BF: You arrive at Aon as part of a turnaround team, but separate from the team -- as the finance leader. What is it that you're going to accomplish here? What exactly is it that you expect to put your thumbprint on at Aon?

Davies: I would say that the first thing that is my area of focus is capital management and making sure that we measure and manage return on invested capital, with all the scrutiny it deserves for shareholders. The second would be improving the quality of management information. I do believe that my role as CFO is to partner with the CEO to drive business decisions and, therefore, everyone who reports to me has that same role of partnership with the business to improve the quality of management information so that the business leader can deliver the best value for clients.

I would say that my third objective is to improve compliance and controls, which I think currently are good, but we have acquired a lot of companies, so they still have room to improve. The last thing is really around improving the efficiency of the finance organization. I definitely think that there's room to take cost out and to optimize the organization of which resources sit where.

BF: You were a CFO for a giant division within a software developer, and meanwhile today you are CFO for a large professional services firm. These are different worlds in many ways. Or are they?

Davies: It is definitely a change, moving from the technology software industry, where value is really created by software developers, to an insurance brokerage and human capital firm, where the talent is really in the people in the field and how they interact with clients every day. The focus on economic value is quite different, and I would say that the industries are very different.

They're both service businesses where the main asset in the entire firm is people. We have 36,000 colleagues who come to work every day and try to deliver great value to clients. At Microsoft, it was similar: We had 8,000 people around the world who were trying to deliver value to clients. That part of it is actually quite similar. Fortunately for me, running the finance organizations is also very similar. You have to review the books every month, you have to drive compliance and controls, you need to get the right management information structure in place. All these sorts of things around running a finance organization, getting the right talent into finance -- they're all similar objectives.

BF: The finance organization's costs within most companies have seen a drop from roughly 3 percent a few years ago to about 1 percent of revenue. How does this match up against Aon's finance costs?

Davies: I would say that finance falls into the non-client-facing category. It is higher than you would naturally expect for an organization like this, simply because of the acquisitions we have done. There have been about 400 acquisitions over the past 20 years, and in many cases these acquisitions haven't been integrated. You have lots of different duplications in the field and at headquarters of finance activity. So we fall into that same category you were describing, of the 3 percent moving down to 2 percent. There's a lot of natural efficiency around what should reside at a regional level and what should sit at a global level, and then at the global level around what should sit local, versus offshore.

We're going through a very thorough analysis of that from top to bottom to really understand how we should optimize the finance organization to achieve our three key objectives, which are improving the quality of management information so that people can make the best decisions about the business in the fastest possible way, improving the control and compliance of the organization, and making it more efficient.

BF: What can you tell us about decision support within Aon today? What type of priority will it be for its finance organization going forward?

Davies: Decision support is clearly at the forefront of helping business leaders engage with clients, in making sure that Aon delivers the best client service. The decision support function is incredibly important to make sure that finance is doing everything possible to optimize client service, client value, and client delivery.

In that context, I would say that while we have OK -- and in some areas, terrific -- decision support today, there's a long way to go to improve the quality level of it. I'm not necessarily sure that we're going to make any substantive changes in the size of the team that does decision support. What I would probably say is that over time we'll have more high-level resources in decision support because that's really the role of the CFO, as a business leader. The key CFO role is really going to be the role of business decision advisor to make sure that we're providing the maximum impact to clients.

BF: What recent changes to Aon's business are likely to influence how you expect to manage finance or what you expect to make priorities? We've heard that there's focus on higher-margin business and that the business mix is fluctuating, perhaps ...

Davies: I think that there will be two big business changes that impact how I'm going to lead day-to-day. One is what I think you sort of alluded to, which was the portfolio change, in that we're really exiting the underwriting business, particularly with our divestiture of (Combined Insurance Companies of America) and of (Sterling Life Insurance Companies), which we sold on April 1 for $2.7 billion in net proceeds. This moves us from an underwriting business to a business focused on two areas that are really major in the global economy: one is around risk management and risk advisory, and the second is around human capital management.

