When Guillaume de Pommereau joined electronics giant Hitachi as CFO of its European group of businesses, he brought with him a zeal to transform finance.
The strategy was to apply the philosophy of lean to finance to drive efficiency and raise profit across the European group, which comprises 100 entities delivering revenue of around £8bn a year and employing a staff of 12,000 (compared to the group’s global 300,000 workforce and annual revenues of $100bn).
“In finance we try and lead by example, putting pressure on other functions to meet our commitments, so that we deliver more revenue at less cost, to maximise profit. We seek to be the thought leader on how to be more efficient,” he says.
“That process is about delivering cost reduction in every area, trying to measure robust KPIs, measuring the performance in every business on the bottom line, measuring profit in absolute value, not in percentage terms,” he adds.
But the function de Pommereau sits in Hitachi Europe Ltd has several roles. It is head office for the European group,” making sure the group is compliant and is following the group policy on strategy,” he says.
It also hosts some commercial activities such as the digital media group selling projectors as well as selling electronics equipment, and is also a shared service centre (SSC) employing 60 staff. “In finance my team support a range of activities to a third of Hitachi companies around Europe, along with HR, IT and legal,” he explains.
Art of lean
On arrival at Hitachi, de Pommereau set about delivering a strategy of two main pillars, increasing the capability of finance in high value services, such as internal control, internal audit, tax, FP&A, and secondly automating and standardising systems across the separate businesses. “We realised we had 30 different ERP systems,” he reveals.
Having developed a career across global businesses including Dell, KPN Qwest, Alliance Healthcare and Takeda Pharmaceuticals, he had experienced what was required to drive an effective transformation programme.
Although Hitachi is steeped in the Japanese culture of lean using the kaizan method across manufacturing, de Pommereau says the change management process he undertook “is not specifically driven by a Japanese environment.” He says: “It’s more about trying to become lean in a common-sense meaning of the word.”
In delivering value-added services, functions such as internal control and tax previously outsourced to external providers, were brought in-house, following a recruitment drive from Big Four accountancy firms and tax specialists. “We developed in our shared service a complete range of services for Hitachi Europe itself but also for the other group companies in EMEA. “We managed to get a significant cost reduction from this approach as a result,” says de Pommereau.
Regarding harmonising the automation process, de Pommereau concentrated on accounts receivables, accounts payable, month-end closing, FP&A, VAT and management of travel expenses claims. “We invested in systems that can make our platform absorb more and more volume every day, that at the same time standardises our approach, so that we can now industrialise the approach.
“The combination of not using high value external providers and undertaking our own transactions, has very significant cost reduction over time. Once you have invested in your platform, any addition of volume costs little but provides you with lots of value,” he adds.
Realising the benefits
When it comes to tangible outcomes, de Pommereau says the gains have not just been in cost reduction, with improved automation but also a speeding up of some transactions such as accounts payable. “In the past it would have taken three weeks or more to pay the supplier, now with a process incorporating the reading of invoice and data, the payment follows in next few days.
“We are shortening the time to process transactions significantly, more than 2-3 times, sometimes to just a few hours. That is about plain vanilla processes and software, before we even talk about AI or robotics,” he says.
“Once we have a clean process, we will consider adding additional layers of complexity like robotics, but we’re not yet ready for that yet. I think if you go too fast you don’t receive the benefits, I think we need to walk before we run. For the moment we are improving the rhythm of our walk,” says de Pommereau.
He says he and his team have learnt a huge amount from executing the change process, especially in the need to communicate effectively the plan. “Without showing the benefits and improvement of the process it will be very difficult to do. We managed to grow in the last five years because we were able to convince other Hitachi companies who now use the shared services that our processes were superior and cheaper than what they were using previously.
“Some resistance is inevitable, so you need to get buy-in, change needs to be positive and simple. Another learning is that the change management process can take 4-5 times longer than you think, because you always underestimate some details, especially on the budget cycle,” he says.
Guillaume de Pommereau is participating in a panel discussion on optimising the digital transformation journey at this year’s CFO Agenda.
For Finance, 2019 marks the start of a new world where the proactive leaders will be at the helm, navigating their businesses safely through the changes. Join us at this year’s CFO Agenda on 7th May in London to network with 200+ CFOs, FDs, and Heads of Finance to drive growth and meet the future with confidence and certainty. To learn more and register, please, visit: https://www.thecfoagenda.com/