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Welcome to CFO 4.0, the future of finance, the CFO role is changing rapidly, moving from cost controller to strategic visionary. And with every change comes opportunity. We are here to help you take advantage of this transition, to win at work. Drive your career forwards and lead with confidence. Join Hannah Munro, managing director of itas, a financial transformation consultancy, as she interviews key experts to give you real world advice and guidance on how to transform your processes, people and data. Welcome to CFO 4.0 the future of finance.
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Hannah Munro (01:26):
Welcome to the podcast. I'm very excited to announce that we have Steven Gallucci from Deloitte on the session today. Now, what do you prefer Steve or Steven, I guess is my first question.
Steven Gallucci (01:40):
Steve is fine. The only people that call me Steven are my mom and dad.
Hannah Munro (01:45):
So, definitely Steve. So, Steve your official title, as I've been told is the new North American leader at the CFO program. You're here today to talk us about the CFO signals report, which is very exciting. Steve, tell us a bit about your role, Steve, and how long you've been in it.
Steven Gallucci (02:03):
Sure, sure. Relatively new to the role as, as you've indicated with the title new, or with the term new associate my title was officially took over on June 1st, June 1st happens to be the beginning of Deloitte's fiscal year. I was it was announced shortly, shortly before that. I've been having conversations about it for about six months now. So, really in the role for officially, for about three months now,umaybe a little bit about my background might be helpful if, if that's okay.
Hannah Munro (02:37):
Absolutely. Cause you've worked for Deloitte for a while. Haven't you?
Steven Gallucci (02:40):
I have, I have, I've been a career Delloiter if you will. 30 plus years and I stopped for the most part, although I didn't do it here telling groups when I talked to them, if I tend to talk to a lot of our younger people cause obviously the big firms, the lifeblood of our firms is hiring really, really smart young people and seeing them grow in the firm. But when I introduce myself and tell them that I've been with the firm for 30 years, they typically tuned me right out. So I stopped saying that when I talk to younger people, but I had been with the firm for obviously a very, very long time hired rent at a university, as you say, in the UK. Became a certified public accountant, similar to being a chartered accountant. Soon thereafter I made partner in the early two thousands. And I've had a number of different leadership roles within Deloitte.
Steven Gallucci (03:33):
Well, at one point in time, just recently, up until recently, I ran our New York market, which is really, really exciting from that perspective. I did that for seven years. I served a whole array of industries and sectors, which maybe we'll touch on as we get into the data. So that's a little bit about my background, a little bit about our CFO program. If I can. Our CFO program is what we think to be a program that is, and more broadly, our firm is considered to be one of the preeminent visors to CFOs globally. We have enormous depth and breadth of capabilities. And what our program does is, is really leverage those capabilities to deliver forward-thinking fresh insights to the CFO at every stage of his or her career. So, we have programming that targets CFOs that are coming up the ranks, if you will.
Steven Gallucci (04:28):
We have a program that we call our next generation CFO Academy whereby, we bring together folks that are sponsored by CFOs mostly public companies based in the US and North America for what typically is a three day session at our Deloitte university facility moving to a virtual platform. We're doing that over a couple of weeks currently actually. So, that's an example of the investments we made. We make around aspiring CFOs for CFOs, sitting CFOs. We have a number of different programs, including bespoke labs for transitioning into a CFO role. We have a number of conferences. We have a significant eminence platform signals, which signals is also a part ofand maybe just a pivot towards signals itself. We've been doing our signal survey for 10 years. We serve a fortune 500 CFOs across North America, primarily in the US. A large majority of those CFOs lead companies that are billion dollar plus. We look at a whole series of different topics some of the same questions each, each quarter, and we do it on a quarterly cadence. And then we also augment those questions with additional questions about topics of interest in a particular time and place.
Hannah Munro (05:55):
So I'm guessing that COVID, in particular has come up quite a bit in this, service. Tell us a bit about what your key takeaways from the survey were.
Steven Gallucci (06:04):
Yeah. So I will acknowledge your statement, which is a bundling true. And I'll get into more of that. Obviously the impact that COVID has had on the work that our CFOs are doing and also their outlook, but maybe a few commentary about what we saw in this quarter, and the data was collected over a couple week period in August. So you can imagine, obviously, you know, across the globe, the impact of the pandemic was having on businesses and CFOs alike when we did it. And if I'll digress just a bit, when we did the earlier survey, the survey right before the August one, in the second quarter obviously that was in the depths of the pandemic. So the feedback out of that survey was a little more dour obviously, but when we looked at, when we talked to CFOs in August and we saw their perceptions of the economy across the globe rise a bit.
