CFO Outlook 2023: Leading through instability

Some of these people may be worried; in some sectors there have been layoffs recently that have affected finance departments. Some of these conversations could be difficult. Late in 2022, some technology companies were laying off workers, finding they couldn’t get the books closed with their shrunken teams, and then hiring temporary help to get the job done, said Lisa Heacock, Partner and Finance Transformation West Region Market Leader for Grant Thornton LLP.

As much as it’s possible, the CFO needs to reassure and motivate these people and help them understand the strategy of the organization and their role in supporting that strategy.

“CFOs and their team leadership report down and cascade that message to their people,” Heacock said. “They need to get everybody together on a regular basis, whether it’s virtually or in person, because in uncertain times, people wonder about their jobs. So making sure you’re communicating on a regular basis is key.”

Succeeding in an environment with a high cost of capital may require a greater focus on the most pressing, core initiatives that will lead to organizational success. Investments in less critical activities may need to wait for sunnier days.

Important human capital considerations for CFOs for 2023 include:

• Prioritize essential positions. As funding gets limited, CFOs and CHROs will need to preserve and hire talent first in the most essential areas that drive their organizations’ productivity and growth. “Evaluate all the strategic and operational activities and goals, and prioritize those of the highest and greatest value to the organization,” Belden said. “What can you afford to wait on until the economy shows greater promise? Conduct deep dives on operational models and effectiveness. Leverage technology and digital capabilities and eliminate unnecessary, non-value-added work.”
• Make your space a fit for your people. Vast quantities of empty desks and chairs in offices throughout the country attest to the fact that real estate has not been optimized since the start of the pandemic. Many employees don’t want to return to the office for more than a couple days a week. “There is an opportunity to move real estate spend into other employee satisfaction efforts that will increase attraction and retention,” Belden said. “There are interior designers and wellness companies that are reinventing what space looks like and how it gets used to entice workers to visit and engage.”
• Go beyond pay in retention. Although competitive salaries and benefits are important, money isn’t everything and companies have financial limitations in this economy. “This is the year of getting in touch with your people and what matters, motivates and will entice them to stay,” Belden said. “Do they like what they do? What is the culture like? Do they feel supported? Do you foster a sense of health and wellness? Are you investing in their career growth and development?”
• Throw out the playbook in recruiting. Organizations can attract talent more easily if they get creative about the types of skills and educational backgrounds they seek. Some companies are moving away from requiring standardized college degrees and instead developing skills through training and on-the-job experience. “Some are redesigning jobs to be more attractive, taking away the administrative aspects,” Belden said. “Others are amplifying their great culture to attract and retain.”

“CFOs are likely going to be asked to sign off on the information in the annual and other reports, so they need start in 2023 to ensure they have confidence in the data,” said John Friedman, Managing Director, ESG & Sustainability Services for Grant Thornton. “The data has to be complete, comparable, accurate, timely and decision-useful so that when they sign off on it in 2024 and beyond, they have the confidence that it is all those things that they need it to be with the same controls, rigor and professionalism that they currently expect for the financial figures.”

The proposed rules would require public companies to disclose, for example, the greenhouse gases associated with their purchased electricity. Companies may have to figure out who has that data within their organizations (facilities management, accounts payable, etc.) and how to get that data, and they may need to build systems to collect that data across multiple locations.

Companies will need to make sure that data is complete and calculate their emissions correctly using factors accepted in the Greenhouse Gas Protocol. With all these new requirements, company leaders may wish to undergo a readiness assessment to make sure they are prepared to report properly after the rules are issued.

While this would satisfy the minimal regulatory compliance aspects of ESG, many companies are reporting much more because their investors or customers demand it. In addition to climate and environmental metrics, many companies are reporting on metrics that may make them an attractive employer related to worker safety; diversity, equity and inclusion; and employee training and benefits.

In addition to reporting on these metrics, many companies are working to improve upon them. To make progress on ESG, Friedman suggested that companies:

• Look for credits and incentives in the 2022 Inflation Reduction Act and other legislation that present opportunities to get reimbursed for ESG investments.
• Invest in ESG initiatives that can produce efficiencies and cost savings that offset some or all of the investment. This is where a CFO’s skill set is particularly helpful.
• Find the specific ESG initiatives that make sense for your company and leverage them for all they’re worth.

For companies that don’t yet have a cloud-based, fully integrated enterprise resource planning (ERP) system, Unruh said that this is an ideal time for assessing and potentially doing an implementation.

Companies with legacy ERP systems that aren’t in the cloud will be at a disadvantage compared with competitors that do possess these tools. The best cloud-based systems integrate financials with supply chain management (SCM) and human capital management (HCM) for a seamless approach to management, operations and planning.

“With HCM plus an enterprise performance management, there's specific functionality around workforce planning and management, so you're really understanding your cost structure, the workforce that you need to support your operations and your business,” Unruh said. “That’s an area where we see a lot of software companies are releasing new capabilities and making sure they can help organizations through lean times.”

Leading software companies have heavily invested in SCM applications over the past couple years. This has allowed manufacturing-based organizations to replace outdated technologies by moving to the cloud.

“Now that these applications address the full suite of the supply chain, this can provide additional efficiencies throughout the manufacturing and supply chain process,” Unruh said.