Stay in Focus

In recent years, major Indian companies have been expanding their territories, buying up well known Western brands. Leading the charge is IT and engineering conglomerate Wipro. For CFO Suresh Senapaty, the heart of the $5bn company’s success, enabling its business strategy and international growth, is its finance function.

"As we have progressed and grown, the role of the CFO and the finance function has undergone significant change," Senapaty says. "In the old days, the finance function typically had responsibilities such as controllership, financial planning and analytics, audited accounts, treasury – primarily with a view to mobilising money and information management – although that eventually became a separate independent department."

Today that list has expanded considerably and Senapaty has a lengthy roster of responsibilities, such as controllership, business finance, delivering profitability initiatives; mergers and acquisitions and risk management.

Corporate affairs also figures significantly, with a focus on relationship development with government and other organisations, directed towards creating a favourable business climate.

"You have to be working with the various government agencies, the political leadership, the bureaucracy, to be able to influence the thought leadership programme," says Senapaty. Listing responsibilities is one thing, but knowing how to create value for the business is quite different. Senapaty neatly encapsulates the value added through the finance function, with a five point explanation:

1. Doing The Right Thing

This is about anchoring the organisation’s strategy, Senapaty says. "For example, we have a three-year broad-based strategic plan where finance plays a critical role. We evaluate the financial attractiveness of various business opportunities, the operating framework and investment required to take advantage of those opportunities and provision the right financial resources to execute the strategic plan."

He adds: "Whichever industry we are in, we should be growing, 25% faster than the industry growth rate, and planning to be among the top three industry players. Otherwise we will vacate that market."

Facilitating the organisation’s strategy involves rigorous go/no go financial analysis for new investments that test out future business dynamics, enabling the organisation structure to create best advantage. We analyse the strengths, weakness, opportunities and threats involved, consider risks and evaluate investment potential.

"In helping to create key measurement matrices, that can monitor the progress of the strategy from day one," Senapaty says, "We should be clear in our heads right from the beginning whether we are doing the right thing or not and evaluating whether we are performing or not-performing."

It is easy to adopt a market leadership strategy, but more challenging to deliver it, requiring tough discipline and some difficult decisions. To achieve this, Wipro sets specific metrics, and if performance deviates from the intended route, it is time for a fundamental course correction.

Senapaty says: "We have a list of discontinued businesses. Wipro was in the finance business, doing lending, leasing, hire purchase, merchant banking services, but we realised after about seven years of operations that this is not a business that we can be among the top three, so we discontinued them, and took a big write off as a result."

As Senapaty is at pains to point out, while Wipro should be doing business with a view to growing and sustaining profitability, it must always be doing business in an upright, ethical manner and with full legal compliance.

2. The Best View

Senapaty explains this in terms of broad-basing the leadership via the widespread use of profit centres across the organisation. So, whether it is manufacturing, sales, procurement or marketing, each is run on a profit centres concept. Similarly, each business, geography and customer becomes a profit responsibility.

Running alongside this is a one-year operating plan view, to monitor and tie up all the loose ends, in terms of the financial performance from the income statement, balance sheet and cash flow perspective.

"We are always creating more leaders, and that encourages people to drive and create more value, and has proved an important success factor in growing multiple businesses," Senapaty says.

As soon as a strategic business unit becomes a certain size, it will be subdivided, creating new business leadership opportunities. "Where once we had financial services, now we have banking, securities and insurance, and I am sure after several years with banking and securities, we will again have multiple business streams."

Organising along these lines requires a cadre of talented finance literate leaders, and Wipro pays considerable attention to this aspect of its business.

The finance function provides ongoing training for the non-finance managers. Senapaty says: "We constantly run finance programs for our non-finance people. It enhances our business leaders’ overall awareness and reasonable working knowledge of the financial aspects of our business, improves their financial savvy, and creates an extended family of finance."

The focus on finance training means that an organisation with a headcount of around 98,000 can still succeed with a finance team of about 300.

3. Knowledge is Power

This means optimising an efficient information flow. "Management information has always been a key tool in our environment of leaderships and ownerships, it drives business performance," says Senapaty. "That means focusing on efficient business drivers, such as what the new customer wins, the growth rate for the top fifty accounts and examining traditional financial measures, including revenue growth."

The main metrics currently used by the finance team are revenue growth, operating margin percentage, EBITDA percentage of sales, EBIT per person and return on capital employed. For mergers and acquisitions there is a particular focus on the internal rate of return, and the payback period.

The finance team also relies on a lot of important nonfinancial information. In an IT business like Wipro’s there is a strong focus on people, their deployment, experience, how productively they are deployed and how projects can be done effectively.

Wipro builds non-financial parameters into the management information gathering process to enable a proper review of the business. The information is viewed via a dashboard approach, as opposed to the traditional long-winded report.

4. The Right People

Senapaty describes this as enhancing corporate governance and creating a powerful seamless continuous character of the organisation. The guiding Wipro messages, once called beliefs, and then promises, are now the spirit of Wipro: intensity to win, acting with sensitivity, unyielding integrity.

"Intensity to win means make the customer successful, and you will be successful," Senapaty says. "Teams must innovate and excel. These are some of the aspects of intensity to win that we talk about. Acting with sensitivity means respecting the individual, be thoughtful, be responsible. And unyielding integrity means delivering on commitments, honesty and fairness of action."

Another aspect of governance is the transparency of business performance to shareholders. Corporate performance information is shared with the stockholders on a monthly and quarterly basis, via chairman’s communications and also a webcast Q&A session with top management.

This is nothing but relentless talent management, Senapaty explains. Wipro likes to promote from within, keeping the second layer of management hungry for success. There are many examples, Senapaty says, of people being given leadership jobs, even though they are only 60% or 70% ready.

Talent management in the company includes cross-border exposure for as many bright candidates as possible, to provide exposure across functions and across geographies. Plus there is continuous learning. "We have the flagship Wipro finance leadership programme, for example. We make sure that the key finance people get job rotation, go to classroom training, they are required to go on training programmes, do courses both internal and external, and to write research reports."

About 40% of the CEOs direct reports have come through the finance function and are currently responsible for about 50% of Wipro’s revenue.

5. Growth and Challenges

To date, the finance function has been very successful in adding value to Wipro’s business, and the company continues to grow rapidly both organically and through acquisition. "We are expanding in three directions: in various verticals, which means having a range of industry specialisations; through more service lines, whether it is IT infrastructure, business process outsourcing, or applications development; and in different geographies, constantly increasing our footprint of execution, so that we can have more local employment, benefit from language and skill sets of the local people and address customers in those local geographies."

Wipro has centres across the world including the Ukraine, South America, South Africa, Cairo, Brazil, Mexico, Canada, and the UK. It also recruits from Asia and Europe. Despite Wipro’s success, there are many business challenges ahead. "This is a people organisation, the assets are people, and the IP is residing in their heads, so we must ensure that they rate Wipro as the best employer, that we can attract the right talent and that they stay with us."

"Also, sustaining and enhancing the growth rate, even as we go through uncertain economic conditions, is a challenge," he adds. "What are the different ways of selling, of creating value for the customer? Although the value proposition we offer becomes more attractive in a slowdown situation. And making sure that we sustain profits. Working relentlessly to mitigate cost pressures, so that we can grow at constant profitability - that is how the share value is created."

Senapat believes there is plenty of growth left in the market: ‘I think the kind of market we are talking about, is about a $1.7tn IT services market, if you look at the business process outsourcing, IT and R& D. In India this year we will do about 40 billion dollars, so the market share is not very large.’ Wipro’s conquering of global markets shows no sign of abating any time soon.