Schneider Electric CFO on crisis management

Despite starting as CFO of energy tech group Schneider Electric in April – when the pandemic was on the rise – Hilary Maxson was unfazed.

The American had spent much of her career managing in a crisis or rapid change environment, in previous roles at Schneider Electric or AES Corporation before that, so was able to adjust quickly. “Although it was my first time as group CFO, I’ve always been an operating CFO that’s worked with crisis, So I think it was actually an okay time for me to come into the role,” she says.

“I had started my career with restructuring and crises in Latin America and so crisis was something that’s not unusual to me, and an area that I don’t feel uncomfortable in, regarding liquidity management. I know the playbook from a crisis management standpoint,” she says.

“Nobody knows the playbook for coronavirus, because this is a different crisis than we’ve had before. But the key elements of crisis management I felt fairly comfortable with,” Maxson adds.

A background in finance – following a degree in economics and management from Cornell University – at investment banks Bank of America and Citigroup, ensured confidence when tapping capital markets, an urgent priority.

“Schneider is a strong cash producing investment grade company, so we were able to access the debt market throughout the entirety of the crisis and took advantage of some very favourable rates. We wanted to shore up, liquidity but not take on too much long-term debt that’s not going to be necessary.

“We were closing some very big acquisitions, of RIB Software and ProLeiT, so we jumped quickly on making sure from the liquidity standpoint we were able to manage our full capital allocation strategy, to close the acquisition.

“We also took a number of key actions to make sure that in all scenarios, we would still be able to meet commitments such as paying dividends and continue with the strategy that we had,” says Maxson.

Change manager

One marked difference between Maxson and many of her peers has been a determination to drive through a change programme that Schneider Electric had already embarked on before the pandemic. “I don’t see a lot of silver linings coming out of the pandemic, but it did give us a great opportunity to accelerate our finance business transformations.

“Digital has probably ended up a winner, if you can use that word. We have accelerated our commitment, internally and externally, to the key themes that we were already focused on prior to the crisis,” she says.

“Just being more digitally-focused means I think I had the opportunity to work more closely with my colleagues, especially CEO Jean-Pascal Tricoire in a very short time period,” adds the MBA graduate.

Maxson says that aside from common themes in a crisis such as shoring up the cash position of the group, she says there were big differences to her experience of the GFC- while at AES. “This has impacted both the supply chain, and demand, and worldwide governments are tackling it very differently, which impacts parts of the business very differently,” she says.

She says that Schneider Electric was well placed to address what she describes a “local and global” challenge as the group had been operating a multi-hub operation for quite some time. “Given we’re based in Paris and a couple other European locations, Hong Kong and Boston, the team was quite used to working digitally already,” she adds.

A global weekly executive committee meeting focused on challenges from business continuity, to issues in the supply chain and tactical savings in cash flow. An operating finance committee- comprised of regional CFOs, business CFOs and the corporate team, reporting to Maxson and a similar committee in HR drove action through “control towers” in areas such as supply chain, sales and finance at a territory and local level.

Out of a global staff of 135,000, 90,000 employees transitioned to working remotely, while the rest of the workforce continued to work in plants worldwide. “We were qualified as mission critical almost immediately and continued to have our supply chain in full operation throughout the crisis,” she says.

Another development was moving to monthly pulse calls with the leadership team keeping in touch with the top 1,000 employees in the company. “People were able to understand the key issues and implement all the way down in each country,” she says.

Digitally-focused

Maxson’s arrival at Schneider Electric came with a mandate to push the group deeper into a digitisation-led strategy, having developed a skill set at AES, from leadership roles in M&A and Investor Relations, and being CFO of its Africa and Asian businesses. AES’s model is centred on the power plants and utilities sector, so Maxson was able to view Schneider Electric through the lens of a key customer.

Once one of France’s staple industry leaders, Schneider Electric divested from steel and shipbuilding in the last 20^th century to become  a more engineering oriented group. In 2010 the group moved to a new focus on software, critical power and smart grid applications before embracing the IoT (Internet of Things) revolution.

Despite a dip during the GFC, Schneider Electric’s share price has grown exponentially since then to give a market value of around €66bn by mid-November. The coronavirus pandemic has done little to dent the effectiveness of the group’s business model as its marketing thrust continues to move from non-digital to a more digital approach. Third quarter results, presented on 22 October were promising. Despite impacts on UK industrial software group AVEVA that Schneider Electric owns 60 percent of, the group revenue saw 1.3 percent organic growth to €6.45bn in the period.

In her previous roles at Schneider Electric, as CFO of the building and IT division and then the energy management arm- its two biggest value drivers- she played a vital part in a strategy to address what she describes as “the major energy and industrial transformations happening worldwide”. This means “more electrification, a shift to renewables, lower carbon over time and the need for greater digitisation,” she explains.

It was the drive to addressing these trends as well as a commitment to values around areas such as diversity that prompted Maxson to join Schneider Electric.

“It’s no longer a product or technology-based company, but more of a customer-centric and solution-based business focused on sustainability, efficiency and resilience to address the full customer lifecycle from design to build, operate and maintain,” says Maxson.

From acquisitions, that she took a big part in driving through, Schneider Electric will be more focused on execution of the model, with smaller bolt-ons to complete the offer.

Scenario planning

The challenge now for Maxson and the rest of the Schneider Electric management team is plotting a route through the complex macro environment ahead. “We need to understand the key elements of our business and the themes that will continue to be positive for us,” she says.

The group took a decision early on to delay for a year some of its key goals, “in particular a progression in our profit margin to 17 percent”.

When it comes to depicting how the group is likely to perform in the short and medium term, Maxson says: “What we try to do is not overburden the business with endless forecasting as there’s a huge degree of uncertainty in the market right now.”

“We’re focused on forecasting and reforecasting in some key areas like cash flows for example, where we’re doing a bit more forecasting than we did in the past.

“We’re also trying to do more central forecasting- really understanding where we are from an overall group standpoint, depending on where the economy is, based on the use of AI,” she adds.

The finance transformation, focused on digitisation of the finance function, is aimed at developing “one version of truth” within the organisation, that can identify for example orders on a daily and weekly basis.

Key performance indicators (KPIs) have been developed to measure the implementation of technologies “that are going to enable us to use data more and more,” says Maxson.

There’s also KPIs to measure the group’s ability to achieve its long-term objectives on climate change, which Maxson says is a driver of Schneider Electric’s model. “Sustainability is a key metric for our teams, and is an important part of the finance transformation programme.

“We’ve been focused on ESG (environmental, social and corporate governance) for quite some time, and have been AAA-ranked by MSCI (Morgan Stanley Capital International) for nine years. We’ve been at the top of our peer group in sustainability analytics ranking and we share externally, what we call the Schneider Sustainability Index, a number of key goals around climate change and the UN sustainability development goals.

“One of the reasons I joined Schneider Electric is that it is positioned to be part of the solution in the new energy world through sustainability, efficiency and resilience and what we bring to the customer through digitisation.

“That long term vision will continue, despite the coronavirus crisis,” she adds.

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