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Why getting international experience matters

Though Harry Potter-style, horn-rimmed glasses, Eaton Corp chief financial and planning officer (CFPO) Rick Fearon sees himself not as a finance man, but as “chief strategist”. It’s a philosophy that he has carried, or that has carried him, throughout his career to his current role with the Cleveland, US-based power management business that operates across the world.

Not meaning to stroke anyone’s ego, but Financial Director would more likely call him a global strategist. A restructuring Fearon led at Eaton in 2002 – the year he joined – has seen it evolve from a very US-centric business to a place where it can enjoy reporting growth spread across 150 countries. And the 2010 figures are tasty: a revenue growth of 10 percent in the first quarter, 16 percent in the second and 18 percent in the third. Had Fearon not restructured the business in the early 2000s, there arguably would be little of it left now.

“In 2000, 80 percent of our sales were in the US and a very large vehicular business made about half of the profit,” he says. Today about 45 percent of the company’s total sales are in the US and the vehicular businesses less than 25 percent of the mix. “The art was to grow businesses that were more consistent and grew faster. That’s why we focused on electrical, aerospace, and hydraulics. We believed that all of them had growth rates in excess of GDP.” He was right: Eaton’s electrical business rose from just under £2 billion revenue business to $7 billion.

From a professional standpoint, Fearon sings the praises of finance people obtaining high-level international experience when facing challenges of that type. “You’re not going to get there having been an expert in one discipline for your whole career. You need to have worked in multiple finance disciplines, including some time in operations – to have lived in other regions of the world, had corporate experience, and experience in a business,” he says.

Fearon’s career is the culmination of tightly engineered planning and raw ambition. Even if it may at first glance seem that the variety of roles and places he has enjoyed are the product of a scattergun approach, on closer inspection you’ll see an almost forensic attention to detail paid to ticking all the right boxes. His CV jumps from an MBA and law degree at Harvard – not many people do both – to consulting with The Boston Consulting Group before taking in a role as director of strategic planning for The Walt Disney Company in California; next was his international move, to a consultancy position at Booz Allen Hamilton in Singapore, followed by a management position for the industrial conglomerate NatSteel. Seven years later he returned to the States for a corporate development role with Transamerica before jacking in having a boss in 2001 to found his advisory firm, Willow Place Partners, back in the Golden State. A year later he changed tack and joined Eaton as CFPO (with vice president up front on that title, as is the American way) – becoming vice chairman and CFPO last January.

As he recalls, his formative years with Boston Consulting Group offered him a “super-charged” business experience, focused on strategy, travelling all over the world, learning how companies evolve and how they made sustainable profits. He landed at Walt Disney in time for the 1980s turnaround job on EuroDisney under the group’s then-new leadership, the fearsome Michael Eisner and his colleague Frank Wells.

He describes his later move to Singapore as decided upon “relatively on a lark” with his then fiancée (now wife). That lark, though, landed him at Booz Allen, at the time the largest consulting firm in southeast Asia. The early 1990s were boom years for the region and Fearon is quick to point out the old business adage that growth hides a lot of sins. With a high growth rate, you can make a lot of mistakes and still do pretty well,” he says. Later, at Transamerica, he recalls enjoying “buying and selling businesses with a fair amount of frequency”.

Large, diversified businesses are clearly where Fearon feels most at home. One also gets the sense he’s happiest growing through acquisition rather than waiting around for organic growth. In his eight years at Eaton it has notched up 50 acquisitions – and none, he claims, needed to go hostile. “A diversified company has a lot of powerful benefits over a single market company”, Fearon says. “If you construct the company well you create a powerful, relatively consistent growth engine that is very attractive to the capital markets. Financing synergies, for example – cashflow can be deployed from one unit to another.” That kind of growth and that kind of job is, as he says, “very complicated and time-intensive. My briefcase is full of a thick compendium that is the distillation of all our markets.”

And that compendium is constantly renewed. If he lost touch with the latest on any of Eaton’s companies, markets or regions, says Fearon, he would risk having “a bunch of fiefdoms that don’t interact”. And he thinks reward for that attention to detail is offsetting cyclicality. “Most single-industry companies are cyclical; they do great in the upcycle, but not so good on the down.” The 2009 recession aside (“an aberrant event, not to be repeated in our lifetimes”) “if you create a proper mix [as a diversified company], you can continue to grow through recession”.

Back in the core functions of the CFPO role, Fearon sets high ambitions for the business. “All of our businesses need to outgrow our end markets by 50 percent”, he says, an ambition he calls outgrowth. “So if the market grows at 4 percent, they need to grow at 6 percent minimum. All of our planning, our compensation programmes, everything is based around that. We expect to see from 2009-14 an average 7 percent market growth. Add that to our outgrowth strategy and you’re up to 10-10.5 percent organic growth. Though we think we could add another two to four points of growth through acquisition.”

Listening to Fearon, business sounds like a very simple game. His calm manner masks the demands of his role. But far from resting on certainties, it is dealing with uncertainty that Fearon believes separates the strategic finance head from the functional one. “The world is rarely black and white”, he says. “It’s a matter of wading into that grey world and crystallising the facts as best you can, and then using your experience and wisdom to figure out what you should do.” It’s what he calls ‘strategic opportunism’.

He equates building a successful career to building a successful company. “You need to know where you want to go,” he says. “But always be on the lookout for opportunities that come by – then grab them.”

 

CV: Richard Fearon, CFPO, Eaton Corporation

2009 – present
Vice chairman and chief financial and planning officer, Eaton Corporation

2002-2008
Executive vice president, chief financial and planning officer, Eaton Corporation

2001 – 2002
Founder, Willow Place Partners

1995 – 2000
Senior vice president of corporate development, Transamerica

1990 – 1995
General manager for corporate development, NatSteel (Singapore)
Vice chairman, NatSteel Chemicals

1989-1990
Principal Booz Allen & Hamilton, (Singapore)

1987-1988
Director of strategic planning, The Walt Disney Company

1982-1986
Manager, The Boston Consulting Group

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