CFOs are starting to think the rest of the C-suite needs a reality check. And their faith in them weakens.
“In times of growth, CFOs are the voice of reason within the C-suite when making investment decisions,” says Jim Lawson, co-head of the global financial officer practice at Russell Reynolds Associates. . “But in times of uncertainty and decline, they become the voice of reality.”
Russell Reynolds, a consulting firm, recently released its Leadership Confidence Index based on the sentiment of C-suite members, leaders one or two levels below the C-suite and directors. The research found that CFOs’ confidence in leadership teams fell from 69.2 at the start of 2021 to 62.4 at the end of 2022, a decline of 6.8 points. It’s out of 100 possible points. (For CEOs, their confidence in the leadership team fell from 74.2 to 65.7.) The findings are based on data from a global survey of more than 1,000 executives.
According to index data, one of the concerns of CFOs is how well the team understands the competitive dynamics to effectively manage the business in macroeconomic times. “We see it in our day-to-day interactions with CFOs beyond the survey,” Lawson says. “The CFO is the member of the C-suite team who will often revert to fiscal conservatism and preserve capital. Over the past year, for every investment a business wants to make, it pays a higher interest rate. »
Lawson shares what he hears from CFOs. “A good friend of mine is the CFO of a private equity-backed company,” he says. A year and a half ago, the company was leading the market, says Lawson. The CFO chatted with his C-suite colleagues about investing in employee and marketing initiatives, and “doing fantastic things,” he says. Then a new private equity firm came along, paid top dollar for the company, and then the growth stalled, Lawson says. So now the CFO is sitting in meetings with the same C-suite peers still talking about initiatives like they did 18 months ago, he says.
“It’s a totally different story,” says Lawson, the CFO explained to his peers. “We are late in this agreement now with the new sponsor. You are used to being one step ahead. The tone must therefore change in the room. We are in cost-cutting mode.
How can CFOs keep everyone on the same page to ease their worries? Lawson offers three tips:
— Become even more collaborative with C-suite peers who may come from a different, less financial perspective.
— Practice balanced communication. The CFO can help them understand why certain investment decisions might not be viable right now. They need to take their peers along on the journey and really explain the reality of the situation to them. CFOs are rooted in numbers and data, and they need to share it.
— Have more empathy for C-suite colleagues. CFOs shouldn’t take the approach of just saying, “We can’t afford this,” and then shut everything down. Help them understand short-term and long-term investment trade-offs.
Another piece of advice from Lawson: “CFOs need to be careful not to prevent companies from making strategic investments in times of uncertainty. This can harm the company’s strategic position when activity resumes.
Close collaboration is essential.
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
Big deal
In 2022, global pension assets recorded their biggest decline since the 2008 global financial crisis, according to the latest Global Pension Asset Study of the Thinking Ahead Institute of Willis Towers Watson (WTW), a global consulting firm. The study covers 22 retirement markets around the world (P22). Research finds global pension assets now stand at $47.9 billion, down from $57.452 billion (a 16.7% decline) in a year, mostly due to a correction in securities markets income and equities, WTW found. The United States is the largest market, with 64% of P22 assets, followed by Japan and Canada. The three countries account for 76% of all pension assets. “A new era is rapidly unfolding, potentially marking the end of cheap money and a long period of low volatility,” WTW says in the report. “A period of the business cycle with a disinflationary headwind has come to an end. Asset owners may find the next period uncomfortable.”
Go further
“Going back to the office could be the real reason for the drop in productivity. Here’s the data to prove it,” A Fortune opinion piece by Gleb Tsipursky, CEO of future of work consultancy Disaster Avoidance Experts, explores trends in workplace productivity. “If the silent shutdown and resulting drop in productivity came from remote work, we should see a drop in productivity early on in the pandemic, when office workers transitioned to remote work,” Tsipursky writes. “Then, when offices reopen, we should see productivity increase as workers return to the office from early 2022.” However, U.S. productivity increased in the second quarter of 2020 as offices closed and remained at a high level through 2021, according to Tsipursky. “Then, when companies began to mandate a return to the office in early 2022, productivity fell sharply in the first and second quarters of that year,” he writes.
Ranking
Joan Knight was promoted to Chief Financial Officer Cargill, a global food company that provides agricultural and financial services. Knight is currently Cargill’s interim chief financial officer. Prior to this role, she was vice president of finance for Cargill’s agricultural supply chain business, including shipping and global trading group. Prior to Cargill, Knight spent 10 years in finance, marketing and business leadership roles at General Mills, including responsibility for P&L. She has also held financial leadership positions at Wachovia.
Christine Forney was appointed Chief Financial Officer of Ocean Spray Cranberries, Inc., a farmer-owned cooperative, starting Feb. 27. Forney has over 28 years of experience in financial management. She joins Ocean Spray from Hain Celestial Group where she served as SVP of Finance for their North America division. She led a financial organization backing a $1.6 billion organic and natural products business. In addition to Hain, Forney has held leadership roles in finance and revenue growth management at several ConAgra Brands businesses over the past 15 years.
Heard
“While current generation AI tools aren’t terribly scary, I think we’re potentially not that far off from potentially scary tools.”
—Sam Altman, CEO of ChatGPT maker OpenAI, shared in a series of tweets last weekend his thoughts on the dangers posed by current AI technology and the tools that will follow in the years to come, Fortune reported.
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