CFOs are increasingly losing faith in their executive leadership team

Finance chiefs are beginning to think fellow C-suite members need a reality check. And their faith in them is waning.

”During times of growth, CFOs are the voice of reason within the C-suite when making investment decisions,” says Jim Lawson, co-leader of the global financial officers practice at Russell Reynolds Associates. “But in times of uncertainty and decline, they become the voice of reality.”

Russell Reynolds, a leadership advisory firm, recently released its Leadership Confidence Index based on the sentiment of C-suite members, leaders one or two levels below the C-suite, and board directors. The research found that CFO confidence in executive leadership teams dropped from 69.2 in early 2021 to 62.4 at the end of 2022—a decrease of 6.8 points. This is out of a possible 100 points. (For CEOs, their confidence in the executive leadership team fell from 74.2 to 65.7.) The findings are based on global survey data of more than 1,000 leaders.

Among CFOs’ concerns are how well the team understands the competitive dynamics to effectively run the company during macroeconomic times, according to the index data. “We’re actually seeing this in our daily interactions with CFOs beyond the survey,” Lawson says. “The CFO is the C-suite team member who’s often going to revert back to fiscal conservatism and preserve capital. In the past year, every investment a company wants to make, they’re paying a higher interest rate for it.”

Lawson shares what he’s hearing from finance chiefs. “A good friend of mine is a CFO of a private equity-backed company,” he says. A year and a half ago, the company was at the top of the market, Lawson explains. The CFO talked with his C-suite peers about investing in employee and marketing initiatives, and “just doing fantastic things,” he says. Then a new private equity firm came in, paid top dollar for the company, and then the growth stopped, Lawson says. So now the CFO is sitting in meetings with the same C-suite peers who are still talking about initiatives as they did 18 months ago, he says.

“This is a totally different story,” Lawson says the CFO explained to his peers. “We’re behind in this deal now with the new sponsor. You’re used to being way ahead. So the tone needs to change in the room. We’re in cost-cutting mode.”

How can CFOs keep everyone on the same page in order to ease their concerns? Lawson offers three pieces of advice:

— Become even more collaborative with C-suite peers who may be coming from a different perspective, which is less financial.

— Practice balanced communication. The CFO can help them understand why certain investment decisions might not be viable at this moment. They must take their peers along the journey and really explain the reality of the situation. CFOs are rooted in numbers and data, and they need to share it.

— Have more empathy for C-suite colleagues. CFOs shouldn’t take the approach of just saying, “We can’t afford that,” and then just shut it down. Help them understand the short and long-term investment tradeoffs.

Another piece of advice from Lawson: “CFOs need to be careful not to prevent companies from making strategic investments during times of uncertainty. This may harm the company’s strategic position when the business picks back up.”

Close collaboration is key.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Sign up here to receive CFO Daily weekday mornings in your inbox.

Big deal

In 2022, global pension assets recorded their largest fall since the global financial crisis of 2008, according to the latest Global Pension Assets Study from global advisory Willis Towers Watson's (WTW) Thinking Ahead Institute. The study covers 22 pension markets in the world (P22). The research finds that global pension assets now stand at $47.9 billion, down from $57.452 billion (a decline of 16.7%) in a year driven largely by a correction in both fixed-income and equity markets, WTW found. The U.S. is the largest market, with 64% of P22 assets, followed by Japan and Canada. The three countries represent 76% of all pension assets. "A new era is rapidly unfolding, potentially marking the end of cheap money and a long period of low volatility," WTW states in the report. "A period of the economic cycle with a disinflationary headwind has come to an end. Asset owners may find the next period uncomfortable."

Going deeper

"The return to the office could be the real reason for the slump in productivity. Here’s the data to prove it," a Fortune opinion piece by Gleb Tsipursky, CEO of the boutique future-of-work consultancy Disaster Avoidance Experts, explores trends in work productivity. "If quiet quitting and the resultant drop in productivity stemmed from remote work, we should see a drop in productivity right from the start of the pandemic, when office workers switched to remote work," Tsipursky writes. "Then, when offices opened back up, we should see productivity going up as workers went back to the office from early 2022 onward." However, U.S. productivity increased in the second quarter of 2020 as offices closed, and remained at a heightened level through 2021, according to Tsipursky. "Then, when companies started mandating a return to the office in early 2022, productivity dropped sharply in Q1 and Q2 of that year," he writes.

Leaderboard

Joanne Knight was promoted to CFO at Cargill, a global food corporation that provides agricultural and financial services. Knight currently serves as Cargill's acting CFO. Before this role, she was VP of finance for Cargill's agriculture supply chain enterprise, including ocean transportation and the world trading group. Before Cargill, Knight spent 10 years in finance, marketing, and business leadership roles at General Mills that included P&L responsibility. She also held finance leadership roles at Wachovia.

Kristin Forney was named CFO at Ocean Spray Cranberries, Inc., a farmer-owned cooperative, effective Feb. 27. Forney has more than 28 years of financial executive experience. She joins Ocean Spray from Hain Celestial Group where she served as SVP of finance for their North America Division. She led a finance organization supporting a $1.6 billion revenue organic and natural products business. In addition to Hain, Forney served in finance and revenue growth management leadership roles across multiple businesses at ConAgra Brands over the course of 15 years. 

Overheard

"Although current-generation A.I. tools aren’t very scary, I think we are potentially not that far away from potentially scary ones."

—Sam Altman, CEO of ChatGPT maker OpenAI, shared in a series of tweets this past weekend his thoughts on the dangers posed by current A.I. technology—and by the tools that will follow in the years ahead, Fortune reported.