| At last year's Asian Shared Services & | | | | JD: OK, so we have our two divisions - railway, and |
| Outsourcing Excellence Awards, the runner's-up gong | | | | commercial vehicles - and railway is enjoying what's |
| in the Best New Services Delivery category was | | | | happening in many countries worldwide where they |
| awarded to the shared services team at | | | | have stimulus programs focusing on big state |
| Knorr-Bremse Asia Pacific. Now, we speak with | | | | infrastructure projects like for railway. |
| Jerome Debreu, CFO Asia-Pacific for Knorr-Bremse | | | | And then for us, the good news is that when the crisis |
| and the man responsible for the development and | | | | arrived the Chinese did not stop the investment that |
| growth of the shared services unit into a | | | | they'd said they would do: they just speeded it up. So |
| multi-award-winning organization, about the secrets of | | | | for us there wasn't a project that we didn't know |
| his success - and how to grow an idea into a | | | | about: they just made it happen faster.. |
| multi-billion-euro institution when you're starting with only | | | | Following that megatrend and stimulus, the Railway |
| €100 in your pocket... | | | | Division became our biggest in sales revenue. |
| * | | | | In contrast our Commercial Division has been highly |
| SSON: Jerome, let's begin by getting an understanding | | | | affected, similarly to the car industry anywhere in the |
| of your role at Knorr-Bremse: what are your | | | | world, with a significant drop - I would say of 50% in |
| responsibilities? | | | | Asia last year. At the time I had to manage the growth |
| Jerome Debreu: In Knorr-Bremse I am CFO for the | | | | for the Railway Division - which is at least as |
| Asia-Pacific region and Member of the Executive | | | | complicated as managing the downturn in the truck |
| Committee Asia Pacific; that covers 20 legal units in | | | | division - a business which has two legs: one leg going |
| India, China, Japan, South Korea, Singapore, Australia, | | | | very well, and one leg not doing so well yet, still has the |
| Taiwan, and the HQ in Hong Kong. Sales revenue last | | | | advantage of balancing on the stronger foot. Our |
| year was €530 million, and this year we already | | | | shared services help to also flexibly balance cost |
| have orders of around €1 billion. I started the | | | | structures and we did not have to take tremendous |
| business in 2003 with €100 equity! I went on the | | | | cost-cutting which would have been dangerous - and |
| road with my €100 looking for opportunities in | | | | this is another difference between Asia and the rest |
| M&A, joint ventures and greenfield operations - | | | | of the world, in that we're still in an emerging market - |
| and this is where we are today. | | | | because the growth is ahead of us and it would have |
| So my responsibilities as CFO are a little bit more than | | | | been stupid to cut off people that we only hired few |
| they are with other companies: we are family owned - | | | | years ago, developing new products which will |
| we are not listed but following the same reporting | | | | anyway come onto the market two or three years |
| requirements, I would say even more operational and | | | | from now with the recovery to come. |
| long term orientated - and when you start a business | | | | Of course we had one-time cost savings but the |
| from scratch you have to take care of much more | | | | savings were more in the real business - not what I call |
| than with, let's say, an already well-established | | | | "cookie management", which is where you go into a |
| company. I have been taking care of, for example, HR, | | | | meeting and you don't have cookies with the coffee in |
| IT, operations and compliance as well. And of course | | | | the meeting-room. We didn't cut the coffee and the |
| other than that I have the job of a "normal" CFO which | | | | cookies; we were focusing more on localization and |
| is consolidation, treasury, hedging activities, taxes, | | | | reducing costs in the sourcing area, and also taking the |
| planning, forecasting, budgeting, M&A, Post Merger | | | | opportunity of the crisis to redesign the product, to |
| Integration, Transfer Pricing, Cash Management, | | | | make it cheaper for China and India, and also taking |
| Balance Sheet Management etc.; I'm also company | | | | the opportunity to hire talents suddenly ok to move to |
| secretary sitting on the Board of our key locations in | | | | another company like us while coming partly from big |
| China, Japan and South Korea. That's what I do. | | | | OEM. |
| SSON: That's a pretty big workload! | | | | So overall the crisis for us was not hurting so much in |
| JD: This is a very big workload; that's why I've been | | | | Asia. On a group level yes, of course, in Europe and |
| working more or less day and night for seven and a | | | | the US yes, but in Asia we registered overall growth |
| half years - from 9 in the morning to, minimum, midnight, | | | | doubling in the last three years and inside of this there |
| every day… | | | | is a truck division going down by 50% within a year. |
| SSON: That's very inspirational - and also a little | | | | However, as of today, we already registered a |
| intimidating… With regards to your shared services | | | | recovery for our Commercial Vehicles Division back to |
| team specifically: you won the Runner Up award for | | | | before crisis numbers and a further strong increase in |
