Profile: Paul Hart, Bill Gates' UK financial chief

Making a name for yourself when you work for Microsoft is no mean feat. And to describe the corporation as a market leader is to stretch understatement to the limit.

Back in 1975 it started out with the dream of ‘a computer on every desk and in every home.’ In just 29 years, Microsoft now sells software to an estimated 90% of the world’s desktop computers.

In 1978 Microsoft’s sales exceeded $1m for the first time. By 1985, the company’s tenth anniversary, revenues had reached $140m. The company went public in 1986 at $21 a share. The successful launch of Windows 95 sold more than one million copies in just four days. Revenues for the year to 30 June 2004 increased 14% on the previous year to $37.8bn.

But Paul Hart, director of finance and administration for Microsoft Ltd, makes no secret of his desire to make his mark. He may have only been in the financial top job since July 2003 but already he has set out his vision for a finance function with a distinct shift in focus – away from bookkeeping and towards a broader, more forward-looking role. ‘Beancounting is a very nasty term,’ he says. ‘It’s not the way the finance function is going.’

His grand plan is perhaps not that surprising given Microsoft’s structure. As the UK arm of Gates’s technology empire, the company exists, to all intents and purposes, as a sales location. It may be the third largest subsidiary after the US and Japan, but technically it has no revenue.

The UK operation is a sales and marketing function, promoting technology that customers buy through resellers. But the channel buys from Dublin, and the UK arm of Microsoft is paid costs plus up to 10% commission. There is a simple reason – corporate tax in Ireland is 10% compared to a 30% full rate in the UK.

These days, Hart explains, his finance function has shed its number-crunching shackles. Instead, it’s a revenue-driving function. ‘We focus on the business,’ he explains. ‘The role of the CFO is changing to more of a COO – it’s all about driving growth.’

It’s all a far cry from his early career as an auditor – first with Andersen, the firm with which Hart qualified as a chartered accountant in 1993, then with Ernst & Young with whom Hart spent three years living the ex-pat life in Abu Dhabi.

‘I’d joined E&Y because I wanted to see the world – but after three years I decided my auditing career needed a change. When you sit on the industry side of the fence, you realize it’s better to be driving revenues and supporting the business,’ Hart says.

Hart, now 38, started his career with Microsoft back in 1997. He was initially based in Reading working for the Middle East and Africa region, but when the person who hired him moved on to work at Microsoft HQ in Seattle, Hart stepped up to become regional financial controller and in June 1998 moved with his family to Dubai.

Initially, making the shift from practice to industry, he admits, proved a big shock. ‘I’d never processed a journal before. But having been an auditor for six and a half years, I think that it does make you a better accountant.’

He looks back fondly on his time abroad. ‘The ex-pat lifestyle is great depending on where you are – but in Dubai it is great. I improved my golf handicap – it’s now 18.’

It was also a hectic period in Hart’s professional life, regularly involving large chunks of time travelling to various countries in the region – including Israel, Saudi Arabia, Turkey, Morocco, Palestine and Oman. ‘It certainly gave me a good understanding of the huge diversity in cultures. I wasn’t in a client facing role but even still, working abroad is a fantastic opportunity to broaden your horizons.’

The challenges of juggling a travel-intensive job with the demands of a small family – by this point son number one was almost three – meant that when in March 2001 the job for head of finance and administration in the UK came up, Hart and his wife jumped at the chance to lay down some roots.

Back at home, Hart originally worked under Steve Harvey, Microsoft’s then director of people, profits and loyalty (which became people profits and culture). ‘I was the profit,’ Hart quips. When, in July last year, Harvey’s role was split to allow him to focus primarily on the HR elements of the job, Hart took on the title of director of finance and administration, with reponsibility for facilities management, procurement and IT.

Harvey is, admittedly, a hard act to follow. Hart’s charismatic former boss, a regular on the conference speaking circuit, is leaving Microsoft this month to become managing director of jewellers Goldsmiths. Rumours suggest that Harvey took the decision to move on after he lost out on the UK managing director job following Neil Holloway’s promotion to EMEA as head of sales marketing and services.

But Hart does a good job of playing down any potential for rivalry – except he can’t resist a slight dig when mentioning Harvey’s golf handicap. It’s 3.

In the UK, Hart’s responsibility spans eight buildings, 2,900 desks and 2,500 employees and contractors. ‘Facilities takes up a huge amount of my time,’ Hart says. ‘We’ve invested quite significantly in the procurement function and influencing the control of how we spend our money.’

Use of in-house developed self-service e-procurement applications that link through to Microsoft’s global SAP enterprise resource planning system has already slashed $22m off the purchasing bill – all thanks to a $1m investment. ‘It means that we control the vendors that go on the database so people can only spend money with people that are on the system. People can try to go around the system but we won’t pay anyone without a purchase order.’

