March 22, 2021 – Perhaps the most important lesson that business leaders have learned from the pandemic is the importance of continuity planning in the C-suite, and beyond. In the crosshairs: Chief financial officers who are suddenly dealing with a vast array of new challenges, from cash flow, declining revenues, and employee health, to advising the CEO and board on strategic alternatives. Since COVID-19 struck, CFOs are being asked to play a broadening role. For executive search firms, CFOs continue to be in high demand, and finding these executives is keeping recruiters busier than ever. But the position is changing before our very eyes. That means recruiters must have a deeper understanding of their clients’ companies and the CFO’s role and relationships within them, especially with the sudden transition to virtual work. Being able to create liquidity and guard cash in an emergency are no longer enough for today’s CFO. Financial planning and analysis skills have become more critical. And preventing business disruption now means much more – a new layer of risk on the CFO plate is employee health.
“For many years the typical CFO job description has included the notion of partnership with the CEO and very many CFOs have the HR function reporting to them,” said David Hart, managing director of ZRG and co-head of the firm’s financial officers practice. “These two elements of the CFO’s job are changing dramatically and rapidly in today’s world. Helping the CEO and/or the private equity client make better decisions about CFO talent means that we have to bring a more complete understanding of how these changes are effecting the CFO role in our clients.”
Understanding that the culture is changing – and the move to a more virtual work environment – will change a company’s culture, he said, “and that means we have to find ways to assess the CFO’s ability to be a real partner to the CEO and to manage an HR function that is facing dramatic changes in recruitment, retention, performance evaluation, training and support in a highly virtual environment.”
Rich Herman, managing director and a specialist within ZRG’s PE-backed CFO recruiting platform, said that the current pandemic-model of a CFO has moved from the emergency activities of creating liquidity and conserving cash. “CFOs are being asked to create new analytics and key performance indicators to understand trends and predict opportunities in the business,” he said. “The FP&A element of the CFO’s role is being thrust to the forefront and these skills are in increasing demand from the CFO’s chair and down through the team.”
“CFOs can’t just be good technicians,” added Mr. Herman. “They have to know how to pass along their knowledge and develop their people. The role is migrating from a functional specialty to a broader training ground for general management.”
Heightened Level of Involvement
“In addition to new challenges and expectations placed on CFOs, brought on by the current climate, our firm’s experience in the financial services sector and other industry verticals that we serve points to a heightened level of CFO involvement in business transformation initiatives,” said Fred Loewen, chief operating officer of Waterford Global. “Clients in a number of the sectors we serve are currently engaged in, or embarking upon, multi-year transformation journeys in response to digitization.” As a result, he said, “CFOs are increasingly expected to play a leadership role in digital transformation, both in their specific functional area as well as more broadly in their roles as strategic contributors corporate-wide. From a recruitment perspective, we see this skill-set and experience progressively moving from nice-to-have to must-have as increasing numbers of organizations address the impact and implications of the digital economy.” Fold in a pandemic, and you can see the transformation of the role unfold in real time.
The pandemic has dramatically accelerated many of the necessary attributes that today’s CFO must master, said Joost Goudsmit, financial service co-practice leader and partner at Boyden Netherlands. “Digital transformation was already the impetus for the evolution of the new C-suite executive and now COVID-19 has thrust it front and center with a new urgency,” he said.
“In addition to steering their company towards financial stability, with one eye on the current state of cash/liquidity and another on the post-COVID-19 environment, today’s CFO must be digitally savvy, in lockstep with technology and completely hands-on in order to set the financial tone of the organization and effectively communicate with the rest of the C-suite as well as staff,” said Mr. Goudsmit. Along with mastering the “soft” skills surrounding communication and relationship management, these traits are especially critical when it comes to developing leadership and mentoring opportunities as well as acting as a confidant to the CEO in resetting strategies post-pandemic, he said.
“The role of the CFO has been evolving over the past couple of decades and has become more strategic and focused on overall business leadership serving as a true business partner and advisor with the CEO,” said Russell Boyle, co-head of the financial officers’ practice at Odgers Berndtson. “The CFO of yesterday is more compared to today’s controller, while the CFO of today is more akin to the COO as finance is at the heart of every major corporate decision. While the fundamental aspects of corporate finance are still incredibly important, greater emphasis is now placed on CFO’s broader-based leadership competencies that are sought by leading, global companies in all industry sectors. Today’s CFOs need to be more strategic and operationally focused than ever before.”
