Enroute To Recovery: CFOs On Changes Here To Stay

Reeling out of the second wave and with all hopes of dodging a third wave, CFOs prepare for the next challenge ahead unlocking and resuming operations in a recovering economy. As functions move towards pre-pandemic expectations and levels, it becomes crucial to note the changes which emerged as immediate priorities but are here to stay.  

Pushed into survival mode, the role of a CFO has tended to multiple priorities, chief of which has been value creation. Understanding the risk scenarios, planning liquidity, capital allocation, ensuring that the supply chain isn’t affected, while communicating with internal and external stakeholders and doing it all with the latest technology have demanded immediate attention.  

Redefining The CFO Role With Technology

Madhavan Hariharan, Group CFO, CK Birla Group speaking at a BW CFO Roundtable explains, “40% of our revenues in some of our businesses today come from digital interventions. So we had to invest in new business models. We had to accelerate investment in growth and it became more attractive.”

Digitization has also reimagined operations considerably, making certain tasks faster and more efficient. T Srinivasa Rao, CFO, Rain Industries remarks, “Since the onset of Covid, we're moving away from non-digital payments, such as issuing cheques. Earlier, we could be doing 75-80% of the transactions through cheque payment and the collections too were done in a similar way. But today, close to 100% of our transactions are moving towards digital payments. It improves the realization and cash conversion cycle and also avoids delays and duplicate payments.” He explains how these change in processes will remain irrespective of subsequent covid-19 waves.

Contrarily, Ramesh Swaminathan, Executive Director, CFO & Head Corporate Affairs, Lupin Limited adds that fundamentally things have not changed but merely differently defined. He believes the role of the CFO has broadly always been one of protecting value, simplifying processes to release value, creating value and communicating value. He observes that technology has been changing, pandemic or not.

“For example, physical verification of stocks was always something a CFO would do during the course of the year. Today, I might not be able to do it physically, but now, I use drones,” he said. He further explains, “The way we promote to doctors has also changed and it is because of technology. Telemedicine seems to be the order of the day. We are used to patients calling on doctors. But now, you have tablets and phones, and you don’t call on doctors physically. It saves on cost as it is a lot more efficient.” 

Workspaces Redefined 

Emerging as a solution to cope with the ripples of disruption caused by covid-19, the changes to the workplace as a concept will be a lasting transformation. Cubicles and office desks are losing relevance as virtual meeting rooms and digital collaboration tools become the norm. With many companies set to explore Work-From-Home (WFH) set-ups until August this year at the minimum, companies have progressed to unlearning older ways of working for the unravelling of the new set-up. 

Many jobs are expected to now have a virtual posting alone. Swaminathan explains, “Even when things normalize, I would expect a huge chunk of salespeople to adopt a hybrid approach. Travel will come down, so will be the need for office space and so on.”  

With digital collaborative tools rendering it easier to connect with colleagues across geographical boundaries the future of meetings, virtual events will coordinated by employees who are geographically dispersed. Madhavan adds, that the most important aspect was talent management where hiring for the future continued but the talent management will be significantly different.

This could facilitate a sustained reverse migration where employees live away from metro cities and work from their hometowns, casting an impact on the need for office real estate and internet advancements like 5G technology. 

Rao’s comments also show much promise towards the same. “The office space requirement is coming down. We now have about 300 employees working in Hyderabad and we have a goal to take it to 400 people in the next one or two years. But there is a clear direction that we will not take any more office space,” he says. He also conveys that the concept of working from home is not for IT companies alone and manufacturing and brick-and-mortar companies are adopting it. He remarks how the patterns of increased spending on IT and cybersecurity will harbour a more comfortable WFH culture and that those who work for companies in Europe and North America can sit at home in India and alter their work schedule to the client’s local time zones. 

On Team Building 

With the pandemic leaving communication at the mercy of the internet and digital tools, managing employee morale and building agile, resilient teams is a constant test. With no opportunity to share space with fellow colleagues, onboarding new employees virtually and maintaining a friendly and cohesive rapport between colleagues to facilitate business decisions is a managerial and leadership challenge.    

Madhavan responds that it becomes important to support teams to embolden them to make agile business decisions and humanize the process, giving room for mistakes and vulnerabilities. “There is a functional element and a behavioural element. The biggest support is to give confidence to business teams to make those hard choices and that is the functional perspective. On the behavioural side, agility has become imperative, which means empowerment of the people down below within broad guidelines and frameworks. The second part is after people take decisions, don’t judge as far as they are within the overall framework and learn from those decisions. The last one is for all of us as leaders to show our own vulnerable side and not to act as heroes. Showing the vulnerable side makes it much easier for everybody in the organization.” 

Ramit Gupta Partner, Managed Services IBM, India and South Asia, adds, “There are teams which work across geographies, social environment, time zones, and different types of issues. Of course, the critical element is to empower them to take quick decisions and we don't get stuck in bureaucracy. This is a garage way of working and there are a lot of examples.”  The garage method, he elucidates is where identified cross domain skills are matched and driven towards a common goal. Teams then get common briefs, a definition of the success expected, a specific allocation of funds and a robust system of governance. The idea is to help be a sounding board for teams and create value for clients, he surmises.

The Future Of Outsourcing 

With introspection of existing operations and agility, many job roles have been reimagined. Some responsibilities have been divided among colleagues and others have been outsourced, resulting in lean teams that a crisis ready and capable of multi-tasking.  

“We have heard about creating and preserving value. What we also learned is that there's a lot of focus on how things have changed and accelerated in the last few quarters. This is what we captured in an IBM study as 60% concurred. Hackett Research issued a report in 2021, which said that around 60% of business executives are likely to outsource more in the next three years as compared to now. Today, we heard about cybersecurity and leveraging the capacity and capability of partners. Interestingly, in that Hackett report, IT outsourcing is already at a peak and we’ve seen that many companies already outsource their application management.” Gupta explains.

Supporting the trend, Rao adds a manufacturing perspective. He states that they are trying to increase the allocation for cybersecurity and looking at outsourcing IT and 24x7 surveillance. He remarks, “There's no point in expanding the team internally. It is better to outsource it. The issue is not about cutting costs, but about spending wisely.” 

The changes and challenges precipitated by the pandemic have come to question the need for physical infrastructure, the ability to engage with partners and customers virtually while offering lasting lessons in capital and cash allocation. Change is not only constant but also charging ahead, with no room for retrograde.