During these challenging times what can finance leaders do to promote a healthy psychological and emotional perspective on the current crisis?
Managing the impact of the current pandemic has caused high levels of stress and has hit all leaders and functions hard, the hardest hit may be chief financial officers and the departments they are leading through these highly dynamic times. With the strain falling on the finance function and a majority of companies predicting a loss of revenue and profits, how can the finance function minimise the financial damage caused by the crisis.
There’s no doubt that the pace at which finance leaders are running is impossible to sustain. On top of that, many of the strategies CFOs are recommending integrate restructuring plans that have real human impact. Needless to say, stress is at an all-time high.
The chief financial officer is there to guide the organisation from the enterprise level. Even in the most average of business environments, it is a sizable, demanding, and highly complex responsibility. In volatile times such as these, that responsibility becomes enormously heavy.
From a leadership standpoint, the CFO not only has to manage and lead themselves through this crisis, but also their teams, and more broadly, their companies. What can finance leaders do to cultivate a sustainable environment and promote a healthy psychological and emotional perspective on the current crisis?
The following four activities may well lie outside their comfort zones, but by embracing them, CFOs will drive positive outcomes in their organisations:
- Understand self-awareness. Understand that the crisis is going to have a personal impact on you. Working 16-hour days and making decisions that potentially result in your co-workers losing their jobs is going to take a personal toll.
- Think differently. Commit yourself to learning and thinking differently about things; don’t have the crisis force you to do so. Great organisations will innovate through these times rather than simply work harder. These organisations will then be poised to pivot quickly as things shift in the future.
- Actively listen. Especially to your team. Being receptive to their ideas and understanding their challenges creates connection at a time when you need it the most. Standing firm in your own position versus being open to another’s is counterproductive. Keeping an open mind and encouraging diversity of thought is imperative.
- Look to the future. Your organisation is going to come out on the other side of this crisis. How, depends on the actions you take today, because what you do and say now will be remembered for years to come. Given this far-reaching impact, talent needs should always be part of the decision-making criteria on any restructuring or downsizing event.
CFOs must be cognizant that their people are looking to them for signals on how to react and respond during this crisis. If as a leader, you are closed to new ideas, your direct reports will model that same behaviour. As leaders of leaders, CFOs’ direct reports can cascade unfavourable, pervasive behaviours ubiquitously into the organisation. The aftermath of ineffective leadership at this level can echo and reverberate through every area of the business and have a negative impact on morale, encouraging an environment where innovation and collaboration are stifled when needed most.
On the other hand, leaders who can recognise the emotional aspects of what’s going on inside themselves and others will be better poised to nurture empathy, create calm and balance, and enhance critical connection among team members throughout the organisation, thereby accelerating productivity and effectiveness. As companies face increasingly challenging barriers, an atmosphere such as this promotes constant, transparent communication, which is required to make stalwart, forward-thinking decisions.
CFOs are routinely tasked with making data-driven decisions. But, in order to be effective in the current environment, good CFOs and their teams will need to exercise their qualitative analytical skills as well as their quantitative. Quantitative data, such as a fall in revenue, may indicate the need for a reduction in the workforce. Those types of decisions need to be made and, frankly, are fairly simple.
What’s more difficult is to predict the implications of that revenue drop over the longer term. Will that revenue come back or is it gone forever? What can we learn from recent changes in our customers’ buying patterns and behaviours that will impact our business model and cost structure moving forward?
These are more involved questions that require a finance leader to create a more collaborative and inquisitive decision-making process.
At an enterprise level, a leader’s ability to practice self-awareness, remain open and curious, listen, and focus on the future amid these extraordinary obstacles will serve to strengthen the foundation they’ve built. This gives them the leverage they need to pull their organisation and teams out of their immediate and natural fight or flight responses and stand them solidly in a position to create the stability and routine needed to unlock their capacity for long-term perseverance.
However, this only happens when the leader owns the transition on a personal level.
What are today’s CFO challenges? Well, the role of a CFO has changed for good. No longer simply thought of as some just in charge of the numbers, you now have the tools and technology to become a visionary, plotting the course for the future of your business.
Already an essential member of the C-suite, you as the CFO have strategic business decision making as a key responsibility.
Alongside that are numerous challenges that you have to face. Below, we go into more detail and offer advice to help you solve them.
1. Dealing with Brexit (and other global legislation)
According to a Sage research report, CFO 3.0: Digital transformation beyond financial management, where we took the views of 500 senior financial decision makers, 44% expected Brexit to increase regulatory burdens.
With the UK having already left the European Union (EU) and with discussions going on over a trade deal with it, you’ll already have assessed and prioritised the risks and potential opportunities that Brexit will bring in.
As well as currency fluctuations, you’ll also need to deal with what a proposed trade deal will look like, covering, for example, how your business raises finance in the future.