| Best New Captive Services Delivery at the 2009 | | | | orders intake for our Railway Division. Our outlook for |
| Asian Shared Services & Outsourcing Excellence | | | | Asia Pacific remains strong for this year 2010 at least. |
| Awards. Can you go into a little detail about how | | | | SSON: What other challenges do you see materializing |
| shared services is distributed within Knorr-Bremse and | | | | that aren't so much related to the crisis? |
| the kind of changes you've undergone since you | | | | JD: Right. I see external and internal risks. Basically the |
| began? | | | | internal risk is the high complexity I'm facing. With two |
| JD: OK, so first of all, Knorr-Bremse is a company | | | | divisions, the railway being the strong-growth model, |
| doing worldwide around €2.8 billion sales, with 14,255 | | | | and the truck and bus division reflecting the car |
| people; it's a little more than 105 years old, with two | | | | industry generally, I have two different businesses - |
| divisions: railway, manufacturing mostly brake systems, | | | | and at the same time I ramp up 20 locations which are |
| doors, and air-conditioning systems for trains; and the | | | | on average "three years old". We have 3,000 people |
| commercial vehicles division supplying brake systems | | | | with less than three years with the company. So |
| for trucks and buses. As I said Knorr-Bremse is the | | | | managing the growth and the downturn at the same |
| world‘s leading braking technology company. | | | | time, with people being so young in the organization, is |
| Using this strong corporate experience and backing, | | | | a huge challenge. |
| and having worked for four years at the Group HQ in | | | | Now with new people and new suppliers in new |
| Munich before coming to Hong Kong, I did leverage | | | | markets, business requirements and challenges are |
| that experience for Asia to go one step further in our | | | | huge. So the risk to us is the high complexity and |
| processes - and this is the link to the award-winning | | | | managing the fast growth unknown in other countries |
| strategy we got. I came to Asia in 2003 with, as I said, | | | | so far. |
| €100 in my pocket and tasked to set up the | | | | And then we have external risks. For example |
| business, and it was basically my chance - since I | | | | currency variation: it happened that we are selling in a |
| came after four years at the Munich HQ where I saw | | | | lot of non-convertible currencies or not properly |
| that basically when you try to set up a shared service, | | | | evaluated currencies. As everyone knows the RMB is |
| but you're far from the operations trying to give advice | | | | understated; the rupee is also controlled. The yen is |
| to an outside location, it's quite difficult to get | | | | also - even if convertible - highly controlled and difficult |
| acceptance and recognition. | | | | to predict because it's controlled more politically than |
| So what I've done to overcome this acceptance issue | | | | by the market. So since I import quite a lot from |
| and speed up business under control, since I set up all | | | | Europe and the US, and I sell in local currencies, I have |
| operations on a "green field", I have transformed the | | | | a huge currency exposure to manage which can kill |
| classical divisional thinking: I said "I am Knorr-Bremse: | | | | you quite quickly when you see what happened on the |
| this means no distinction between rail, truck and holding. | | | | financial market last year and if you don't have a |
| My people will be multi-tasked, they will be multi-skilled, | | | | proper risk management process in place with the right |
| and even if they have a corporate function like | | | | qualified people to manage it. |
| corporate treasurer, I want them from the beginning to | | | | In summary our risks are, first, a young organization |
| have a link to the operations and to be able to get | | | | with phenomenal growth; and a risk in terms of |
| acceptance from within operations." This is how | | | | currencies. But for that we have tools and processes |
| Knorr-Bremse Asia Pacific Shared Services were | | | | already in place and we could manage successfully |
| born. | | | | during the financial crisis in 2009. |
| That meant also a ‘godfather/ godmother' rule: this | | | | SSON: As well as overcoming those risks what are |
| means that my treasurer for example is the | | | | your personal ambitions for the next few years? |
| ‘godfather' of the air-conditioning activity, so he is | | | | Where do you want to take your shared services |
| the first guy to be contacted at HQ when the | | | | team? |
| company we have in Wuxi manufacturing | | | | JD: Well, my shared service team is so far very |
| air-conditioning and heating systems for trains has | | | | successful. The guys I hired once upon a time - |
| some finance questions, or another company we have | | | | although we set up our shared service officially in |
| also producing air-conditioning systems in Shanghai; or | | | | 2006, I hired the first people in 2004/5 - are now six |
| my deputy CFO, she is the ‘godmother' for doors in | | | | years with me and of course they are more senior |
| Qingdao and platform screen-door activity in | | | | now, so we are now hiring a second wave of people |
| Guangzhou, and she will be the first person contacted. | | | | because my managers will move forward. They have |
