Since October 2011, the distribution rights in Western Europe for Toshiba heating and air conditioning products have been held by the Swedish Beijer Ref Group, which markets these products in 11 countries through seven subsidiaries. Olivier Gandy, Chief Financial Officer of Toshiba Air Conditioning, a division of the Beijer Ref Group, spoke to CashLab about how he manages the finances of these subsidiaries. Turnovers vary from €3 million to over €50 million. He also explains how performance management has been able to drive his business.
What are the specific features of your organization?
"Before its attachment to the Beijer Ref group, our company depended on the Carrier Group, an American giant, world leader in air conditioning and member of UTC (United Technology Corporation). We were very much influenced by American corporate culture: approval matrices, very strong focus on cash... The watchword was "Cash is King". We sought to partially free ourselves from the constraints linked to this model, which was very hierarchical and very strict, and to keep only the elements of the cash culture that could be implemented in small and medium-sized structures. Thus, we made two models coexist: family and matrix.
To achieve this, we have implemented a "flattened" pyramid that reinforces the proximity between decision-making processes and operational staff. The holding company's workforce is rather small. In Europe, a CEO and a CFO (myself) share most of the tasks, without assistants. In the countries, we want all employees to be highly operational and very focused on customer service. While we have kept functions such as after-sales service and technical management and finance in-house, in most countries we pool back-office, IT, and human resources functions, where these are coordinated internally before being called upon externally if necessary.
We have also implemented a real cash culture in the company, both in terms of costs and working capital requirements."
In this context, what are the main ingredients of cash and working capital management?
“Our business model is quite simple:
Toshiba is our exclusive supplier, and payment terms are fixed. This leaves us with relatively little leverage to improve our performance, but we are constantly striving to improve our gross margin. Performance management is the primary driver of our business. To improve our cash flow generation, we have implemented several measures:
- A strict cost-savings policy. The company's family-run model has greatly helped ensure that all operational staff accept the restrictions. We are also committed to managing by example, being the first to do everything we can to reduce costs.
- An "ideas box" allowing everyone to submit their suggestions. We believe everyone can have a good idea to improve the company's performance. To encourage operational staff to express themselves and reward good ideas, we have implemented a reward system called the "Bravo Bonus." This way, everyone feels listened to and involved in the company's life. This helps promote acceptance of the rigor of our cost savings policy.
- Profitability/WCR arbitration and reinforcement via a new KPI: Gross Margin * NITO (Net Inventory Turnover). One of the levers we have is inventory management. Monitoring the evolution of NITO is essential for us.
- Monthly cash forecast for the Group by entity
The working capital is managed via:
- Sales forecasts by country
- A centralized order schedule
- A monthly review of stock positions at European level in addition to the review carried out in each country
- Key KPIs including NITO used in annual objectives
- Recovery carried out locally by country
As well as with credit risk coverage by country."
If you had to give some key advice?
“The main thing is to:
- Do what you say, let others know what you do and lead by example
- Involve employees to strengthen the culture of performance, profitability and cash
- Creating a bond at each level, facilitated by the flattened pyramid and proximity to management and very short decision-making processes
But also, knowing how to congratulate (say “well done”) and reward (“bonuses” for good ideas that enable cost reductions/optimization)."
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