Strong relationships can aid CFOs in building C-suite cohesion
While some economists are cautiously optimistic about the future of the economy, executive leaders are still facing high inflation, rising interest rates and shifting consumer spending trends.
To best position their organization to weather continuing economic headwinds, the C-suite and other members of executive leadership must be united in their approach — but, as recent data from leadership advisory firm Russell Reynolds shows, many executives appear to be losing confidence in their executive leadership team’s ability to respond confidently to market uncertainty.
CFOs serve a crucial role during such times — finance leaders can help both to make the companies’ position more transparent to their C-suite peers and to help the executive team make strategic decisions to put the organization ahead in a rocky market, Jim Lawson, co-leader of the global financial practice at Russell Reynolds said.
The CFO is “always going to be rooted in the reality of the financial data,” Lawson said in an interview, and “not all of their C-suite peers are going to be as analytic and numerate.”
Sharing the CFO perspective
With overall confidence in executive leadership declining — Russell Reynolds data found confidence among CEOs, C-suite leaders and other executive leaders fell by 4.9 points between 2021 and the end of 2022, according to its index — getting a clear picture into the realities of one’s business and how to respond to shifting macroeconomic factors is crucial.
CFOs have visibility into where the business is going, Lawson said, and are also often the first executive to have to explain the results they are seeing and “put their reputation on the line” to their boards, he said.
Companies’ finance leaders are also the ones responsible for making sure the company is not just cutting costs in order to brace for a potential downturn, but to ensure their firms are prepared for the other side of the dip. As their C-suite peers discuss where they might be looking to invest or what initiatives they want to focus on, “the CFO’s role is really to bring everyone back to the reality of the situation,” Lawson said.
In order to do so, CFOs need to be sure that they are “sharing their perspective and communicating” with others in the C-suite, Lawson said, while also keeping in mind that their fellow leaders may not have the same background or training when it comes to interpreting financial or market data. Building out stronger, individual relationships with others in the C-suite can help financial leaders better bring their peers on board with the realities of the market.
CFOs can take steps like spending more one-on-one time with their C suite peers and explaining how their individual department or business unit is going to be impacted by market shifts, Lawson said.
Making space for next-gen leadership
Besides CEOs and other C-suite leaders, the future leaders that are rising through the ranks are also reporting slumping confidence in the abilities of their leadership team, according to Russell Reynolds data. These include executives who are currently one or two levels below the C-suite, and are typically responsible for executing business strategies once decided.
Overall, confidence by these executives in their current leaders slumped by 5.6 points between 2021 and 2022, according to Russell Reynolds, with confidence in the teams’ ability to respond to critical issues retreating by 7.8 points.
Senior leadership and those behind them take different tacks — emerging leaders are trained to use technology to help predict outcomes, Lawson said, while more senior leaders rely upon their experience to help make strategic decisions.
“I think that there's tension in the system between the next generation leaders and more senior leaders, who are used to leading through more of their experience and wisdom, versus being as analytic as the next generation is,” Lawson said.
This dichotomy can also be seen within the C-suite, as “old school” and “new generation” CFOs tackle expenses and other challenges in different ways. Melding the wisdom of an experienced CFO with the data skills of the new generation would be the ideal mix for a finance leader, Vikram Bhandari, CEO and founder of technology and consulting firm Yantra previously told CFO Dive.
More and more CFOs are looking to data analytics and other technologies to help them assess future trends and make determinations on how certain moves could impact company profitability, Bhandari said — a trend which also makes robust relationships within the C-suite essential. A sturdy relationship between the CFO and CIO can help companies best optimize their technology spend, for example, providing key benefits both during and past a downturn.