Scaling new heights at Sara Lee.
What's the most important quality for a CFO to develop? "Guts," says Judith Sprieser, executive vice president and CFO of Sara Lee Corporation. "Guts. You have to be willing to take a chance. Stick your neck out."
Like she and the rest of Sara Lee's executive team did last December 22 when, with only a smattering of facts at their disposal, they ordered a voluntary recall of several of the company's brands of hot dogs and packaged meat products that might contain the Listeria bacteria. Knowing the recall would cost a fortune, "We spent an agonizing lifetime one Sunday debating the issues. But what's most important is the integrity of this company. As the CFO, I realized that the NPV [net present value] of the recall was going to be a big negative number. But I quickly concluded that the health and safety of our consumers had to take precedence over financial considerations."
Add to courage the ability to influence people and the dexterity to walk a fine line between being a team player and truth seeker. "Finance is one of those few professions where you have torn allegiance. You're part of the team, but yet you're the Diogenes," Sprieser explains. "The key is knowing how to put the positive, supportive bent on what you're doing while, at the same time, gently nudging with the truth."
Something at which this warm, engaging 45-year-old corporate change agent has excelled and which she has constantly emphasized to the finance executives during her career at Sara Lee. She joined the company in 1987 as assistant treasurer. In 1990 she became senior vice president and CFO of Sara Lee Bakery's North American operations and was promoted to president and CEO of that division in June 1993. Next she was appointed corporate CFO and senior vice president in October 1994.
Then in October 1998 she was named executive vice president and was elected to Sara Lee's board of directors, becoming the first woman inside director. As corporate CFO, she is responsible for the corporation's tax, accounting, insurance, treasury, purchasing, internal audit, and information systems functions. John Bryan, chairman and CEO and to whom she reports, says "Judy Sprieser has been an exceptional leader since joining Sara Lee, and her accomplishments have inspired others to follow her example."
One of her latest ventures is an executive leadership program called "Scaling New Heights." As part of that program she's training all 140 division CFOs and their "wannabes" (about 500 people) to become strategic business partners. She says there are too many bookkeeper-type CFOs, and that has to change. Her favorite analogy might help explain the concept.
"You're driving down the road. You've got the CEO in the driver's seat and the CFO in the passenger's seat. The bookkeeper CFO actually has his seat turned around facing backwards, and he's saying, 'Well, boss, we just passed a gas station. Oops, that was a pothole we just hit. Oops, we missed that turn in the road that would have given us a shortcut.' The CFO as the strategic partner is looking ahead. 'Ah, I see a pothole up there. Let's avoid it. I see a shortcut. Let's take it.' I think it's getting through."
"In fact, we just had a leadership conference last month in which we worked on honing the CFOs' strategic skills. A number of our CFOs exhibit what I call the inability to think beyond the scope of their division. They're focused on just that line in the income statement on which their bonus is paid. I'm making it clear to them they have to think much further outside that box to get good strong marks here. Presentation skills are a must. Several CFOs who are good at detail are not good at presenting and influencing, which is a core competency in moving up that grid. Many of them believe that if they have the facts, that's all they need. I say the package is just as important as the facts."
And what do the Sara Lee CEOs think about the program? "Our CFOs found - much to their own surprise - that, when asked, their CEOs responded that they wanted their CFOs to step up to a more strategic advisory role."
THE RIGHT STUFF
The leadership program is phase two of an initiative Sprieser undertook to make sure the financial people throughout Sara Lee had the right functional competencies and skills to do their jobs and to help the company grow. The $20 billion corporation is divided into five lines of business: Branded Apparel, Sara Lee Foods, Coffee & Tea, Foodservice, and Household & Body Care. Supporting these are 140 business units or divisions, each with its own CEO, CFO, and operating staffs. Total number of employees is more than 139,000. Sprieser heads up the entire financial side of the corporation (1,565 people) and whether acting as the "gatekeeper of shareholder value" or champion of corporate integrity, she has to be able to make fast, sure decisions based on her knowledge of the numbers. And that means she has to have extreme confidence in her financial staff.