This moves us essentially from a professional services and underwriting business to really a professional services business, which has quite different financial characteristics than an underwriting business -- it's a lot less capital intensive, as you said, and slightly higher-margin. On average, this is going to improve our return on invested capital, which is clearly why we did it from a shareholder's point of view. So the first big change is that we're going to be running much more like a professional services firm. This means that the metrics change, the management methods change.

The second big change is really that the business is becoming more and more global over time. We announced in February a move to organize our global retail business as a global organization rather than four separate regional organizations. We noticed that as our clients become more global, we actually become equally global to serve them. If you happen to be a client based in Spain, then we may have a team of people from around the world to bring our best service to you because your risk is based everywhere. This really makes us think through our clients' organizations and where they're based in each country, and about being located centrally in global locations to be able to service clients more effectively.

BF: Can you share in any greater detail how you expect to measure your business going forward and what types of business measures you will be closely observing?

Davies: We did a lot of analysis to understand what drove shareholder value for the company. The key metric that drives shareholder value for the company is return on invested capital, so this is the metric upon which we determine how we allocate capital, how we make organic investment decisions, how we measure M&A. This is the metric that cascades down to all the different businesses.

BF: Could you help us to understand what to expect as far as Aon's future performance management effort goes?

Davies: I would say that in performance management there's always room to improve. Particularly as we have recently evolved the business from more of an underwriting focused company to more of a professional services focused company on these two big areas of risk and human capital management, our performance metric will get much more focused in these two areas. Then these will be much more globally managed like that, as opposed to regionally optimized, which they have been previously.

BF: What can you tell us about the budgeting and planning process at Aon, from what you've observed during the past six months? What are you telling members of your finance team who may be thinking, There's a better way to go here, in how we do this, if we want to change ...?

Davies: I would say that budgeting and planning is never a perfect process in any organization, and I'm sure that you've found this. What I would say is that our budgeting and planning process operates differently in these two global businesses today, and operates differently in four different regions. So what we're describing for 2008 is a much more consistent process between the two global businesses and between regions to make sure that there are fewer disconnects and areas that overlap.

BF: Can you explain to us a little bit about the current economic climate out there and how this impacts Aon's business?

Davies: The great thing about the nature of Aon's business is that risk is getting more complex and more demanding every day. Regardless of the economic environment and, interestingly, regardless of the soft cycle in insurance, we are continuing to see enormous demand for our services from clients. It's becoming a much trickier, riskier, and more complex environment in which to manage risk. This is continuing to grow regardless of the environment.

BF: Improving the quality of information ... what are the initial steps that need to be taken to accomplish this?

Davies: Part of it is consistency of management reporting. Simplifying the management reports and making them consistent around the globe, this would be one thing. The second would be systems -- you need the same system, and the same method of accounting, and the same chart of accounts globally. And then a single source of the truth. I think that there are often multiple methods of analyzing a problem and agreeing on one way to do it, and getting it done consistently globally is really important.

BF: It's been reported that part of Aon's recent turnaround involved the consolidation of 27 sales management systems that were in use. Similarly, you imagine that finance has a big challenge with numerous and varied systems as well. Can you share with us what needs to be done there as far as systems are concerned?

Davies: Actually, it was almost 30 sales systems -- we found a few more. It's now down to one, which is Salesforce.com. Revenue reporting is quite a large part of the reporting pipeline for finance, so that's simplified our challenge a lot. On the finance side, there's PeopleSoft, and it's really about making that consistent around the globe for the majority of our revenue and profit, making sure that the chart of accounts is consistent and the method of accounting is exactly the same. We are doing a lot of work to put this in place today.

BF: Can you give us a sense of your involvement as the chief financial officer? How do you execute such a thing?

Davies: We have a terrific CIO, and he has been driving incredible efficiency in the IT area to date, in the same way that I actually hope to do things in finance -- simplifying systems, reducing costs, deciding on ways to do things in an optimal way. So I'm definitely partnering with IT on this. The other group of people I'm partnering with very closely are business leaders, because finance's information needs to meet their requirements in exactly the format they need, in a consistent, global format.

Christa Davies speaks with Business Finance Editor-in-Chief Jack Sweeney about how Aon is transforming its business by exiting lower-margin underwriting, and focusing on risk management and human capital management services in this video [1].