I chuckled when I saw that memorable gummy bear commercial, featuring a board room filled with adult executives talking like toddlers about the chewy treats.
Though achieving consensus-by-gummy-bear may work on television, we should be smart enough to know that the last place for petulant, child-like behavior is the C-suite. Yet I have seen my share of “Executive-Level Dysfunction” (ELD) in my years as a sales and marketing executive, and the results are predictable: Quagmires. Uneven results. Power struggles. And a tendency to retreat into separate corners, with the business hanging in the balance.
For those experiencing ELD, it’s time to turn fractiousness into function. This is particularly true for the money generating triumvirate that includes the Chief Financial Officer (CFO), Chief Marketing Officer (CMO), and the Chief Sales Officer (CSO). The former spends it, the latter two make it – and if this trio is going to feed the beast, they have to – without fail – be on the same page, especially in the face of economic uncertainty.
I recently sat down with my friend, Eric Krucke, the National Practice Director for Aprio CFO, which offers advisory services for companies needing a top finance executive. Between us we represent the three “Cs” on the revenue side of the house, and together, we zoomed in on the importance of connectedness within the ecosystem.
Eric and I are cut from the same cloth – albeit with distinctive scissors because our jobs are different. Nonetheless, we agree: In talking about what we should expect of the three C’s, we can define three key attributes – that Eric neatly defines using his own set of “Cs”:
Clarity: In times of uncertainty, having a clear strategy is Job No. 1. It starts with a shared approach among the CFO, CMO, and CSO. Clarity of vision and clarity of purpose means you can define your destination, understand your market, and establish a playing field. Having a strategic roadmap enables everyone to know the game they're playing and boosts team confidence.
Clarity, of course, is not just about having a plan; it's also about seeing the present situation in 20/20. Warren Buffett, in his annual letters to Berkshire Hathaway shareholders, emphasized the importance of staying out of the gray and operating in the black and white. It's crucial for business leaders to not pull punches about current performance and expectations. Openness creates a culture of transparency that gets leaders talking about future strategies and challenges.
Compensation: The second C, compensation, is about lining up incentives with the goals and expectations set for the company. A well-designed compensation program can set a fire under your team, encouraging them to work with purpose toward common objectives. That’s why leaders need to regularly evaluate and adjust compensation structures to ensure they're driving the right behaviors and outcomes.
Compensation goes beyond foldable cash; it encompasses recognition and appreciation for contributions. In challenging times, acknowledging and celebrating small victories can boost morale and keep the team motivated. An engaged and motivated team is more likely to weather economic storms effectively.
Cash Management: The third C is the lifeblood running through the veins of any organization. Managing cash effectively means allocating resources toward their highest and best use. It involves continuous reallocation of resources and, importantly, a proper return to investors, whether they're banks or shareholders. A well-structured cash flow management plan ensures sustainability and growth.
Cash flow management isn’t just about managing the money you can reap for today; it's also about ensuring you have a financial safety net for uncertain times. The COVID-19 pandemic taught us the importance of having cash reserves. As economic indicators suggest a looming recession in 2024, businesses should be prepared with cash reserves that can tide them over during challenging periods.
To complete a successful journey through challenging economic times, it's not enough to rely on tea leaves, intuition, or past experiences. Data and insights play a pivotal role in making informed decisions. Business leaders, especially the CFO, must have access to the right data and be able to interpret it effectively. Understanding both internal and external factors, such as market dynamics and supply chain issues, is essential.
Data-driven decision-making provides a clear advantage in uncertain times. By tapping into data, businesses can identify trends, spot opportunities, and anticipate threats. Investing in data analytics tools and talent can be a strategic move to gain a competitive edge in a turbulent market.
One important piece of data I recommend for any new client is the revenue rates of change, which ITR Economics has so aptly helped me better understand – parsed out as the 3/12 rate of change, which helps you see where revenues are headed; and the 12/12 rate of change, which indicates which economic state your business is in right now. Are you in a recovery, accelerated growth, slowing growth, or a recession? Using these measures will bring extreme focus to your strategic planning and execution.
As you can see, no one is expecting Nostradamus-like qualities here – just a concerted effort by the CFO, CMO, and CSO to work together to build a solid forecast. It's not about making perfect predictions but rather creating a cohesive document based on logical, data-driven assumptions. When all three leaders sign off on the forecast, it ensures a unified approach and makes it easier to allocate resources effectively.
One last thought — forecasting isn't just about predicting future revenues; it's about building believers within the organization. When leaders collectively agree on a forecast with clear assumptions, it instills confidence throughout the team. It also streamlines decision-making processes, getting everyone on the same page regarding expected outcomes and resource allocation.
Some of the most robust periods of growth are born from economic downturns. Rather than fearing the coming 2024 recession that ITR Economics is forecasting, leaders should embrace it as an opportunity for growth and learning. Change is inevitable, and the ability to adapt and innovate becomes even more critical during uncertain periods – as long as you have a clear line of sight.
Your Cs need to be open to new ideas and approaches, fostering a culture of experimentation where failure is OK, as long as lessons are learned. In challenging economic times, businesses that can pivot quickly and adapt to changing circumstances are the ones that thrive.
So where should you be, dear CEO, in all this? For you, the challenge lies in recognizing when a member of the C-suite is not performing optimally. It's a delicate situation but a fairly common one. Open and honest communication is key. You should always provide candid feedback, discuss expectations, and encourage improvement. If doubts persist, you may already have your answer.
Leadership requires making tough decisions, including personnel changes when necessary. While it's essential to give individuals a chance to improve, it's equally important to prioritize the well-being and success of the entire organization. A weak link in the C-suite—particularly the folks who impact revenue and growth—can hinder overall performance and jeopardize the company's ability to navigate economic challenges successfully.
Let’s summarize here: The three C's—Clarity, Compensation, and Cash Management—should be your pillars of stability during challenging economic times, and a strong partnership between the CFO, CMO, and CSO is essential for successfully navigating the chop in the waters. Embracing change, fostering a culture of constant learning, and making data-driven decisions will not only help your business weather the storm, but also thrive in the face of adversity.
Remember, in the business world, the only constant is change, and those who adapt and collaborate effectively will come out stronger on the other side. As we face the economic challenges of 2024 and beyond, the collaboration and expertise of the CFO, CMO, and CSO will be more critical than ever in ensuring business resilience and growth.