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The most popular trait in the job market right now is the CFO

The most popular real estate on the job market right now is…

It’s not just truck drivers and nurses. The most acute labor shortage right now for many companies is the chief financial officer.

CFO hiring in Europe, the Middle East and Africa is almost a third higher than this time last year, according to executive search firm Spencer Stuart. With inflation and higher interest rates heralding the end of easy money, companies are asking more of their CFOs.

“The Covid pandemic has made it clear to many CEOs that their CFOs were technicians, rather than leaders in a crisis,” said Chris Gaunt, who heads Spencer Stuart’s financial practice in Europe.

With companies looking to upgrade, there have 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 looking for a new CFO, while Ahold Delhaize has a vacancy while Natalie Knight pursues an American opportunity.

However, good CFOs are scarce, according to Rebecca Morland, co-head of global finance practice at search firm Korn Ferry. Given that the average age of a CFO among companies in the UK’s FTSE-100 stock index is 52 years old, few have ever experienced such a level of inflation coupled with the prospect of a recession.

“The CFO not only heads the finance organization, but is almost the deputy CEO and in many cases also the chief transformation officer,” said Morland. “It’s quite a challenging, demanding time.”

CFOs are no longer boring calculators, but now occupy the most popular 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 cut and banks were asked to extend credit lines to keep businesses afloat. Now they must deal with economic prospects few could have imagined before Covid-19.

Stay calm
Francois-Xavier Roger of Nestle SA said he disagrees with CFOs’ reputation as mere bean counters. His job is to “keep calm” and have a long-term vision. A critical part of the role is ensuring liquidity – and thinking of every possible outcome.

At the start of the pandemic, Nestle didn’t need to raise money, but its finance chief provided lines of credit anyway. “When we went into that crisis, we didn’t really know where the world was going,” he said. “As a CFO you have to prepare for the worst case scenario.”

As companies look for new funding in the coming months, CFOs will increasingly have to prove their worth. Banks will become more demanding on loan terms. Credit is much more expensive. Even the companies that were lucky enough to raise money when rates were low will have to face the challenge of investing to expand their business.

Nik Jhangiani, CFO of Coca-Cola Europacific Partners Plc, made a difficult decision in mid-2021. With colleagues convinced that interest rates would fall further than the lows, he decided to pay off 100% of the Coca-Cola bottler’s debt in markets in Europe and Asia.

“I said at some point you’re going to be in a bullish environment,” the CFO said. “At that point the cost of debt was still so low and attractive, why was I trying to crank it up to get two or three basis points more when we were putting ourselves more at risk?”

Today the decision looks sensible. With central banks still raising interest rates, any company unlucky enough to refinance in the coming months will face a high interest bill.

Haleon Plc, Sensodyne’s toothpaste maker, which split from GSK in July, raised £9.2 billion ($11.3 billion) in debt in March 2022, with 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.

Scenario planning
Haleon CFO Tobias Hestler, 50, said much of his work revolves around scenario planning.

Hestler said he didn’t think anyone could have predicted the UK’s mini-budget turmoil in September, which pushed up borrowing costs, and is now worried about China’s Covid and preparations for when global inflation cools.

“We assume that we will peak and it will fall in the second half of next year, but how quickly it will come down requires some scenarios,” he said.

Hestler is looking for savings in areas like advertising, saying the company is on track to reduce its debt to less than three times Ebitda by the end of 2024.

Spencer Stuart’s Gaunt said boards are now looking for CFOs better suited to crises. They’ve found that their existing CFOs have been the “easy revenue grower, rather than the real challenge-of-leadership, always ready to act.”

Esben Christensen, a general manager in turnaround and restructuring at consulting firm AlixPartners, said CFOs would take a more leadership role as the focus shifts from a company’s profit and loss statement to cash and liquidity. “When we have a restructuring, the CFO is the person people really want to talk to,” he said.

Changing role
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: an understanding of a company’s finances. “The part that can never go away is controllership,” she said.

The departure of a CFO often comes when a company is experiencing financial turmoil. On January 13, gambling company 888 Holdings Plc announced that CFO Yariv Dafna would step down after just two years. Since 888 bought the international assets of British bookmaker William Hill for £2.2 billion in September 2021, 888’s shares are down about 80%.

“It’s not for the faint hearted,” said Korn Ferry’s Morland.

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