(Bloomberg) — It’s not just truck drivers and nurses. The most acute labor shortage for many companies right now is the chief financial officer.
Assignments for CFO appointments across Europe, the Middle East and Africa are up almost a third on this time last year, according to executive-search firm Spencer Stuart. As inflation and higher interest rates signal the end of easy money, companies are seeking more from their finance directors.
“The Covid pandemic highlighted to many CEOs that their CFOs were technicians, rather than leaders in a crisis,” said Chris Gaunt, who leads Spencer Stuart’s financial officer practice in Europe.
Now that businesses are looking to upgrade, there’s been a series of job swaps. Eoin Tonge left Marks & Spencer Group Plc to join Primark owner Associated British Foods Plc, and Julie Brown decided to leave Burberry Group Plc for GSK Plc. Asos Plc is hunting for a new CFO, while Ahold Delhaize has an opening as Natalie Knight pursues a US opportunity.
However, good finance directors are scarce, according to Rebecca Morland, co-head of the global financial officer practice at search firm Korn Ferry. Given the average age of a CFO among companies in the UK’s FTSE-100 stock index is 52, few have ever dealt with such levels of inflation, combined with prospects of recession.
“The CFO is not just running the finance organization, but they’re almost the deputy CEO, and in a lot of contexts they’re often the chief transformation officer as well,” Morland said. “It’s quite a challenging, demanding time.”
No longer dull number-crunchers, CFOs now occupy the hottest seat in the boardroom. During the pandemic, they had to raise billions of dollars to shut down operations and furlough thousands of workers. Budgets were slashed and banks were asked to extend credit lines to keep businesses afloat. Now they need to deal with economic prospects few imagined before Covid-19.
Nestle SA’s François-Xavier Roger said he doesn’t agree with the reputation of CFOs as mere bean counters. His job is to “stay calm” and take a long-term view. A critical part of the role is ensuring liquidity — and imagining every possible outcome.
At the start of the pandemic, Nestle didn’t need to raise money, but the finance chief secured credit lines anyway. “When we entered that crisis, we were not exactly sure of where the world was going,” he said. “As CFO, you need to prepare for the worst-case scenario.”
In the coming months, as businesses seek new funding, CFOs will increasingly find themselves having to prove their mettle. Banks will become more demanding on loan conditions. Credit is much more expensive. Even the companies that were fortunate to raise money when rates were low will have to grapple with the challenge of investing to expand their businesses.
Nik Jhangiani, CFO of Coca-Cola Europacific Partners Plc, made a tough call in mid-2021. While colleagues were convinced interest rates would drop further past rock-bottom lows, he decided to fix 100% of the debt of the bottler of Coca-Cola in markets across Europe and Asia.
“I said at some point you’re going to be in a rising-rate environment,” the CFO said. “At that point, the cost of debt was still so low and attractive, why was I trying to crank it to get two or three more basis points, but putting ourselves more at risk?”
Today, the decision looks prudent. With central banks still raising interest rates, any company unlucky enough to be refinancing in the coming months faces a steep interest bill.
Sensodyne toothpaste-maker Haleon Plc, which separated from GSK in July, raised £9.2 billion ($11.3 billion) of debt in March 2022, at an average maturity of just over eight years. One-fifth of the debt is exposed to interest rates, while the rest is fixed. Haleon’s next major refinancing will be in 2025.
Haleon CFO Tobias Hestler, 50, said much of his job is about scenario planning.
Hestler said he didn’t think anyone could have predicted the turmoil of the UK’s September mini-budget that sent borrowing costs higher, and is now concerned about Covid in China and preparing for when global inflation cools.
“We assume that we’re hitting the peak, and it’s going to come down in the second half of next year, but then how quickly it comes down requires some scenarios,” he said.
Hestler is looking for savings in areas like advertising, and said the company is on track to bringing its debt down to less than three times Ebitda by the end of 2024.
Spencer Stuart’s Gaunt said boards are now hunting for finance directors who are better suited to crises. They have found their existing CFOs were the “easy top-line growth person, rather than the real challenge-of-leadership, rise-to-the-occasion person.”
Esben Christensen, a managing director in turnaround and restructuring at the consultancy AlixPartners, said CFOs would play more of a leading role as the focus shifts from a company’s profit and loss account to cash and liquidity. “When we have a restructuring, the person that people really want to talk to is the CFO,” he said.
While the role has changed significantly since Lavanya Chandrashekar, CFO of Guinness-brewer Diageo Plc, began her career, there is one key responsibility that has remained constant — a firm grasp of a company’s finances. “The part that can never go away is controllership,” she said.
The departure of a CFO can often come when a company is experiencing financial turmoil. It’s Jan. 13, the gambling company 888 Holdings Plc announced that CFO Yariv Dafna would step down after only two years. Since 888 bought the international assets of British bookmaker William Hill for £2.2 billion in September 2021, 888’s shares have fallen about 80%.
“It’s not for the fainthearted,” said Korn Ferry’s Morland.
–With assistance from Dasha Afanasieva.
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