The CFO’s position is rapidly evolving. More and more, we hear that the CFO is a kind of heir apparent to the CEO — but what, in practice, are the implications of this trend? One answer must be that it’s time for CFOs to make their foray into the social leadership role for which CEOs are known.
To financial officers who have historically led from behind the scenes, it may seem like a daunting change. But as many companies are shifting their growth strategies after a year marked by economic turbulence, CFOs’ ability to help their organizations navigate this transformation from more than just a financial standpoint is essential. They must approach this aspect of their role with the same forethought and intention they give to the quantitative aspects of their job. Their choices and attitudes as emergent social leaders will prove consequential in the years ahead, both for their own success and their organization’s bottom line.
In fact, the best social leadership philosophy for CFOs to adopt may mirror the growth strategy they have applied to their businesses. The common thread? Looking inward.
What Can We Do Better?
High interest rates, hot inflation, and a frigid M&A environment took a noticeable toll on business leaders’ outlooks over the previous year. BDO’s
2024 CFO Outlook Survey reported that two-thirds (66%) of CFOs say economic volatility poses the same or greater risks to their business than it did a year ago.
In response, CFOs have led shifts away from external growth drivers and instead prioritized shoring up internal controls, bringing down costs, and updating policies and practices to cultivate a loyal customer base and enhance profitability. This is a markedly more introspective approach to growth. About half of tech CFOs, for example, reported plans to leverage artificial intelligence (AI) for internal cost optimization (55%), adjust pricing strategies (49%), and improve the customer experience (47%). The approaches vary, but they all center on factors that rest within companies’ control — and all these approaches ask: What could we be doing better?
Now, with recent positive trends like the improving job growth rate, we’re seeing indications that the economy may be on firmer footing. Some clients are acknowledging that we’re finally past the soft landing the Fed had been aiming for, and companies may soon be ready to release the brakes and hit the gas.
CFOs have a unique opportunity in this transitional moment. They sit at the nexus of financial and social leadership. It’s time for CFOs to step out front and help define the next chapter of their organization’s goals. The question is how to leverage their evolving role to claim a competitive advantage as market conditions improve.
Asserting Values to Create Value
By shifting strategies, CFOs have demonstrated that they understand how internal improvements function as investments in the future. Given the current direction of the market, many may already be thinking about the next step — about how to leverage cost-cutting strategies to streamline their organizations for when the M&A or IPO market heats back up, for instance.
But they must also understand that the success of these initiatives might hinge on an altogether different form of introspection. A return to fundamentals must touch on values as well as financials. How can CFOs guide their companies through these changes if they aren’t in touch with the values that underpin their organizations? If CFOs do not think through this side of the equation, they risk not fully realizing the potential of their strategies.
Now is an ideal time for CFOs to introspect alongside their businesses.
CFOs: Get reacquainted with your mission. What are your organization’s core values? Who does it serve? What does it exist to accomplish? Answering these questions is another form of investment in the future. Rather than taking a reactive approach to defining core missions and values — bending in the breeze of others’ opinions — take a proactive one. CFOs have a responsibility to be active advocates for their company’s identity and to stick to who they are. Success in a changing market means being true to themselves, their corporate identity, and their customers — and doing right by them all.
Improving the customer experience, for instance, is not a lever that CFOs can simply pull at will. It requires planning, design, and intentionality. Customer experience is the avenue through which a company communicates its identity to a key group of stakeholders. If CFOs desire to improve or revamp that experience — to deepen loyalty, win back trust, or grow their base — they must know what they intend to say.
Take the rapid proliferation of generative AI as another example. It’s easy for CFOs to talk in high-level, nebulous terms about potential cost-savings and efficiency gains — and these benefits are certainly real. However, the top layer is not enough. CFOs must go deeper and think about the welfare of their teams.
Consider that employees might be harboring anxieties about the implications of AI adoption. How will AI impact their roles? What new skills might be required? While they tout the financial advantages of AI, CFOs also need to articulate how it will impact the whole organization and monitor and communicate risks. Their teams want to know if and how their jobs could change, how AI will impact their time spent on day-to-day tasks, and how it will complement their existing abilities.
Effective communication around these concerns requires understanding more than the financial side of the equation. It relies on CFOs staying in touch with employee temperament and understanding the impacts of their decisions beyond a spreadsheet. Even more broadly, it means CFOs must be able to create a plan and explain to stakeholders how new measures or tools like AI will help the company accomplish its mission in a more effective — and responsible — manner. Communication and concerted education foster buy-in and will prove critical to the overall success of any new initiatives or pivots.
A Winning CFO
CFOs may not always think of themselves as cross-functional people leaders. They may see themselves as defined by the “finance” portion of their role. But in transitional moments, when people look to their leaders, CFOs should be prepared to step into a role of active stewardship. They must become beacons of their organizations’ values.
The successful CFO of this year and beyond takes an introspective path to their organization’s growth as well as their own — positioning themselves and their businesses to weather headwinds and seize nascent opportunities. Embodying social leadership across the organization is fast becoming a requirement for success. Core values, missions, and accountabilities can provide the compass that CFOs need to navigate this shift.
Eskander Yavar, is National Managing Principal of Advisory, BDO