The Woolworths watershed: Reeza Isaacs, CFO of the Year 2016
“Setting a target, being clear about it and measuring it are some of the key ingredients for my success,” says Reeza Isaacs, group finance director at Woolworths, who was elected CFO of the Year 2016 at the CFO Awards on 12 May. Reeza talks to us about his adventures in Australia, acquiring a new brand, his passion for transformation, and changing the mindset of the business to focus on balance sheet and return on capital.
- Nominations are open for CFO Awards 2017, happening on 11 May.
- Nichola Dewar (Postbank) nominated for CFO Awards 2017.
- Mary Vilakazi (MMI) nominated for CFO Awards 2017.
By Joël Roerig
The David Jones acquisition
Winter is coming, is what Woolworths CEO Ian Moir said, using the Game of Thrones quote to drive home the message that slow growth in the northern hemisphere was forcing businesses to look south and Woolworths needed to scale up to ward off the threat. Like in the epic novel and television series, not everyone was convinced by the decision to prepare for the cold by buying Australian department store David Jones. It was a department store, it wasn't cheap, it was almost as big as Woolworths itself and it wasn't doing very well.
Enter the new group finance director Reeza Isaacs, who had just joined the group in 2013 after that same CEO invited him for dinner and surprised him with a job offer. It was attractive enough to make Reeza leave a 22-year career at EY in which he had been part of substantial growth of the firm's Cape Town offices.
"The acquisition of David Jones and minority interest in Country Road was a game changer for the business and not something I expected to be part of so soon. It was definitely not business as usual. It was exceptionally complex but has been a phenomenal experience and something which I feel privileged to be part of."
The acquisition transformed Woolworths from a South African business into a southern hemisphere business, with half of the group now in Australia. "It has been quite a journey for the business, as well as for finance, which had a key role. It was our job to ensure that the deal metrics made sense and stacked up, and that - from a shareholder point of view - this would be reflected in increased value. The acquisition of David Jones had an impact on the way we approach certain aspects of finance at Woolworths: "Before the deal, we had no debt on our balance sheet. It is a substantial number now, but it is manageable. Profitability has always been a key focus but we have also brought in measures to focus on Return On Capital Employed (ROCE)."
Recipe for success
After joining Woolworths at a watershed moment, Reeza embarked on restructuring the finance function within the group, with his CFO of the Year award as ultimate recognition for his achievements over the last few years. When asked about his recipe for success, he has a surprisingly traditional answer: hard work, perseverance, integrity and being clear about expectations. "Setting a target, being clear about it and measuring it - these are some of the reasons for success, although business is not only about KPIs of course."
Reeza on winning CFO of the Year 2016:
"In a very short space of time, the CFO Awards have become the pre-eminent event for finance professionals, which is testimony to the hard work and commitment of the CFO South Africa team. I was surprised to be nominated and being named CFO of the Year 2016. It was really unexpected. As my colleagues will testify, I struggle with the limelight and the attention, but I appreciate the acknowledgement and was very humbled - especially by my peers. There are many talented CFOs in this country and many who deserve the recognition."
The finance team's involvement in what Woolworths does is all-encompassing, Reeza explains. "We are a consumer-based business focused on the upper end of the market, which means we're impacted by macro-economic factors and sentiment. We noticed that Nene-gate [when President Jacob Zuma unexpectedly fired finance minister Nhlanhla Nene] was significant for our customers. During that week, we saw consumer confidence drop and an impact on food sales. People were emotionally affected and this impacted spend. We have no control over this, but need to respond appropriately as a business to things like this. As soon as this unfolded, finance engaged with the Bureau for Economic Research and started looking at the possible top line impact, consumer behaviour, costs and margins".
Passion for transformation
Besides his new title as CFO of the Year 2016, Reeza was also presented with the Transformation & Empowerment award 2016 at the CFO Awards, an acknowledgement that didn't come as a surprise to people who know Reeza. "Before I accepted this job, I worked at EY for many years, eventually leaving as managing partner of the Cape Town office. I felt as passionate about transformation then as I do now. I was also on the board of ABASA at some point. I feel very strongly about developing young black CAs and it gives me enormous satisfaction to see young people succeed."
Reeza says this focus fits well with Woolworths, which has been voted the most socially responsible retailer in the world for three years in a row. "We have a broader focus than most companies. We look at sustainability, local sourcing, environmental impact and relationships with communities. In South Africa we also support programmes like 'Farming for the Future', but we also drive transformation from a people point of view. It is part of who we are." Woolworths probably has the most transformed board of all local retailers, suggests Reeza.
