CFO to CFO: How Finance Leads Change ManagementBy
Management accounting and finance professionals must be prepared to adapt to changes, and that need is amplified during crises such as the COVID-19 pandemic.
Hari Avula, executive vice president and chief financial and strategy officer at Clif Bar & Company and the former CFO for global business transformation at Walgreens Boots Alliance, and Brian Wenzel, executive vice president and CFO of Synchrony, had a conversation about change management best practices and how they and their organizations have adapted to unexpected changes over the past year-plus.
SF: How can CFOs guide their organizations through changes of the magnitude of the COVID-19 crisis?
Wenzel: We had a recession playbook coming out of the great financial crisis of 2007-2008. But when the pandemic hit, the ability to apply the playbooks the way they existed didn’t really work, so you have to adjust. Never have we seen a global health pandemic hit us, at least in the last 100 years. But the government response with fiscal stimulus and the efforts around the world in order to stem the pandemic were unique.
So you have to be flexible and take the core roots of those playbooks and be able to do a couple things. One, you have to lean on your leadership principles. It’s important to lead with your company values and be transparent with the employee base, because they will follow you. Even if your playbook needs to be adjusted, employees will follow you if they believe in you, so those leadership abilities are important.
The second aspect is embracing new tools and technologies. We were forced to bring on different types of collaboration tools in order for us to host stand-up meetings and complete documents. So that ability to bring in [technology] and have a culture of innovation was important. We sometimes joke that our plans are written in pencil because we have to adjust them and be flexible enough to recognize when they need to adjust and adapt as we move forward.
Avula: If you think about finance as a key enabling function, a key role is to help manage risk across the business. And in a global pandemic situation like we have had in COVID-19, this capability came to the forefront, with the entire function from the CFO down playing a critical role in enabling the business to successfully navigate the extreme uncertainty that existed. The finance function is uniquely positioned to help establish and enable informed and agile decision-making forums and processes without compromising governance and operational controls needed to manage a complex organization.
Of primary importance at the start of the crisis for everyone in the business, including finance, was ensuring team members could execute business-critical activities safely and securely. Without that, there wasn’t a way to move forward.
And at Walgreens, an essential health service provider and a retail organization with more than 9,000 stores and thousands of pharmacists and front-end employees, implementing enhanced safety protocols, securing PPE [personal protective equipment] supplies needed for employees, and developing new operating procedures and processes to ensure continued execution of business-critical activities became the top priorities.
Strong finance leadership was critical in ensuring the organization’s ability to meet customer needs under these unprecedented conditions. The global supply chains were significantly impacted, and a lot of essential medication in the United States comes from overseas. Finance had a crucial role to play in supporting the global procurement and supply chain teams to secure and move product across countries through real-time policy and process changes including due diligence and onboarding of new suppliers, ensuring supplier funding, and facilitating changes to payment terms.
Under the CFO’s leadership and guidance, the organization was able to ensure adequate liquidity and ongoing access to funds needed to operate the business throughout the pandemic, establishing new lines of credit and significantly improving internal cash generation through aggressive working capital management and very disciplined capital allocation.
While business has many situation-specific crisis management plans and playbooks, COVID required integrated deployment of several of them simultaneously, as several core operations of the business were simultaneously impacted by the pandemic. We have playbooks for hurricanes, which are generally localized events, that now needed to be adopted at a national and even international scale because hurricanes generally tend to disrupt small, localized areas, and we have plans and resources that we can ramp up when limited to, say, an island in the Caribbean or parts of Florida. Addressing issues on a global scale meant improvisation and activation of multiple contingency plans and playbooks.
Crisis management for COVID involved the entire company and was orchestrated with significant leadership and input from various finance team leaders, who are very experienced in framing policy and establishing processes. We leveraged the finance team’s capabilities and engaged several finance team members who would normally not have day-to-day interaction with the business to establish new ways of working to navigate around the uncertainty created by the pandemic. This increased the collaboration and engagement by the wider finance team, and I expect it to stay in place after the crisis as everyone realizes it’s a lot more efficient and effective when you have highly integrated, cross-functional teams managing a process.
SF: What is the CFO’s role—and, by extension, the finance function’s role—in change management?
Avula: Clearly all functions have a role in it, but finance plays a critical role in developing the overall framework. There’s a real need for the finance function to help establish the imperative for change, the “why?” Once the “why?” is clear to the organization, then helping with the “what?” and the “how?” of the change through setting of clear goals and the allocation of resources is a role finance also has to play. Everything we do as a function in terms of business planning, budgeting, and resource allocation facilitates effective change management. The CFO’s role isn’t just creating the imperative for change but also enabling that change by ensuring prioritization of relevant activity through appropriate resource allocation.
Wenzel: One of the important aspects of the CFO and [what] the finance function brings is a holistic view of the business and the impact on all stakeholders, and that’s both an internal as well as our external set of stakeholders, whether they are shareholders, rating agencies, [or] communities in which we live and operate, our customers. We bring a very holistic view because we connect with every aspect of the business from a finance perspective. So we bring that perspective as a challenge function, a support function, [and] an enabling function to help drive business initiatives.
Capital allocation is one of the keys. How do you allocate more capital to things that are imperative for your business and also fund things in a manner that achieves all the stakeholders’ [desired] outcomes? You’ve got to put that capital allocation through a rigorous process so that the imperatives are evaluated in a very systemic and objective way. And it’s important to then report the different aspects of the business that are going through the change.
How do you flex and meet their needs? And then show as you’re doing this again, this concept of the values-based management system, the ability to use your values to drive change and embrace change. People will follow you. Functions and stakeholders will follow you if you lead by example and you lead with your values. It’s that holistic view, it’s the ability to adjust processes and flex to what the company needs, and then it’s being able to be that driver, a partner of change as you move forward.
SF: How do the technologies enabling automation and data analytics impact change management?
Wenzel: In our world, robotics, automation, and AI are essential in all aspects of our business, whether it’s in the finance organization—when you think about account reconciliations, there are daily settlements—to the broader aspects of the core part of our business, our credit. In our business, we have enormous amounts of data; how you process that data, how you can get that data into what we call a data lake, an environment where it’s in a position to be utilized in business decisions that could be processed and drive things forward, that’s super critical.
Synchrony’s data analytics has transformed during the last five years, and [the adoption curve] is more like a hockey stick. We’re in that part of that upward slope, but for a while it was the flat part of the stick. Now it’s going to be accelerated, and everyone’s on this path. There’s so much data that’s out there, and it’s the ability now to ingest it, cleanse it, and utilize it in your business that’s at the center of what’s driving the acceleration of transformation in our business and many other industries as well.
Avula: Technology is at the heart of what’s needed to deliver the change. Step back and ask the question, “What is it that is critically important in any business for enabling transformational change from a data and analytics perspective?” The answer would be access to accurate and granular data, along with timely and insightful reporting. Technology today has solutions and tools that allow for the efficient management and processing of the vast data pools that exist across disparate systems. Technology that allows you to do that is becoming increasingly sophisticated and cheaper, and most organizations are in various stages of building on these new capabilities.
The future for finance organizations’ effectiveness hinges on the ability to get timely insights from the data through automation and AI and then overlay individual experiences and knowledge to make the right decisions. While you’re never going to have all the information you feel you need to make a decision, technology and automation will significantly increase the number of variables incorporated into the analytics and improve the quality and speed of decision making. These capabilities are all going to be foundational for businesses to successfully deliver on their transformational change agendas.