And back at KPN, Scheepbouwer offers an historical perspective. “I’m 64, so I’ve seen many ups and downs,” he says. “In the down periods, you always see the finance function blossom. Around the highs, when everything is possible, finance becomes relatively less important. Whether that’s smart is another matter, but that’s the way it goes.”
Scheepbouwer admits that finance at KPN has seen “a lot of turnover and reduction in personnel” as part of a multi-year benchmarking and efficiency drive. At the same time, the quality of information produced by the department has improved, he says appreciatively. “They do an excellent job.”
One of their most important jobs currently is to develop a set of contingency plans, as the depth and length of the downturn remain difficult to predict. In September, Scheepbouwer and his finance chief drew up plans for “a mild recession, a serious recession and a depression, including all of the steps we can take, in detail, to protect earnings and cash flow depending on whether it becomes a bit serious, very serious or disastrous.”
Like so many other CEOs going through similar exercises, he is relying on his CFO’s natural caution to develop a “balanced strategy whereby we take the risks that we can afford to take.” And it isn’t only about survival, he asserts, as industries are often transformed during downturns. “Competitive positions always change during down times. The opportunity is now.”
The same could be said for CFOs. With their star shining brighter, everyone — including the boss — is looking to them for guidance. As the data guru, devil’s advocate or some combination of roles, CFOs can use this downturn to cement their reputations and set the stage for larger roles in the future.
“Normally people work very hard in finance, a fact relatively unknown to the rest of the organisation,” says Scheepbouwer. After spending some of his formative years in finance, he appreciates the function at all stages of the economic cycle, he explains. Some of his peers, possibly facing their first recession as CEO, may only now realise how important finance can be at companies under siege. “I appreciate the department,” Scheepbouwer says, “because it is very important in times like these.”
Jason Karaian is deputy editor at CFO Europe.
At work, as in life, relationships can be difficult to sustain. Ever-shrinking executive tenure makes it especially difficult for a CEO and CFO to stay together for long. And with a severe downturn challenging companies’ strategy and business models, some opt to change tack by making changes at the top. This often means looking for a new finance chief.
Over the past year, Caroline Raggett, a member of the financial officers practice at headhunter Russell Reynolds, says that boards haven’t wavered in their profile of the ideal CFO candidate: it must be someone who’s done the job before, preferably for a long time. “In a bull market, companies are open to the idea of a young, up-and-coming CFO who might add a new perspective, more modern practices and inject a bit more dynamism into the boardroom,” she says. Now, however, boards want to speak with experienced CFOs, some going as far as limiting their search to candidates who were finance chiefs during the recession of the early 1990s. “Companies now recognise that experience from 17 or 18 years ago is relevant to today’s market,” she says. “The dotcom bust doesn’t compare.”
Once a CV has been examined, how much does the rapport with the CEO influence hiring? “Chemistry is critical,” says Suzzane Wood, a partner at Heidrick & Struggles specialising in finance searches. For her, this means “complementary skills and empathy; they do not have to be friends.” In fact, “the minute you fall in love with your CEO, you lose all value,” she adds.
At the same time, good CEOs don’t hire CFOs based solely on personal affinity. “The CFO is your co-pilot, so why would you hire you again?” Wood asks. A “healthy tension” between the top two members of the executive team is generally preferred, and especially encouraged at private equity-owned companies, she adds. In general, “CEOs are CEOs because they know that building a talented, diverse team is critical to their success. They’re not marrying these people for love. They’re marrying for profit.”