Summit 2022: Navigating Rough Waters with Finance Leaders at the Helm
An audience of over 1,300 finance professionals tuned in to the two-day event from all around the world.
Not only was the event chock-full of expert advice and actionable solutions, it also aimed to inspire current and future finance leaders. In particular, surviving and thriving through the next 12 months (and beyond) is top of mind for most.
We learned how CFOs can succeed in this tricky period by:
Taking a true leadership in their companies, thanks to their deep knowledge of finance and ability to share this expertise with employees
Carefully managing company cash
Keeping their people happy
Let’s dive in and explore what the experts had to say about all of this.
Put the “leader” in finance leader
The CFO is in a unique position. You act as both a finance team leader and a member of the executive team. You ensure the finance function runs smoothly while helping make high-level strategic decisions for the company.
The CFO has the privilege and responsibility of stepping up as a leader when times get tough. The executive team relies on the CFO to help make critical financial decisions and steer the company to safety. And the wider company looks to you to make sense of a confusing economic situation.
Not all CFOs are created equal, however. So what separates true finance leaders from the pack?
Hone excellent communication skills
The CFO has the most insight into the economic environment. You must then clearly communicate this information, and the accompanying strategy, to help employees understand the situation.
Most people are unfamiliar or even uncomfortable with finance concepts. And in times of crisis, this discomfort grows. The CFO should be able to explain the situation and reassure employees with a clear and comprehensive plan.
Great CFOs lead through curiosity and a desire to help across the entire business. Seek out opportunities to guide and give context through this stressful period, and show that there are cool heads steering the ship.
According to Sergei Galperin, CFO at Alan, transparency is the key to navigating economic crises together:
“Radical transparency is one of our core values. We kept the entire company informed every step of the way related to each one of the decisions we made…The entire company was really energized by the direction and everyone is truly bought in and we’re all pulling in the same direction.”
“The name of the game is being flexible while remembering your priorities” - Julian Lange, Aiven CFO
Flexibility and the ability to adapt quickly are underrated yet essential qualities for CFOs. The market can hold surprises - good and bad. And from one day to another, you’ll need to adapt your plans.
You may even be forced to scrap big projects and plans when an economic crisis hits. Although this is disappointing, finance leaders have to know when to cut their losses.
Keep evaluating over time and maintain an open mind. This is especially useful when it comes to budgeting and forecasting (more on that below).
“As finance leaders, we really have to welcome the other leaders to build the budget with us.” - Dan Zhang, ClickUp
Collaboration plays a huge role in leadership. CFOs and the finance team must be acutely aware of what goes on in other departments. Communication is key, as is cross-department understanding. In the end, you’re all on the same team!
The CFO can act as a bridge between departments and also from the business to external stakeholders.
Finance teams have the privilege of being able to connect and work with every department. Use this to your advantage; create links and relationships with colleagues outside of your everyday scope.
For example, understanding the sales pipeline is important in a crisis. You’ll need all the revenue you can get. So get to know your sales unit well before a crisis hits. Learn their strengths and find ways to help.
The CFO who understands every aspect of the business will have an easier time making decisions when storm clouds are brewing.
Get obsessive about cash
“If you run out of cash, you run out of business.” - Jan Kalmer, Finance Director at Everphone
“Obsessive” might be a little strong. But tough times call for tough decisions when it comes to cash management. And most of our finance experts agree that this period will require more scrutiny and care over spending.
Put simply: hope for the best, plan for the worst.
Crises are good periods to develop a cash-sensitive culture and way of operating. Focus on the basics:
Streamline and renegotiate your tools. Check subscriptions for auto-renewals, and make sure you actually use all the tools you’re paying for
Get creative with marketing and don’t rely on paid advertising
Invest in new, modern tools that increase productivity and efficiency
Embrace standardization and automation
And remember: everything is negotiable. Even your “fixed” costs.
Find your forecasting rhythm
You can forecast and reforecast as necessary, but only do your full budget planning cycle once per year. If there’s no need to adjust, then you can just run with what you originally planned.
However, given certain market changes, you may be forced to update those budgets. If you see certain developments throughout the course of the year, you need to maintain some flexibility.
