With the completion of the recent transaction between CenterPoint Energy and Vectren Corporation, the veteran chief finance officer discusses advances in the energy industry and the importance of focusing on the customer.
Although William Bill Rogers recently announced his retirement as executive vice president and chief financial officer of Houston-based CenterPoint Energy, ., he remains focused on the future of finance at the 140-year-old company and helping ensure a seamless closing on CenterPoint’s recent acquisition of, and merger with, Vectren Corporation.
As the utility industry overall confronts disruption in the form of technological innovation, rising consumer expectations, lower growth rates in demand for energy, and other pressures, Rogers notes the importance of shifting the focus of finance from “transaction-centric activities to thinking-centric activities.” The former investment banker also discusses some lessons learned to be an effective CFO and the importance of growth and innovation to attracting talent.
Q: In terms of technology, what advances have you witnessed during your time in the industry?
Rogers: First of all, business in general is undergoing major technological disruption, which can be more difficult for companies in older industries such as utilities. Nevertheless, the power and utilities industry has made many advances, with new operating technologies, better systems, and more data that we are learning to use. For example, at CenterPoint, we have initiatives in the finance organization to pilot robotics and machine learning for routine tasks. The industry overall also has made advances, ranging from more efficient gas turbines and photovoltaic solar systems to more effective grid management. More advances are coming as companies throughout the world work on battery technology.
Q: From your perspective, what are some key traits of an effective CFO?
Rogers: For the CFO and the finance team, I believe the starting point is to have the books and records correct and, equally important, to have the financial strength so that the company can execute its strategy. That’s just table stakes.
For the broader finance organization to be successful, it needs to be an effective partner to the business and support the CEO’s organizational design, whether that be by product line, customer, or geography.
Finance also has to understand how the accounting, treasury, tax, and risk functions work together as the machinery within the company to support the business. For example, the FP&A group must be keenly aware of key performance indicators and key leading indicators to make sure that management understands where the business is headed in terms of both a near-term and long-term forecast.
As CFO, you want your risk team to be thinking beyond just commercial and enterprise risk. The risk team needs to be able to explain what the risks and the distribution of risks and returns might be longer term; and, therefore, what the opportunities for generating returns and mitigating risks might be within each sector of an industry in which the company elects to compete.
There are other examples that I could add, but the point is, each function within finance has a very significant role to play and forms the mosaic of the overall finance organization. When they come together, that makes for an especially enriching CFO experience. That’s something that I may not have appreciated as much as an investment banker.
Finally, developing the skills to interact with business partners or other functional areas is critical to success—for anybody who aspires to be in the C-suite.
Q: What advice has served you well in your career?
Rogers: One of the best pieces of advice I got when I first became a CFO 14 years ago was to follow the cash and understand the movement of cash within a company, because just doing financial analysis on your statement of cash flow would not be sufficient. Leveraging the FP&A organization to understand cash returns on investment and leveraging the treasury organization to understand the cash and investments in working capital, as well as the cash conversion cycle within working capital, is incredibly useful for analytic purposes. Areas like insurance, tax, and regulatory accounting offer the CFO other perspectives. All of them become different lenses a CFO can look through to get a sharper focus on, and a better understanding of, the business, which is critical to adding strategic value.
Q: Given the highly regulated nature of the business, what can utility companies do to generate growth?
Rogers: Granted, the utilities business is in a mature industry sector; like some other industries, it faces challenges in terms of volume sales growth due to advancements in technology and changing customer preferences. In that case, you have to think differently to generate growth. You can work to take market share, but that means you have got to get your cost structure down for appropriate returns. Acquisitions could be an element of that. In April 2018, CenterPoint announced the deal with Vectren Corporation, which closed in early February of 2019. CenterPoint expects the merger to provide the newly combined company with greater regulated earnings, more customers, and a greater breadth of products and services to offer.
Along with increased size and scale, and focus on cost structure, a utility company may elect to redefine the value proposition to its customers. So, if you think in terms of the customer’s energy wallet and where they elect to spend that, a company may elect to pursue more of that wallet reserved for activities other than purchasing kilowatt hours or dekatherms in the case of natural gas.
Perhaps customers are buying solar panels or battery packs for their electric vehicle and seeking an energy company for the installation and integration. They also may be buying home warranty services. Or the customers might be intrigued by data analytics for their energy consumption and want to be a part of the Internet of Things, meaning sensors in this example, to better understand where they’re using energy. These are just a few examples of nexus of the customer and technology. If a company focuses on what customers are purchasing, it can then create a larger market and add value.
Q: What will be your role prior to the completion of the merger?
Rogers: My role will be getting Vectren’s financial systems integrated into our company and implementing our controls framework. There’s a lot of accounting work that goes with a merger. Not only do we have to make sure we put the right systems and controls and accounting policies in place, but we must remain focused on the strategic rationale. In mergers there is always the concern that the focus on the imperative to successfully integrate diminishes the importance of the strategic rationale and detracts from attention paid to customers. Competitors are very aware of this as we compete with them for the customers’ share of mind.
Q: From a talent perspective, what have been some of your priorities?
Rogers: Speaking broadly, it’s critical to show growth and a commitment to innovation as a component to opportunities for our talent. If you’re in a mature industry and you’re not growing and innovating, there will be some resistance when it comes to recruiting.
For finance, I think it’s important to think through how to access and grow talent over the long term and to move from focusing on transaction-centric activities to moving into thinking-centric activities. Recruits often ask, “Is this industry going to be innovative and stay current?” That is very important to our younger employees. They know careers are going to be very different over the next 30 years and staying current with technology is critical. For example, an initiative we have on the accounting side using robotics and machine learning has been well-received by a number of finance employees.
On the other hand, longer-term employees may not be as comfortable with the introduction of new technologies. As a leader, it’s important to address the anxieties that new process and technologies can bring and help employees understand how those can help position them to add greater value to the organization and to their career.
—By Josh Hyatt, Deloitte Services LP, senior writer, Deloitte Insights for CFOs
Editor’s note: This article is part of an ongoing series of interviews with CEOs, CFOs and other executives. Bill Roger’s participation in this article is solely for educational purposes based on his knowledge of the subject, and the views expressed by him are solely his own. This article should not be deemed or construed to be for the purpose of soliciting business for CenterPoint Energy, nor does Deloitte advocate or endorse the services or products provided by CenterPoint.
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