Patrick Butcher is Group CFO at Headlam Group plc, and has previously worked as Group CFO at Capita and Network Rail. Here, he shares his perspective on the evolving role of the CFO, the difficult choices facing business leaders, and how businesses today could be defining and measuring success.
In a sentence, how would you sum up the role of the CFO? How has it changed?
Through my experience there are four key elements to the role of CFO:
- You need to understand and believe in the company’s purpose so that you can be an effective advocate for the company.
- If you’re a CFO in the UK you’ll likely be a member of a unitary board, with responsibility for both supervising and steering the organisation’s direction of travel.
- The CFO has a special relationship with the CEO. The two will be most effective when they work together in partnership to deliver the organisation’s objectives and purpose. Part of this is recognising the need to provide complementary skills and focus to the CEO; you can’t be a good partner if you’re focused solely on your own agenda.
- As a function leader, you are responsible for the smooth and efficient running of the finance team. You need to set the best possible example not only for those directly accountable to you, but also for the whole organisation.
Although this is how I see it now, these elements have not always been intrinsic to the role of CFO. When I began my career, CFOs were called Finance Directors, and that caricature – being someone focused on backwards-looking financial data - was clear and in many cases fair. You spent much more of your time just producing the numbers and closing the books, technology was simply nowhere near as good as what we have access to today. Now with much better access to data, the CFO role has been able to shift towards being forward-looking, with a focus on a much broader set of stakeholders.
As CFO, you see what a company measures. Are you measuring things differently, or measuring different things than you used to?
Today, I think we as business leaders have a clearer understanding that businesses exist to provide outcomes for stakeholders. Therefore, the way to define and measure success in any organisation is through its impact on stakeholders – something that the best in the charity sector do very well.
At Headlam, I’d say we’re interested in more than just the numbers, but this contrasts to how success has been defined in some of my previous roles, where the focus was purely on financial performance. I found this more common in private equity, although things are changing. Even in that world they’re beginning to realise that consumers, employees, and political stakeholders have a minimum level of principled and moral behaviour that they are entitled to expect.
What societal issues keep you awake at night?
For me, the unsustainable and growing inequality present in the UK is extremely worrying, and I have a feeling that it could cause even greater problems than we are seeing today. The list of challenges that feed into inequality is daunting, and this alone can understandably lead to despair and inaction. I worry especially for young people using social media, much of which is constantly churning out the sense that we’re all doomed and removing hope for people. Even in the darkest moments of the Cold War we were still able to remain hopeful in a way that I am not sure many people are today.
How can business solve these issues?
I think that businesses do have a responsibility to help in addressing these issues – they can give people hope by giving them a job that is fulfilling and that pays them enough to live their lives. Our superpower as a species is our ability to cooperate. Business can help to restore hope by providing a community in which people can cooperate to fulfil their organisation’s purpose.
For businesses, some of the choices we face in addressing societal issues will be very difficult. For example, supermarkets could spend money removing more plastic from their supply chain, reducing prices for their customers, or they could spend that same money on giving their workforce a pay rise. Leaders don’t always get these decisions right, and there isn’t always a clear right or wrong answer.
Nevertheless, in deciding to accept the enormous sums of money offered to them, executives and board members acquire the responsibility for taking these decisions. We shouldn’t act like many of today’s politicians, in the often disingenuous way that they talk about and treat these ‘difficult decisions’ and ‘hard choices’; we need to undertake the soul-searching process of assessing each option and choosing the one that we think is, on balance the best.
Are there examples you’ve seen of companies or leaders doing something differently to have a positive social impact?
Last year we took the decision to put everyone in the organisation on the real living wage. We had a conversation around how to appropriately allocate resources, and in the end our decision was weighted towards the lower end so that they would see a relatively higher pay rise whilst people at the top got less. It was really interesting to see the way this was messaged and communicated throughout the organisation; we though there might be quite a bit of pushback from those on higher incomes, but the reception was really positive.
Peoples’ experiences during the pandemic, gave them a new appreciation for those who keep the country running. The ongoing cost-of-living crisis has left many people struggling, even after working throughout the pandemic.