Another corporate giant is following the traditional post-crisis playbook. German conglomerate Siemens is planning to cut 15,000 jobs, according to Bloomberg. This is nearly double the company’s original target for layoffs, first announced last year as part of a broad cost-cutting exercise to put the venerable engineering group back on track after a series of missteps.
It’s no coincidence that the cuts come shortly after the arrival of Siemens’s new chief executive, Joe Kaeser, who took over in August after a long stint as the company’s chief financial officer. The previous CEO, Peter Löscher, was ousted after a rocky tenure that ended when a string of profit warnings angered investors and forced the board to act. The shares of the bellwether German industrial group have lagged the market for some time.
Promoting the chief financial officer to a company’s highest office is a tried and trusted move when the chips are down. The former finance chief, a Siemens lifer with 33 years of service at the group, is the quintessential safe pair of hands. Shortly after his appointment, an asset manager who owns Siemens shares told Bloomberg as much: “I want less vision and more concentration on profit. Kaeser is a numbers man, which is a positive.”
The surprisingly large job cuts—a third of which will come in Germany, according to reports—are the upshot of putting a “numbers man” in charge. A streamlined management structure is another hallmark of an efficiency-seeking boss. Siemens’ shares have outperformed the German market since Kaeser was promoted from CFO.
For the new CEO, the challenge will be to develop a long-term vision for the company that goes beyond simply wielding a hatchet, even if that is what’s needed right now. Some aggressive financial engineering may steady the ship, but new ideas will be needed to propel it forward. In a recent interview, Kaeser admitted that Siemens “woefully underestimated the internet,” so that seems a good place to start.
Around a quarter of CEOs at large listed companies have CFO experience, according to recruiter Crist/Kolder. The share of former finance chiefs now running firms has risen, predictably, since the financial crisis put cost-cutting and cash preservation front of mind for directors. Some are promoted to CEO from CFO to lead a major restructuring, as was the case when Marcel Smits took over at Sara Lee, split the company in two, and sold off the parts. Others find it difficult to make the transition to the top job, such as Olli-Pekka Kallasvuo at Nokia, which lost ground to rivals on his watch. More positive examples include Paul Polman at Unilever and Indra Nooyi at PepsiCo, both of whom are lauded for striking a balance between long-term vision and short-term results.
It is never easy to cut jobs—much less 15,000 of them—but in some ways these things come naturally to a hardnosed CFO. Although Siemens shareholders may applaud the sprawling conglomerate’s newfound focus on efficiency, until Kaeser presents a path to profit beyond slashing costs, the optimism may prove short-lived.