Steven Gallucci (07:06):
Now it was a good mix. They were a little more bullish on the agents, specifically the China economy less bullish on the North American economy. A large majority of CFOs indicated that they are operating above the 75% capacity level, which we thought was positive. Although, it was inconsistent across some industries. So industries like tech healthcare, life sciences, obviously a lot more bullish industries like retail, particularly those retail establishments that didn't have an established online component. Energy were a little less bullish from that perspective. You know, maybe a few data points, you know, 7% of the CFOs, rated current conditions as good, in the last quarter, that was 1%. So, an uptake there and 43% and expect better conditions in a year, which is, which is down from 58%. So that's another theme that has emerged is that, well, we saw CFOs become a little more bullish in this third quarter. They also felt like the pandemic was going to have a longer impact, and it was going to take a little bit longer to get out of and back to pre-pandemic levels. So, let me just pause there and certainly happy to comment on any of that.
Hannah Munro (08:24):
Yeah. So it's interesting what you're saying about the outlook. And do you have, was there any information about how their outlook is affecting their behaviour or how organizations are operating? Was there any sort of takeaways on that side of things?
Steven Gallucci (08:39):
Yeah, there was actually again, comparing it to the earlier quarter. When we ask our CFO what is is they are focused on? Are they focused on more cost control type initiatives or revenue growth? And for many success with quarters we always saw that revenue growth outpaced cost control, obviously an up market. You would expect that. That, that was reversed in the second quarter, but it came back to that natural cadence. In the third quarter, we saw there was a much more of a focus it's a 45% of, of the CFOs were versus 35% in the second quarter. We're focused on revenue growth over over cost reduction.
Hannah Munro (09:20):
So that's an interesting shift, isn't it. And in terms of obviously the shift to remote working, was there any commentary around how they're managing that across the board?
Steven Gallucci (09:31):
Yeah, there was. And I think it was you know, if we could say that there's a, you know, in the world of a CFO, a silver lining out of what they are dealing with or what broadly management teams and companies are dealing with and finding out of the pandemic is that the ability for their teams to pivot towards a remote platform they were very encouraged and surprised how well finance teams could do that. Now, certainly in the, you know, in the respond phase, we look at dealing with COVID and under three banners, if you will, framework of respond, recover, and thrive. And clearly in the first couple of months, which is when we did the, the second quarter survey all CFOs and all companies were really in there in the respond phase.
Steven Gallucci (10:20):
And what that means is, how do we make sure that our people are operationally ability to able to do their jobs, that distribution centres, shared service centres, production facilities in a manufacturing setting we're back up and running with the proper protocols to deal with the pandemic. But, as companies and particularly finance organizations pivoted more to the recover phase, from our respond phase there was a very, really positive takeaway in terms of companies being able to move to that platform. What you're also hearing and seeing, and we're seeing more broadly across our CFO program is a, is a heightened interest in technology capabilities for companies to be able to not only just move their finance organization to be more tech enabled to be more remote and more mobile better connected but looking into you know, how do we move quicker in terms of our, IT strategy as it relates to finance how do we enable our company with, you know deeper capabilities of cloud based technologies?
Steven Gallucci (11:48):
So, real opening up from that perspective which was the trend that we're seeing. Obviously your podcast is called CFO 4.0, and I think you certainly are seeing that in who you speak with. When we sit back and we think of that the CFO we think that we have a framework, which we call the four faces of the CFO and on those four phases, we say a CFO typically spends his or her time as an operator, as a steward, and then as a strategist and a catalyst. When you step back and those kinds of really fall on, on two paradigms, the steward operator is the traditional role of a finance CFO of a CFO or finance organization at large, the strategies catalyst is more forward looking.
Steven Gallucci (12:41):
And what we're seeing is that the pandemic has accelerated some of the trends that forward-thinking finance organizations or were already pivoting towards with a focus on data with the focus on how CFOs can be front and centre, strategic decisions and taking the data that's been always really at their fingertips, but now with these tools and technologies and ability to use that data to, to really be part of the decision making process with business units, with the C suite around critical investments.
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Hannah Munro (14:10):
Yeah, and I think that's a really interesting trend, and it's certainly one we've seen in that, the questions where you're being asked around, how do we get better data quicker, and how do we have the ability to manipulate and use that data to see what's happening within the business? Because the, you know, the days of waiting for month end to get figures and results out for lots of businesses, it's just not viable and what we're seeing. And I'd be interesting to see how that's reflected in what you are, is that actually they're looking at weekly reporting and daily where possible to try and really keep an eye on those numbers to spot those shifts and those trends.
Steven Gallucci (14:48):
Yeah, no doubt. The appetite for real-time data is exploding if you will, for lack of a better term. Finance organizations are being asked to really be the champion of that. But what is your data strategy, you know, have you thought about creating a data Lake, you know, what type of tools and how can we enable our frontline salespeople with better data and it's not uncommon if you will, to see many CFOs, actually also double hatting as the chief transformation officer, because really, you know, the underlying transformation is it driven and also data enabled.