"When I was named to this position four years ago, the idea of having the responsibility for the numbers that come out of 140 decentralized operations was terrifying. It was stunning to me how little I knew and that I could be on the road every day and I still wouldn't have my finger on the pulse. My quick conclusion was I had to be heavily reliant on the people in our divisions. I had to trust their judgment. I had to trust that they were spending their time on the right things and that they were top-notch.
"So we started focusing on functional competencies, such as controllership, MIS, financial analysis, cost accounting, and communication skills. We got a group of CFOs together and we asked, 'What are the key functional competencies you have to have to be a good CFO at Sara Lee?' We came up with six and defined them with 24 special skills. Then we started a process whereby every year I go out and visit groups of CFOs on a regional basis. They assess their high-potential people based on these functional competencies. We do this in groups because we can move people around to give them the experience they still need to move to a higher level in the company. It has been a marvelous process. Not only are the CFOs attending these sessions but so are the heads of HR. Our HR department has been very supportive. We have everybody logged into a system now where we know who they are, what their capabilities are, and how they're ranked, so when an opening comes up we can give someone an opportunity."
The other reason Sprieser started the assessment program was to attract and retain top financial talent and to promote from within wherever possible. So she assesses the CFOs on the same competencies they assess their direct reports. Sara Lee's chairman, president, and the Compensation and Employee Benefits Committee of the Board assess her skills and progress. "We're making headway. Last year 73% of our new CFO appointees were internal promotions. When we started the program, it was only 40%. It means we are developing talent rather than just hiring it."
"A side benefit that I didn't realize until two years ago, because we never anticipated it, is it makes people want to work here more. They have a sense that somebody's thinking about them. If they lack a skill, we're not declaring them bad, we're going to give them opportunities. It hit me when the CFO of one of our European divisions who's fabulously talented called me up one day and said, 'Judy, I got a job offer. But you know what? I turned them down, and I turned them down because I know you're thinking about me.' I thought, okay, we're heading in the right direction here, folks."
The timing of Sprieser's programs has been fortunate. Two years ago Sara Lee began a major restructuring effort it coined "de-verticalization," which it hopes to complete by the year 2000. Under the new business model the corporation is examining its entire operations from a horizontal view (impact on the organization as a whole) rather than its traditional vertical view (almost independent business units). Although it is retaining its decentralized operating structure - the individually run business units - it is reducing the number of assets it owns, is streamlining and centralizing its processes and resources, and is focusing more on building the value of its brands.
What does that mean? Sara Lee had always grown by buying companies and then pretty much letting them continue to run on their own. "We gave a company we acquired the benefit of our capital, our tax planning - costs we could offset and lower rates we could pay - things like that. But by and large we left them alone. I ran one of our divisions for awhile, so I can tell you there's an important psychological aspect to that. When you are running a business - whether it's a $60 million or a $1 billion business - we make you feel like you own it. You're not part of some bureaucracy where you just shuffle paper every day and get paid at the end of the week. Your neck's on the line, and you live and breathe it. There's a lot of power in that."
But with the new economic environment of the 1990s - the slowing of growth, no inflation, and true globalization of the economy - it was time for a change. "We found that our structure had some anchors to it that were not allowing us to be as profitable or as nimble as we felt we should be," Sprieser says. "The first foray into that thought process was manufacturing deverticalization. We own a lot of manufacturing assets. Do we need to? Is this allowing us to be as competitive on a global basis as we have in the past? What about our distribution networks? This questioning was a huge step for us because we were actually penetrating the business and questioning a part of the divisions' turf.
"From my perspective, the exciting thing that initial breakthrough in manufacturing did for other parts of the business was allow us to consider changing other areas." The first area she tackled was IT. "I thought, 'We're going to question division ownership of certain manufacturing assets. I wonder if I can start centralizing some of the administrative functions. Every division has its own data center and handles routine transaction processes. Does every division need to have its own payroll department or accounts payable department? Now we're taking a look at IT through the whole organization to figure out how it should optimally supply the right level of service and at a better value. It's a sea change for us."
