Finance in a Post-Pandemic World

A Roundtable Discussion

What are the main challenges facing CFOs as we navigate our way through the pandemic and beyond? This was the topic at our recent CFO debate, where we were delighted to welcome CFOs from a wide range of sectors.

Strong themes resonated with our guests as they plot a course to create a new type of finance team to meet the demands and needs of businesses during the pandemic and beyond.

Setting the scene:

As regularly highlighted, COVID-19 and leading businesses during these unprecedented times, especially during lockdown, has led to high levels of exhaustion amongst the C-suite.

No more so than for the CFO. March through June is a busy time for finance in a ‘normal’ year due to year-ends/audits/budgets etc. This year all of these things had to be delivered remotely. Added to which there was the increased need to manage liquidity more closely for most businesses, as well as considerable scenario analysis & planning for the many and varied situations which need to be considered. All such tasks quickly come in the direction of the CFO.

Lockdown rules changing generated more challenges when it had been assumed that many of us would be returning to the office after the Summer. Lockdown #2 has now increased this uncertainty. In addition, there are many other challenges ahead for business, including but not limited to; further lockdowns in 2021, Brexit and planning for the ‘New Norm’. How are CFOs preparing for this? How are they prioritising their time and that of their team? What changes have been made in 2020 and what further changes are being considered?

AT THE HEART OF BUSINESS DECISION-MAKING

Many have and are still, seeing constant reforecasting with the business moving away from current year’s budget. More common is the agreement of expenditure one month at a time. Something which non-finance colleagues are finding difficult.

Finance is having to be a little bit more in people’s faces now about delivering messages, especially around cost management, as well as helping the business find different solutions.

“Central is partnering – finance helping the business take the right decisions at the point of crisis.”

Where finance hadn’t previously established a business partnering model, many have moved to this and have changed their mindset from providing the numbers to one of help and support. One guest pointed out that “Right now, reconciliations are not as important as meeting people and sitting in business meetings.” Finance needs to be closer to the action, probing, asking questions and challenging rather than waiting for the normal process to deliver the answer.

The pandemic has also forced finance teams to look at more efficient use of technology to deliver essential data and analysis. The future is going to be different but what will always remain central is partnering – finance helping the business take the right decisions at the point of crisis. Have the metrics, KPI’s, understand the root drivers of performance and be able to very quickly assimilate those up to decision points.  It is clear finance can’t get every decision right all of the time, but mistakes will be made by pausing and trying to find every tiny nuance of a decision.

“Key question is whether businesses can come back in the right way and build back more efficiently, focussing on sustainable growth.”

A CFO from the leisure & hospitality sector mentioned budgeting was previously a year-on-year evolution process but given the state of the sector, they are now re-introducing zero based budgeting. Another Group CFO has told his divisions to continue with rolling monthly forecasts for their divisional management teams if they wished, but he was not going to put pressure on them to give that information to him. He only wanted to forecast on a quarterly basis to try and take away the non-key reporting pressure.

Another business had found they had continually missed forecasts during 2018 and the business came together in early 2019 to focus on the accuracy. Finance would then challenge the business and said, going forward, they would only accept copper bottom forecasts. This had the effect of the business coming together, really for the first time, to give a forecast they could hit. So, coming into the pandemic they had 12 months of accuracy which allowed them to forecast cash flow and liquidity more effectively.

“You can get DVT sitting at your desk as well as on a plane.”

DATA TO BUILD BACK BETTER

As the old saying goes; “never waste a good crisis”. Looking at what that means in terms of building back with a more efficient cost base our guests made the following comments.

• Getting suppliers into the mindset of differing and more flexible contracts and what a business may want from them going forward.
• Look at innovation and productivity; the key question is whether businesses can come back in the right way and build back more efficiently, focussing on sustainable growth.
• People have enjoyed the positive environmental aspects of the pandemic and in particular transport and aviation are in the middle of that. Those sectors need to look at building-in sustainability more and consider how they want the next phase of growth to come back.
• The focus now seems to be on how to come out as leaner and more efficient organisations, building-in less reliance on 3^rd party contractors.

The crisis has really exposed the quality of data. When new, never seen before, situations arose risk management processes have been looked at differently. How we can ensure we have built that data bank and the knowledge to help with situations in the future, so when we go to the bookshelf, seeking that manual to guide us, there will be something there to help us.

“As an Independent NED it’s interesting to get more involved yet distracting from the day job for executives.”

AGILE WORKING

Many businesses have invested heavily in agile working in the past year, with such tools as MS Teams. This gave them the infrastructure but not necessarily the cultural shift. However, in March, when it was all about cash and liquidity and running scenarios, there was a huge amount of work for finance. With other home pressures as well, many revisited all the tools, controls and segregation of duties, just to double check that they had not inadvertently created these in the vacuum of a normal operating environment i.e., the office. Many found that their standard reports weren’t really giving them the insight needed and so ditched a number of things and introduced new ways of reporting and tools.

One guest remarked that; new technology tools deployed as part of a system upgrade, helped to produce timely analysis and the quality and accuracy of reporting during what was quite an intense period for reporting weekly performance that shifted week to week.

“Right now, reconciliations are not as important as meeting people and sitting in business meetings.”