But, as Hart is keen to point out, there’s much more to the job than simply cutting costs. ‘It’s about partnering and supporting revenue,’ he says. ‘My job is meeting customers or sales guys, talking about deals and driving the business. I don’t have access into our ERP platform,’ he boasts. ‘I’m not selling products. I sell the way we run the products as a user of Microsoft technology.’

Hart denies that being a ‘geek’ is a prerequisite for a job with the world’s biggest technology company, although he admits he’s much more techno savvy than he used to be. Indeed, he’s taken the reins for an internal project to rollout smart phones across the company. He has also acted as an ambassador for the home computing initiative (HCI) scheme, which allows employers to offer tax-free loans for computer equipment for staff to use at home.

But the technology Hart gets most animated about is Headtrax – a seven year old headcount reporting system, again developed internally, that allows Microsoft to keep tabs on the skills it possesses and the job vacancies up for grabs. ‘I think it’s the most powerful application we have in the business,’ Hart enthuses.

‘Headcount is absolutely crucial to any hi-tech company. About 95% of our product development – about 14,000 people – is handled in Seattle, and we have development centres in Aachen and Cambridge in the UK. Finance is responsible for positions – the budget and making sure we have the right number of staff – whereas HR has the people.’

Getting prospective candidates to apply for jobs is one problem that Microsoft doesn’t have. But fitting the Microsoft mould and getting through the selection process is another kettle of fish altogether. Even Hart admits that the number of people involved in the typical selection process is ‘unbelievable.’ ‘My security manager had 13 interviews,’ he says, almost apologetically.

Cultural fit is, as with any organisation, crucial. ‘At Microsoft, being brilliant at the basics is a given. I look at personality and different competencies and strengths rather than whether you can do double-entry bookkeeping. The way finance is going at Microsoft, everyone in my team is part of another group’s management team, supporting the business.’

The bulk of financial grunt work – things like expenses and accounts payable – is carried out by employees at a shared service centre in Dublin that processes transactions for the whole EMEA region. The company also outsources payroll and spends ‘a lot of money with outside experts’ on tax and Sarbanes-Oxley compliance (see box), but Hart is reluctant to extend the scope of its outsourced operations. ‘I don’t believe we should go any further. I think you could go too far outsourcing.’

The future of Microsoft may not lie with wholesale outsourcing of the finance function, but the commercial spin that Hart brings to the job is certainly set to continue. ‘The future will be more of the same. Even my counterparts in other parts of the world are looking to us to change their focus.’

An 800lb gorilla like Microsoft certainly can’t afford to sit still, and with competitors constantly looking to muscle in on its markets, Hart and his team have a tough task as evangelists for Microsoft-branded technology.

But some analysts have suggested that the company is entering a new era of maturity, symbolised earlier this month with a one-off special dividend payment of $3 a share, equivalent to $32bn. The company is also planning to buy back $30bn of shares over the next four years. ‘We’re just giving some money back to our shareholders.’ Hart says. ‘It’s a good thing.’

Maybe being generous to shareholders makes him feel better when he’s walking over the competition on the golf course.

Hart on Sarbox
Ask Paul Hart what keeps him awake at night, and he barely hesitates. ‘SOX is the one things that’s critical to us at the moment. We treat Sarbanes-Oxley as a massive priority.

‘When the rules were first released, companies had to have their internal controls audited from year ends after 1 May last year, which means we would have been one of the first.

‘It subsequently changed to November, but we carried on and got our auditors Deloitte & Touche to do some testing last year.

‘With section 302, I had to go through that process every quarter. It’s a huge problem. We’ve had to change our processes and we have new tools for things like balance reconciliation. Before it was a nice-to-have, now it’s law.’

Now every single journal has to be approved by every single manager with backing to support it.

The task is made no easier by the complexity of Microsoft’s business model. ‘Our business is a complex one – we have seven P&Ls from the MSN business through to the Xbox, Windows and Office businesses. But we operate in a very consistent way around the business, reporting up to a regional level and then up to corporate. It allows us to escalate decisions quickly and it’s a process we’ve fine-tuned over the past 18 months.’

Hart is reluctant to put a figure on the cost of compliance, only going as far as to describe it as ‘many millions of dollars’ – primarily to pay the army of outside consultants – ‘although it’s not as much as some companies are spending.’

He’s convinced that having one ERP platform globally makes it easy to make changes to processes. ‘It’s scary how fast a change can be with 57,000 people. But fortunately,’ he adds, ‘I’m not the kind of person who gets stressed out too easily.’

Only last week, it was revealed that the move to Sarbanes-Oxley compliance would cost UK corporates as much as £120m. At the same time, the London Stock Exchange said it was anticipating a surge in de-listings as a direct result of the regulatory burden.

A survey of 321 US companies by Financial Executives International found the biggest corporations could face a bill as large as $4.6m for compliance, while the average burden would be $2m.