One of the first steps was standardizing hardware, buying new PCs from one company for every person at Sara Lee, and giving everyone the same software. Next Sprieser and her team are setting up a shared service center and looking into the possibility of an ERP (enterprise resource planning) software system. "I've got 40 people swacking through that plan now. It isn't easy, but the economics are so compelling."
The restructuring also has led to new financial goals. Because the company's earnings per share growth rate will accelerate under the new business model, Spriser says, Sara Lee increased its earnings per share growth goal to a range of 13% to 15%. It also increased its return on invested capital goal to 20% to measure profitability. As for financial strength, it will target 40% cash flow to total debt. Results for the first year were 13% earnings per share growth, ROIC of 17.5%, cash flow from operations of $1.9 billion, and revenues exceeding $20 billion for the first time in the company's history. At the end of January, the board of directors declared the company's 212th consecutive quarterly dividend.
And how are the division CFOs taking to the changes? "Coincidentally, this whole new latitude to think about things differently at Sara Lee happened at the same time I got together with our CFOs about their skills," Sprieser says. "We were talking about their jobs and what they liked about them and what they didn't like about them. What came back loud and clear was that they were drowning in routine stuff, in transaction processing and financial reporting. They were saying, 'We are horribly inefficient; we spend way too much of our time on things that don't get us any medals or kudos. And we don't have the time to be in there with our CEO quantifying the value of strategic options and all those kinds of things.' So it just fit together beautifully. And I hope the desire on their parts to become strategic business partners makes it less painful to give up a lot of the stuff they used to manage and control. 'Yes, I know you used to supervise a staff of 50. But remember that included 40 clerks. Do you really want to have an empire of clerks? Wouldn't you rather have 15 top-notch analysts who are adding value to the business?'"
The answer would have to be, yes, if Sprieser is right about the next area of change for the finance crew - measuring and managing risk and knowing how to present that information. "There's a whole new bent in finance. It's a much more quantitative orientation in the measurement of risk. At my office we have a full-time quant person who runs simulations. When I say, 'I'm wondering how much of our debt should have a fixed rate of interest versus floating,' what I'll get back is a very detailed statistical analysis that says, "95% of the time based on how rates have moved in the past, given our current structure of fixed versus floating, your interest expense would be expected to fall inside this band. Is that acceptable to you?' It isn't the good old days when I could say, 'Oh, 60/40 feels good. Let's do that.' There's also more to hedge or manage than foreign exchange and interest rates. We should be looking at all of our commodities; we should be looking at how they move vis a vis each other. We should be looking at our pricing flexibility. Are our products price elastic so that if inflation pops up we know we can move on that? If not, maybe we need to be thinking about that as a risk to manage as well. That's a key area of opportunity for finance because the nonfinancial folks struggle as to how to measure it, and we can help them."
All this is necessary to improve Sara Lee's top line, she adds. "We are that economic model where the top line is growing single digits, but despite that, the bottom line is strong. Wall Street hates that. They like to see a strong top line. There's so little trust in earnings, they are always looking for verification. They verify by the top line and by cash flow. One of the ways I sold my centralization program is I promised the division CEOs the savings to put back into marketing. They all want to provide more support to the top line."
CHECKING OUT THE VALUE ADDED
Speaking of risk, Sprieser is about to take the plunge once again. She wants to concentrate on increasing the value of Sara Lee's brands and tying employee performance to that. "I would like to be able to say at the end of a year that a division manager increased the value of the brand or didn't. I don't know if that's possible, but I want to look at it because people behave as they are measured. We measure them on operating profit and return on investment, so if they aren't making plan, they may cut something out of the budget that won't have an immediate impact on the business. But if we measure them on the basis of whether they enhanced the value of the brand or not, they may behave differently. You might argue that's a nonfinancial area, but I think redefining value in this company is one of the most important things I could do. We should put the value of the brand on our balance sheet."
