The Alignment Between Tax & Strategy

John Carr has turned process challenges into business opportunities. He not only transformed his tax department but also how Bruker Corporation develops its strategy for worldwide operations.

When John Carr joined Bruker Corporation in 2013 as its global head of tax, the Massachusetts-based scientific instrument manufacturer was in the process of becoming a more centrally controlled organization to better manage its more than ninety locations around the world.

John Carr, Bruker Corporation

Carr was specifically tasked with creating a more efficient tax department that would act as a proactive business partner. Since then, he has successfully improved the department’s processes and controls, as well as create new working relationships with Bruker’s board of directors, its senior leaders, and business units.

Carr spoke with Profile about the challenges he faced, the strategies and solutions he developed, and what the impact has been on Bruker’s business operations.

What was the tax department’s status when you joined Bruker Corporation?

I was brought in to address an inefficient, manually-driven reporting process. The process took far too long, leaving precious little time for generating insights that would ultimately guide business decision-making.

What issues did you address to correct the situation?

Too much time was being spent on tax determinations, which constrained the time needed for adequate review and, as mentioned, generating insight. We improved the efficiency of numerous processes, which increased review time. The additional review time then uncovered other insights that informed tax planning, which led to better outcomes.

We also developed the tax team’s soft skills. That allowed them to move from a strict process role that was focused on preparing financial statements and tax returns to acting as business partners. We developed stretch assignments that forced staff to go outside of their comfort zones and to start developing trusting relationships with colleagues. That can be uncomfortable, but they learned to do more than sit in meetings and listen. They took active roles offering opinions, demonstrating their expertise, and helping the business identify new opportunities.

All of that happened in a very supportive environment. I encouraged them to take risks expressing their judgments and to learn from their mistakes. I also provided constructive feedback to help them in both their business and professional development.

What results came out of prioritizing new, more proactive business relationships?

One of our main priorities is to lower our global effective tax rate, which is higher than most of our peers. We’ve been able to generate an effective rate analysis by business unit that’s been very helpful in demonstrating how each unit impacts the tax rate. We also provide more guidance and suggestions for improvements that focus on business considerations—not just tax rates.

One example of excellent collaboration that was based on tax insights was the establishment of a principal company in a tax-favored jurisdiction in which Bruker was heavily involved. Implementation involved a series of extensive interviews and workshops we held with the business units to help everyone understand each other’s processes and to gain more insight into each other’s key drivers. Ultimately, we were able to determine the proper allocation of profits going to operations in each tax jurisdiction. The entire exercise enabled the business to understand complex issues related to developing and sustaining tax positions in the face of uncertainty.

Overall, we’re more nimble, provide greater insights, and hone in quickly on the core drivers for any particular issue. We can show why the numbers are what they are. We can show strategies that enable us to tax efficiently deploy capital across our worldwide enterprise. And we’re able to accomplish these things with much greater collaboration that enables us to avoid unforeseen consequences after the fact.

How did bringing the treasury function into the tax department change operations?

Historically, the two functions interacted more formally and less frequency than we do now. We’re now able to act in a more strategic and efficient manner as partners with common goals and objectives. Recent US tax reform, for example, created opportunities to bring cash back to the US. We can repatriate cash in a more coordinated fashion with a greater appreciation of some of the constraints imposed by our capital structure. It is a seamless and efficient strategic engagement rather than being a more complicated, cross-functional effort.

How have those changes contributed to creating enterprise value?

First, they have created tremendous credibility with our business stakeholders. I set out and socialized a plan to address our existing challenges, provided regular progress updates, and showed that they were resolved. That well thought out, orderly, and systematic approach—along with a sense of urgency—gave stakeholders the confidence to pivot to strategic initiatives to address our effective tax rate.

The process also made them aware that our rate is dependent on where we do business and staying aware of the most tax-efficient jurisdictions. They saw that changes could be driven by business priorities and could be made without disrupting operations. And by working together, everyone gained an understanding of how the tax rate comes together and what part they play in it. All of those elements have great inherent value—including having decreased our effective tax rate by two hundred basis points since 2013.

As far as a dollars and cents value, we measure our success by earnings per share. That’s what is left over after all business inputs and creditors have been paid. I obviously have an obligation to ensure that the tax authorities receive their proper claim. However, I also want to ensure that our shareholders receive the highest earnings possible. My guiding principle, then, is to provide good, solid judgment so that I pay the authorities what they’re entitled to under the law.

What has been the most challenging aspect of implementing so many changes?

Change management itself has probably been the most challenging. Whenever those issues have come up, I’ve gone back to our shared mission and sense of purpose. At the end of the day, we’re all working toward optimized enterprise value and effectiveness. If restructuring to pay less tax will help reach those objectives and increase the value of shareholders’ investment, then it becomes hard to resist change.

Photo: Karen Prunty

BDO congratulates John Carr on his accomplishments and well-deserved professional recognition. As a long-standing tax partner of Bruker Corporation, we remain consistently inspired by John’s exemplary leadership and extraordinary vision. We look forward to our continued partnership with him and Bruker Corporation in the years to come.