The CFO as Change Agent: Finance People Need to Ask the Tough Questions, Says Steven Paladino of Henry Schein

The CFO as Change Agent

Finance People Need to Ask the Tough Questions, Says Steven Paladino of Henry Schein

NOELLE KNOX

March 9, 2014 7:47 p.m. ET

Over the past 25 years, Henry Schein Inc. HSIC +0.01% has transformed itself from a family-owned business with $125 million in annual sales into a $10 billion provider of products and services to dental, medical and veterinary offices world-wide.

Steven Paladino, who joined the firm in 1987 and became chief financial officer in 1993, has been there through it all, helping steer an expansion that has included more than 200 acquisitions.

Mr. Paladino spoke to the Journal about the Melville, N.Y., company’s prospects in the wake of the Affordable Care Act and why he sees himself as a change agent, among other things. Here are edited excerpts:

Boon for Business?

WSJ: How will the Affordable Care Act affect your business?

MR. PALADINO: The ACA is still being shaped, but we think it’s an advantage because of our position in the market. People are going to have health-care insurance who never had it. That will mean more procedures in the physician’s office. And the more procedures doctors do, the more of our supplies and equipment they use.

The piece that could be a negative is the fact that there will be more reimbursement pressure on our core customers. Physicians, and everyone else in health-care services, are going to be asked to do more with less.

WSJ: How do you view your role at Henry Schein, and do you see it changing?

MR. PALADINO: I view finance people as has having three primary roles. The first role is to produce financial information that is accurate and timely, and to make sure there is a solid system of internal controls. We can’t do anything else until we get that right. The second part of the job is in acting as a business partner. We help the business leaders with strategic decisions, business decisions and business analytics support—everything to help improve whatever business goals they’re trying to achieve. And the third thing, which people don’t always like, is acting as a change agent. The finance person can push the envelope, to see things differently and ask, “Why are we doing it this way? Should we be doing it this way?” The finance department has a unique viewpoint from which to ask those hard questions.

image001-11

WSJ: What are some of the hard questions you ask as a change agent?

MR. PALADINO: What businesses should we be in? Are there any businesses we shouldn’t be in? It is never a popular discussion at any company to have to say, “We’re in a business that maybe we shouldn’t be in” even if it’s profitable.

For example, several years ago we exited the hospital-distribution business because it required a much different model of delivery that didn’t fit well with our core business. In 2013, we divested a non-controlling interest in a dental wholesaler in the Middle East. That operation wasn’t profitable, and although we had made a strategic decision to invest in that particular geography only a year or so previously, it was clear that the appropriate course of action was to divest our interest and return our focus to our primary customer base, which is the office-based practitioner.

Looking to Asia

WSJ: You have purchased more than 200 companies. Why do you seldom disclose the price?

MR. PALADINO: Most in our industry are smaller players. If we disclose a price, we just establish a floor for the next deal. It works against us. Obviously, some businesses are worth more or less than others, but target companies look at a price and say, “I want that, plus some.”

WSJ: What are the biggest issues facing CFOs these days? What has you most excited or concerned?

MR. PALADINO: My biggest concern is risk management, and by risk I mean everything from IT security to the physical security of our world-wide facilities and human capital, to disaster-recovery systems and ensuring we maintain a robust system of internal controls.

Henry Schein continues to grow, and our need to find, train and motivate top talent also continues to grow. While the recession of the past few years made the applicant pool more plentiful than it had been in some time, of late the market has tightened up, especially in the U.S.

New talent also has to be nurtured and trained, and good employees are good trainers to other employees, so the cycle feeds upon itself.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

<span>%d</span> bloggers like this: