering.

Piscatelli sees partnering as an essential role of finance, but the function needs to first ensure it’s got the basics covered. To begin with, he says, “a company needs a solid foundation made up of accurate accounting and a strong system of internal controls. Once those are in place, a CFO and his or her team can drive financial improvement through cost containment, top-line growth, and delivering more bottom-line value.”

Sharing Data Drives Efficiency

“If you want to create value, you have to ensure that everyone has access to the information they need to do their job right,” he says. “Regardless of whether you’re talking about production—which involves keeping tabs on everything from inventory to manufacturing—or product, or branding activities, or cost centers, or customer information, you need to be able to get real-time information so you know where the company is right now, and use that as a planning guide to determine where you want to aim in the future.”

Piscatelli is well qualified to address and integrate these myriad concepts — his background includes responsibility for purchasing, financing, information technology, and other functions. He also understands the human angle.

At Gillette, prior to leading finance for the Personal Care Business, he served as Director of Corporate Finance, where he led a global SAP implementation that included revamping data architecture, accounting, reporting, and analytics. Afterward, he was Senior Vice President and CFO at Timex Group, where, among other things, he drove changes in reporting and analytics that he believed helped enable the transformation of the financial function from accountants to involved business partners.

A lot of the information may be on a sales invoice, but it’s useless unless a data system can capture it and present it in a meaningful manner. “The key is to structure a system that can capture data from disparate sources and integrate it all in a way that makes sense,” says Piscatelli.

As part of the effort, Piscatelli is talking to employees at all levels and functions across the company, and will continue to, asking key questions that will better enable systems that will aid Hunter Douglas to deliver more value. That’s where the human element comes into view.

“People are more likely to be candid with you if they know their statements are being taken seriously,” he says. “We let our co-workers know that they are an integral part of the Hunter Douglas operations, and that their input and activity will be vital to the company’s success.”

In addition to updating its internal data-gathering and reporting models, the company has recently had a changing of the guard in the C-suite. At the beginning of July, longtime Hunter Douglas North America CEO, Marvin B. Hopkins, retired. Ron Kass was named as the new President and CEO. Kass joined the company in 2005, previously serving as President of both the Hunter Douglas Design Products Group and the Independent Fabricator Group of companies, and as Executive Vice President of Marketing, where he oversaw brand marketing, advertising, and communications for Hunter Douglas.

“Our underlying strategy has not changed,” says Piscatelli. “Hunter Douglas has a long legacy of bringing to market well-designed, high-quality, and otherwise superior custom window treatments that are both profitable for the company and sought after by consumers. We are well positioned to continue this trend moving forward to maintain our leadership position.”

Scientific Method

As Seen in CFO Studio Magazine Q4 2015 Issue Cover Story

TAKING INSPIRATION FROM AGRISCIENCE, CFO BERRY BIER IS TRIMMING, TENDING, AND GROWING BAYER’S U.S. SUBSIDIARY TO REAP REWARDS

BY JULIE BARKER

In August of 2014, when the corn was high and ambitious American political figures were already jetting in and out of Iowa prior to the first big test in the 2016 election race, Bayer Corporation CFO Berry Bier made his own trip to the state. He, too, was interested in meeting Iowa farmers face-to-face, but his purpose differed significantly from the politicians’. They were testing the waters for presidential runs. Bier, plucked 10 months earlier from the global headquarters of Bayer AG in Leverkusen, Germany, to become CFO of the Pittsburgh, PA–based U.S. organization, wanted to meet customers and find out from them how growers use Bayer CropScience products. For Bier, such exchanges were every bit as important as a politician’s pressing of the flesh.

The growers he met showed him two side-by-side plots of corn. One was treated with Bayer Sonata™, a biological product, and the other was untreated. The first exhibited green-husked corn bursting with kernels, and it demonstrated to Bier that Bayer was creating value for its customers. He could now better imagine how the businesses in which Bayer invests are improving lives and livelihoods.

That trip came just prior to an extraordinary period, during which Bier was responsible for spinning off part of Bayer. CFOs often have the opportunity to help shape their company through M&As or divestment, but Bier had a high-profile carve-out to accomplish on a short deadline. In achieving his goal, he found it useful to look up from the flowcharts and spreadsheets and envision … cornfields.

Bier and his carve-out team were fundamentally renewing the 150-year-old Bayer’s focus on life sciences: health care and crops.

Shaping the Company

On Oct. 30, 2014, just one year into his new job, Bier was given the task of spinning off one of Bayer’s three major product areas, MaterialScience. This would leave HealthCare (pharmaceuticals for humans and animals) and CropScience (including crop protection products, growth stimulants, and seeds that need less water or that are pesticide resistant). MaterialScience, which makes high-tech polymers, would then no longer compete for resources with the two other business areas. Though it would remain a subsidiary of Bayer AG, MaterialScience, with the new name of Covestro, would be removed from the U.S. corporation entirely and would have its own access to capital markets. (Subsequently, 31 percent of Covestro has been floated on the German stock market.)

Bier took up his role as project leader, and was given two months to clear the first hurdle: executing the legal separation by a Jan. 1 deadline. The target date for the spin-off to begin operating separately was Sept. 1, 2015. Bier calls this assignment one of the biggest challenges of his career. “You are separating about a third of your sales,” he says. “If we are a $50 billion company and you spin off $15 billion of that, that’s a big undertaking. Such a company needs a fully fledged organization.”

He had to divide functions across the whole company, including finance, HR, communications, IT, supply chain, procurement, and sales. He says, “That’s a huge task, but also really exciting.” In addition, he had to start the registration process and transfer contracts with suppliers and customers.

