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How customer connections, reporting and sustainability drive success
In this episode of The Better Finance podcast, Lululemon executives Meghan Frank and Alex Grieve join host Myles Corson to explore the importance of sustainability and building relationships.
In this episode, Lululemon executives Meghan Frank, CFO, and Alex Grieve, CAO, engage in a captivating conversation with Myles Corson. Together, they delve into their pivotal roles in driving Lululemon's success, highlighting the significance of sustainability, customer connections and technological advancements.
To kickstart the discussion, Meghan and Alex reflect on their unique experience of sharing the CFO role for a brief period, which ultimately resulted in the development of a strong and mutually beneficial relationship between them. They emphasize how open and transparent communication has played a pivotal role in their successful engagement with investors. By consistently focusing on key themes that investors are genuinely interested in, they have been able to shape their communication strategies accordingly.
Recognizing the paramount importance of sustainability, Meghan and Alex proudly view it as an integral part of Lululemon's mission. They prioritize keeping investors well-informed about the company's progress in this domain, and specifically stress the crucial role of accurate reporting, including sustainability reporting.
Customer loyalty is another important aspect that Meghan and Alex address during their discussion. They delve into the various programs implemented by Lululemon to nurture and maintain customer satisfaction. Moreover, they emphasize that the very essence of Lululemon's DNA lies in fostering connection and building a strong sense of community among its customers. By prioritizing these foundational principles, Lululemon continues to cultivate and strengthen its customer relationships, reinforcing loyalty and further solidifying its position in the market.
Key takeaways:
Gain a deeper understanding of the strategic role of executives in driving overall success in organizations.
Recognize the value of open and transparent communication in building strong relationships with investors.
Appreciate the significance of sustainability as an integral part of a company's mission and its impact on long-term success.
Understand the importance of customer satisfaction and the implementation of effective programs to foster loyalty.
For your convenience, full text transcript of this podcast is also available.
Meghan Frank
“I’d say Sustainability is obviously accelerating in its importance globally and to investors, and it’s just the right thing to do and it lines up with our purpose. Our purpose is centered around well-being and the impact we want to have on that with our brand.”
Myles Corson
That was Meghan Frank, the CFO of Lululemon, and I’m Myles Corson from Ernst & Young, host of The EY Better Finance podcast. A series that explores the changing dynamics of the business world and what it means for finance leaders of today and tomorrow by sharing insights from global leaders on key topics affecting the world of corporate finance. In this episode, I’m joined by Meghan and Alex Grieve, the Chief Accounting Officer, to talk about a number of topics including the importance of sustainability in Lululemon's mission and what drives an effective relationship between CFOs and CAOs. They share great insights on the engagement with investors, the significance of customer retention, and how organizational purpose translates into action
Enjoy the conversation!
Corson
Megan and Alex, fantastic to have you here today. I really appreciate taking the time to join us and as we get started, perhaps I can ask you just to do some quick introductions, describe your roles and how you got to where you are. Megan, do you want to start?
Frank
Thanks for having me. I started my career in banking in Boston. I went through a buying training program at Saks Fifth Avenue, New York City and since then I’ve spent, which is hard to believe, over 20 years in the retail industry. Most of that in FP&A [Financial Planning and Analysis] and my longest stint at J.Crew pre-Lululemon, and I’ve also held some roles in merchandise planning. I’ve worked in very different retail models, department store, off price, digital only, vertical retail and then I’ve been at Lululemon for almost seven years, almost three of those as CFO [Chief Financial Officer] and it’s definitely been my most rewarding professional experience. I love the brand, I love what it stands for and the people and the growth trajectory has been fun as well.
Corson
Fantastic. Alex.
Alex Grieve
Myles, great to be here. I started my career with Ernst & Young. I was 11 years with Ernst & Young. First five years of that were in the UK and then six here in Canada. I moved out to Canada in 2008 just as IFRS [International Financial Reporting Standards] was being adopted here, was meant to be a two-year secondment. Fell in love with Vancouver and we’re still here, goodness knows how many years later. But I stayed with Ernst & Young in Canada for six years and then made the transition. I joined Lululemon back in 2014 as the Director of Financial Reporting here at Lululemon and now I’m the Chief Accounting Officer [CAO]. So, over the last nine years or so, my role at Lululemon's grown and changed since I joined. I had a team of four people and today we’ve got about a team of 150 looking after all of our accounting, our reporting, our shared services functions within finance including payroll, corporate tax, indirect tax, and then we also have a team that’s focused on technology and our investments across finance there as well.
