CFOs across industries are going through liquidity exercises to ensure their organizations have cash to survive the downturn, but they're also modeling scenarios of when stay-in-place restrictions start to lift.
The exercise isn't academic. If CFOs get it right, they can position their organizations for success right out of the gate; if they get it wrong, their organizations could struggle to recover.
"We know [the downturn] is going to end, but the new normal is what we don't know," Sara Baxter Orr, global head of CFO practice for business planning platform Anaplan, told CFO Dive.
In a Gartner survey, three-quarters of CFOs said they will try to keep at least 5% of their organization's staff working remotely following the stay-at-home mandates, because the downturn has shown them the efficacy of having at least part of their workforce at home. Not only do cloud solutions make that possible, but remote staff can save money and increase productivity.
"Most CFOs recognize that technology and society have evolved to make remote work more viable for a wider variety of positions than ever before," Alexander Bant, vice president of Gartner’s finance practice research, said in the study.
The question CFOs are trying to answer, says Orr, is what new ways of working and what new ways of engaging with customers will make sense for their organizations while also taking into account how the pandemic will change people’s behavior long-term and what new rules will be in place.
"The scenarios there are almost endless," she said. "How many of us are going back to work? And when we go back to work, will there be new safeguards? Will we be wearing masks in the workplace? Is the open work environment still good? Probably, but will we need more space? Will people be concerned about taking public transportation? If people are working from home, will there be more online shopping?"
To get a handle on these future-looking questions, avoid relying too heavily on historical data, no matter how deep or robust it is. Backward-looking data reflects broader economic growth over the last 11 years that's unlikely to be repeated, Jason Loh, Anaplan's global sales solutions head, said.
"Almost overnight, the perspective has changed," Loh said. "[Your customers'] intentions and behaviors are changing."
Bringing in third-party data, including natural-language data, and AI-driven predictive-analytics capabilities will help CFOs model this new environment. The predictive analytics in particular can provide insight into customers' behavioral and tactical changes.
"Best-in-class organizations are leaning more into these third-party predictive insights," he says. "What are our customers talking about? What are they hiring for? What’s happening in their organizational structure? What topics are they researching online?"
CFOs can improve their modeling by taking this data and running it through predictive algorithms to better anticipate customer behavior in a new normal world.
"Pulling in that third-party insight [lets you] look at potential sales through an entirely different prism," Loh said.
Navigating the near-term
It can also help you manage through the here-and-now by providing insight into your customer pipeline.
If your sales are falling, the last thing your organization needs are sales staff focusing on the wrong customers or prospects, Loh says. You want them to thin out unproductive prospects and customers who are unlikely to renew, if you’re a recurring-revenue company, so they can focus on likely sales.
And you, as CFO, working with your head of sales and other functional leaders, can get a sense of what changes are needed — to compensation plans, commission structures — to help ensure the broader business is optimized to bring in good revenue and weed out unreliable customers.
It’s about "the shape, size, and contents of the pipeline," Loh said. "In general, pipelines are wide at one end and gradually taper. [You'll want to] thin out all the bad deals as quickly as possible."
The third-party data, what Loh calls outside-in data, can help by shedding light on what potential customers are doing, allowing you to decide whether investing in them is a good use of limited resources.
"Are the customers in our pipeline still the right customers that are going to be in a position to make these types of decisions?" he says. "Are the products and offerings that we’re selling still relevant to them? Are they still going to take action? Are these deals desirable and winnable?" [You need a] real quality assessment of the pipeline to understand their terra firma, so they can make these business decisions.”
To optimize resources, the CFO’s planning must reflect real-time input from all of the functional leaders so finance, sales, marketing, supply chain, and the others see the same data and analyses, and can work toward a common solution.
"With this assessment in hand, decisions might be sales realignment, staffing, change in compensation plans, change in targets," Loh said. "because we’re going to change our revenue targets."
The decisions — whether for getting through the near-term upheaval or positioning the organization for a post-COVID world — won’t be easy. Trade-offs are painful; they mean shifting resources toward one area and away from another, but analyses that reflect the input of all parties, and include outside-in data filtered through predictive analytics, can at least put everyone on the same page.
No solution is a magic bullet, Loh says. "Tough negotiations, tough trade offs, tough decisions, pros and cons, not one answer," he says. But "enabling people to balance those variables, so they can understand the consequences, can [ease the pain] when these decisions need to be made."