Catching up with BW CFO World’s Janani Janarthanan, the CFO of Tata Consultancy Services, Samir Seksaria distils his learnings about the nuances of financial strategy from the arsenal of his experience, the pace of financial transformation at TCS and the success mantras for companies and the emerging CFOs for 2021 and beyond.
Edited excerpts-
You had shared online about completing 100 days as CFO, at this juncture, what would you say are some of the practises you’ve adopted, lessons you’ve learnt and issues you would like to work on?
I was very privileged to have a team that has the depth of experience and knowledge and we have been together for a substantially long period which has been a big advantage for me.
When I took over in May, there were a few big learnings. First, was the shift of focus onto outcomes. Whereas previously, a lot of focus was on activities performed or the effort put in, rather than outcomes. The second is to invest ahead of the curve. And lastly, I would say important learning is to look beyond ROIs and focus on value drivers.
Let me offer an anecdote, somewhere in 2018, we were looking at workplace collaboration tools from some of the key providers in the market. At that time, we already had an email and instant messaging in place, a video conferencing facility and our own file-sharing application. So why go for a workplace collaboration tool which would just integrate all of it and put it together? The question was whether it was justified to invest. What helped us when we eventually made that decision and looking back, I would say that so that was a very wise decision, is that we focussed on the value delivered by the integrated solution. It ensured to drive employee efficiency and we saw that it helped in our move to remote too when the pandemic started.
IT has been the bellwether of the post-pandemic times and cloud computing, cyber security and 5G are trending topics that have been drivers of growth. Going forward, what are the areas of investment focus?
TCS is very technology agnostic, we invest across streams of all existing as well as upcoming technologies. And the approach we follow is an investment strategy perspective, specifically on technology stacks is a ‘portfolio approach.’ Our investments are primarily in terms of competency building through training and re-skilling employees and in areas of research and innovation as well as building IPs.
Talking about the TCS NPSD framework which is the ‘New Products and Services Development’ Framework. All products go through various stages of validation from the incubation stage till when it becomes commercial and live.
If we talk about offerings like cloud and security, they’re practically mainstream, so now we are just harvesting on our early investments. And even if you take offerings like 5G or even block-chain, they are now slowly gaining momentum and we continue to invest around all these objects.
Two wage hikes in, at the cusp of the biggest hiring drive for women talent and also looking towards bringing employees back to the office at the year-end are important updates coming from a big employer like TCS. Financially, how do you sense this to impact the manpower strategy?
These initiatives mentioned do not have an incremental financial impact as they are a part of a business model itself, whether it is wake hikes that are already reflected in our Q1 or the hiring drive which is a part of our diversity and inclusion initiatives, or the back-to-office initiative. Since we didn’t give up any of the office premises it’s invaluable to our vision 25 by 25.
From the manpower strategy perspective, it has been on attracting, engaging and retaining talent. Primarily, attracting the respective markets that we operate in and then in terms of engaging talent towards digitally upskilling employees where others might replace people every time there is a technology change. I would like to quote our chairman who once mentioned there are no legacy people, it is only legacy technologies and that is the philosophy we maintain.
You’ve been a part of the financial transformation TCS has seen over the last two decades and have mentioned three predecessors as mentors online recently, combing your insights and learnings from them, how would you phrase the pillars of a strong financial strategy and the requisites for sustained financial growth?
As CFO I would say that the key constituents of a financial strategy are around business planning, good governance and value creation by ensuring stakeholder returns. But if I take inspiration from my learnings, I believe the mantra to a successful finance function lies in the following four pillars-
First, is the leadership where finance partners with business, working across functions and acts as an influencer. The second is around operational excellence where finance possesses a strong understanding of the company’s business model and the industry in which the company operates, and can use this knowledge to ensure that business decisions are grounded on a solid financial basis.
The third one is around controls, which is in terms of identifying quantifying and mitigating risk. The last one is on long-term financial planning or long-term planning. This is around, supporting strategy development and helping enable the execution of the strategy itself.
Our financial transformation journey has initiatives that involved using technology to enable enhancement or transformation in finance.
We have about five cluster units, about 40 main business units and 150 sub-business units and across all these business units at the start of business hours on ‘Day One’, immediately after the period closure, the financials would be available with the respective business Leaders.
Secondly, we have state-to-processing; where we leverage analytics-based risk management to replace the physical verification. Let’s take the domain of employee reimbursement, claims get processed straight through and get paid on the very next day. While ‘Day One’ processing releases a lot of management bandwidth, where no one’s waiting for numbers and they get the results spot on, the second one increases employee satisfaction because they get paid as soon as they raise a claim. Additionally, the digital governance we had adopted about 5-6 years back, paperless board, meetings and AGMs (Annual General Meetings) has also been impactful.
Based on your industry experience and your insights with one of the biggest employers in IT, what would you figure are some of the new skills for the CFO emerging post-pandemic and would you say the CFO CV has changed?
I would say finance functions such as financial reporting or classic finance activities around payroll procurement invoicing and statuary compliance continue to be important, but are taken as hygiene factors.
Today’s modern CFO has to play the role of an effective business partner. The CFO must assist the CEO in long term strategy and should he/she should assist the business heads in better, operational decision-making by leveraging analytics. And also, at times take the lead in driving initiatives that lead to organization-wide change and transformation. I would go to the extent of saying that traditionally CFOs were stereotyped as bean counters or number crunchers who operated behind the scenes. While today’s CFOs are expected to drive the direction and success of the organization they work in, focussing on strategic business, imperatives partnering with business and driving change in a dynamic business environment.
Moving to a trending topic, ESG continues to be a dominant discussion as we come out of the pandemic, how do we move ESG interest from a chairman’s message on the financial report to a line on the balance sheet and add more value to it? Do you think companies are taking sustainability reporting seriously? And how can a country like India lead the charge for corporate consciousness?
I would say that ESG is on the agenda of a lot of CFOs and the awareness and the need for action is well accepted across corporates from an environmental perspective. Companies have started setting aspirational targets, and some companies have been taking complete action towards reducing their carbon footprint, energy consumption, and their metrics, which companies themselves have been driving or through a matrix which is independently reported by analysts as well as by a few years ESG centric firms.
Now, this matrix needs to be standardized and probably this matrix would be different from industry to industry and we need to find some common ground on that. Then if we take the societal spend, again there is increased participation. At the Tata group, we have always been very much involved in this area for many decades through the philanthropic trust, but now that CSR has been mandated for spend basis in the company law, it has led to increased participation by other large companies. Corporate governance is also high and we see the increased interest in India.
Talking TCS specific, we have been leveraging technology, using smart sensors across all our delivery centres, and we deployed this somewhere in 2015. They enable remote monitoring and centralised controls for efficient energy management and despite our increase in volumes in terms of headcount and overall seating capacity, in the last 7 years our energy cost has remained flat for five years up to FY20 and with the pandemic when offices closed, this was made negative.
We are taking this offering to our customers and we call it clever energy where the same smart sensors can be used in our customer locations to optimise energy. We have also stated our aspiration to be net-zero by 2030.
Lastly, on sustainability reporting- TCS has been publishing its sustainability report based on the GRI standards since 2006 and for the past two years, we have adopted integrated reporting and in FY 20 we received an award from The Institute of Chartered, Accountants for the best presented, integrated report as well.