5 top tips from Shell’s CFO

Royal Dutch Shell is one of the largest companies in the world. The Anglo-Dutch oil and gas company, which ranked 11th on Forbes magazine’s Global 2000, has about 92,000 employees at operations in more than 70 countries. It produces more than 3 million barrels of oil per day and reported revenue of $451.2 billion last year.

It’s quite a lot to keep track of – especially in a rapidly evolving global economy. But Simon Henry, FCMA, CGMA, a Shell executive director who has been the company’s CFO since May 2009, says he relies on a strong team to keep the company’s financial strategy moving ahead.

As a member of the executive board, Henry oversees a series of formal governance, audit committee, risk management, general strategy, financial reporting, and performance appraisal requirements. As the CFO, he focuses on the business performance management process – everything from strategy through to medium-term planning, budgeting, performance reporting, management appraisal of performance, and the feedback that leads in to the resource allocation process. He is also responsible for the company’s IT function and Shell’s Asia division.

Henry is scheduled to participate in a panel discussion in November at the World Congress of Accountants on how businesses thrive in disruptive times. He recently spoke with me about how he drives sustainable business success, harnesses top talent, and manages risk to steer the organisation’s evolution and development. Our conversation yielded these insights:

• Your people are at the heart of creating sustainable success. The primary factor in maintaining successful business practices is to ensure that you have a good team. The role of a CFO or a CEO very much requires you to develop talent, and, at Shell, 25% of collective executive leadership time is spent on enhancing the company’s people. A lot of Shell’s success is based on creating the right environment for talented people, with an upwards development trajectory. It is essential to create organisations and leaders that are robust and resilient enough to encourage the change needed to expand an organisation.
• Understanding and managing risks is vital to the credibility of your business. The economic shift to developing countries, the pace of change of technology and markets, and the relentless transformation of globalisation put enormous strain on business. As well as that, the danger of complacency is always a risk. Falling back to traditional modes of behaviour is something which executives have to consistently be conscious not to allow. Management accountants, with their focus on forward-thinking and sustainable business, are therefore vital to the risk-management process. Shell is clinical in understanding its risks, and the company has a well-structured process for ensuring that all risks are addressed at the executive or management level. Although there are certain events that simply can’t be planned for, it is crucial to have an established process in place to deal with any eventuality.
• For businesses to succeed and innovate, being a good corporate citizen is a prerequisite. Being a good corporate citizen is not just a necessary core competency for every organisation, but also is a competitive advantage in many sectors. Industries and organisations must not just wait for regulations to be applied, but get ahead of the curve, and be reactive to financial, environmental, technological, and economic change. If you have the correct approach to the role of responsible business by acting in a sustainable way, you can create different regulatory environments in which you can then do better business.
• Finance is not an island, and it can’t go through change by itself. Shell is currently looking to expand the way it does things in finance to non-finance activities. This includes updating the customer service centre, order scheduling, distribution activity, contracting, and procurement so that they are mirroring the finance function. This should lead to immense improvement potential. The finance function can only have a positive effect on other parts of the business. Part of the role of finance leaders is to ensure that the finance function culture is embedded across the wider organisation.
• Be curious. Part of being a professional is understanding what is required of you and making sure that you get the job done. But being an effective finance leader doesn’t stop there. Having the curiosity to understand exactly your organisation’s business model and risks – that is what will catapult you and your business forward. Understanding everything from finance to organisational effectiveness and allocation of resources – coupled with expertise in other parts of the business – can prove to be an extremely powerful asset in the effective management and development of a company’s finance function. 

Speaking with Henry reinforced what the Chartered Institute of Management Accountants and the American Institute of CPAs have discussed on CGMA.org about the vital aspects of successful, sustainable business practices. In the volatile, uncertain economic climate in which we live and work, it cannot be stressed enough that companies should look to develop their human capital to achieve competitive advantage. Understanding and harnessing your talent pipeline is vital to the strategic evolution of any organisation.

It is clear that Henry and his team execute this effectively at Shell, realising the full potential of their most effective tools – their management accountants and forward-thinking finance function.

—Charles Tilley is the chief executive of the Chartered Institute of Management Accountants.