Live dashboards, stand-up meetings and looking ahead rather than backwards are all part of Finance 2.0, says Jan Kees de Jager, CFO at KPN. ‘Our department is the navigator which helps steer the business.’
Jan Kees de Jager well remembers what he found when he started out at KPN – a finance department which continually looked to the past and swamped colleagues with reports and management letters. ‘Every month you would end up with giant stacks of papers’, he says.
‘No wonder no one could see the wood for the trees.’
The new CFO launched his ‘NextGen Finance’ programme almost immediately. Four years on, it has led to the telecom giant’s metamorphosis, particularly in terms of far-reaching digitalisation. That process of change is now virtually complete, with positive results. Last year, the new strategy won KPN a Corporate Recognition Award, given to companies which are trendsetters in the field of innovation in accountancy and finance by the Institute of Management Accountants.
What aim did you have in mind when you started it all?
‘At the time, 80% to 90% of the finance department's time was spent on ‘reporting the past’. I wanted to cut that back to about one third of our time so that we could spend the remaining two-thirds on understanding the present and looking into the future. That has worked, and, as planned, has generated a 45% saving on costs.’
Jan Kees de Jager (50) has been KPN’s CFO since 2014. After gaining a bachelor’s degree from Nyenrode Business Universiteit, De Jager studied at Erasmus Universiteit Rotterdam, graduating with an MSc in business economics, (honours) and sociological economics, and two years later with a master’s in Dutch law. De Jager then began his entrepreneurial career, co-founding internet company ISM eCompany. In 2007 he was appointed junior finance minister on behalf of the Christian Democratic party and from February 2010 to November 2012 was finance minister in two successive cabinets.
How did you start?Hoe begon u?
‘We were given a generous mandate to digitalise the department from the ground up – three years and a substantial budget which, incidentally, had to be earned back. Although it was not an aim in itself, digitalisation and automation allowed us to reduce the number of full time finance jobs – up to 70% in some areas. We began by using the ESSA method – Eliminate, Simplify, Standardise and Automate – to reduce the complexity which had accumulated over the years. You start by eliminating – deciding what you will keep doing and what is to be dropped. What remains is simplified and then you standardise the processes, so that you can easily automate them. You need to carry out these four steps in the right order, otherwise you will end up in a mess.’
Can you give an example of something which has been achieved?
‘Take processing a journal entry. It used to take 15 manual steps. We’ve been able to reduce it to three and put a robot on the job, which makes no mistakes because the process has been simplified. And this process of simplification and digitisation has also cut costs considerably.’
‘We used to talk about a financial review, now we have
You want to do more with predictive forecasting. So how are you organising the traditional control functions?
‘Financial control and business control are now further apart. The hard side of the business, the financial control and accounting work for internal reporting and the IFRS, is now part of a shared service centre with corporate control. The business controllers sit at the same table with the divisional management teams. We call them ‘business navigators’, a title which comes from my favourite hobby – rally driving. I see the navigator as the passenger in side-car racing. He is the navigator next to the driver, who checks the map and never loses sight of the road ahead. To keep the analogy going, navigators are much less likely to use the rear view mirror than our controllers used to do. So they generate more added value for the managers, and that leads to better results.’
What does this mean for the skills you require from KPN’s finance professionals?
‘A lot. The financial controllers have to be good at figures. But our business navigators have to speak the language of both commerce and finance. The selection process was wide-ranging and that means some members of staff have moved to departments better suited to them. We have also taken on new people with very specific, data driven skills. I always say – and this is something I tell students as well – that the CFO of the future will be half finance chief and half data scientist. They will need to understand data analytics, AI, robotisation and the like.’
That is fairly easy for you, given your IT background. Would you say other CFOs are sufficiently on top of the subject?
‘Yes. Most of them have it on the agenda. And if they lack the expertise and the affinity for the issues themselves, they can make sure their staff have the necessary skills. However, in general I think management boards, and certainly their supervisory boards, should pay more attention to the theme of digital transformation – including when it comes to electing potential board members.
‘The CFO of the future will be
half data analytics expert
and half financial chief’
Would it be useful to have a Chief Digital Officer or Chief Technology Officer on the management board of every company?
‘Mmm, that depends on the context the company is operating in. A marketing organisation would be well served if the CMO of COO were responsible for digitalisation. But for a company like KPN, digital transformation is part of our core business, it is what we deliver to our clients. So that is why, in our case, we have a Chief Technology and Digital Officer on the management board.’
Digitalisation boosts transparency and makes clear what is profitable, including the performance of colleagues. Is that not a deterrent? ‘Yes, it does generate discussion. We can go granular, down to micro level, to determine the profitability of our products and services, and we can do that across the complete value chain. If the data disappoints, it makes sense to discuss the methodology from a business point of view. And I consider such discussions to be very important. That is not to say that a product with a very low margin cannot still be valuable. It’s this transparency that leads to better insights.’
During meetings you work with digital screens and real time market information. Is that useful?
‘Yes, very. We used to sit there passively looking at each other across a big table, with a big pile of paper between us and figures that were weeks old. Now we meet standing up and in front of a large touchscreen. So meetings are no longer one-way traffic. We look together at a wide range of KPIs and we talk about them. How do we interpret the latest market data? What is the impact of competitors’ recent campaigns? How do we explain the latest developments and what can we do about them? But we also look at what consumers are saying about telecom companies on Twitter. We have it all in front of us so we can look at the company as outsiders, and take action when necessary. In addition to these weekly and monthly reviews, we also make time to take a more strategic look forward to the coming three or five years. Put simply, this dialogue generates added value and much better discussions.’
So better decisions?
‘Absolutely, even though I can’t actually quantify this. But I do see a different culture and a different mentality. We used to talk about a financial review, but now we have a business update. It is a subtle change but a significant one. Our NextGen Finance programme is helping us to steer more efficiently and more effectively, based on informed decisions.’
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