Corson
Well thank you for sharing that. It’s great to have you both on and part of the reason we wanted to be both on is to talk about what drives effectiveness in relationships between the CFO and the Controller or Chief Accounting Officer role Alex that you fill and obviously the two of you have quite an interesting backstory, but when the CFO succession happened, you were both Co-CFOs for a while. So interested if you can talk a little bit about how you divided responsibilities and how you’ve worked to leverage your respective skills and make that relationship successful.
Grieve
It is certainly an interesting time for both of us. That was right at the start of the pandemic [COVID-19 pandemic] as well. So, in March 2020, Megan and I were in our Co-CFO or well, I kind of suggest that Co-CFO is a little bit generous. I think I just let Megan do all the hard work. So, the split there between the two of us it was relatively natural given our background. You know, I took on all the accounting and reporting, tax, some governance responsibilities with the audit committee and then I also led the treasury function through that period of time, which is I’m sure you can imagine an interesting time with all of our store closures and then Megan took on investor relations guidance, the forecast which she is already responsible for, and then you know financial management of the business and leading us through that COVID period and beyond with our senior leadership team.
Corson
Megan, anything you’d add?
Frank
And I’d echo those sentiments. I think Alex and I had a really strong partnership prior to that transition. So, there was really a lot of ease in how we approached it and how we worked together through it and then how that has translated to today. I really rely on Alex as an obviously a thought partner leader in accounting, but more broadly in our financial strategy and we have a lot to find along the way as well.
Corson
Fantastic. That's an important part is that looking at some of the findings from our DNA of the CFO research. One of the things that we talk about is the need for CFOs and finance leaders to balance some paradoxes, which includes how you deliver long-term and short-term performance, the need to be bold and drive innovation, while protecting value. Megan, can you talk about some of the paradoxes that you face and then how do you try and reconcile them as a CFO?
Frank
I would say it’s definitely a balance of both. First and foremost, I’d say we start with our long-term goals and strategies, and then really our quarterly guidance performance and how we’re thinking about the near term should really be an outlook of executing on that long-term vision. I would say in it agility is key and we continue to take the posture of positioning ourselves to capitalize on upside opportunities and then also ensure contingencies are in place to manage through downside risk as we're managing in the year and the quarter, and as we’re working through that and either living into upside opportunity or managing through a downturn, always taking a long-term view on your decisions and you know, even if we think about COVID, we pulled back on a lot of areas in terms of investment and expense, but we actually accelerated in some areas like digital. So, with the view of we maintained our optimism about the long term, we wanted to emerge from a position of strength. So, I think it’s a balance of those pieces.
Corson
Part of getting that short- and long-term piece right and understood by the investors is obviously what you report and how you tell that story externally and Megan, coming back to this, what drives success for the CFO and the Controller is communication and transparency. Our research shows that corporate reporting there is a gap between sometimes what preparers think and what investors think particularly around the short-term, long-term area, Megan, can you also talk about can your role engaging with investors and how you seek to balance that long-term, short-term story for Lululemon?
Frank
Externally, we’ve framed a long-term goal. So, we’re currently you know in a five-year plan that culminates in 2026 called the power of 3 x 2. First, we’ve explained that plan to investors, explained the key building blocks of that plan, but I’d say they want to understand the health of our key performance indicators that drive into that long-term strategy. So our reporting that we do provides those metrics and then we’re providing the color on those as we’re communicating the story for the current period that we’re in, and relating that to how we see that moving forward and how it connects to the long term outlook, and I would say the themes that investors focus on have an element of consistency and then there are some changing topics within it as well. So, based on competitive trends, based on the macro environment, specific dynamics in our business, it’s key to understand what other info is out there. What other questions have come up through competitor reporting, you know, what are the macroeconomic trends and how they relate to the retail industry, and then diving into specific differences in our performance indicators relative to what we declared in our long-term strategy and why that might be, and then just spending adequate time preparing for what you feel like will be the relevant topics.
