Five strategies from BT Group’s FD

Tony Chanmugam, FCMA, CGMA, was appointed group finance director of British Telecom Group (BT) in December 2008 and has since revolutionised the business by taking out around £4 billion of costs. 

BT Group is a leading multinational telecommunications company established in 1846. It now has a presence in more than 170 countries and is one of the largest providers of telephone, broadband and satellite television in the world, with 18 million customers in the UK alone. The Group provides services to corporate and public-sector customers with operations in a wide range of sectors, such as banking and financial services, consumer packaged goods, logistics, pharmaceuticals and manufacturing.

The BT Sport division has been making headlines lately after winning the £900 million UEFA Champions League television rights from broadcasting rivals Sky and ITV. BT’s investment in sports coverage, as well as the fibre-optic upgrades and a 4G network, mark a turning point towards a more aggressive growth strategy after years of rationalisation.

I had the pleasure of meeting Chanmugam at the BT Centre in central London. We discussed his renowned cost leadership and what he believes to be the drivers of sustainable business success. He offered these top tips:

• Always tackle the key issues head-on. Shortly after my appointment as group finance director, I went to the CEO to talk through a number of concerns. The company had been going through a tough time – cutting debt, addressing the pension deficit, resolving issues in the international business. And you can be sure that if the employees are concerned, then the customer base will be. This led to a perfect storm for change – it is easier to make change happen when there is a business need for that change.
• Adopt a forensic approach. Analyse the business component by component to fully understand the consequences of any action. For example, a key challenge BT faced was in improving the efficiency and effectiveness of our customer services. If you focus only on your costs, you could impact customer services. We improved customer services by reducing the number of calls we received, improved the effectiveness of each call by meeting the customers’ requirements the first time and improved the efficiency by reducing call handling time and the call centre staffs’ ineffective time. However, the business and consumer expectations then rise, and we have to continue to focus on improving our processes.
• Look after your people and they will look after you. The quality of your people is essential. We limit the use of consultants where possible so that we encourage and grow our in-house expertise. Nurture your talent, and your team will become the catalyst for growth – for driving down the cost base, improving efficiencies and driving long-term sustainable success. We also encourage our people to learn the different parts of the business. My experience as a COO has allowed me to be a successful CFO. If you understand the operational side, you will have a better understanding of the financials.
• Finance must play a full role in business strategy. Management accountants have never been at such a high premium. Management accounting skills are vital to our success. We need the right people, but they need the right tools, knowledge and skills to work efficiently. You need effective decision-making, and you want people brave enough to make those decisions. This may mean that someone makes ten decisions, gets eight correct, and makes two mistakes. But he or she learns the most from those mistakes.
• Innovation fuels growth. When we rolled out our fibre-optic network [beginning in 2009], it cost us £2.5 billion. There was a high degree of concern about cost and take-up, but we were bold and had a reasonable confidence we could meet market expectations. We look to safeguard such investments with contingency plans. Be aware of the pessimistic and try to counter that. You cannot afford to stand still and must always be looking to achieve that next set of aims.

Chanmugam emphasised areas that the Chartered Institute of Management Accountants and the American Institute of CPAs agree are key drivers of business growth: innovation and people. I am pleased that our research addresses these critical areas and would encourage readers to look at our recent outputs on these topics on CGMA.org.

It is essential that today’s organisations have a resilient business model. They need to understand how they make money and deliver value, to ensure that their business model is delivering the right results now and into the future.

It was clear from speaking to Chanmugam that management accountants have played a major role in BT’s success, adding real value with their holistic view of the business and ability to guide critical decisions, acting as the CEO’s co-pilot. After our time together, I really do think there has never been a better time to be a CGMA designation holder.

—Charles Tilley is the chief executive of CIMA.