A lofty goal, but her other initiatives have succeeded so far. They weren't easy to accomplish, but they were worth any struggle, she says. And what has made her the most proud? "Besides my kids?" she laughs. "Neck and neck with the people development side has been the emphasis I've brought on different measures of success around the organization. The first couple of years as CFO I drove a focus on total return on total capital and on cash flow. We've been able to push this company up into a different level of cash flow generation, and that feels good. Next I want to go after the value of the brands. And the value of the people. I'd love to get into the measurement of people and try to get that measurement into our incentive system. It would drive the right kind of behavior that's going to make us very successful."
ROLE DEVELOPMENT OF CFO
Advisory/team membership business scope long-term business planning resource
Proactive/business scope short-term ideas and implications responsibility
PROBLEM SOLVING RESOURCE
Proactive involvement/finance scope planning responsibility
Reactive involvement/finance scope control responsibility
RELATED ARTICLE: ACHIEVING HER PERSONAL BEST
Now I don't want this to be a woman's piece," Judy Sprieser said as she settled down to talk with us in her spacious Chicago office after greeting us warmly. But her story is just that in some ways, especially as she claims she fell into finance by accident because she's a product of the '70s and the second wave of women in the workforce.
"We just came into the workplace and ended up where we were because we knew no better. Women's first foray into the job market was probably the mid-1960s. They were bloodied and bowed and gave up everything to be successful. My generation - the group right behind them - is the messy group - the bumblers. We had few role models to accept or reject. The women behind us - the ones in their 30s - I call the dubious. They have looked at us making a mess of things [juggling career, family, and, if there's time, friends], and they've said 'Ugh!' And, ironically, it's around 32 where they should be transitioning out of an emphasis on functional excellence into executive prowess - being cognizant of whether they're behaving like leaders. I don't know what the 20-somethings are thinking, but my daughter at 14 thinks she can do anything."
PATH TO THE TOP
Sprieser's career path might sound a bit unusual to some. Her freshman year in college she was a music major - until someone told her she wasn't very good. So she dropped out and moved to New York to become a Broadway star. "Was that practical?" she sighs. When she tired of the "off off Broadway" life, she went back to Northwestern University in Chicago, finishing with a degree in linguistics.
Since she had "thought nothing about a career until the day I didn't have to show up for class anymore," she found a job as a secretary at a consulting firm. But "after about six months I was fired because I wasn't a good secretary. The president of the firm - the one who fired me - told me to go back to school and get an MBA. But I had an apartment, and I needed a job. So he suggested, 'Try the area commercial banks. I hear they'll hire anybody these days.' That was the direct quote! I applied to a management training program at Harris Bank, catching them at that lucky moment when they were hiring generalists.
"I got my MBA at night from Northwestern, and because I worked at a bank I gravitated toward finance. Fortunately, I loved it! I spent six years in banking and was hired away by one of my customers - Esmark - which doesn't exist anymore. They owned Hunt-Wesson, Pepperidge Farm, Playtex (which Sara Lee now owns).
After five years of moving up the corporate hierarchy at Esmark, she left because Beatrice Foods had taken over the company and instituted a bureacratic culture she didn't like. "At Esmark I could play in lots of sandboxes. Beatrice put me in charge of pension fund management, managing the managers. It was not challenging." She ended up at Sara Lee a few years later because it was a family-friendly company. With a nine-month old, she wanted to be able to travel for her job but then come home once business was finished.
"I never thought I'd find another company like Esmark. But I did with Sara Lee," she says. "I love it. There's very little opportunity to get bored. They don't put people in tightly defined boxes. You can reach out and play in the areas that interest you."
FAMILY IS NUMBER ONE
As much as she loves her career, her family remains her number one priority. She's been married for 21 years and has "two terrific kids," a daughter, 14, and a son, 10. "I don't have time for friends," she says, "but that's okay. I have my work and I have my family. Anything I do for fun, I do with my family."
She and her husband manage to shift back and forth between degrees of support, depending on which of them is under more job stress or time pressure at the moment. One of the secrets to their longevity, she says, is that they make all their decisions based on three issues: what's good for his career, what's good for her career, and what's good for the kids.
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|Title Annotation:||Sara Lee Corp CFO Judith Sprieser; includes related article|
|Author:||Williams, Kathy; Hart, James|
|Date:||Mar 1, 1999|
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