Corson
And Alex, is there anything you’d add in terms of how that translates into your experience as a CAO and Controller, and what it means for the work your team does?
Grieve
I’d say my involvement with Investor Relations process is probably one of the most enjoyable bits of my job. Being in the room with Megan with Calvin, our CEO [Chief Executive Officer] and the investor relations team and actually hearing that preparation cycle, thinking through the questions that are going to be asked from analysts and what their focus is, looking at our results, the Qs, the Ks, the releases we put out on, understanding those metrics and then also the more strategic questions around the industry trends, the economic trends and how we approach answering those short term and long term. So, anything for me, I really enjoy that process.
Corson
Building on that theme as a very purposeful organization, Lululemon sets ambitious goals, particularly in sort of ESG areas, you had your goal of achieving full gender pay equality for 2020. You talked about the use of 75% sustainable materials in your products by 2025 and moving to a circular ecosystem by 2030. Can I ask you to describe why sustainability is important to Lululemon and the conversations you’re having explicitly with your stakeholders on that topic?
Frank
I’d say sustainability is obviously accelerating in its importance globally and to investors, and it’s just the right thing to do and it lines up with our purpose. Our purpose is centered around well-being and the impact we want to have on that with our brand. So, I think it’s a sense of pride for our team for us to be a leader in that space. I’ve definitely seen, I would say increase in interest from investors and we make an effort I would say in addition to providing our performance metrics to make sure we’re keeping investors up to date on how we’re progressing on those sustainability goals as well and where we’re making investments and progress in the business.
Corson
So, I think that's sort of reporting the progress and being able to communicate is important and Alex, you know, I know you’ve obviously been very proactive in preparing with the evolving global regulatory environment around standard settings. How do you articulate your role in controllership around that area and how do you prepare for a somewhat uncertain future?
Grieve
I think we’ve got a very important role to play in the skillset that we have within finance from a data control standpoint, lends itself well to any kind of reporting, whether that’s sustainability or anything else, and we’re working very closely with our sustainability and impacts teams. We’re going through a cycle right now of control design walkthroughs, process review with them, supporting them in making sure that we’ve got the right process and controls around all the reporting that we do, and we’re also working with them on a technology solutions selection process as well. So, we’re looking at a tool that will support us in meeting all these requirements and capturing the right data and then you know that’s against a backdrop of continually evolving regulation. We’re seeing it in numerous different countries around the world and just trying to stay abreast of the timelines and the requirements in each of these different countries and making sure we’ve got a strategy set up to meet those timelines and requirements.
Corson
Moving on. One of the drivers of sustainable long-term value creation that we’ve seen through our research is obviously focus on customer and you as an organization have a fantastically engaged and loyal customer base. How do you build on that, Megan, and how does it influence your corporate culture?
Frank
I’d say the DNA of Lululemon is connection and community, and I’d say as we enter markets, we look to understand the local community where they’re sweating, what fitness studios they’re showing up in and forming authentic relationships with studio ambassadors, which fosters that community feel and then our educators in the store, I’d say are an extension of that connection, really seeking to get into a relationship with the guests, which is what we call our consumer, understanding what activities they’re participating in, what their needs are and really being able to help them in our stores. We have very high guest retention and we’re also excited and I would say to extend that and still see opportunity, particularly with our Lululemon Essentials program, which is our new free membership program where we can really offer more personalized interactions recommendations in addition to deepening our relationship through community connections as well there.
Corson
Alex, what’s the role of technology and finance at Lululemon and what are you most excited about in terms of the application of technology and what are some of the concerns that you have?
