South African CFO goes global - an interview with Ray Leclercq (Unit4)
Ray Leclercq, a South African living in the UK and working from the Netherlands, has been with Unit4 as CFO for more than a year now and is working on probably the biggest transformation the company has ever seen. He is loving every minute of it, he says. “My job is to keep the business growing and performing, while simultaneously redesigning the company.” In this interview with CFO South Africa, Leclercq talks about business transformation, the ideal role of finance and how new technology can help finance to be a better business partner.
By Jeppe Kleyngeld, FM.nl
The growth Unit4 wants to realise comes from its core markets: the Nordics, the UK, France, Germany, the Benelux and North America - while the company is also active in upcoming markets in Asia and Leclercq's home country South Africa. "Our strategy is to add functionality to our products aimed at specific markets", says Leclercq. "Our ERP-solutions are not suitable for every type of business. It is designed for people centric industries, and especially suited for professional services, education, public services, not-for-profit, real estate and wholesale. In those verticals, we see significant opportunity for growth. Because we specialise, we can do better in those fragmented markets than our competitors."
"When you show added value, you quickly become victim of own success"
The functionalities are either developed or bought. "We recently acquired Three Rivers Systems, a software company aimed at higher education. Their solution for student management connected to our university research module and our ERP creates the completest system in the market. The functionality manages the entire student lifecycle - admissions, course registration, billing, student services, fundraising, and more."
Besides vertical functionality, Leclercq stresses, horizontal functionality - like HR, payroll, and core records administration - is just as important. "Take HR for example", says Leclercq. "Nowadays, this is about much more than just core HR and payroll, it's about recruitment and onboarding. It is about developing and retaining talent, about rewarding them and performance management. Our solution must optimally support these processes."
Becoming one global company
Historically, Unit4 consists of a number of independently operating units. "The problem is", according to the CFO, "that if every unit only invests in their own products, we never get the optimal result. The transformation is all about scaling up to one global business. That means globalising functions, standardising processes and setting up global scalable platforms for finance, IT and HR."
Leclercq's role in the transformation has grown. In the design phase, he was mostly working on the five year plan, translating that into annual operating budgets, but also analysing the costs, identifying the risks and opportunities, and making a forecast of the deliverables. Now, he is responsible for not only delivering the transformation in Finance and IT, but also overseeing the delivery across the rest of the organisation. "One of the projects is setting up a large global delivery center in Portugal for the delivery of professional services", says Leclercq. "Resource demand ebbs and flows between countries, so we don't want all our people and resources 'trapped' in specific geographies, but to be able to move or allocate them freely to where the demand is being experienced. We can deliver many things, such as software upgrades remotely from one global center. We chose Portugal because it is attractive from a cost perspective, but also offers a young, well-educated and highly skilled graduate pool. From there we can offer our clients the same level, or preferably better level, of service they are used to. We have also centralised the R&D function supporting our global products in two locations in Poland and Spain. This ensures we are able to universally adopt best practice, benefit from scale economies and makes us more cost competitive."
Finance at Unit4 is also considered a global function. The finance transformation has focused on three components:
- Organisational design for finance team
- Skillset and capabilities of people in the team
- Processes and tools.
"We have looked at finance as a global function and decided what should stay local, what transactional work has to be done in shared service centers, and what we will assign to centers of excellence. After that, we redesigned and standardised processes for quarterly reporting, procure-to-pay, order-to-cash, contract management and travel & expense. We used an approach that I call 'ruthless standardisation'. That means that every unit will standardise and the only exceptions we accept are for legal, regulatory and contractual reasons. If you don't hold the line, everything becomes an exception", Leclercq observes.
"Demand ebbs and flows between countries, so we don't want all our people and resources 'trapped' in one place"
For the setup of the shared service centers, Unit4 has partnered with Capgemini. "We have broken the transfer into four waves", says Leclercq. "The first wave went live this month. On the organisational design we have centres of excellence for treasury and taxation amongst other functions. We keep those within Unit4. They will either stay centrally, or if a division or country has proven to be best in class, they could become the centre of excellence. So we have taken away all the noise and production from the countries and only left a small number of high caliber business partners who work with the business. They do the analysis, interpret the results and drive the business to higher levels of performance and decision making."