Generally, teams are leaner and have been managing the productivity, but we must make sure they are productive on the key things that will help and guide the business forward in today’s environment and not take a step back. We have all changed what we define as ‘productive’ and the way we work. We used to get in for eight o’clock, hit all our meetings, get the papers out by the end of the day and leave. Now we’ve got more people working flexibly around their household pressures; kids, loss of internet connection, online deliveries or the plumber arrives.

“It is clear finance can’t get every decision right all of the time, but mistakes will be made by pausing and trying to find every tiny nuance of a decision.”

We’re now more used to files coming through at ten o’clock at night if people are working more agilely, so we should now cut back on what’s only rarely needed. Go to the ten key things and concentrate on those and pushing them out the door on time. Concentrating on being better and focussing on a shorter list of things that are really important.

TALENT DEVELOPMENT

Businesses are also spending time on thinking about development and a lot of training has moved online which is very effective but what gets missed, and especially for more junior members of the team, is the learning gained by osmosis and listening. Sitting in the office and seeing the way others are behaving and how peers/bosses are responding to events, provides a huge amount of development. This informal learning ‘on the job’ is harder to replicate, so how to recreate that ‘soft development’ needs to be considered. There are people who will have lost a whole year of this informal / soft development, so the next big challenge is must now be people orientated.

One of our CFOs has started to invite juniors into senior meetings far more than previously, so enabling them to take a more end to end view of what’s being done. Feedback on this has been really positive.

CULTURE & MANAGEMENT INTERVENTIONS

“What gets missed, and especially for more junior members of the team, is the learning gained by osmosis and listening.”

Early on in the crisis one business, which had recently divested a large part of their organisation, started to have executive board meetings daily and calls with all regional managing directors once a week. They then did a straw poll, and everyone wanted that to continue for alignment and bringing everyone together within the newly designed business. It has been a silver lining with better coherence amongst their senior management team than previously. They’ve managed to change behaviours from having big two-day conferences in a central hotel to having much more frequent and fruitful meetings on MS Teams. The crisis has enabled them to change their culture and align their teams for essentially, what is a brand-new company going forward.

Others felt it was easy to hide behind MS Teams and Zoom, which is great for transmission of information but not always effective when it comes to motivation. Keeping levels of enthusiasm and engagement going when there’s more and more scenarios to be run or when the numbers are getting worse, is challenging. Ways of working and the pressures put upon finance is hard going so it should be OK to say when we’re having a bad week. This gives colleagues the opportunity to bolster one another and provide support.

“Go to the ten key things and concentrate on those and pushing them out the door on time.”

One guest mentioned they faced a conundrum on the desire of the NEDs, who wanted more not less engagement with the executive team and that was a burden not a benefit. As an Independent NED it’s interesting to get more involved yet distracting from the day job for executives. NEDs need to recognise they’re a NED and they don’t have the responsibility to do day to day management and they should trust the executives to do the right thing for the people and the business.

WELLBEING AND COMMS

Many people reacted differently, seeing a benefit to the crisis especially freeing up time normally spent travelling and commuting e.g. being able to exercise more. But many people feel their working day has increased and the old commuting time is now filled with more working time. So, it’s the leadership team that have to help people to step away. We all need that down time as sitting in front of the screen all the time, with no break or water cooler moments, is not good for you. You can get DVT sitting at your desk as well as on a plane.

One business has had a programme of soft communications, the CEO peppering the organisation with messages and monthly catchups that are televised so people can dial in and get first-hand access to the executive team, which didn’t happen before. When we’re in the office it’s assumed, we don’t need as much communication as that. They also brought people back on site for those that haven’t been surviving so well at home, as some are just more naturally social animals and need access to someone else they can talk to. In effect, that’s changing their organisations’ DNA and they can’t see them going back full-time to the office.

Another guest commented on his mantra ‘do something for yourself’. He tasks everyone. with doing something for themselves every day. A number of CFOs commented, that for a few months no one took holiday as we couldn’t go anywhere, which helped them get through the increased workload at that time. But now organisations have a duty of care to insist that people take time off and that’s critical to contributing to productivity and wellbeing.

The volume of work has jumped up for everyone this year and the mental health and wellbeing agenda is very important. It has risen to prominence and moving forward we all need to make sure we have checked-in on everyone.

CONCLUSIONS

In some regards 2020 has been a bit of a novelty; a learning and an exciting ‘in it together’ bonding experience. However, the challenge for 2021 will be the motivation and energising of a top team after an extremely tiring year.  Many believe that if finance can stay calm whilst being assertive about what needs to be done, it will bring a calm to the rest of the business. However, if finance is not calm whilst being assertive, it will create a very different environment. Therefore, adding further responsibility and pressure to the CFO and the finance function as a whole in 2021.

Acknowledgements:   

Hoggett Bowers are very grateful to all our guests and a special thank you to:

Wilma Allan, CFO, London City Airport

Jason Clarke, CFO, Bristol Airport

Bruce Claassen, Group FD, RAC plc

Kirk Davis, CFO, The Restaurant Group

Andrew Duxbury, CFO, Galliford Try

James Fasey, Group FD, Division of Asda/Wal-Mart

David Gerrard, CFO, Veolia UK

Steve Hurrell, CFO, Cadent Gas

Neil Morling, CFO, Handley House

David Mulligan, CFO, DX Group

Himanshu Raja, CFO, Countrywide

Alan Stewart, CFO, Tesco

Richard Smothers, CFO, Greene King

Monica Turner, CFO, William Jackson Food Group