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It was late for a workday (perhaps after 9:00 p.m.) when Seb Martel shared his team’s candid findings with a collection of top managers tasked with assessing the economic downturn’s likely impact on BRP’s business. As a manufacturer of popular vehicles for snow and water, BRP management was naturally concerned that the downturn could wallop BRP’s recreation-minded customers, depressing sales and raising doubts about whether BRP would meet its debt covenants.
Still, the question that remained top-of-mind for Martel was a question that the downturn posed to industry at large: “Is management prepared to listen?” Today, Martel believes that his forthrightness served him well that night—along with an unflinching confidence in the numbers. BRP’s management listened and responded to Martel’s clear-eyed message by taking steps to better manage all areas of business, while battening down any unnecessary risk-taking.
It’s no secret that CFO careers are built on decades of experience that every so often yield unique places in time where an executive is permitted to transform before the eyes of others. So it was, perhaps, for Martel, who entered the CFO office within four years of the fateful night that he says even his CEO still likes to recall: “Remember that night when Seb presented the numbers?”
“The beauty that we have in finance is that we get to convince the organization by using a powerful tool called numbers. And if you know how to communicate a message with numbers, you can steer an organization in any direction,” says Martel, while highlighting what many agree is the essence of CFO leadership—its very own lightning in bottle. –Jack Sweeney
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Guest: CFO Sebastien Martel
Company: BRP (TSX:DOO)
Headquarters: Valcourt, Quebec
Connect: www.brp.com
CFOTL: As the finance function broadens its role, what has it given up or what has finance stopped doing?
Martel: Well, there’s one thing we stopped doing, and there’s one thing we’re doing more of. One thing we stopped doing is extensive budget reviews. When I started at BRP, in my early years at BRP as a CFO, I changed that pretty quickly. We used to spend like days and days doing budget reviews, detailed budget reviews, and that was done once a year and was very extensive and nonproductive.
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It took up a lot of time from the finance organization and also the business. We went away from detailed budget reviews, and now we’re doing more 12-month annual reviews of certain topics. Maybe it’s going to be a marketing review, but instead of doing it in October as part of the budget review, we’re going to do it in March because that’s when we’re going to be planning to spend a lot of money in the next few months.
That’s when we’ll do a more thorough marketing review. R&D and Capex planning is going to happen in June, instead of doing a deep dive in October. This spreads out the work over the year, but also makes sure that the reviews are more aligned with the business cycle and allows for better planning and less knee-jerking, which I had seen in the past.
One thing we’re doing more of, as well, is measuring the returns that the business is generating and allocating Capex and cash differently. Now our Capex decisions are much more driven in terms of not necessarily “Okay, we have a percentage”–historically, it used to be a percentage of revenue–but now it’s more “We have the cash, we’re generating strong cash flows. What are the projects which are going to bring strong returns?” Instead of putting a cap on Capex, we’ll put a cap on the resources that are there to execute on these projects. But if someone has a project which drives good return, we’re going to find the money and not necessarily say, well, the budget doesn’t allow for it. If it’s going to drive good returns and the cash flow is there, we’re going to go ahead and do those projects.
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It took up a lot of time from the finance organization and also the business. We went away from detailed budget reviews, and now we’re doing more 12-month annual reviews of certain topics. Maybe it’s going to be a marketing review, but instead of doing it in October as part of the budget review, we’re going to do it in March because that’s when we’re going to be planning to spend a lot of money in the next few months.
That’s when we’ll do a more thorough marketing review. R&D and Capex planning is going to happen in June, instead of doing a deep dive in October. This spreads out the work over the year, but also makes sure that the reviews are more aligned with the business cycle and allows for better planning and less knee-jerking, which I had seen in the past.
One thing we’re doing more of, as well, is measuring the returns that the business is generating and allocating Capex and cash differently. Now our Capex decisions are much more driven in terms of not necessarily “Okay, we have a percentage”–historically, it used to be a percentage of revenue–but now it’s more “We have the cash, we’re generating strong cash flows. What are the projects which are going to bring strong returns?” Instead of putting a cap on Capex, we’ll put a cap on the resources that are there to execute on these projects. But if someone has a project which drives good return, we’re going to find the money and not necessarily say, well, the budget doesn’t allow for it. If it’s going to drive good returns and the cash flow is there, we’re going to go ahead and do those projects.