Grieve
With our trajectory of growth, I mean technology has been and will continue to be both a driver of that growth and an enabler of it as well. As I look within finance, we have a team of people specifically focused on driving technology investments in the finance function, whether that’s just ensuring some level of consistency across the globe in system and process or it’s adopting new technologies like robotic process automation with a team of people in finance that are acting as a service center to the whole business and rolling out RPA (Robotic Process Automation) across the business and then new capabilities. We’re investing behind data and analytics in finance as well as a whole bunch of different areas across the business and then from a concern standpoint, I wouldn’t really quote this as a concern but I think one of the things that we do make sure that we’re doing is as there are business initiatives coming up, virtually every one of those has a downstream impact on finance some way shape or form. So, we have a team of people that sign-off on system technology changes as they occur before they go live to make sure that the process and the accounting and the data that’s coming out is as we expected, and we have got a really robust process around that just making sure we keep pace with the business change that’s happening.
Corson
I think that point about staying connected with the business is really important, particularly in rapidly changing environments, whether that’s driven by technology, geopolitical, macroeconomic type situations, that importance of effective cross functional collaboration can really be a differentiator for finance organizations. Megan, what have you seen as being the drivers of effective business partnering at your organization? Again, are there some challenges that you’ve overcome?
Frank
Yeah, I mean, I’d say collaboration is key to maximizing our potential. I think it’s essential that our finance team is curious about the business. I think it allows them to be much better partners to the business and I think it makes the work a lot more fun when you know how all the pieces fit together and feel like you can really influence that. I would say to a large extent, it’s inherent in how we work at Lululemon and it’s part of our values, and then we are also making efforts as the business scales and complexity increases. One of the areas within my scope is enterprise business transformation, which that team is really focused on evolving our people, technology and process approach across the entire business, and in that we are making an effort to ensure as we continue to scale, we have the right connection points for collaborating between teams, whether that be cross functionally, whether that be between regional and global teams. So having the right mechanisms in place is a safety net to ensure we really live into that collaboration.
Corson
So picking on that point of transformation Megan and what drives successful organizational transformation, we have some research that we did with the Oxford University Business School that really emphasizes the importance of getting the human aspects of transformation right. Sounds like you have this really strong culture that there’s a great starting point, but as you think about the skillsets and the mindsets that you look for in your team, what are the attributes that are going to help you successfully transform the business? What are the things you would point to?
Frank
I think being a subject matter expert is a given and I’m really looking for people who are curious, curious to learn, have a growth mindset, they’re humble, they’re energized by a fast-paced environment, and they thrive in a collaborative setting.
Corson
Alex, anything you’d add from your perspective?
Grieve
I think that ability to work in an ever-changing environment, being comfortable with change, I think an ability to partner and collaborate with other parts of the business and then also to communicate and be able to articulate what are often relatively complicated items in a clear and understandable manner.
Corson
Being able to simplify complexity and communicate it clearly and precisely I think it is a great attribute of successful finance leaders. Research also shows that despite all the complexities and increasing scope of the role, there’s a lot of job satisfaction for CFOs. So, Megan I was interested, would you agree with that finding and what is it that you do to prepare for the additional expectations that seem to get mounted up on top of CFOs and in your role particularly?
Frank
I love my role. I’m very grateful to have it at Lululemon. In addition to the traditional finance functions, as I mentioned, I also have enterprise business transformation. I have strategy in my scope and then asset protection and facilities. I view it as an opportunity. The more involved I can be across the company, the bigger impact I can have, the more dots I can help connect. I think key in supporting me being successful in that I think is having great leaders on my team as thought partners to me as leaders of their respective functions, which Alex certainly is.
Corson
And Alex, anything you’d add a bit more in the Controller, CAO context?
Grieve
For me, I’ve been through quite the journey at Lululemon from back in 2014 to today, and I’ve been afforded a lot of opportunity and challenge. I tried to embrace those opportunities when they come forward, whether that’s new responsibilities or things happening differently, difficult things to navigate through and I guess look at each of those as an opportunity to learn and develop. So, I feel very grateful for everything that I’ve learned in the last nine years.
Corson
What a wonderful way to wrap up on the core content of our discussion. So, we covered a lot of ground, I really appreciate your insights on that. So just in closing, wanted to go through some rapid-fire questions just to get your reactions. We talked about the importance of staying relevant and current. Are there any particular sources that you use to make sure you know you feel like you’re staying on top of emerging trends and topics? Megan, start with you, what do you use to stay abreast?
