Sally Johnson is CFO at Pearson and a non-executive director at Rentokil Initial. In our conversation, Sally explains why she believes leaders need to be brave with their convictions, and shares her perspective on how to address the challenges arising from non-financial metrics and measures. This interview was conducted as part of our research, in partnership with ICAEW, A4S, and Odgers Berndtson into the CFO’s role in creating a fairer future.
What do you think are the greatest challenges facing CFOs today?
The rapid pace of change and level of macro-economic issues that require an urgent strategic response is a significant challenge. Stakeholders (employees, investors, customers, etc.) are reassured by strategic stability but it is commercially important to be agile and adapt to changing circumstances in real time. Balancing these competing objectives can be difficult.
The succession of issues surrounding the pandemic, inflation, and climate have all encouraged us to adapt and innovate more quickly than ever before but it’s also contributed to making robust strategic planning increasingly difficult.
What role do non-financial metrics and measures play?
They are an important factor in internal and external reporting and allow stakeholders to understand underlying business drivers and important societal and reputational factors such as carbon emissions and DE&I.
Collecting non-financial data is a challenge for lots of businesses. Getting the systems and processes in place to allow you to collect the data is time-consuming and sometimes costly, and once you factor in the level of change, it adds to the challenge.
As a large, relatively complex business with different customer types, commercial models, and opportunities we strive to provide KPIs that are meaningful across the whole business. It is important, however, to ensure KPIs align with what is helpful for those charged with strategic and operational delivery.
Another challenge with non-financial measures and KPIs is the variety of potential options available. Financial measures are well understood because they have been honed over many years. But, it is important to choose a few, and for these to be the most meaningful. We track non-financial metrics internally before we share them externally to ensure they correlate with the outcomes we desire and do not drive any unintentional behaviours.
We’ve been keen to be consistent in the metrics we use and also to be very upfront about what we are doing to course correct when things haven’t gone as planned.
What are the societal issues that keep you awake at night?
Climate change is the biggest and most globally consistent challenge humankind faces. My generation and my parents’ generation have a duty to right things for our children. But that is not the only challenge societies face. The recognition of issues, and the way to solve them, are often a source of disagreement, whether fuelled by fake news, social media, or real-time global connectivity.
“My generation and my parents’ generation have a duty to right things for our children.”
Businesses have a really important role to play in resolving these issues. As an education and learning company, my business has a dual role — ensuring access to education, as well as fulfilling our corporate responsibilities.
If you could issue a challenge to your peers, what would it be?
I challenge my peers to be brave about sticking to our convictions. I think that the example of carbon is a good one — everyone set targets in the late 2010s for 2030 which seemed a long, long way away at the time. And now it’s much nearer, I expect it will become increasingly difficult to stick to our convictions and take action. We have to hold the line, because if the larger players start wavering, then everyone else will follow. This applies elsewhere, too, in areas like diversity and inclusion where true change requires year after year conviction and improvement.
We have to keep this conviction because markets can be very short-term and we can’t just chase profits in a specific quarter. Some of the decisions we need to make will be difficult ones; there’s going to be some tough calls. But they are decisions that actually make good business sense to pursue, alongside being the right thing to do, which means they will create value across the medium and longer terms.
“We have to keep this conviction because markets can be very short term.”
This interview was conducted by Dr Scarlett Brown, Director of the Board Intelligence Think Tank. If you’d like to nominate a CFO leader to be part of our interview series, get in touch.