| That means that outside of their corporate tasks they | | | | an incredible experience and incredible value, and you |
| all have operational links via the ‘godfather and | | | | need to plan their succession. The story of starting a |
| godmother' rule. | | | | business with €100 and moving it to €1 billion only |
| This is how everything started - and basically I initiated | | | | happens once; we're now an award-winning shared |
| a shared services organization even without at that | | | | service team because we started everything from |
| time knowing in detail what a shared service was! | | | | nothing and we know the value of one euro. Of |
| When I came to Hong Kong I had no-one and knew | | | | course we now also know the value of one billion |
| nobody; so you hire one guy by one guy, and you | | | | euro… |
| need to ask them to do much more than just being for | | | | What I see now is that I need to professionalize the |
| example a treasurer, the person in charge of | | | | emotional parts of what we have. If you didn't go |
| consolidation, or the person in charge of M&A. | | | | through the story of one euro to one billion euro, you |
| The principles are simple: no distinction between rail | | | | don't know what it means to finance yourself through |
| division, commercial vehicles division and holding | | | | yourself even though I can tell you the story. The |
| corporate division; and ‘godfather and godmother' | | | | challenge for me is to hire the right people with the |
| rule, so a link between corporate and operations to get | | | | right mindset, and it's quite difficult! There's a lot of |
| acceptance from the locations as the customer of the | | | | supply of people right now, but their loyalty, let's say, or |
| services you provide. | | | | their reliability, their honesty as a core value is quite |
| The shared service itself is like this: in Hong Kong we | | | | difficult for me to find. The people who identify |
| have IT; HR; indirect purchasing; finance and controlling | | | | themselves with the business are getting rarer, I would |
| - my department covering: M&A; planning; tax; | | | | say, because many were educated during the new |
| treasury; consolidation; rail controlling; and truck | | | | economy/ internet stock market bubble and they are |
| controlling. This is how we're set up, and of course only | | | | probably too used to easy money. Hopefully the crisis |
| the management function is based in Hong Kong. We | | | | will recall core universal values necessary for a true |
| have offshored some of our operational IT staff to | | | | industrial and business recovery: you have to work |
| China – because our biggest market and operations | | | | hard and show long-term sustainable performance to |
| are in China - and an IT development team in India | | | | make money and to create real value, placing |
| already, in New Delhi. The shared services head is | | | | speculative orders on the stock market is |
| based in Hong Kong, because we feel Hong Kong | | | | disconnected from the reality. It's so hard to make 1% |
| provides us with the right infrastructure and educational | | | | profit in the real industry! |
| environment to find and retain really very highly | | | | Where I want to drive my shared service is, first, to |
| qualified and capable people - I would say that this is | | | | hire these people, and to extend it. For example, to |
| the best place in Asia-Pacific - but let's say operational | | | | have a regional purchasing manager to ensure all |
| tasks can be done offshore, and no matter if the | | | | possible synergies in our material consumption - we |
| people are with us physically or not, we are | | | | have developed a shared service also in the indirect |
| collaborating via phone/ video conferencing, emails and | | | | purchasing area, but not yet for direct purchasing. We |
| web meetings just fine. This is how we are organized. | | | | want also to have the legal department in the region; |
| SSON: So can you give us any insights into headcount | | | | we want of course to have engineering in the region, |
| in each of your different areas? | | | | because China and India are very specific markets |
| JD: Talking about finance, controlling, IT, HR, indirect | | | | and if you bring the product over designed from |
| purchasing: we're talking today around 70 people. That | | | | Germany with German costs to China then you are |
| would be on four sites in China, India and Hong Kong. | | | | sure to fail. So we need to have knowledge in the |
| SSON: Let's look specifically about what it was that | | | | region - and I think this is where we go to extend the |
| the judges really liked about your operations: what | | | | scope of the shared service, with engineering, design, in |
| makes you stand out from the crowd? | | | | the central function with a legal department and |
| JD: I would say, number one, a very very | | | | purchasing. That's what I see. |
| unconventional, successful business story compared | | | | SSON: OK, let's close with some more general |
| with anything you could learn in business school or a | | | | questions to you directly. What do you think is the |
| CPA, or MBA degree creating value for countries | | | | secret of success in business? |
| infrastructure and for our company. We have not | | | | JD: Well, I would say: be hands-on, hands-on, hands-on. |
| one-digit or two-digit growth over the last seven years: | | | | You have to have a private life balanced with the job - |