High Stakes, Long Hours
Shawn Woessner, co-head of the financial officers’ practice at Odgers, said the current pandemic has stressed companies in every sector. The firm’s thesis is that the responsibilities and importance of the CFO role has not changed, he said, but the crisis has shifted business priorities and intensified certain leadership aspects of the role, perhaps with a shift towards a more short-term focus.
“For some companies or industries, downsizing the workforce and the maniacal focus on cash flow management and forecasting are critical tools being employed to survive,” said Mr. Woessner. “In some other sectors, the crisis has increased dramatically the demand for services that has put pressure on the supply chains that struggle to meet expectations. In any case, the environment in most companies is intense, the stakes are very high and the hours are long.”
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“One of the challenges that I hear from many CFOs is how to keep their teams engaged and motivated – and how to continue to mentor them – as we all continue to work remotely,” said Jenna Fisher, leader of the global corporate officers sector at Russell Reynolds Associates. “Coming up with new and novel ways to spark interest, spontaneity and curate/create moments of fun team bonding can be a challenge, even for the most innovative leader. When we are all feeling a bit like ‘Groundhog Day’ and ‘Zoom’ed out,’ it is important that leaders continue to provide optimism and energy to their teams – while being authentic. Communication continues to be paramount to success, both in the short term and long term.”
Communicating with Empathy
Communication and stakeholder management skills are critical for any CFO today and will likely be in a post COVID-19 environment, said Adam Stolerman, partner at TritonExec. “A strong CFO must have the ability to lead an executive team in scenario planning, M&A and divestiture strategy with the ability to communicate consistently and with purpose throughout their organizations. Historically, a CFO’s communication is often aimed at their leadership team and external market. Today, the CFO must talk to the entire organization often with honesty and empathy.”
The financial health of a company has always been and will always be the CFO’s primary responsibility, Mr. Stolerman added. “Today, we are seeing a lot of CFOs trying to stockpile cash and gain access to additional lines of credit,” he said. “We would expect to see cash management philosophy to be high on the agenda in any CFO hiring post COVID-19.”
The pandemic is creating additional dimensions in a CFO role that has already evolved significantly in recent years, said Kent Burns, president of Simply Driven Search, a member of Kaye Bassman Sanford Rose Network. “Leadership and mentoring are more challenging with COVID-driven virtual work. Soft skills and EQ in a CFO are more critical now than probably any time in history. The world-class CFOs I speak with understand the unprecedented importance of making relational dynamics a high priority on a daily basis.” The little things are not little things right now, he said.
At the core, the risk factors are dramatically different as survivability of the business becomes Job 1. “The health and well-being of the leadership team has become paramount,” said Bernard Layton, managing director at Comhar Partners. “At the end of the day, the role of CFO is now a wisdom strategy and risk management role. That risk management portion of the role grows here as well as advising where to go with the business. And ultimately protecting cash is going to be a key for survivability of the business.”
CFOs, he said, are apprising the CEO of various scenarios vis-à-vis planning and managing around various business outcomes, Mr. Layton said. “They’re also mentoring and managing a team that has their own scope of responsibilities, controllership cash, treasury, financial planning, analysis and so on. In many cases, they’re even performing a human resources role, i.e., reporting in and keeping the team upbeat, motivated and looking past their own concerns towards the broader business objectives – these are all part of an expanding and challenging role.”
The job profile of the CFO will remain relatively stable, but the focus will shift,” predicted Benedikt Rinio partner and chief marketing officer of the global board at Ward Howell. “Experienced, proven CFOs are preferred as there is currently no time to develop into the CFO role or corporate processes.”
In his view, the CFO has morphed into a chief performance officer, who intervenes in the management and analysis of corporate processes, Mr. Rinio said. “In order to do this, he or she needs to know the business even better and give concrete impulses for improvement. Therefore, it is not just a matter of gathering knowledge and insights, but also of supporting the implementation. This demands a lot from the CFO as well as the entire organization. This transformation will shape the coming years.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media