Of course Unit4 is 'drinking its own champagne' in the finance transformation, as the CFO puts it. ERP is critical for success. A recent trend that is emerging in ERP is 'self-driving ERP'. What does that mean in the eyes of a finance chief? Leclercq: "I will give you some practical examples. If you take professional services, it could help in a number of ways. For instance, if you want to do a bid for a new project, you could put in a number of characteristics of the bid in the system. Basically you are telling the system: find me similar projects that have been very successful. How were they priced and resourced? The system would then look into the history and provide you with the pricing structure and resource options. Rather than starting from a blank sheet of paper, you have the opportunity to look at previously successful components of similar projects, take those components and build them into your project."
"No exceptions. Every unit will standardise and the only exceptions we accept are legal, regulatory and contractual reasons"
Another example is when services people are doing timesheets. The system is able to look at a professional's diary and pre-populate his or her time-sheet. "It can see where you have been and which customers you have seen. Based on that, it makes a proposal of what your week has been all about. Again, you now only have to update it rather than starting from a blank sheet of paper." Off course, it is also applicable on finance processes, such as expenses or invoicing. "Self-driving ERP informs approvers - for example - that ten invoices need to be handled, but for nine of those it can say with 99.9 percent accuracy that everything looks alright; the price and volume check out, the supplier is familiar, the sum total is the same as last times, et cetera. The other one is potential fraud, so you should definitely check it out."
This latest example - the invoicing process advanced with pattern recognition and machine learning - is scheduled for 2017. Unit4 is currently working on the other examples. Leclercq expects to see an acceleration: the technology is ready. He thinks this is important because a lot of these mundane routines are low level activities that are hugely labour intensive. The point of ERP is assisting people to be more efficient. To help them do their job better. To free them up from the mundane things, so they can focus on the things that make a difference. And we know what that means for the finance function...
Ultimate business partners
Leclercq believes finance has a key role in enabling the business to make better and quicker decisions - creating value. "Finance carries a number of hats. We participate in strategic business decisions. We are stewards for the business: we need to manage it, guide it, and keep it out harm's way. Finally, we are operators as well; we run our own parts of the business. So we are not just servants of the business, we drive it as well to make sure that it performs to the best of its capabilities. We, finance, are the objective conscious of the organisation. Is the business operating in the best way for the company? Are they taking excessive risk? Are they being compliant with what needs to be done? Are they operating in a controlled environment? How much are we exposed to risk and loss? Fine if it is a conscious decision to take risk, but the worst thing is to expose yourself to risk and not being aware of it. The role of finance is a very proactive one. You should be at the center of the business, coaching, mentoring, supporting and driving it."
"The point of ERP is to free people up from the mundane things, so they can focus on the things that make a difference"
The way Leclercq describes it, it is the ideal business partner role. But is finance ready for this role? Often, the business does not perceive finance as this, but rather as no-sayers and spreadsheet jockeys. "It is a challenge", says Leclercq. "I think that it starts at the top: the Board should have that expectation of that role of finance. The CEO and the rest of the executives need to be aligned. And you need a strong minded CFO who has the aspiration to deliver that. Then, when you start to demonstrate that you add value, and the business sees that value and that it is to their benefit, very quickly you become a victim of your own success. If you bring in high caliber people, who are very credible, respected and objective, and who consistently deliver valuable advice and opinions, they will soon have their advice being sought out even with things that are not in line with what you'd expect finance to be involved in. When that happens, you know you've hit the sweet spot. Off course you need to be careful not to get too distracted. You have to stay focused. And I am not talking about a lot of people, but a few high caliber people."
To conclude, is there anything keeping the CFO awake at night? "It would be unnatural to have no worries about the execution of our business and finance transformations. We are underway, but it is not yet delivered. We are moving at a very high pace. I would say we are now two thirds underway. For most of the projects we are undertaking now are in the stage of benefit realisation. The design is done, the implementation, the build now come the benefits. Pretty exciting. Do I worry sometimes? Absolutely. But we have great people that work very hard. Overall, the challenge is keeping the business on track while simultaneously transforming it. When you are transforming, an organisation can get very introspective rather than keeping its eyes on the market. And at the end of the day, the competition is out there and not in here."