2. Tackling admin and productivity
The CFO 3.0 research says 70% of senior financial decision makers agree that admin hurts productivity. Your business will look at to find ways to fix this, and the answer is technology.
You should look at cloud-based financial management software, which can harness the power of automation for daily accounting tasks. In essence, 87% of financial decision makers are already comfortable with the use of automation for these tasks.
Essentially, future-proofing the financial industry is going to require technology innovations to provide even more automation.
Businesses understand the impact that financial management technology has in enhancing productivity. More than nine in 10 (94%) agree it will play a crucial role in tomorrow’s finance function.
Beyond the benefit for the finance department, it will also lay the foundation for better use of critical data and insights.
3. Coming up with new ways to help the business with financial matters
More of than half of financial decision makers (51%) say thinking of new ways to improve the business with financial issues is the most challenging aspect of their job.
Your role might be less about traditional accounting, with 94% of financial decision makers deciding their role has expanded over the past five years, and is no longer about fiscal responsibility.
They have better data tools at their disposal, such as real-time data, predictive analytics, immediate data access and a variety of information sources.
These tools provide you with new ways to quickly determine the immediate and mid-term commercial opportunities for the business, allowing you to adapt faster, take opportunities and effectively manage operations.
To achieve superior visibility of business performance, finance teams must have the tools and flexibility befitting the fast-paced, always-on era. Only then can they dovetail with all other facets of the business and collaborate as growth occurs.
Digitalisation provides advanced analytics to improve decision making, automation to improve processes, and metrics for improved real-time financial information.
Increased efficiency offers valuable insight into business operations to uncover growth opportunities.
4. Building a case to invest in financial management tech
The need for improved financial management tools is a catalyst for digitalisation. Indeed, more than two thirds (70%) of CFOs have full responsibility for digital transformation, a relatively new responsibility.
There are numerous pain points and an ever-expanding role in mastering – such as new data, technologies, and managing employee and stakeholder expectations. They are understandably concerned about how to bed down into their new function.
Also, 77% of financial decision makers will be unable to provide insights if they do not invest in financial management technology. And more than three quarters (78%) of finance leaders agree that if emerging technology is going to be transformational, they need the knowledge and resources for a successful deployment.
CFOs have become both the gatekeepers and king-makers to digitalisation. You must embrace your role as a leader of emerging technology, taking your place on the boardroom table.
You could witness a surge in progression that reverberates across the business. Don’t leave your business in the slow lane.
5. Tackling fraud and cybersecurity
The evolution of the CFO means you now have an integral role in data governance, data flow and cyber security, which means you’ll need to be active in performance analysis and innovating the business model.
This new remit will become key to unearthing cyber security and fraud. In the face of increasing cyber security attacks, it’s no surprise this is a priority.
Fraud, cyber misuse and data privacy protection now increasingly fall under your remit and the finance function.
What financial decision makers don’t always realise is that emerging technologies decrease the risk of data breaches.
Using the cloud creates enhanced levels of verification, securing data more comprehensively, as well as unearthing new commercial opportunities.
6. Lack of digital skills
As a finance leader, you should look to develop the skills that are essential to the future of your department and imperative to the changing industry. The task for the next generation of financial leaders is to manage a new landscape. You need the training and workforce to lead the charge within your organisation.
Delivering data-driven insights is another worry that keeps financial decision makers awake at night.
More than three quarters (78%) view technology literacy skills as essential to the future of their department, increasing to 86% in the financial sector.
More specifically, up to 31% are concerned about their lack of digital skills. The skills gap is felt keenly among finance professionals, especially with their enhanced responsibilities.
As such, two-thirds of CFOs (70%) still make decisions based on gut feel rather than data. Skills training is undoubtedly a factor for most CFOs, especially with the changing dynamics of the job.
You need a full complement of business, analytical, and data skills in your team. The need to harvest data rests on your team’s shoulders, so there’s an increasing requirement to upskill and use digital tools and cloud-based services.
Don’t estimate the change. But with the right systems and skills in place, finance teams will be able to operate more strategically to drive the business forward.
7. Dealing with concerns around automation
There is unease from financial decision makers who worry automation may replace their jobs (61%).
Finance maybe needs to rethink its traditional mindset. Rather than recruit finance professionals and try and upskill them with IT and data knowledge, they may need to look at non-traditional avenues.
It may be easier to hire data scientists and provide them with financial training. The skill-set should be closely aligned to allow a smooth transition and may also bring new blood and much-needed diversity into the profession.
Conclusion on CFO challenges
Emerging technologies, such as automation and artificial intelligence, are set to support the finance function throughout the digital transformation phase. This includes the creation of new jobs that will enhance the quality of working life.
Half of all respondents in the report (50%) agreed that emerging technologies would positively impact efficiency and accuracy. The most significant effects will be on data governance (48%), strategic and financial planning (48%) and efficiencies (47%).
Despite the challenges facing financial decision makers, the tools are emerging to help you tackle them.