Frank
I would say a lot of varied sources, industry reports, competitive performance, staying up to date on the macrotrend with the Wall Street Journal. For instance, I like Harvard Business Review for, you know, key topics and then leadership themes, and then I’d also say I rely a lot on some mentors I have in the industry, and I find their experience and their perspective, what might be a theme they’ve seen before, invaluable to me.
Corson
And I see that personal networks are important, and Alex?
Grieve
We have within finance; we actually have a subscription service to arrange a podcast. So maybe we’ll find ourselves on there, Myles. There’s a variety of different topics that get covered through that economic forums and updates, and then from a more technical standpoint of firm publications on new developments and roles that are coming out, they’re a great source of summarized versions of what’s coming down the road.
Corson
Is there a particular quote that you use, and you live by? Alex, do you want to start with that one?
Grieve
Live by, that’s deep, Myles. There is a quote that I have in my office, which is a bit of a joke for the team, which is I’m going to try and get this right. Not everything that counts can be counted and not everything that can be counted counts, and allegedly that was in Albert Einstein's office. I’m not comparing myself to him, but just a little reminder of the fact that there’s a little bit more to life than numbers.
Corson
Fantastic. Well, I think we’ve actually heard that one before. So, you’re in good company on that one. It’s definitely one that resonates with the accountants, and Megan?
Frank
And my favorite one is Go Towards Your Fear, which is actually a Tina Fey quote. I find and I found for myself, like you want growth but sometimes change can be really scary, and I’ve always found when I’ve moved into an area, said yes to something that felt a little bit uncomfortable. It’s, you know, how I grew, where the change happened and how I think we all maximize our potential.
Corson
Great, and has there been a particular piece of advice that’s had the biggest impact on your career? Megan, do you want to start with that one?
Frank
Sure. I had a mentor once say to me that I know more than anyone in the room. I think he sensed that I was very nervous before a board meeting and I think sometimes certainly earlier in my career, I don't think we appreciate that you know, when we’re working in our respective roles day in and day out, we do know more than anyone else on the topic that we’re focused on and really have a responsibility to share what we do know. So, I think that was really game-changing to me and how I approached leveraging relationships with the board and seeing them also as people that really want to help and make an impact and can be a conversation.
Corson
Great way of instilling confidence and I appreciate that. Alex?
Grieve
One thing that I heard from a mentor of mine and I also heard him say to other people at various different points was good things happen to good people, which was just a reminder that sometimes a little patience goes a long way and to sort of focus on what you control, focus on doing a good job, working hard, etcetera, etcetera, and the journey will take care of itself after that.
Corson
And we do ask this question generally, even though it’s obviously very relevant in this context but what would each of you do to maintain your well-being and personal balance?
Grieve
For me, I mean, I’ve got two kids, 7 and 10, so they take up a lot of my time. We’re coming into ski season here, so they’re both actually much better skiers than I am. So, I’m going to be spending a chunk of this winter chasing them down a ski hill, trying to avoid moguls and trees as best I can, but outside of that, for me, I play badminton weekly. I commit to that and make sure I get some time to myself. I think I’ve had 10 rounds of golf this summer, which is a record for me. Occasional run, which I absolutely hate but always feel quite good about afterwards, and then I also coach a whole bunch of kids sport, which I’m not sure that actually is good for my blood pressure, but I do enjoy it.
Corson
Awesome. Megan?
Frank
I too have two kids, 12 and 15, so that’s a whole new journey for me that I’m learning about. So I’d say time with my family. I have a dog that I’m obsessed with, so cuddling with my dog helps me with my well-being for sure. Exercise, I’m currently doing a four-week strength challenge with a friend on the East Coast, which is a nice way to stay in touch and stay in shape and help with the balance, and then I love good music, good movies. My husband works in film, which is a nice balance with my career and something totally different and it kind of pulls me out of my comfort zone.
Corson
That’s wonderful work. Really appreciate you taking the time to join us and share all of those wonderful insights, and just thank you again.
Frank
Thanks for having us.
Grieve
Thank you.
Corson
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