President John F. Kennedy once commented that the word “crisis,” as written in Chinese calligraphy, involved two brush strokes — one representing danger, the other opportunity. “In a crisis, be aware of the danger, but recognize the opportunity,” Kennedy advised.
His point is useful advice for CFOs addressing the crisis of our times — the pandemic’s staggering impact on customer demand, cash flow, liquidity, working capital, and work itself. Continuing social unrest, political acrimony, climate change, and a new presidential administration with a new economic agenda are complicating factors.
For some CFOs, the challenges were too many. More than 80 finance chiefs at S&P 500 or Fortune 500 companies handed in their resignations in 2020, according to a study by Korn-Ferry, “a remarkable figure,” the consulting firm stated. While it is pure conjecture to conclude what prompted their exits definitively, surely the confluence of high-pressure events played a role, Korn-Ferry posited.
Perhaps, according to Korn-Ferry, these CFOs felt so overwhelmed by the crisis that they had reached a limit of endurance. They were too exhausted to put their noses to the grindstone once again. In no way is this a criticism. A crisis changes everything, particularly when you’ve been there before, again and again.
Data Tells the Tale
Nevertheless, a setback like the pandemic has a way of activating basic human ingenuity and resourcefulness. This was evident in the singularly remote and virtual forms of mass work that kept large companies operating, a work paradigm that continues.
It is also obvious in the work of CFOs to generate revenue from adjacent markets — the case with the hospitality sector renting rooms to remote workers on an hourly basis and the many restaurants that pivoted to online menu orders and third-party meal deliveries.
Now, CFOs are developing new scenario planning exercises and pulling key performance indicators out of silos like operations and HR and adding them to financial dashboards. Both activities will help the CFO be more prepared the next time a black swan event makes a mess of business.
Since data is the currency for making smarter bets in business, CFOs can be expected to invest more capital in their organization’s digital transformation. Certainly, the company with the easiest and fastest access to accurate financial data has a competitive edge. This is the opportunity at hand for midsize companies.
Nearly two in three (63%) midsize companies rely extensively on spreadsheets to close the books, according to a recent global survey by Capstone Insights of 1,500 midsize companies (between $100 million and $749 million in revenue). The use of spreadsheets resulted in incomplete or inaccurate data and version control issues, the respondents said.
When boards of directors pressured CFOs for an accurate picture of the risks and opportunities, many CFOs could not confidently articulate it. The data informing demand, revenue, accounts receivable, cash flow, and liquidity was too little, too late, and maybe incorrect. Unable to posit a clear course, even the toughest trouper might ponder an exit.
When You’re Done, You’re Done
For these battle-scarred CFOs, veterans of past disasters like 9/11 and the 2008 financial crisis, piloting a course through yet another mess can feel like just too much of a commitment. Maybe they mulled other CFO and board opportunities or just wanted more fun and relaxing lifestyle. Good for them, I say.
But is the “remarkable volume” of CFO leave-taking a problem for their former employers? Simply put, no. New blood may be just what is needed to reassess the dangers brought about by the crisis and discern out-of-the-box opportunities to transform the duress into dollars.
A new CFO of any age brings a fresh set of eyes to bear when examining risks and opportunities. The new CFO isn’t weighed down by the institutional relationships that burden the ability to make tough but necessary decisions — decisions the prior CFO knew had to be made but lacked the organizational flexibility to make them.
I know this to be the case from our customer base. Each time a CFO shift occurred, it catalyzed new ways of doing things. I recall one recently hired CFO who retained a new auditor, a decision the prior CFO was reluctant to make because of the company’s longstanding business relationship with the existing one.
A new CFO can be a powerful change agent when there are no sacred cows. New ideas, processes, solutions, and people are liberated to recognize opportunity amid the danger.
Mark Partin is the CFO of BlackLine, a provider of automation solutions for finance & accounting.