Firms Seek CFOs with Strategies for the Long Haul
Challenging financial times call for inspirational financial executives. Exactly what companies are looking for may depend on how the crisis is affecting them. One thing, however, has become clear: CFOs will be leaders in driving and implementing the strategies stemming from the economic turmoil, according to CFO.com. In a recent interview, Starwood CFO Vasant Prabhu told CFO.com, “I like to look at worst-case outcomes and know what I’m going to do in those situations. If I’ve already dealt with a nightmare while I’m awake I don’t have to dream about it at night.”
Amid the trend, executive search firm, A.E. Feldman, reports demand is growing for Finance Chiefs who can manage a balance sheet, who know the debt markets and are strong on valuing assets. Flexibility and the ability to adapt to the dynamics of the market during the recession are also critical. “It’s imperative to be ‘battle tested’ with regard to capital markets experience,” said one veteran CFO consulted for this article. CFOs need to be nimble and skilled enough to side-step the capital markets “call,” in any way they can (avoiding defaults, selling non-core assets, tightening working capital, etc.) Otherwise, they will inadvertently transfer value to lenders from shareholders.
Pressure is mounting on CFOs to rethink and adjust their financial strategies in order to ensure that they continue to drive productivity and bottom-line performance. Right now, most companies are implementing cost cutting measures. At the forefront of those measures are Chief Financial Officers who can play a significant role in helping their company achieve substantial and sustainable cost reductions, according to a recent PricewaterhouseCoopers (PwC) report. It states, “Undoubtedly, CFOs should take a leading role in re-positioning the business’s finances.”
The PwC report argues that CFOs may be key players in resolving current issues, but they must re-think their role in the downturn. So how can the CFO provide the compass from which companies will navigate to a more profitable future? PwC narrows it down to the following five steps:
- Earn the mandate to lead by demonstrating competence: Leading from a position of strength requires having, or building, a reputation for the finance function as a great service and at low cost. In the current environment, the focus is on information.
- Develop a plan: Assess the value and the cost of all operational and support activity.
- Address the short term fixes decisively: Review quickly those costs inherent in the business that can be rapidly addressed without compromising value.
- Tackle complexity: Long term sustainable cost reduction is achieved by eliminating unnecessary complexity that adds cost but no value.
- Communicate: Ensure that actions taken are understood, supported and sustainable through effective stakeholder management.
CFO credibility is crucial, says PwC. It is also vital to show some diplomacy while deciding between non-essential and essential activities in order to preserve full shareholder commitment. The report states, “Be aware of the sensitivities, the ’sacred cows’, and deal with them appropriately.”
Throughout this process, CFOs are advised to “Be visible in driving the management of cost in the business.” Finance chiefs must ensure they have the support of top executives.
The PwC report also argues that CFOs must develop a comprehensive cost-reduction plan. CFOs should understand overall business costs, the major cost categories, what is fixed and what is variable and be able to identify opportunities. PwC also advises CFOs to be aware of customer value and strike the right balance between cost and value.
Undoubtedly, CFOs are being more intensely challenged now than ever before. The CFO’s ability to predict the future has become indispensable, but PwC says they must also address the short term. PwC explains in its report, “Acting fast and getting the quick wins can make a big difference to long-term prospects, improving the outlook until longer term initiatives start to deliver. Low-hanging fruit should be identified – and taken.” PwC adds however, that quick wins should be balanced with the potential negative long-term impact on the business morale or culture.
CFOs should ensure that highest-value employees are retained and regularly informed of changes in the structure, advises PwC. This improved communication is an essential part of the winning strategy that should be implemented, and it is “far preferable to overdo it rather than leave messages unsaid,” according to the report.
PwC concludes that by having a unique view of the business across its costs, complexity and value drivers, CFOs can take the necessary cost-reduction measures and communicate results to the different parties involved - skills that are critical in the current economic crisis.
Now with this greater CFO accountability, comes a higher rate of turnover. Recent KPMG research suggests that CFOs are, in fact, moving on to new opportunities for which their particular talents are best-suited, reports CFO.com. Indeed they are. A.E. Feldman, reports that CFO jobs are opening up as a growing number of companies are now looking for finance chiefs with treasury and capital-markets skills as well as the ability to adapt to the dynamics of the market.
Are you a CFO? If you want to grow your career or discuss your company’s talent needs, contact A.E. Feldman’s President, Mitch Feldman today.