| we have three-digit growth. This is quite simple: we | | | | that's quite important. You cannot sit on your leather |
| went from €0 towards €1 billion of sales revenue, | | | | chair in your central building: you have to go outside. |
| enabled and supported by our new captive Shared | | | | Talk to your people; meet your customers; meet your |
| Services organization with an impressive performance | | | | suppliers. Be interested in anything related to business: |
| also on the delivery processes and cost structure. I | | | | any contractual issue for the building, for the rent, for |
| think this was something which the judges liked | | | | supplier agreements, special liabilities in contracts etc. |
| because when you look at the individual results and | | | | You have to be on-site. I would say: hands-on. |
| respective KPI charts it's very impressive. And this is | | | | Then, I think you have to be loyal. I don't believe a guy |
| not what I would call a company selling nothing, with | | | | who is changing jobs every two years can be |
| just a room and a server and nothing behind it: we are | | | | successful - because it takes at least one year to |
| selling answers for a world of mobility with every day, | | | | understand the business, one to two years to |
| more than ome billion people who put their trust in | | | | understand all the systems and probably four or five |
| systems from Knorr-Bremse worldwide as the world's | | | | years to build up a network which enables you to drive |
| leading manufacturer of braking systems for rail and | | | | things. So honesty, loyalty and consistency are |
| commercial vehicles. | | | | important. |
| For more than 100 years now the company has | | | | Then excellence in execution is something very |
| pioneered the development, production, marketing and | | | | important. And I would say for me to have a mentor is |
| servicing of state-of-the-art braking systems. In the rail | | | | quite important. I had and have the chance to have |
| vehicle systems sector, the product portfolio also | | | | great business mentors. To have a senior guy driving |
| includes automatic electropneumatic or electric door | | | | you, helping you when you're adapting - because as I |
| systems, air conditioning systems, control components, | | | | said as you're developing a business from €100 to |
| toilets and windscreen wiper systems, as well as | | | | €1 billion, and you didn't do it before, you have some |
| platform screen doors. In the commercial vehicle | | | | doubts sometimes: did you make the right decision? To |
| systems sector, the product range includes complete | | | | have a mentor is something very important. |
| braking systems with driver assistance systems, as | | | | SSON: That goes onto our next question, then: what's |
| well as torsional vibration dampers and | | | | the best advice you've ever been given? Did that |
| powertrain-related solutions, such as the Pneumatic | | | | come from one of your mentors? |
| Booster System (PBS) and transmission control | | | | JD: Yes, absolutely. Because my position is quite |
| systems for greater efficiency and lower fuel | | | | unusual - I'm 35 years old and CFO of such a large |
| consumption. When you take the train anywhere in the | | | | region, and the people I met along the way were |
| world it's most likely using our products. | | | | almost all more senior and older than me. So when |
| In Asia we have really developed a strong position | | | | you don't have the experience in years, in order to |
| comparable or bigger to the rest of the world within | | | | manage such a position (while being 15 years younger |
| only 7 years. I would say our shared services have | | | | than the mentors I've had), you have to compensate. |
| been the foundation to enable our business best. We | | | | And how you compensate is by working twice as |
| are Knorr-Bremse, full stop. And we identify ourselves | | | | hard, and by developing a social competence largely |
| with the company as one and do not think in separate | | | | above the average with language skills and strong |
| divisions or functions. We are thinking simple and flat. | | | | networking. This is the advice I got from them and this |
| So our first priority I would say is the business. Our | | | | is what I have done. |
| spirit, as I said is: hands-on with an efficient and lean | | | | If I'd have followed everything that people told me |
| organization. In Europe or the US - when you usually | | | | before going to Asia back to 2002 - just to tell you I |
| take via M&A new companies - you have a lot of | | | | would be still an accountant somewhere in Europe and |
| history. And history means different cultures | | | | for sure without now five prestigious Awards and an |
| (sometimes politics…) and integration issues. We don't | | | | incredible valuable experience. |
| have that. In Asia we started from scratch so there is | | | | In most companies Asia was accounting for less than |
| no history or politics. I think this is a key factor enabling | | | | 5% of the global sales back to 2002. This was not |
| our speed. | | | | even shown in the reporting as a sub-group like North |
| Then I would say our unconventional management | | | | America, South America and Europe but part of the |
| style. We don't have a CEO. This amazes a lot of | | | | Elimination line… I was even told that the people going |
| people. We are an executive committee, and we are | | | | to Asia are the low performers. Seven years later this |
