It’s no secret that we’re in the middle of a market pullback. Everyone wants to debate the potential of a recession in the next year. But there have already been plenty of signs of economic turmoil before the first day of 2023 even arrived.
In the tech sector alone (which has been described as currently a bloated industry that overextended itself during the pandemic), there is news every day of a new set of layoffs or downsizing. Companies like Facebook, Twitter, and Amazon have all announced plans to reduce their staff. Others, like the crypto exchange FTX, have completely collapsed under their instability.
These make for dramatic news stories and good long-term lessons. But the actual events are a nightmare for the employees going through them. The real tragedy is that high-strung emotional announcements and sudden staff reductions are often avoidable, even when the need to downsize is an inevitability.
The linchpin of this prevention manifests in the relationship between two essential members of the C-suite: the CFO and the CHRO.
The Issue With Short-Sighted CFOs
Before we talk about the essential connection between the financial and people departments, let’s take a minute to consider one of the major shortcomings behind many of the most horrendous layoff stories: financial mismanagement.
Many CFOs are competent when it comes to short-term finances. They’re able to budget, boost profits, and generally guide an enterprise’s bankroll toward success. The issue comes with long-term forecasting.
To be fair, there are many times when unforeseen events blindside a CFO. At times, these even take on an epic magnitude. (The recent pandemic is the easiest example of the perpetual unpredictability of daily business in action.)
Even so, the ability of a CFO to prophetically prepare for negative events isn’t the point. Rather, CFOs should be willing to at least try to project further in advance and gauge a wider variety of potential events—including the possible need to reduce the workforce in the future.
That’s where the CHRO comes into the picture.
The Crucial Connection Between CFOs and CHROs
CFOs should be planning for the impact of economic downturns and forced layoffs long before they ever occur. The need to prepare for repetitive tough stretches of business is well documented.
For instance, Schwab reports that the stock market goes through a pullback of 10% or more every two years on average. In other words, disruptive moments in business are par for the course—and every once in a while, they hit a sector (or the entire market, as is currently the case) hard enough to precipitate layoffs.
When that happens, CFOs should already be working with HR executives to ease the blow. They should have strategies in place to make workforce reduction as short, small, and painless as possible.
By working together, these two leaders can both proactively and reactively minimize the damage that layoffs cause by:
- Investing in things like upskilling to improve efficiency and productivity before layoffs become a necessity.
- Having a sound financial approach to reducing a workforce that isn’t dictated by temporary circumstances or emotional decision-making.
- Handling the need to lay off workers with confidence and compassion (and protecting the solidary of a company’s culture in the process).
When CFOs and CHROs are willing to work together before a workforce disaster strikes, they can minimize the damage created by each external economic event.
Hiring the Right Collaborative Talent
CFOs and CHROs collaborating for potential future crises isn’t necessarily a natural state of being in most C-suites. That’s why you want to have the right personnel in the building long before layoffs become a question.
“CFOs and CHROs collaborating for potential future crises isn’t necessarily a natural state of being in most C-suites.”
At Stanton Chase, we’re intimately familiar with the traits and skill sets required for financial and HR executives to thrive, both independently and in concert with one another.
If you are looking to fill one of these positions in your C-suite, our team of experts can put our industry-specific experience, tools, and network to work to help you. We can ensure you staff your company with leaders who are willing to work toward sustained success, not just in the present but in the long term as well.
About the Author
William Brewer, CCP, is a Director at Stanton Chase Los Angeles. He is also Stanton Chase’s Global Human Resources Practice Leader. Prior to moving into executive search, Bill had 25 years of experience in corporate human resources. In addition to his executive search career, Bill is an adjunct Professor at the University of Redlands. Bill also serves as a mentor for the MBA program at the Paul Merage School of Business at the University of California, Irvine (UCI) and has been a mentor with the School of Business at the University of Redlands.
Cathy Logue is the Founding Managing Director at Stanton Chase Toronto. She is also the Global Practice Leader of Stanton Chase’s CFO and Financial Executives Practice Group. Cathy previously served as the Global Vice Chair of Finance on Stanton Chase’s Board of Directors. She is also proud to represent Stanton Chase on the global Board of Directors of the Association of Executive Search and Leadership Consultants (AESC) and as Chair-Emeritus of the AESC Americas Council.