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International Paper’s CFO on Leveraging Disruptive Finance

International Paper’s CFO on Leveraging Disruptive Finance

After serving as CFO of International Paper (IP) from 2007 to 2011 and then as senior vice president of the company’s industrial packaging business, Tim Nicholls was asked to lead finance for a second time in 2018. Nicholls, who has moved between finance and operations over much of his 23-year career at IP, says it was an easy decision to make and that he returned to finance with a new understanding of the company. “I had been running some of IP’s larger businesses and seeing firsthand the opportunities they had, the risks they were trying to manage, and the economics of what they were doing,” he says. “That perspective gave me so much more to draw upon when I returned to the CFO role.”

Today, Nicholls is leading a more streamlined finance function following last year’s spinoff of IP’s global printing papers business, Sylvamo. Here, he discusses finance’s role in that complex transaction and how collaborative teams embedded in the business are bringing new levels of data-rich analysis to a range of decisions across the enterprise.  

How has the finance function changed for manufacturers like IP over the last decade?

Nicholls: Finance needs to provide more value today, focusing more on the strategic perspective required to drive better business decisions. Technology, particularly data analytics, has allowed us to expand our skill set to find value in the data. In this way, finance has become much more service-oriented. We have to support the vision of value-add projects to the enterprise, provide project management and change management expertise, and elevate the value of finance in terms of communication, impact, and influence.

What are some benefits you see in the current state of finance technology, and how is it helping your teams support the business?

Tim Nicholls

Technology is helping us improve our business model, our processes, our customer interactions, and much more. Access to large amounts of data has increased our capabilities for decision-making at every level of the organization. At IP, we have built cross-functional teams focused on using advanced analytics to identify patterns and streamline our operations. Our teams take the opportunities presented to us through advanced analytics and find ways to create unique value, with the ultimate goal of bringing scalable solutions to the enterprise.

For the past two years, our finance teams have used a disruptive technology approach with the businesses to find innovative solutions with data, analysis, and other technologies. That approach has been used on many projects now in various phases of proof of concept, piloting, and implementation. For a low-dollar investment, the returns in efficiency are significant. An example of that process in action involves problem-solving for our daily containerboard shipments; we move about 40,000 tons of containerboard covering 15,000 SKUs out of our mills each day to our plants to be converted into boxes and then shipped to customers. We have a very sophisticated supply chain management system but today’s environment requires us to shift plans daily, and we’re using data to find the best resolutions in real time. We can see the options in an instant and can determine how to take advantage of them. Given the complexities in our current business environment, with changing supply chain constraints and limitations, having that ability to make faster and better decisions is an important advantage.

What economic or sector conditions led to last year’s spinoff of IP’s global printing papers business, now operating as Sylvamo?

The spinoff was not a result of a specific market event but rather an attempt for us to set up different companies to allow each the best chance to pursue its own strategies. As a more simplified company, we are working to build a better IP as a primarily corrugated packaging-focused company with a strong cellulose fibers business, and are better positioned to grow earnings and free-cash flow.

What was finance’s role in the Sylvamo spinoff?

It was one of the more complicated transactions the company has undertaken, so it required a cross-functional team effort, especially given the fact that we were creating a new, stand-alone, publicly traded entity rather than just selling part of the business to an acquirer. Operations were global and highly connected, involving legal entity structure and all that goes with being able to support a business in many different regions around the world. In addition, the operational systems of IP and what became Sylvamo were intertwined, with connections across IT, legal, and HR, so they needed to be separated and remade to ultimately serve two distinct companies.

Finance’s role was multifaceted. We oversaw the program management office to make sure that timelines were coordinated and understood, and almost every element of finance was touched. Our team was involved with all issues that go into creating a new public company from a financial standpoint. Corporate accounting, tax, treasury, and internal audit had to be replicated in some way on the Sylvamo side, including staffing and leadership positions, and had to be in place immediately upon closure.

In addition, as we helped the new Sylvamo leadership team prepare to take the reins of a publicly traded company, it was a time to reimagine what type of company IP should be post-transaction. Finance has been a big part of the value creation process, determining how we support our businesses and the enterprise by evaluating opportunities, making sure we are measuring performance the right way, and ultimately playing a key role in some of the decision-making processes in terms of prioritizing and implementing important initiatives.

What are your priorities with IP’s current finance function post-spinoff?

We’re still a global company serving customers around the world, but with a streamlined portfolio and a simpler organizational structure. We’re striving to become more nimble, more agile, and better at creating value faster. Finance has to mirror that not only in terms of supporting the broader business goals but also in terms of remaking ourselves. We need to mirror what the company has become and where it’s going, and make sure we’re organizing finance talent and capabilities in a more streamlined, focused way.

We are restructuring our approach to how and where we deploy talent. Where people sit isn’t what drives who works on projects. We focus on what needs to be accomplished and then determine who has the best skill set to make it happen. That means teams may be virtual, face-to-face, at headquarters, or in our facilities. We are using all tools at our disposal and restructuring from a traditional finance organization to build teams around critical tasks and projects.  

—by John Labate, Deloitte Services LP editor, Deloitte Insights in The Wall Street Journal 

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