| equally managing the region. We're basically four | | | | is the fastest-growing region in the world, which by |
| people: a COO Sales & Marketing (Spanish guy); | | | | passed South America six years ago, US three years |
| a COO Operations (Austrian); a CFO Compliance - | | | | ago, and now rivaling with Europe from the market |
| which is me (French); and a CIO (German). So a true | | | | size and we are benchmark and award-winning in our |
| management "melting pot" team. So since we are an | | | | processes and performance. |
| executive committee with completely different | | | | So don't believe what everyone tells you. This is |
| backgrounds and completely different responsibilities - | | | | basically my advice…Do not follow the burger check |
| but we HAVE to manage a region together - we | | | | lists! Do not go where the path may lead, but go |
| cannot afford to have one guy working against | | | | instead where there is no path and you leave a trail. |
| another one. With this structure we have had to learn | | | | So this is basically what I've done! |
| to work together, developing an incredible team spirit - | | | | SSON: Excellent advice! And finally, Jerome, how |
| and then this is very powerful. When you talk about | | | | would you like to be remembered when you leave |
| compliance, the ‘four eyes' principle; since we are | | | | business? |
| four guys we have the ‘eight eyes' principle. So this | | | | JD: Well, as I said I'm only 35 - I'm not dead yet! But… I |
| strong point is the cross-functional responsibility. | | | | would like to be remembered as an unconventional, |
| Since we are a strong team we developed a ‘plug | | | | smart guy, atypical, a guy who wants to leave a trail |
| and play' concept together: that means when we buy | | | | and not follow the other ones, using common-sense. A |
| or set up a new company, or integrate a new | | | | very hands-on guy. A guy who enabled a billion-euro |
| company with the cross-functional management | | | | business with €100 of equity, breaching any rule |
| process for Asia Pacific, we have one cockpit of tools | | | | from any university - like, normally you need 50% |
| - especially the SAP system, the finance and | | | | equity and 50% from the bank to drive something, and |
| controlling processes within a Corporate frame called | | | | I started with 100% bank liabilities following my common |
| KE (Knorr Excellence) - and it takes us two, maybe | | | | sense (and of course when you don't have the cash |
| three months maximum to integrate a company within | | | | you become more creative to get it). You are learning |
| the group - and this without any external consulting. | | | | the price of money! |
| Then I would say that business excellence is not the | | | | I would like to be also remembered as a guy who |
| monopoly of the listed company: I think we were the | | | | demonstrated that business excellence is clearly not |
| only unlisted company - or having no link to a listed | | | | the monopoly of listed companies or overqualified |
| company - getting an award this year, and for us, | | | | people on paper. Everything is possible with the right |
| instead of dying under complex legislation like SOX or | | | | mindset: that is sufficient honestly! |
| IFRS - because one euro will always stay one euro no | | | | |
| matter in which account you book it - we are following | | | | This article was first published on the Shared Services |
| German GAAP which is cultural for us. In German | | | | & Outsourcing Network (SSON) - Read it here: |
| GAAP you only book the risk and you don't book | | | | About The Shared Services & Outsourcing |
| unrealized chances. Other than that: when you look at | | | | Network (SSON) |
| the financial crisis, what is "fair value"? So we are quite | | | | SSON is the largest and most established community |
| conservative, taking no potential chances into account | | | | of shared services and outsourcing professionals, with |
| in our accounting. So if we have any surprises we're | | | | over 25,000 members. |
| normally always positively surprised because we're | | | | SSON provides the roof under which key industry |
| really conservative. And overall I think we've largely | | | | experts and organizations share their experience, |
| beaten the downturn: in 2009 we basically increased | | | | knowledge and tools, and practitioner peers connect |
| our sales by around 50% compared with the year | | | | with other all over the world, both face to face and |
| before. So, why not coming back to basics? E.g. book | | | | online. |
| only what you have truly in the pocket? Anything else | | | | SSON focuses on developing its members through |
| is simply virtual and BS to me. | | | | providing training, tools, and networking opportunities. |
| SSON: That's very good going! | | | | SSON staff works from international offices in New |
| JD: While everyone else was talking about the | | | | York, London, Singapore, Sydney, Berlin and Dubai to |
| downturn, basically we continued our growth on a | | | | research current trends and developments in shared |
| regional level. This is what happened to us. | | | | services. |
| SSON: Well, that does bring us nicely onto our next | | | | More information visit the Shared Services & |
| question: how WERE you affected by the downturn? | | | | Outsourcing Network (SSON) website. Stay up to |
| And do you think there are more challenges around | | | | date with SSON's latest twitter posts at twitter. |
| the corner? | | | | |