CFOs Face Big Headwinds—And Opportunities

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Make sure you’ve adjusted your financial planning to handle today’s economic challenges, and to take advantage of new opportunities if the company can handle it, says Jordan Copland, CFO of symplr.

The key to taking on today’s economic headwinds is making the right adjustments to your financial planning, says Jordan Copland, CFO of symplr, a Houston-based provider of healthcare operations solutions and services.

Copland spoke with StrategicCFO360 about what those adjustments should be, the opportunities that arise in tough times, including acquisitions, and how many metrics are too many to have on your dashboard.

The Great Resignation, a looming recession and inflation have significant consequences for consumers and businesses alike. How can CFOs help their organizations navigate these market forces from a financial planning standpoint?

These factors require a response, but at the same time, you also need to be careful not to overshoot the mark. In challenging macroeconomic times, strong companies must strike a balance between being bold—but doing so in a way that is not overly risky.

Start with the premise that the situation is unstable from a macro perspective and operate under the assumption it is going to get worse before it gets better. To prepare, CFOs should set financial planning targets more conservatively than they would in ideal conditions. If your expectation was at a certain level, create your spending plan around a slightly lower top line and anticipate unexpected challenges.

All of these headwinds will affect companies in some way, and once you have established your spending plan, you have to make a decision about which initiatives you should be taking advantage of in a market where perhaps weaker companies don’t have the opportunity or the financial wherewithal to respond in kind.

If you have the depth and breadth of financial resources, now is an ideal time to be bold. This does not necessarily mean investing in immediate growth initiatives, rather it may take the form of pursuing certain longer-term investments or supplemental enhancements to parts of your organization.     

How do you leverage financial and other data to inform your decision-making and steer your organization to success?

The way CFOs measure data and information can vary from company to company, especially if the organization is undertaking a lot of acquisitions. Additionally, the type of information you are measuring will vary from industry to industry. For example, a manufacturing company may need to measure detailed raw materials’ costs while a retailer might be more focused on the level of inventory markdowns.

Whatever you decide to measure, it should be consistent across all of your products, geographies and departments. If you can normalize and operationalize that data, you can gather consistent information across the company, and your options for analytics-based outcomes expands.

First and foremost, you have to be objective about what you’re measuring and determine whether or not the quality is there. If it isn’t quality data, then you have to be very careful that you don’t use that information to inform decisions. However, once you’ve determined that your data is high-quality, you can establish an executive dashboard to put critical information in front of senior leaders and the individuals that report to them to help guide decision-making.

For this executive dashboard, you’ll want to limit it to between 10 and 20 metrics. If you are keeping track of too many variables, that will detract from the critical focus you are striving for. Whatever you decide on, it is key that these metrics are cascaded down through the company and are made visible to most, if not all, of the employees.

The top-level summarized information is critical to senior leaders, however, as you go a level deeper, this information will be more detailed and operationally focused. For example, at the executive dashboard level, “days sales outstanding” might be measured. For an accounts receivable collections team, they will have a detailed spreadsheet with A/R outstanding by customer aged by due date.

What advice do you have for CFOs to successfully lead their organization through an acquisition?

If acquisitions are rare for your organization, you don’t need to build a lot of internal competence around integration management and operational processes. For a one-off acquisition, you should plan to free up time for existing staff for a few hours per week for a few months to assist in the pre-purchase diligence process.

You also need to have the capacity within the organization to let go of a portion of your “day” job for some period while you’re conducting the integration work and supplement that work with external resources as needed. Bringing on external resources will cost you a little more, however, having people sitting idly by for most of the year waiting for an acquisition is not a productive use of resources.

If your company is more of a serial acquirer or you are planning to participate in a lot of M&A diligence activity, the key to success is establishing a dedicated diligence team and an integration management office. I can’t emphasize enough how important it is to have a plan.

Start by developing a checklist of items to accomplish prior to acquiring another organization and work to check those boxes off as thoroughly as possible during diligence and post-acquisition. You are never going to anticipate every single challenge or roadblock while completing an acquisition, so setting your plan in motion as quickly and efficiently as possible will allow you enough time to troubleshoot and pivot when needed. From there you observe how things are working, revisit the action steps you had outlined, and take those lessons learned into the next acquisition.

When acquiring another company, it is also important to be as transparent as possible when it comes to your internal communications. Tell the employees at the acquired company as much information as you can at the earliest opportunity. When you have your regular town hall meetings with the team, communicate any changes you are making and the reasoning behind them.

Speed, transparency and thoroughness in internal communications are critical. The employees at the acquired company are responsible for your success, as they are the ones that run the day-to-day operations of the company and are going to continue to have active involvement. Therefore, you need to treat them as part of your larger team as soon as possible.

What key metrics should CFOs focus on to position their organization for short- and long-term success?  

It is a challenging question. If you are a public company, your ability to focus on the long term is going to be impacted by your need to set and achieve shorter-term goals. As a public company, if you are not meeting your short-term goals, the market will punish you in ways that could potentially inhibit you from achieving your longer-term vision. If you are privately or closely held, the stakeholders of that business have predominant control of how strict they want to hold you to that short-term standard should you happen to miss your commitments.

With that being said, in the short term, it is critical to measure your return on invested capital and the in-process return on the various initiatives you have underway. Revenue growth, and the quality of revenue growth, are also going to be important to most companies.

Additionally, environmental, social and governance factors are becoming increasingly more significant. Any measurement of metrics that do not include some component of ESG is going to miss the mark. External stakeholders want to understand what your organization is doing and that your success is not coming at the expense of environmental and social factors or bad governance.

CFOs are also going to want to focus on employee satisfaction levels. In today’s environment, hiring is more challenging and competitive than ever. If you do not have your finger on the pulse of employee sentiment and have programs in place to elevate it, you are just going to have higher employee attrition and inhibit your success over the long run.

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