Some companies forecast twice a year, some once a quarter, and some do it monthly. In an environment of uncertainty, you may need to do your forecasts more often than you used to.
Find what works for you, and stay open to the possibility of change.
Cut fat, not muscle
Many companies are forced to tighten their belts when the economy is down. But cutting costs just for cost cutting’s sake doesn’t make much sense. Analyze and understand what works and what doesn’t.
Don’t just cut 10% of costs across the board. Instead, cut 100% of the things that don’t work. And then you can use that money differently, or save it.
If you are spending money on a program or perk that employees enjoy, try to find a way to keep it. This type of (relatively minor) investment pays off in the long run!
To paraphrase Spendesk’s CFO Julien Lafouge, don’t switch out the good coffee for a lesser brand. You risk lowering morale and angering employees over something small that doesn’t make a huge impact on your budget, but will have an outsize impact on the overall mood and feeling around the office.
A note on fundraising & IPOs
The 2022 landscape for fundraising is vastly different from that of 2021. But startups needn’t despair! There are venture capital firms out there who still have money to spend, and other non-equity sources available.
Investors are looking for safe investments, companies with a clear path to profitability, and an optimistic and predictable forecast six to eight months out.
If that’s not you, then it’s best to get your ducks in a row and be prepared for when the economy, and fundraising options, bounce back. And that’s also true for those companies getting ready to go public.
IPOs hit an all-time high in 2021 in the United States, and we saw close to 500 IPOs in Europe in 2021. But 2022 has been less favorable. Lucile Cornet from Eight Roads says that “tech has been hit very hard in the stock markets, effectively closing the window for IPOs probably for the rest of the year.”
But that doesn’t mean that companies should give up hope of ever going public. They can increase their chances of an IPO in the future by setting the groundwork now. It’s a good time to prepare for the next window that might open, in perhaps two or three years.
Keep in mind that an IPO should not be the end goal, but rather a financing event. If you focus on building a great company, then the rest will fall into place.
Keep your people happy
“The Great Resignation proves that losing talent is the #1 issue that can hurt business during a downturn.” - Dan Zhang, CFO at Clickup
If you thought the Great Resignation was over, think again. Employee retention is still, and should always be, a high priority for companies. Especially when you need your best people more than ever.
This cannot be an afterthought. It starts right from the beginning of the hiring process. If (potential) employees are treated well, respected, and valued from the very first interactions with the company, it sets the right tone.
Or as Doctolib Head of Finance Max Gärtner puts it: “People work for people, not for companies.”
It’s not only about the salary. Look at the global package you provide to a future team member. It’s “easy” to offer a salary bump - cash permitting - but harder to provide other enticing benefits. Equity, operating principles of the organization, benefits, even the office…the combination of these factors should be something that employees want.
Think of your company as a product. Are you offering an attractive product to your employees and potential employees?
Some companies opt for pay raises across the board, others will choose a one-time bonus, and a few will find alternative measures to help relieve employees of inflation-related burdens. But this will depend on the company and the region, and even significant pay raises may not keep up with rising costs of living.
The best organizations set themselves apart by being transparent (just like great CFOs). The more transparent an organization is, the more likely that employees will remain loyal and happy.
If salary information is opaque and inequitable, it’s a recipe for low morale and mass resignations.
CFOs and company leaders will need to think outside of the box. Get creative with benefits, perks, workplace flexibility, and other offers to help employees through this financially difficult period. Employees will appreciate your transparency.
CFO Connect Summit 2022 was a resounding success, with finance leaders from all over the world taking part in the two-day online event. The expert-led panel sessions revolved around finance issues in times of crisis: who is poised to be the next leader, helpful financial advice for an economic downturn, and a major focus on retaining your employees during a turbulent period.
By embracing this uncertain time as an opportunity for growth and adopting a positive outlook, CFOs will naturally step into a leadership role that draws on their financial expertise and strategic decision-making abilities.
But CFOs are not alone in this adventure! CFO Connect is a community of over 8,000 finance professionals who support each other in all questions big and small.
Join CFO Connect to make connections with fellow finance peers - all of whom are moving the finance industry forward every day.