JIM MARSH, CEO OF CABLE & WIRELESS
Interview by Don Durfee

There’s a long list of troubled companies, ranging from bankrupt airlines to sluggish car companies, that have asked former CFOs to lead them out of financial dead ends. One of them is Cable & Wireless—the UK-based telecommunications company with extensive Asian operations—which two years ago appointed Jim Marsh as its CEO. Marsh began his career as an accountant with KPMG before moving to the British retailer Boots, becoming a divisional finance director and later its head of strategy. Since then, Marsh has moved through roles in sales and operations with KPMG’s consulting business and with Energis, a fiber-optic network operator. Now he’s applying his financial skills to the biggest challenge of his career: making a struggling telecoms business customer-focused, nimble and, hopefully, profitable. Marsh tells CFO Asia how his financial background makes him a better CEO.

Your career has included time with a Big Four accounting firm, a job as a divisional finance director, and senior positions in sales. Did this mix of experiences help you reach your current position as chief executive?

The reason I got this job was absolutely because I have got the finance director experience and sales director experience. That gives you breadth. One of the things I insist on here is that for anyone to get into the top two levels in my business, they have to have moved across different functions. It enables you to understand other people’s perspective.

We’ve seen a number of CFOs become CEO recently. Do you think a financial background has become more important for CEOs?

I think it’s become harder and harder to compete in the marketplace, and that squeezes financial performance. There’s a need to deliver returns in difficult, turbulent markets. That makes it more important that you are getting capital investment decisions right.

It’s particularly true in my industry, since telecoms is, from a financial management perspective, very complex. We have very large capital costs associated with running a telecoms business—the network infrastructure. And from a revenue perspective, you have billions and billions of small transactions. So there is a real complexity around our industry.

You have shifted Cable & Wireless’s focus to the biggest corporate customers rather than consumers or small business. How has that changed the company’s economic model?

When the new management team first moved in, one of the things we announced was that we were going to exit 90 percent of our customers. There was quite an extreme reaction from some in the press. But what they chose not to print was that 90 percent of the customers delivered 4 percent of the margin. Imagine how liberating it is for an organization to remove that huge volume which enables you to focus on the big customer.

One of the legacy issues in our industry is that we have historically been obsessed with size. So the focus was on revenue, revenue, revenue. I’m interested in revenue if it’s good revenue, not bad revenue. So the movement to exit a large number of customers had a revenue impact but virtually no margin impact.

Telecoms is a capital intensive industry. A lot of the guys in the industry, historically, have assumed that you have to spend these huge sums of capital upfront. What we’ve tried to do is change the focus from revenue and gross margins to cash and pure profit. It might sound odd to a finance professional, but for people who’ve been in our industry all their careers, that’s very different. So there are a lot of deals where we have an opportunity but we look at it and say “No, actually we’re not interested. It doesn’t make the margins that we want, so we won’t do it.” Some of our competitors are still in the mindset of “Buy anything you can.” We are proud of the fact that we will say no to bad business.

Has your background in finance and sales helped you lead this kind of change?

It’s been vital. My finance director experience has given me a real commercial sense of what makes sense for shareholders. And my time working in sales and retail has given me that customer focus.

How is your working relationship with your own CFO, given your similar backgrounds?

Maybe you should ask him [laughs]. We’ve both done finance and sales jobs, so we both have the same level of understanding. The difference is that he has far more attention to detail than I do. We’re both quite intuitive about getting the right answer, but he has discipline to work it through the spreadsheet himself, just to make sure it’s right. It actually works quite well.

Another thing is that because we have unusual but very similar backgrounds, I trust him to step in on my behalf when there’s a finance or even customer-related matter. As a CEO, having complete confidence in your CFO is very important. It can be a real enabler for you in terms of getting better leverage out of your own time.

What would you tell a CFO to do to get the most out of his relationship with the CEO?

The most important thing for me is for the CFO to be constantly charting the course to the ultimate destination. So very simple things, like having a proper rolling forecast for running the business. Too many finance directors I’ve met still run the business on the budget basis. Running it from a rolling forecast drives a much better set of conversations. The other thing you want as CEO is no surprises.

Was there anything about the CEO’s job you weren’t prepared for?

You learn that in a role like mine it’s about constant reinforcement of a small number of simple messages. You need to do that because things get lost in translation. We have colleagues in 40 different countries. So, for example, we’ll randomly pick 30 junior colleagues and I’ll sit down to see if the messages we’re trying to communicate are actually getting through. Two times a year, I travel the world, sitting down with colleagues and having these kinds of conversations. What wasn’t expected was just how much time you have to spend reinforcing the core messages.