Applying Budgetary Discipline

MasterCard’s Martina Hund-Mejean ensures input from finance is integral to business decisions.

Martina Hund-Mejean signed on as MasterCard’s CFO in November 2007, just before the financial crisis unfolded and a year and a half after the payments company’s IPO. Hund-Mejean had served as treasurer at Tyco and Lucent Technologies, after working in finance at General Motors. As financial markets melted down in 2008, MasterCard aggressively cut its operating costs, she explains, noting that “nobody should waste a good crisis.” Hund-Mejean says the Purchase, N.Y.-based company has applied the budgetary discipline that’s common among manufacturing companies to its financial services model. She also talks about the evolving role of MasterCard’s finance department.

T&R: How did the financial crisis impact MasterCard’s long-term strategy?

Hund-Mejean: We took the discipline our business units learned during the crisis and applied it to what we do in our base spending and new investments. When we give people budgets now, they don’t just think about how that budget can be spent. Rather, they ask whether they really need to use the entire budget, and whether some things can be done less expensively and money actually returned to their business units or corporate, so it can be spent on other projects.

T&R: Were incentives used to foster that change?

Hund-Mejean: Not really incentives. Our annual budget is the basis of the compensation plan, and we now include cost and efficiency improvements that have to be achieved to meet the budget. My upbringing was in the auto industry, and we’re transferring the discipline that you learn in the manufacturing-type environment to a financial services business.

T&R: Can you give an example?

Hund-Mejean: In terms of third-party investments, the company previously did not have a significant procurement management team to make sure we got the biggest bang for our buck. I hired a top-notch chief procurement officer, and she embedded that kind of discipline, making sure there were the correct statements-of-work and terms and conditions, and that we make the most of our investment dollars.

T&R: MasterCard has sought to integrate finance more closely with its business units. How has that initiative evolved?

Hund-Mejean: Finance people are now an integral part of business decisions, so when we look at business cases or engage in third-party negotiations, finance analyzes them from a risk/return perspective. Because the finance people often look at things from a different perspective than the business people, the combination typically gets us to a better state of making decisions from an execution standpoint. We’ve been able to make successful organic and inorganic investments only because the finance people were so embedded in the business units, to help them make the right calls.

T&R: How so?

Hund-Mejean: In the end, we have to make money for shareholders, and finance people can play a fantastic devil’s advocate. They know the business extremely well and can test assumptions, driving decisions so we can more appropriately line up the risk/return equation. In addition, our finance group is also part of our strategic process as well as M&A. A CFO can be really effective for the overall enterprise if he or she has the overall strategy view as well as the day-to-day nuts and bolts. We have no shortage of good investment ideas, but we can’t invest in everything. So finance people have to play a role in figuring out the best opportunities to go after.

T&R: What are the biggest challenges ahead for MasterCard from a finance perspective?

Hund-Mejean: Cash is very expensive for economies, and 85% of the world’s transactions are still in cash. So we’re very much focused on converting those payments into electronic ones. This is a very competitive space, so the challenge is investing in and rolling out the right kind of technology and services for the future

 

For an earlier interview with MasterCard’s Martina Hund-Mejean, see Charging Ahead.

 

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