When Sally Johnson became CFO of Pearson at the start of 2020, she knew she had a job on her hands.
The education publishing and assessment company was under pressure from shareholders after a period of underperformance that saw it issue seven profit warnings over the past decade.
The FTSE 100 company also was going through a major management reshuffle, with its search for a new CEO getting under way just as the pandemic hit.
Johnson realised that not only did Pearson need to respond to the damage caused by continued weakness in the group’s US education business, it also needed to rebuild trust with investors and other stakeholders.
All this needed to be communicated when presenting results for the first time last February, says Johnson.
“I understood it was about giving people confidence you know what you’re doing, and also bringing a bit of your own personality so that people can feel that you’re talking authentically.”
Johnson had to tackle issues around poor forecasting, which had irked investors.
“We obviously didn’t get it right,” she says. “As I talked to shareholders, one of the bits of feedback that they gave was about managing expectations.”
To give clear guidance to the market, Johnson recognised that the finance function she was now running needed to deliver robust numbers.
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Fortunately, Johnson had been deputy CFO for four years prior to being given the top finance role, a period in which she had built a new ERP (enterprise resource planning) system. So, by the time she became group CFO, finance function had developed a predictive revenue model using CRM (customer relationship management) systems put in place during the ERP rollout.
“The technology we’ve put in place gave us a view of what we could expect over the Summer,” she says, reflecting on the need for clarity in a period dominated by the pandemic.
“We landed within a few million dollars of what the model anticipated and we’ll be using that model again this year, so we’ve definitely moved ourselves forward from a forecasting perspective,” says Johnson.
But she was careful not to claim a “complete victory” given the size of the challenge ahead.
“I pointed out that we would need to use this as a test year to see whether it was working in the way that we’d attempted it to work, and it did.”
Global online learning material sales increased 19 percent to £697m in 2020, driven by demand for increased virtual learning – although sales of US course materials fell 18 per cent to £894m.
The group’s adjusted operating profit of £313m was down from £581m a year earlier while revenue fell 12 percent to £3.4bn, reflecting the impact of global lockdowns.
A deep understanding of Pearson was forged by Johnson when she joined book publisher Penguin, owned by the group, following a degree in maths at University of Oxford and qualifying at Big Four firm PwC.
From planning, reporting and control roles at Penguin, she became finance and operations director of Dorling Kindersley, an illustrated reference publishing business acquired by Pearson in 2000.
But it was as regional head of finance and international controller of Pearson’s business outside of the US, before becoming SVP for finance of core markets, that she gained experience in a senior management role.
“It was useful to have the relationships, as it would have been very challenging developing relationships over a screen,” she says.
That said, preparation for the top role involved spending time with stakeholders “from shareholders through to employees, the executive team and the Board to help focus on profitability, return on investment (RoI), and KPIs across the business,” she says.
As well as developing the ERP system over the previous four years, Johnson also worked on building a future-focused finance team, so when it came to helping support the group’s strategy, the department played a key role.
“We put in place a network of global process owners, which as we stabilised across last year became end-to-end process owners, driving change and improvement, rather than just trying to stabilise by putting a new platform in place,” she says. “These foundations across the finance team have helped with speed and agility.”
Johnson and her team also had to respond to the pandemic by ensuring Pearson had a strong liquidity position, requiring robust scenario planning and moving from quarterly forecasting to a rolling forecast.
At the same time, initiatives such as building the predictive revenue model for the US business were being implemented.
“It was a good balance of reacting to what was happening in the macro-economic world, alongside moving forward with modernisation,” she says.
Another area of development Johnson has been keen to encourage is business partnering, “maintaining closeness in some slightly unusual circumstances,” she says.
“Finance business partner teams are truly part of the leadership and team of the divisions that they support, understanding what’s happening, influencing and driving business performance, and that becomes ever more important in times of challenge,” she says.
During lockdown, Johnson strengthened these relationships with “coffee and conversations” – virtual meetings that allowed her to touch base with business partners daily that she otherwise would only see every few years when she happened to visit in person.
The use of effective technology to keep everyone in touch is vital, says Johnson, “because you miss those corridor conversations”.
“The more you can bring the water cooler to a virtual world the better,” she says.
October saw the arrival of new CEO Andy Bird, former chairman of Walt Disney International, who has provided fresh thinking to complement Johnson’s wealth of experience at Pearson.
The strategy roll-out they delivered earlier this month will see the company reimagine how it delivers education services, including a focus on the vast untapped opportunities provided by the life-long learning field.
Although Johnson has yet to meet Los Angeles-based Bird in person, they have spent a lot of time communicating online, developing the chemistry needed to take Pearson in a new direction.
The new strategy focuses on capturing the growing education and learning market, which Johnson says is currently only 3 percent digital, but is set to grow rapidly with online learning accelerating due to the pandemic.
“Whether that’s home learning, or whether you’re looking at a career change and how you can build skills in the workplace, home learning is something that people have turned to in recent times,” she says.
To capture this market, Johnson says Pearson’s investment in technology gives it the chance to provide an end-to-end solution in the space.
“We can tell you where the gaps are in your knowledge, provide you with the solutions and the content to fill those knowledge gaps,” she says. “Then we help you and assess you and certify you to show what you’ve learned.”
The group has also been refocused into five divisions: virtual learning, higher education, English language learning, workforce skills and assessment & qualification.
“Underneath that we have a new direct to consumer group, which will work almost as a centre of excellence across each of those divisions,” says Johnson. “We are becoming more consumer focused because we believe that whilst people have accepted the textbook for learning needs in the past, we believe that consumers are going to want a more engaging proposition.”
Finance will play a critical role in helping deliver those aims by capturing the data that will provide insights to drive effective decision-making.
“I’m focused on developing data and storytelling, telling the story to make the business understand what the key points are and then influencing the right decisions being made to make us all move forward at speed and in the direction we want,” says Johnson.
Another priority is constant simplification, to ensure efficiency and cost effectiveness, and a third leg is transformation of systems and processes, whilst being a “true commercial partner and decision maker in the business”.
Johnson says that purpose is a “massively important” part of how Pearson is developing, relating recent initiatives such as issuing a social bond last year and announcing earlier this month non-financial KPIs mainly around being net carbon zero and increasing diversity.
“That’s something that I want the finance team focused on,” she says. “It’s motivating for people across my team because they care about both our environment and the diversity of our business but also can play a really key part in driving that forward.”