Finance Flies High: How Unilever Redesigned Its Finance Function to Build Brand Value and Drive Growth
Tarasovich, Barbara, Lyons, Bridget, Strategic Finance
It's hard not to know about Axe, the number one deodorant product in the U.S., or Dove, with its "real beauty" campaign featuring ordinary women rather than models.
Unilever's finance team played a key role in the success of these brands and others. The company achieved its fourth consecutive year of accelerating organic sales growth from less than 0.5% in 2004 to more than 7% in 2008, according to Jim Lawrence, Unilever's CFO. Its strategy is to focus on volume growth and strengthening the competitive position of the company's brands.
While growth has slowed to 4% in 2009, this is still strong relative to the market. In August, CEO Paul Polman stated, "While conditions remain difficult in many markets, I am encouraged by the return to volume growth across all regions and the majority of countries and categories. More of our brands are improving share again behind strong innovations, greater consumer value, increased marketing support, and better execution. We continue to focus on restoring volume growth while protecting margins and cash flow for the year as a whole." In terms of actual recent performance during this difficult economic time, volume growth went from -1.8% in the first quarter of 2009 to +2% in the second quarter.
In this article, we examine how the finance function at Unilever was redesigned to deliver the firm's strategic goals, including an emphasis on volume growth and competitive position of its brands. Beginning in 2005, the finance team at Unilever asked: How should the finance function operate to achieve these goals? The result was the creation of a five-step process dubbed "Finance of the Future." The steps in the process are detailed below.
Define "Finance of the Future"
In order to understand the context of the finance team's current participation in achieving Unilever's goals, we need to first look at the origin of the finance team's redesign. At a meeting several years ago, Unilever's top 200 finance professionals set a strategic direction for the team to become "Partners in Value Creation." The team identified what they would look like 10 years into the future. They determined a major transformation was necessary, not only in the leadership and culture of the team, but also in the underlying financial systems and processes. In the past, Unilever had operated with a very decentralized organization structure, and, as a result of this structure, the finance team had collaborated on projects but had never truly worked with one consistent directive globally.
Develop Strategic Thrusts
The team developed strategies known as "Strategic Thrusts," which aligned with Unilever's overall strategy. These five strategies include innovative business partnering, people and organization, dynamic performance management, world-class financial processes, and financial flexibility. Here's a look at each of them.
Innovative Business Partnering (IBP)--Upgrade capabilities to better enable the finance team to add direct value to the business and influence and support Unilever's strategy. This thrust included developing a practical toolkit for decision support and focused on finance professionals who work with brands and customers specifically.
People and Organization--Develop a leading-edge finance team to focus on changes required in behavior, design and implement a learning plan, and create a compelling career proposition to attract and retain the best talent.
Dynamic Performance Management--Apply IBP to the organization's framework. This thrust focuses on the forecasting processes and developing relative performance targets, rolling forecasts, and trend reporting.
World-Class Financial Processes--Simplify financial processes and improve underlying transactions processing, accounting, and information management by forming shared finance services as well as enterprise-wide financial systems. …