The Changing Requirements of Financial Leaders

August 22, 2022 – Over the past year, Christian Schmidt and his colleagues have had dozens of discussions with CFOs to understand how they have been navigating the pandemic era and are adapting as leaders to this challenging and often unpredictable environment. What became apparent during these conversations is that the pandemic created or accelerated some key trends that will become an essential part of any CFO’s repertoire in the long term. All of this is examined in a new report from Egon Zehnder. The role of CFO has always been exceptionally challenging. “Those at the top of their game are masterful strategists yet able to dive deeply into – and solve – often highly complex and intricate finance issues that are essential to a company’s fate,” said Mr. Schmidt. “The past months have further challenged CFOs, and many have been critical in ensuring their companies’ survival. However, as the dust settles and many organizations are coping – even thriving – in the new normal, it is worthwhile to outline some of the key trends that are already impacting the role requirements for CFOs,” he said.

In the report, Egon Zehnder says it wanted to reflect on these developments, highlighting those that are likely to remain with us, which will require unique skills and capabilities from CFOs in the future. The study offered four major trends to pay attention to in the months, and years, ahead:

1. The CFO as Co-pilot
More than ever, the pandemic has demanded “all hands-on deck” by senior executives to ensure business continuity, or even survival. “In addition to the CEO, the CFO has played a pivotal role in this effort, often ensuring that the company remains in business,” said Mr. Schmidt. “The CFO must stay on top of the function 24/7, which entails extremely close collaboration with the CEO. Moreover, we have also observed that remote working, as well as fear and worries among employees, has required CFOs to increasingly focus on the ‘human’ aspect of their role, which is not only to lead the finance function, but also to motivate, energize, nurture, retain, and care for people across their organizations. This is naturally expected from the CEO but carries additional weight when the CFO steps up to a more prominent leadership role.”

“Before the crisis, companies were increasingly looking for CFOs who could act as true business partners to the CEO to help lead organizations in an increasingly complex, uncertain, and volatile world,” said Mr. Schmidt. “The days of the hero CEO and number cruncher CFO are truly over. As a natural and often obvious CEO successor, companies should consider bringing on CFOs who excel as leaders of people and who can connect and engage with others at a deeply human and motivational level. In our work with clients, a CFO’s leadership capabilities and their ability to effectively connect across organizations have become must-have requirements and arguably the most important lens through which we assess CFOs.”

2. The CFO as a Flexible Planner
When the pandemic hit with full force in 2020, companies were forced to abandon carefully planned budgets. In many industries both budgets and scenario planning proved to be futile and even counter-productive exercises, according to the Egon Zehnder report. “One of the most disconcerting aspects of the crisis for CFOs – who, by definition, must be focused on precise details – has been the inability to make forecasts and predictions with any level of certainty, given the totally unprecedented nature of the economic disruption,” the study said. “After trying to ramp up the pace of scenario planning in the early days of the crisis, many CFOs decided to stop and focus on detecting trends and patterns, seeking new learnings in the process.”

3. Getting More Adept at Digitization
Digitization of finance and other functions has been a hot topic for some time, and the COVID-19 crisis accelerated this trend. This is partly because companies have continued to trim down every function, prompting the need to increasingly rely on digitization and automation, according to Egon Zehnder. “The rapid progress in cloud computing has further sped up this trend as has remote working and the increasing globality of organizations,” said the study. “Many organizations need to have deep insight in real time into the performance of any unit across the world, increasing the need for digitization. What this means for the CFO is that she or he will increasingly be able to rely on algorithms when it comes to important decision-making. Rather than having to look over the shoulder of the head of FP&A, the CFO will receive actionable insights at the push of the button.”

4. Champion of ESG and Sustainability
Egon Zehnder notes that environmental, social and governance (ESG) issues have been a focus for companies long before the pandemic. The current crisis, however, has highlighted the importance of ESG and sustainability to businesses, and stakeholder scrutiny has increased significantly over the past months. The more sustainable a business is, the more resilient it will be to withstand shocks, such as a global pandemic. Also, investors are playing an increasingly important part in calling on companies to strengthen their ESG performance, and already now cheaper capital is available in some industries to those companies that are recognized as strong leaders in sustainability.

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