"We have a very focused internal programme that measures our progress against targets. From a preferential procurement perspective, we have set aside a fund for the development of local suppliers which we have just increased substantially. That fund aims to support upcoming black businesses with capital, but also with intellect, as our CAs help them understand cash flow, capex and working capital. There have been very few instances of companies defaulting. We don't make enough noise about it, but I am very happy with what we do in this regard."
"From a finance perspective, the team in South Africa is very transformed. We have the pick of top black CAs, as they like our brand, our ethos and culture. It is also part of our recruitment philosophy, to get the best black talent. We also have an exceptionally strong focus on CSI and the finance team gets involved in many initiatives. If I see what the team achieves on weekends and in their spare time, it never ceases to amaze me. The company then matches whatever a business unit like finance raises. This is hard to explain, but for example there are collection points for toys, there are posters about our efforts around drought relief and this morning an email was sent thanking a business unit for its CSI efforts. It sounds like a cliché, but it really is part of our DNA."
Leadership & culture
On a personal level, Reeza feels very strongly about the role he can play mentoring young South Africans inside and outside of the company he works for. "I mentor young CAs and try and give advice. Within my team, coaching is important. I have lots of one-on-ones."
To be an effective finance executive, you need to be a great people manager. How does Reeza get the best out of his team?
"Two words come to mind: challenge and support. Empower is a third one. I want the best people around me. I encourage a collaborative approach, with debate and discussion. I prefer to bring people along with me, instead of telling them what to do. We have a team culture where people feel they can rely on their colleagues. That means they can build on relationships between them. It is important to make people feel empowered."
When recruiting, the first thing Reeza looks at is a culture fit. "That is very important at Woollies. In retail finance there is a lot more art than in financial services, for example: What makes a garment sell? What consumer decisions dynamics do you have to be conscious of? We need people that can manage that grey bit in between. They need to balance what is best for the shareholders, while enabling the business to thrive and succeed."
Reeza says he likes to think his finance team is regarded as professional, focussed, hardworking and collaborative by the rest of the company. "An example is our work with 'Woollies' food division. Our strategic intent is to change the price perception of Woolworths. Part of my team works closely with the food group to look at which investments we should make, at what pricing and what market share we could get and what that means for our margins."
Shifting the mindset
To gear up for growth, the finance function had to go through a thorough transformation of its own. Reeza added a fully-fledged treasury function and restructured the finance department, appointing a CFO for Woolworths South Africa.
"An important milestone was getting the right focus on the balance sheet and return on capital: changing the mindset, which was not without challenges."
Reeza believes the finance team's work is not complete - it never is. "We have a lot of work to do at David Jones: transforming finance, bringing in new systems, bringing a focus on productivity to the business. They don't have that, while we treat space for example as exceptionally important. We will implement a new finance and stock management system and there needs to be a focus on automation."
"We have a very mature compliance culture and a well-established risk committee. David Jones has benefitted hugely from our risk and compliance process which is comforting. They didn't have an established risk committee and risk process. For example, around IT strategy and governance we had to systematically consider all of the controls and address things like cybersecurity. Having a quarterly board process governs this and holds people accountable."
Reeza Isaacs before Woolworths
At age four, Reeza Isaacs was forcibly evicted with this family from their home in District 6,
relocating to Surrey Estate on the Cape Flats. As the fourth of seven children, he was initially bent on becoming a medical doctor, but realised that it would take too long and that funding was an issue. He then decided to become a chartered accountant, he recently said in an interview with SAICA's communications director Yuven Gounden.
Reeza matriculated from Belgravia High School with good results and was able to secure a full scholarship from Shell in 1985. What followed was the long and arduous road to becoming a CA(SA). The first accolade on this long and winding road was appearing on the Dean's merit list in his first year of study, which inspired him to keep going.
"I joined EY and qualified as a chartered accountant, where I completed my training contract," Reeza recalls. "I was selected to spend 18 months in the USA by EY, and was admitted as partner a few years after my return. I enjoyed the challenge of winning new work." He served as the lead partner for several of EY's largest Cape Town clients, including Engen, Coronation, Metropolitan Life, Sanlam, Truworths and Woolworths - establishing a name for himself at his future employer.
Reeza stayed at EY for 22 years in total, and was made managing partner in 2010. "Three years after being appointed leader of the audit business in Cape Town in 2007, we doubled the profitability of that business. During my tenure we managed to win a number of big accounts, including very large, listed company audits like Coronation Fund Managers and Clicks. One of the things that I enjoyed the most during that period was building up a young, dynamic and diverse team of partners."