In a diverse career that’s taken him around the world – inside and outside the consumer goods sector – Graeme Pitkethly, the new CFO at Unilever, has a clear view on what it will take for his company to succeed. Finance Director Europe speaks to him about the challenges ahead and the role that he will play in helping to address them.
As the name behind over 400 brands, Unilever is a truly global company with a complex matrix of products across four categories - personal care, home care, foods and refreshment - and scores of local markets. Each day, around two billion people use one of its products, and many of its brands - including Surf, Dove, Lynx or Magnum - have built up a loyal following of consumers.
The sheer scope of the business means Unilever's finance function must constantly evolve in a diverse and rapidly changing consumer landscape. In May 2015, Graeme Pitkethly was appointed CFO, succeeding Jean-Marc Huët, who led the team for five years. Pitkethly's path to the job has seen him follow what he describes as a fairly traditional route, though he has held many different roles across a variety of businesses.
After leaving university with a degree in applied chemistry he joined what was then Coopers & Lybrand, working for nine years in audit and corporate finance roles. He then spent six years in management positions in the telecommunications industry before joining Unilever in 2002 as its chief accountant.
"When I first started at Unilever, it was a different type of organisation," Pitkethly says. "Most people joined the company just after University and stayed there all of their working lives. Mid-career recruits were a rarity. I joined Unilever having gone through the excitement and then the pain of the global internet bubble, and I've never looked back."
In the past 14 years, Pitkethly has been Unilever's head of M&A, group treasurer, CFO of the company's Indonesia business and head of finance for Unilever's global markets.
"I was leading finance for Unilever's geographies at the time when we set up our current matrix of four categories and eight market clusters," he says. "It gave me the opportunity to really immerse myself in the business. It was a fantastic role but, after a few years, our CEO, Paul Polman, suggested I try general management and appointed me to Unilever's UK and Ireland business, which I ran for a little under two years. In many ways, the UK is the Olympics of the grocery business with its dynamically changing and challenging landscape of traditional retailers, discounters, pound stores and ecommerce."
It was then that Pitkethly operated on the front line of the consumer goods business - an experience that's proven invaluable since taking over as CFO.
"Unilever creates products that consumers touch and use every day, all over the world," Pitkethly says. "We are custodians of brands that mean a lot in people's lives and we feel a tremendous sense responsibility as a result."
Pitkethly has taken over the reins as CFO at a time when Unilever is performing well. Growth last year exceeded 4%, cash flow is strong and the steady improvement in margin is continuing. In the past six years, Unilever has invested heavily in its brands, people and industrial base; the essential components of its 4G sustainable growth model - competitive, consistent, profitable and responsible - have become integral to its operation.
"The priority for us is consistent and competitive performance, which I believe is a valuable thing to offer to your stakeholders, especially in volatile economic times," he says. "We're moving from an investment phase to a returns phase, and focusing on unlocking value in the company. To do this, we have to focus on a few simple things. It might sound basic, but to be successful, we need to be consumer-centric, make great products, innovate well and maximise efficiency."
Staying close to local consumers is a big challenge for a global business. Challenges from successful local competitors mean the business must leverage its scale, while remaining agile and responsive. As Pitkethly points out, while businesses can be global, consumers are only ever local, so keeping close to the markets is vitally important, and never more so than today.
"A general rule of thumb is to have 70% of brands managed globally, 20% as regional or local brands running on a global chassis and 10% as truly local brands for local markets," Pitkethly says. "This approach enables us to remain globally focused and locally responsive. Performance management is also vital with dynamic target-setting helping to incentivise people to take opportunities. Finance provides the robust information that informs those decisions."
A digital and sustainable future
While working in general management has given Pitkethly a particular awareness of the importance of Unilever's simplification agenda, his finance background means the company's numbers are never far from his mind.
"My passion has always been corporate finance, and I learned a huge amount while working in audit early in my career," he says. "Later on, running one of our largest businesses gave me a real sense of the breadth of the company. The combination of those two perspectives have been invaluable since becoming CFO. It's a big job for sure, but it helps me sleep at night knowing about the importance of good control and stewardship."
That broad understanding of the business helps Pitkethly's finance team take a lead on key issues, not least the impact of digital technology. Cloud computing and the move to platform-based IT, for instance, is a priority for Unilever, as it reduces the need to invest in its own data centres. Software as a service (SaaS) also removes the need to anticipate how many user licences will be needed, so use of IT is greatly improved.
"It's hard to find any part of the business that is not affected by digital," Pitkethly says. "The shift to ecommerce, for instance, is the ultimate example of a channel shift in action. It is also affecting how we interact with consumers and how they interact with each other.
"Advertising and marketing has moved well beyond traditional media to online and mobile, so we have to look at the right mix to get the right return. Digital is moving so fast that it's easy to sit back and see how things pan out, but you need to make a decision about when to invest and what to invest in.
"We have an awful lot of data, but only when that translates into insights and then action does it become valuable. We need to speed up the process. I like to make choices quickly, right or wrong, and then adjust course accordingly, although it needs to be a meaningful cultural shift."
Another key tenet of the company's business model is the Unilever sustainable living plan (USLP). The company has made great strides in sustainability and its public commitment to decouple growth from its environmental and social impact.
"The USLP is our business model. It is not a CSR programme; it is an integrated part of how we operate and it drives a measurable business benefit," Pitkethly says. "Firstly, it drives growth. Our brands with a clear sustainability agenda are growing at twice the rate of others. Secondly, it enables us to reduce costs by taking waste out of the system and increasing efficiency. Thirdly, by emphasising sustainability and integration in our supply chain, we reduce input risks. Finally, USLP increases trust and makes us an organisation people want to join."
One example of USLP in action is the work Unilever has done with its compressed aerosol technology, which allows the same amount of product to be sold in smaller cans. The product has been well received and has enabled Unilever to show that USLP goes beyond the walls of its own business. It wants to move the whole product category, including those of competitors, towards smaller cans that use less aluminium to help reduce waste. It has, therefore, shared its technology with other companies.
Personally, Pitkethly is taking this sustainability commitment even further. He is vice-chair of an industry-led task force on climate-related financial disclosures (TCFD) that is chaired by Michael Bloomberg and was established by Mark Carney's financial stability board (FSB). The task force aims to develop voluntary and consistent climate-related financial disclosures for use by companies when providing information to lenders, insurers, investors and other stakeholders. It looks at physical, liability and transition risks associated with climate change, and what constitutes effective corporate financial disclosures.
While Pitkethly has been in his current job around a year, one of his key concerns is preparing the next generation to take over the demanding roles at the top of the finance function.
"It is a great mindset to have, and was one of the most important lessons I learnt from Jean-Marc. The other great piece of advice from him Paul was to get some sleep and keep exercising. These are big jobs and they can be all-consuming. You really have to make choices about where to apply yourself, what you want to influence and what you can change."