Over the past several years, CEOs were thought of as valiant leaders fearlessly charging far ahead of their associate army, single-handedly forging the path to the conquest of new and profitable markets.
It’s an inspirational picture, a portrait of leadership from what, in hindsight, appears to be a simpler, golden age of commerce, but one that doesn’t hang in the gallery of management thinking in the “business as unusual” world we call the No Normal.
Our current non status quo is not a blip and requires a rethinking of the C-suite, starting with the role and duties of the chief financial officer and her or his relationship with, and to, the CEO. It is increasingly difficult to believe that any one person, however gifted, can master the depth and breadth of the disciplines necessary to win in the No Normal, a period of continuous discontinuity evolving in the wake of COVID-19, the protests following the killing of George Floyd, attacks by cancel culture activists, asymmetric changes in consumer attitudes and behaviors, and other elements of change.
Once upon a time, the CFO occupied a critical, but limited, position in the C-suite, and was often seen as the CEO’s closest ally and key advisor, at least on financial issues. But changing times require changing strategies and rethinking roles, especially in the C-suite. Faced with a climate of continuous complexity and uncertainty, CFOs are assuming more and more direct leadership.
CFOs realize that the sheer amount of the complexity they and their organizations have to deal with is not only not going away but will likely be multiplied tenfold, and that their only recourse is to simplify things, using a six-step process to focus on what is genuinely mission-critical rather than continuing to layer complexity on top of complexity.
Step One: Remove complexity to increase agility and flexibility
Remove as much internal complexity as you can to put your company in the most agile and flexible position possible to respond to whatever happens. System and process complexity seems the all but inevitable by-product of time and the failure to integrate acquired businesses and expanding SKUs, product lines, and categories to meet changing consumer demands. Often, businesses have “added,” but have not taken the time to “optimize,” which has led to temporary fixes, one-off exceptions, and unprofitable complexity. In the end, the accumulated unwieldy bundle of disparate solutions slows down critical functions, makes what should be transparent opaque, can mask serious ongoing issues and flaws, and can put a company in a position where it has no hope of addressing even contemporary, never mind future, opportunities.
Step Two: Accept that cultures change
The odds are that your organization is struggling with a broad portfolio of cultural issues, chief among them the temptation to preserve, or get back to, your pre-COVID culture. In the face of successive waves of change driven by technology like Zoom, new models such as working remotely, and ongoing social change, denial is not only not an effective strategy but can also be a fatal mistake.
Whether it is the new talent you recruit, or existing talent you develop in new ways, the scope of what were previously seen as “finance positions”— whether focused on taxation, financial reporting, or overseeing specific lines of business—has to be expanded to produce “business partners” that can help organizations identify and respond to the volatility that corporations face across all functions in the No Normal.
Step Four: Create and adopt new engagement and communication models
How companies communicated among themselves pre-COVID—through slits in the walls of various corporate silos—was bad enough. Silos are the by-product of too much internal focus, and siloed communication leads to suboptimal performance. We need more transparent, flatter models that allow CFOs to interact with other critical functions in the natural course of their day.
Step Five: Develop new metrics and measurements
New strategies require new metrics. Moving forward, a company’s success will be determined by more than just earnings per share. Total stakeholder value (TSV) will take on more focus from shareholders, colleagues, customers, consumers, and the communities they serve.
Step Six: Walk the talk
Finally, CFOs must understand that bringing any of these reforms to life, especially those with significant social sensitivity such as corporate proclamations of diversity and inclusion, is more than signing a pledge or issuing a press release. In the No Normal, companies will be looked at to take a stand on a variety of “tough” issues, and every constituent, from employees to shareholders, customers to vendors, trading partners to the media, will be paying careful attention. With that kind of scrutiny, a company’s “stand” has to be genuine.
Not every CFO will be comfortable moving away from finance into high profile leadership; at the very least, the challenges of the No Normal are forcing the incumbent CFO to take a hard, objective look in the mirror to see if they have what it takes to meet their company’s present and future challenges.
Authors: Robert Sayner, Partner & Brian Hamm, Executive in residence