He began by assembling a team, building project plans and a timeline, and then moving on to execution. At that point, the team had to “deliver on all these different action items, and there [were] always things coming up. So you have to be very flexible and pragmatic to solve these things.”

Among these difficulties: reluctance on the part of some suppliers to shift their agreements with Bayer to Covestro. “We had to find ways to convince them, and we had to find ways both companies can operate separately as of Sept. 1,” he says. He praises the spirit of cooperation on his team from day one. But as project leader, when tough choices have to be made, “you have to make a decision.” The team can only do so much.

As he was heading up the project to carve out MaterialSciences, Bier was simultaneously part of the steering committee for the integration of a $14.2 billion acquisition. That process had begun in April 2014, when Bayer beat another bidder to acquire Merck’s Consumer Care business, which includes Claritin®, Coppertone®, Dr. Scholl’s®, and MiraLAX®. Added to Bayer’s aspirin juggernaut, the brands would significantly strengthen the company in its HealthCare area. The integration continued until the end of June 2015 and, depending on how it is measured, established Bayer as either the No. 1 or No. 2 company in the U.S. non-prescription medicines market.

The company’s new profile makes Bayer highly reliant on its pharmaceutical products for earnings. It has best-selling drugs for hypertension, cancer, and hemophilia, among other categories. But the pharmaceuticals industry, Bier says, is a “risky business.” This is especially true of companies that are in a stage of their business life cycle where they have numerous successful products and high growth but are nearing a critical moment in their history, when an important patent will expire and “you lose a significant part of your sales,” he says.

Now that Bayer is solely a life-sciences company, having “cut off [its] chemical legs,” the CFO says more M&As will almost surely occur. To explain why, Bier points to the hard realities of developing a pharmaceutical product: It can easily cost $1 billion to $2 billion to bring a new drug to market, says Bier, and the drug’s patent subsequently expires in as few as 10 years.

Creating Value by Being Partners

Bier says the most challenging part of his position is not, as one might expect, working out a complex funding structure or working through tax issues. Rather, he contends, it’s the process of developing “a high-performing organization that is constantly able to respond to the challenges coming from the outside world onto the business, and that has the capability to create value by what it is doing.”

He says, “The real challenge is having an organizational setup with creative spirit but that also has the capability of being great business partners.”

In the past two years, he has worked to bring that type of mindset to his own organization through the recruitment of top business-school students from the likes of New York University, Duke University, and Carnegie Mellon University; through high-performance workshops; and through training in soft skills, such as delivering constructive feedback up- and downwards.

Although innovation is the lifeblood of a company developing pharmaceuticals, Bier can’t budget for development of a specific cancer treatment. He says, it’s more like this: “You know you have so much product in the market generating so much sales, and a certain portion of that you’re willing to spend for your R&D.” Certainly there are benchmarks on R&D spending, but Bayer doesn’t attempt to create all its products from scratch. Instead, like most pharma companies, it spots opportunities to acquire small, entrepreneurial firms. (See “Funding the Future” at right, for more on Bier’s strategy regarding R&D.)

Two Years In

Bier brought his family — his wife, Gudrun, to whom he has been married for more than 20 years, and two sons, now 12 and 13 — to Pittsburgh two years ago, from Cologne, Germany. “It’s great to see how well the family adjusted to the new environment,” he says. He’s passionate about his family and credits them with centering him and giving him the mettle to perform in the C-suite of a top global corporation.

There, Bier has not just a stake, but a big role in building the company. He was heavily involved during 2014 in designing the current strategy, together with the U.S. leadership team. That strategy relies on acquisitions, R&D partnerships, and the funding of promising new products. In pharma, you can’t think of your next breakthrough discovery as the product that will bring you growth in the 2020s, he says. You have to view that drug as just a way “to make up for the loss” when another wonder drug you’ve funded loses patent protection.

In Grinnell, IA, Bier recalls that he was amazed at the stark difference in appearance between treated and untreated crops. In the Crop Protection area of Bayer’s business, says Bier, “increasing yields to ensure that growers can meet their targets” is perfectly aligned with the company’s mission, Science for a Better Life. “We can help to meet nutritional demands and feed the world today and in the future,” he says.

The potential for significant ups and downs in the company’s chief areas of concentration — pharmaceuticals and food production — suggest that there will be little stability in the months to come. Bier, though, seems unconcerned. He says that the most exciting part of being a CFO is having the opportunity to focus on both the near-term and long-term planning for the company.

It’s his job, Bier says, to create value. To do that, a CFO must “understand what the success factors of the business are, and then think about how you can contribute to that.” Sometimes that means walking around a cornfield and having all the pieces fall into place.

Teambuilding 2.0

As Seen in CFO Studio Magazine Q1/Q2 2016 Issue

Teambuilding 2.0

Back in the day, using exotic executive retreats was in vogue to encourage teambuilding. Such adventures often included rock-climbing, fire-walking and “trust falls” to build a collaborative team approach.

Today’s executives do not seem to have the time or financial inclination to spend an organization’s precious resources on week-long pep rallies. Instead, research reported by Harvard Business Review indicates that a much more mundane and time-saving activity can be just as effective: eating together.

The research, conducted by Kevin Kniffin of Cornell University, indicates that “Eating is such a primal behavior that it can be extraordinarily meaningful.”

Face-to-face interactions that involve eating have a particular kind of intimacy that cannot be duplicated by more adventurous teambuilding exercises. (This is the precise approach taken by CFO Studio in its Executive Dinner Series.)

So what does this research mean for collaboration and building a team-oriented company? When properly managed so as to discourage the formation of exclusive, insular cliques, setting aside the time, space, and resources for communal eating can be the best investment a company can make.