The CFO'S Perspective

With so much economic uncertainty the employment landscape in 2022 will likely remain tumultuous. Information about how many people are employed, where, and for how much is going to continue to dominate the business news headlines. And much like last year, compensation will be at the forefront of many employees’ minds as they watch their cost of living increase and worry whether their pay will keep pace.

Of course, for the nation’s unemployed, discussions about how compensation may fluctuate this year remain inconsequential. And for small businesses that have been doing their best to absorb rising costs without laying people off or shutting down, the idea of giving raises this year is likely going to be a moot point. But for middle management, executive leadership, and HR personnel at mid-sized to large companies, the question of what to expect in the way of raises remains critical to business planning.

So, what should you plan for a raise this year?

As the year draws to a close, unfortunately, we must bid farewell to some of our nearest and dearest colleagues and friends Tom Varga, Tom Broetje, and Larry Numata.

Each of these men has contributed to our firm in a unique way to power its success. Their contributions to the long-term evolution of our organization will invariably be missed because the years of experience they leave with are not going to be easy to replace.

So, while we selfishly wish they were not leaving, we wish them best in their retirement.

When you need to fill a leadership position, who can help find the right candidate for the role?

Recruiting companies fall into one of two camps, either retained search or contingent search firms. Understanding how these approaches differ is key in determining which is a better fit for your hiring needs.

Over the last 15 years, we have worked with more than 2,000 consulting and search clients, placing CFOs at companies spanning a wide variety of industries. In that time, we have evaluated innumerable recruitment prospects, giving us unique perspective into the types of questions, misconceptions, and concerns that arise during the hiring process. The most common questions we hear are regarding the nature of retained search as prospective clients try to determine what kind of recruiting firm is going to be best for their open role.

As executive financial recruiters we work with companies every day who have lost their CFO for a variety of reasons. The CFO may have left to pursue a better opportunity, retired, or made a career change. And in some instances, the CFO may have been shown the door due to subpar performance.

In all honesty, the latter scenario is the least common. Most organizations are hesitant to let their CFO go because of the inherent doubt in the process of doing so. First, there is the big question of how to determine whether your CFO is making the grade. (You certainly do not want to let your CFO go if you cannot be certain that someone else will be able to do the job better!) And, secondly, there is the daunting prospect of needing to find a replacement that is going to be better performer.

But just because it is not very common in practice does not mean it should be. Companies, especially those with owners and CEOs that do not have strong financial acumen themselves, do not typically evaluate their financial leadership as thoroughly as they should. Unfortunately, if your CFO is underperforming, not identifying this in a timely manner or not doing anything about it, can be extremely costly. When your financial leadership is falling short of expectations, strategic planning can fail, affecting revenue and profitability.

Employers that want their employees back in the office again are asking themselves the question, “How do I get my employees to return to work?” However, many employees are asking their employers, “Why should I return to work?” in response.

The resulting dichotomy has created a sticky situation for companies that are facing labor shortages and revenue challenges well over a year and a half into this crisis. For key departments like accounting and finance, the pressure is further elevated because these kinds of skilled roles are a hot commodity right now, making them even harder to replace.

As a CFO you live in the numbers. And like Neo in The Matrix, who can see falling green lines of computer code and read them to construct a picture of the world around him, they make sense to you.

However, when you sit down to present to your CEO, COO, CTO, CRO, CMO, or any other c-suite executive, you need to understand that they may not have the same affinity for numbers that you do. This is especially true when the executive leaders you are presenting to are less financially savvy or new to their roles or the industry.

When “non-numbers-people” see numbers, typically all they take away from it is the numbers themselves. However, when “numbers-people” see numbers, they see the whole picture – the story that the numbers are telling, how the metrics are related, and how they fit into the larger framework.

Knowing how to present to your audience is key in bridging the gap to move the business forward.

These days business owners looking to get an injection of cash into their companies have an almost endless list of possible funding options. However, that does not mean that all business funding options are created equal. They will vary by approval requirements, rates, conditions, payback terms, and other criteria. As a result, knowing the difference between funding types is meaningless without understanding what you hope to gain from securing financing.

Expense reduction services and cost reduction consultants have been extremely busy over the last year as organizations scrambled to overcome pandemic-related barriers and an overall downturn in the economy. Many companies that had been thriving before the pandemic saw their future success threatened and quickly froze their spending on everything from marketing to R&D. Others took a more measured approach, tightening spending across the board instead of cutting any areas altogether. And while their intentions were good, many businesses missed the mark when it came to executing cost containment strategies.

The reason too many cost reduction approaches fail is because they are predicated on the wrong assumptions. The assumption is that reducing costs will improve cash flow to allow struggling or compromised companies the breathing room needed to stay in business.