McKinsey says a ‘mindset shift’ can give CFOs an advantage right now

As economic uncertainty continues, “the best CFOs are actually seeing this current environment as an opportunity,” Ishaan Seth, a senior partner at McKinsey & Company’s New York office, told me.

As Seth works with financial services and private equity clients, including investment banks, retail banks and brokerages, I asked him what he hears in conversations with finance chiefs. “If there was one thing to point to that I’m hearing every one of my CFO clients talk about, it’s that the degree of volatility and uncertainty in today’s market is really quite unprecedented,” he says.

“A new McKinsey report highlights the biggest challenges and opportunities CFOs are facing right now,” details my conversation with Seth about the firm’s research. Creating a road map to thrive during these times requires CFOs to have a mindset shift from traditional tactics, he says.

“Having a mindset of being incredibly aggressive and bold on the upside while absolutely continuing to manage the downside is something we see the best CFOs doing,” Seth says.

How are they being bold? By building an edge on insights, commitment, and execution, Seth says.

“In boldness around this idea of insights, we are seeing the best CFOs pushing hard to get better information from a more diverse, non-standard set of sources than ever before,” he explains. “Relying on conventional data, conventional analysis, and the common ways of doing things is not going to hack it in this environment. I’ll give you an example. A bank brought together probably 75 or so chief country officers from all of their global markets.”

He continues, “They put them in a room for two days and said: ‘We’ve got people here who understand China, Brazil, India, Germany, and that are talking to clients, regulators, and suppliers and have different sources of signals on everything from inflation to wage rates to payment flows. But we’re not tapping into this. How can we take all this wonderful information and harness it in a way that we as a company can get this kind of wisdom much more quickly?’”

Another example? “Looking beyond your own industry,” Seth says. “I was talking to a CEO we’ve been working with quite extensively through the pandemic, and they’ve been trying to figure out the best way to set up a hybrid work model. How do we return to the office in a way that really gives us a differentiated advantage in terms of days working at home and onsite? And their source of learning was outside the industry.”

He continues, “They actually convened seven or eight senior executives from across industries, such as technology, retail, and pharmaceuticals, to meet on a monthly basis and hear how they’re dealing with these issues. What are the real estate decisions they’re making? What are their policies on vaccination? How are they thinking of new uses of technology with clients in this domain?”

I also talked at length with Seth about the need for enhanced C-suite collaboration, a value-creation narrative, and KPIs and metrics to reflect growth. Seth also shared what skill sets he thinks future CFOs will need. You can read the complete article here.

See you tomorrow.

Sheryl Estrada
[email protected]

Upcoming events: This month, the Coins2Day CFO community will meet in person in Chicago and Dallas for two in-depth dinner conversations to delve into the new leadership strategies CFOs must embrace. CFOs, click here to apply to join us in Chicago at Sepia on September 22 or click here to apply to join us on September 29 at The Mansion Turtle Creek in Dallas. Please note that attendance is complimentary and subject to approval. See you there!

Big deal

Transactions involving U.S. Private equity and venture capital firms in mainland China through Aug. 9 recorded an aggregate deal valuation of $5.75 billion, compared to $33.64 billion for all of 2021, according to a new report by S&P Global Market Intelligence. 
Second-quarter deal values dropped 78.5% year over year. In comparison, during the same period, private equity deals worldwide experienced a decline of 29.4% year over year, the report found. The decline in investments by U.S.-based private equity and venture capital firms in mainland China this year is amid concerns about the country's macroeconomic picture, according to S&P Global Market Intelligence.

Courtesy of S&P Global Market Intelligence

Going deeper

"How Aging America Is Driving Consumer Inertia," a report in Wharton's business journal, discusses new research by Wharton’s Gideon Bornstein. He hypothesizes that a rise in consumer inertia—choosing the same products over time for reasons other than the quality of the product—leads to higher profits for large incumbent firms. At the same time, it discourages the entry of newer firms. The report explains how Bornstein's study estimates that young households are almost twice as likely to switch their consumption products relative to older ones.

Leaderboard

Gustavo Arnal, EVP and CFO at Bed Bath & Beyond Inc. (Nasdaq: BBBY) passed away on Sept. 2, the company announced on Sept. 4. "The entire Bed Bath & Beyond Inc. Organization is profoundly saddened by this shocking loss," the company said in a statement. Arnal joined the company in May 2020 after serving as CFO for Avon in London for a little over a year and working in a similar role at Procter & Gamble for 20 years, Coins2Day reported. 

Thomas (Tom) Bergmann, president and CFO at Life Time Group Holdings, Inc. (NYSE: LTH) has decided to retire from the company. Robert (Bob) Houghton was appointed to the position of EVP and CFO. Bergmann, who joined the company in 2016, relinquished his CFO role concurrent with Houghton's election, and will remain president through the end of 2022. Houghton served as SVP of finance at United Natural Foods, Inc. Since May 2020. Before that, he served as VP of corporate finance and treasurer, and VP of Investor Relations for C.H. Robinson. Houghton also held finance leadership roles with Sherwin-Williams, Valspar, General Mills and International Paper Company. 

Overheard

"If we brought back the 1.067 million women missing from the labor force since February 2020, we could close the worker-to-open-job gap by almost 25%. This, in turn, would keep the economy from overheating by lowering the demand for workers. As it stands, our economy has nearly two open jobs for every jobseeker, and employers must raise wages to attract and retain workers."

—Katica Roy, the CEO of Pipeline, writes in a Coins2Day opinion piece that women's workforce participation has not recovered to pre-pandemic levels. Meanwhile, record numbers of jobs are left unfilled.