Interview with Paul Verhagen – CFO Fugro

Paul Verhagen is CFO and member of the board of Fugro, an exchange traded multi-billion euro company that investigates earth surfaces and the seabed. He has also been employed as financial director in multiple divisions of Philips. After graduating in treasury, he combined a traineeship at Philips with classes to become a registered controller, after which he quickly built up an international career. We asked him how he experienced this.

You managed to become a regional businessline CFO at Philips in 6 years. How did you work your way up so quickly?

I started a traineeship at Philips, because I could start with my postmaster register controller at day one there. The deal was that in the first 6 years, I would work at 3 or more different positions at least. After the traineeship I got a chance to go abroad, something which I had been lobbying for from the start. I got to go to Taiwan as regional controller for the division components. At Phillips, there is a career leadership programme, where they will discuss how you function twice a year. If show a good performance, you can go up in the ranks. By continuously working complicated jobs and putting down good results, whilst enjoying my job, I was able to quickly get higher up. In my career there have been a lot of logical steps. Looking back, I did a lot of high-profile jobs, and by realising good results, you get ahead, especially at Phillips.

What does it take from someone to fulfil an important position in a large corporation?

In the first place you need a lot of ambition and perseverance. It is fun to do, but it can also be rough. If you have a partner, you both have to fully commit to it. For example my wife also completed a university degree and gave up a good job to join me in an adventure abroad while slowly building our family. You have to be able to always fully commit yourself to your job, because the days can get long, and you often work 24/7. You also have to constantly put down good results. I have seen a lot of people leave in my career, and often enough this was voluntarily. Because you put a lot of your time into your job, you have to make choices. This is especially true if you are working internationally. I spend 95% of my time on my family and my work. This means that I can still sustain relations with my closest friends, but with others, contact dwindles.

What does life as an expat look like?

In China we lived in a city with 6 million inhabitants, where only 200 were foreigners. We got a lot of attention there, and our first child even became a photo model. These are really nice things to experience, for which you don’t get a chance in the Netherlands. Beyond that, we lived there like we live in the Netherlands. We joined a sports club, had friends and in the weekends, we went out.

Did you perceive cultural differences when doing business?

Regarding business, the differences are not that great. In the end, they want to make money in China, just like in the Netherlands. As long as you treat everybody with respect and from the heart, you come a long way. What did stand out was that you don’t ask people tough questions during important meetings, to try to be clever and make them lose face, unless you are the boss. It is more customary to speak to someone after the meeting and tell them some of the things they said were not right. Furthermore, relationships are really important. A lot of decisions are made during business diners. If you live there for a while, you will grow into it.

What does the job of CFO entail?

I try to create value for shareholders and other stakeholders. I’m the financial consciousness of the company. I make sure that the balance sheet looks good, that we have a good financing structure and that we are prepared for future scenarios regarding cash flows and result developments.  Doing that, we can manage risks effectively. Furthermore, it’s a real people job. I spend a lot of time in meetings and I’m constantly guiding, coaching and developing people. As you grow in a company, these things start getting more important. You are as good as your people are, so also selecting the right people is important.

How would you describe the way the board of directors works together?

It is very much like in other teams, but in the board of directors, you work with a group of people that have all been successful in their decisions up to that point in their career. This creates the risk that you think all your decisions are going to work out, and it gives everybody a strong opinion. This mix of strong personalities makes the work really interesting. It gives a lot of depth to discussions. Since we all want the best for Fugro, we eventually make decisions together with that in mind.

The best for Fugro, does that mean the best for its shareholders, or for Fugro in its entirety?

Shareholders are important, but in the Netherlands, you have a fiduciary duty to act in the best interest of all stakeholders. Employees, customers and shareholders are all important parties. In Great Britain and the USA, this is a bit different. There, shareholders are more important. In practice this leads to a difference in how fast you can realise changes in a company. In the Netherlands, a reorganisation lasts 6 to 12 months, while in the USA it’s a matter of weeks.

How important is the stock price of Fugro for you?

The price of our share is an important indicator for our performance. Up until 2013 we were doing great, but 2014 was a rough year. That was also the year I joined the company, but I didn’t know this beforehand. There was a major crisis in the oil and gas industry, where 80% of our business came from. Now, 4 years later, it turned out to be the biggest crisis in the history of oil and gas. Fugro took a major blow and halved as a company. When I entered the company, we had the vision to double our business, but up until now it has mainly been crisis management. As CFO you have a lot of impact on the company in these situations. This involves a different kind of pressure to perform. A lot of priorities come up while the business is transforming. We need to be able to act quickly, and it is important that you are well informed. Also, debt management is more important than in a normal market. Other important things are setting the right targets and managing the working capital and costs tightly.