At Aon, Growth Drives the Finance Discussion

The following is an edited abstract of a recent interview.

BF: How have your goals changed over the past 12 months?

Davies: It's been a very difficult market environment over the past 12 months, especially if you are operating globally -- with GDP in so many parts of the world being negative. Now, as far as what we have been trying to deliver goes, we have three key commitments to shareholders: organic growth, margin expansion, and EPS. Admittedly, organic growth has been hard to achieve in such GDP-challenged markets and economies, but I believe that we have performed well as a firm. Still, we would like to be driving more growth, and we're spending a lot more time on investments, which the finance team is helping to get more discipline around in terms of trying to drive return on capital of these investments for shareholders. I think that if you're going to start investing for growth in difficult market conditions, then it's really about thinking out over a longer-term horizon. We really have been doing a lot more 3- to 5-year long-term planning to make sure that we're getting the right returns not just in year one, but in year two and year three.

BF: You're talking about growth, but hasn't the focus been on costs?

Davies: Have we been engaged in cost reduction and restructuring programs? Absolutely. But we're also engaged in the investments we're making today so that we have a return tomorrow and the following year. We're definitely having a dialogue with our business leaders, because everyone is trying to make the investments that can drive growth. We want to make sure that we are prioritizing them correctly and managing and measuring the results to make sure that they come through for shareholders.

BF: How is your finance team asserting itself to make certain that they are part of that ongoing dialogue concerning growth?

Davies: Well, the first thing I'd say is that part of it is having the right talent in place. We have been sort of realigning the organization in finance into two key groups: one is the financial planning and analysis team and the other is the controller team. We actually have hired and promoted within to get the right talent into these key roles. This ia a big part of empowerment, and the other thing is that we've done a lot of training to make sure that people understand what they should be doing and that they have the right skills and knowledge to do it themselves rather than having to keep asking questions because they lack the knowledge.

BF: Where does this training happen? Is this a special program?

Davies: I think that some of the best training is really on-the-job training. However, one example that I'd like to point out begins with our global controller, Laurie Meissner, who joined us from Motorola about a year ago. She's been leading some of the training herself in the controller organization. All of our controllers globally report up to Laurie today, and this is part of our organizational change. Laurie has been upgrading some of our skills globally and making certain that everyone understands our accounting policies and how they fit in with local regulations. She has led the training effort, along with another executive in our accounting policy area, and together they are rolling this out to the team in all of the different countries.

BF: How is Aon currently leveraging talent in low-cost geographies?

Davies: We certainly have done that, and we think that there is more to do here. We have more than 2,000 people in India today. Broadly speaking, we have three different types of people skills in India: actuaries; catastrophe modelers (who provide a core part of the analytics that we provide to insurance companies in our reinsurance business); and accountants (we have not only some accountants from our internal finance team but also accountants who are helping clients). We are clearly managing talent in this way, and I would imagine that we will only be doing more of it over time.

BF: Has the role of CFO at Aon challenged your philosophy regarding what finance should and should not do?

Davies: My very general idea of what the CFO role should be is that it supports the CEO so that he and the businesses are successful -- because if the businesses are not successful, it's very hard to do anything within. That has been my overriding goal. As for my view of finance, if you look at a sort of Maslow's Hierarchy of Needs, the fundamental need that must be fulfilled in finance is having great controls and compliance. Then you have to deliver great information and analysis to make sure that your leaders are making the right decisions. Then you can get into strategic areas like strategy and M&A. So I guess what I would say is that I'm not sure that my philosophy has changed, but I would say that the time allocation has been different. Within the past 12 months, we have spent a lot more time getting efficient and decreasing costs. Part of this has to do with the economic environment, and part of it has to do with the way Aon grew up and the fact that we had 423 acquisitions over a period of 22 years and that we needed to pull together globally. We have finance people in well over 20 countries, and of course that team spans over every finance function. Very often our key clients are CFOs or treasurers, so this actually allows finance to get involved in helping to address the needs of our clients. These needs are very often the same ones that we're addressing internally ourselves.