Hayes Weier: That’s excellent advice. Okay, well let’s shift gears a little bit and talk about growth through mergers and acquisitions. Your growth strategy has included more than 500 acquisitions over the past 20 years. How do you balance managing risk while driving growth?
Davies: M&A is a very big source of bringing in new content and capability for us to develop more innovative solutions for clients, and to help us bring new capabilities into the firm as we’re trying to navigate through a changing environment dealing with all of this technology. So, we brought a lot of capability in, for example, in data analytics, to help us actually build data analytic capability for our clients.
Mary, I would say we’ve learned a lot on acquisitions and I’m not going to pretend that we’re perfect. And I think we’re getting better at developing a consistent approach to due diligence and M&A integration, but probably much more important than that is really doing the strategic work to say, “Where should we be acquiring capability? What are the most attractive areas for us to invest in and grow?” And then once we did that work five years ago, we then lined up in each of the top areas for us to invest—who would we want to buy? And go out and build relationships with those firms. Because then what you’re doing is really understanding, CEO to CEO, do you view this world the same way? Do you have some sort of cultural fit? Because in our business, the assets walk in and out of the door every day and if the cultural fit isn’t there, we could buy great capability and they could just decide to leave because they don’t like working in our culture. So that cultural fit is at the essence of creating value for our clients.
Hayes Weier: That’s really interesting because I think when companies think of what they have to go through with the due diligence of an acquisition they wouldn’t typically think, “Well, what’s their culture like?” But should that actually be part of the due diligence plan?
Davies: Absolutely. And so we have a cultural due diligence, really trying to explain about the Aon culture, and we talk about what integration would look like, and the kind of ways in which we run the company. Aon United is a very important part of that. And so we’re really trying to be explicit about the culture at the beginning. And then really understand their culture, not just from the CEO but from a whole bunch of senior leaders to really understand how they live their culture every single day to see if it’s compatible .
Hayes Weier: So does that require research, both online and conversations with people? Have you brought it down to any sort of science?
Davies: It’s really a lot of conversations, Mary, because I would say the heart of Aon culture is serving clients. It’s distinctive client service and developing innovative solutions for clients. And so if we’re having conversations with a company that maybe we’re interested in acquiring one day and they don’t have that same passion for client excellence that we do, then it’s probably not going to be a good fit. And so a lot of it is soft. It’s not checking the box or figuring out the research; it’s lots of conversations over time with lots of people at that company to make sure that it’s consistent in culture throughout.
Hayes Weier: So, Christa, you’re also a Workday customer.
Davies: So, we went live on HR a long time ago, several years ago now, Mary, and I think the decision to go live on HR was really about total cost of ownership. We had a number of different systems in place that were very expensive, and Workday allowed us to dramatically reduce the cost and give us a lot of functionality that made it much easier for our employees on mobile phones to do a lot of the things that they were doing via their HR executives, historically. So then we really enabled colleagues to get things done much faster, much more efficiently, and mobile.
Hayes Weier: That is awesome. And then you brought on Workday Financial Management. How recently was that?
Davies: That was the beginning of 2017. Really, the decision to go live on financials was slightly different to HR. We were at the end of life on our existing ERP platform, and so we had to make a change. We looked at Workday, and really the ability to combine HR and financials together was really compelling for us, because we run the business on return on capital, and to be able to have those HR expenses and insights into your people—which is the biggest cost for us— with our financial data together and manage return on capital across both, is really important for us, because we do manage the business that way. We actively manage the portfolio, and so it’s really starting to help us do that.
Hayes Weier: What are some specific examples of how you’ve been able to combine both HR and finance data and gain insights?
Davies: We’re really just at the beginning of that journey, Mary, but I would say that on the finance side, we’re able to actually track finance data so much more immediately. Our time-to-close has sped up a lot, because we have these close dashboards, which actually help us really speed up time-to-close across all of our countries, across every account code, across each person. That’s been very helpful. I think actually drilling into the expense data in HR and combining it with the financial data in finance has just allowed us to drill down into profitability and understand the underlying drivers of it much more immediately, because you’ve got all the transaction data in there. That’s sort of the early way we’re using it, Mary, but I’d say we’re just at the beginning of this journey
Hayes Weier: At Workday, we talk about the power of one community and it feels like our customers really get that, and it means something to them. What does the power of one mean to you?
Davies: Mary, for us, having HR and finance together in one platform is really important because you’re not trying to knit it together yourself. You’re not trying to pull together interfaces. It is one platform. So, for us to manage the business on free cash flow and return on capital, and to be able to do all those calculations and analytics in the actual platform with the underlying transaction data is really important, because then we can actually have all of our finance colleagues around the world actually managing their business themselves in the platform as opposed to waiting for IT to produce reports, or waiting for someone else to produce reports. It’s really putting power in the hands of our finance leadership team to actively manage the business with their business leaders, and that’s not something they’ve been able to do historically.
Hayes Weier: Okay, then also what about bringing in new acquisitions? Has that been helpful with our platform?
Davies: Very much so, Mary. So one of the things with having a platform in the cloud is you get consistency across all your global locations. We’ve got over 100 countries and when we had a finance platform on site; we used to have different implementations in each different country. And so now when we acquire a company, it’s coming into a consistent platform: Much faster integration, much more seamless integration, fewer errors.
Hayes Weier: So Christa, Workday’s in the cloud and it can be a misconception that the cloud is riskier than having your own finance and HR data in on-premise data centers. You almost get that impression, particularly in the CFO world, there’s a lot of concern about risk in the cloud. What’s your take on that?
Davies: Mary, we did a really thorough security assessment of Workday, as you would expect we would, because it’s very sensitive data on the HR side. It’s very sensitive data on the finance side. And in fact the security that Workday provides around both those data sets is superior to what we had on premise. So for us, it’s a core part of Workday’s business. They have to have this level of security and it really is phenomenally better than what we had on premise ourselves.
When you have it in the cloud, you’ve got a very strong perimeter and really strong management of that security centrally, which means there are fewer places where people can enter to steal the data.
Hayes Weier: That was Christa Davies, executive vice president and CFO at Aon. Christa, thanks so much for joining us today on the Workday podcast.
Davies: Thank you so much, Mary.
Hayes Weier: This is Mary Hayes Weier from Workday. Thank you for listening.
(Interested in learning more? Read, “Solving Global Business Challenges with Workday: Q&A with Aon’s VP of Finance Solutions.”)