Hannah Munro (15:38):
And in terms of staff and, you know, we talk about the shift into this new CFO role and you know the finance teams themselves are having to transform and work differently. Is there any commentary on how that shift is happening? Has there been any more investment in training and the skill or the skills that they're being asked or different?
Steven Gallucci (15:59):
Yeah, I think there's, I'll touch on all of those. There certainly is a significant investment in training and upskilling. There certainly is a significant investment in pivot in talent acquisition. What people are you bringing into your finance organization? Do they have technology capabilities? Can they marry the traditional accounting and finance and tax skills with the ability to enable those skills through technology? So so very, very much so you're seeing finance organizations making that pivot and over investing in technology skills and capabilities.
Hannah Munro (16:39):
And I guess one of my other questions is obviously with the shift, is there an increased view on productivity because obviously cost control and, you know, looking to rationalize teams? Is that something that is affecting a lot of CFOs at the moment?
Steven Gallucci (16:56):
Well, I think productivity has always been a part of the CFO's agenda. I think their C suite has always looked to the CFO to make sure that the metrics that they, the overall company is being held to is being managed effectively by a CFO. But, you know, back to the impact of the pandemic, their new options are emerging for finance organizations or companies very large, as it relates to talent. So, you know, back to the theme of the ability to work effectively, remotely, it's opened the doors to thinking about the workforce in a much, much different way and access to talent pools. Companies are challenging the paradigm that the talent pool that they're confined to is one that is within a commutable distance to where their finance group is based. So, with more virtual teams, comes a longer term shift towards you know where can we access the best town, whether that be, you know, in London and New York in the US and UK and what have you.
Hannah Munro (18:08):
Yeah, and I think that's a really interesting piece. It's certainly one we're seeing as around where staff members are located, and it's not even within country, we're seeing a loss, like you say, of global outreach for talents and skills where they can't find them locally. So, it's quite interesting that shift. And in terms of, you mentioned that obviously COVID is having different impacts on different industries. Can you just expand a little bit on that in terms of, are there any industries that have been positively effected by COVID?
Steven Gallucci (18:39):
Well, you know, certainly the technology sector it is, and the communication, what we call TMT, we look at it, industry, group, technology, media, and telecommunications. When, when you look at obviously the service that, that those entities offer the demand for many of those products and services have increased. Clearly when you look at the carriers, the Verizon's, the at T and T, their demand for bandwidth 5G is significant, is uptick significantly. They've been on a significant capital investment program, and they will continue to do that. Take cloud-based technology enablers are certainly seeing a higher demand in certain pockets of the life sciences and healthcare space. You're seeing a significant demand. Now, healthcare is a little bit of a mixed bag because what what the big providers have suffered during the pandemic is a significant downturn in elective surgeries, which is a significant component of their operations, per se.
Steven Gallucci (19:47):
So those entities have certainly seen an uptick in demand for their products and services now for the bigger players you know, the overall macro downturn is certainly going to impact them in a meaningful way also too. So, I think when you looked at the most recent round of averting earnings reports and earnings guidance it was in those particular sectors, I mentioned I think there was a significant number of positives, but also some caution as we moved forward from that perspective. Certainly the industries that rely on an interaction with the consumer, is where we saw demand really you know, fall to the floor. The travel sector certainly is being challenged. Retailers that again, did not, were not well positioned to have a significant digital component to their customer interface have seen certainly a greater than the normal impact or greater than average impact from the pandemic. So there certainly has been, you know, some, some layers and some losers.
Hannah Munro (21:02):
And in terms of them sort of the main challenges that you're seeing in terms of feedback, what are the challenges that CFOs are saying that their biggest challenges at the moment, especially when you're moving into that sort of recover phase?
Steven Gallucci (21:15):
Yeah, well, as they were coming out of the, responding to the recover phase, you know, one of the most cited roles that CFO's were spending a significant amount of time was really the cash and liquidity, but an element of what they were, what they'd been asked to do. Most CFOs have raised or access additional cash, many saying that they're using it to fund reserves in the face of uncertainty. So you know when the pandemic hithe immediate obviously no playbook for a plant pandemic existed for CFOs but certainly many CFOs lived through the 08 downturn. Now, the 08 downturn and the pandemic are very, very different. The way downturn was clearly a credit crisis, if you will, with the drying up of markets. Certainly the monetary policy leaders across the globe reacted very, very quickly to that.
Steven Gallucci (22:09):
And I think CFOs noticed that, so this very early on, while CFOs were moving very, very proactively to share a balance sheet team, making sure that they had plenty of liquidity to get through the crisis because of the uncertainty of how long it would be. Most CFOs or most companies were able to address that in a relatively quickly manner. In other words, some, and we've seen the data with the uptick in bankruptcies and whatnot. There were, you know, there were some that were not able to meet that challenge. But, when CFOs were able to move past that again, it was more focused on just understanding. Okay, when can we get back to full capacity? I think most CFOs spending a significant amount of time talking to their CEO and their executive teams, their boards, their shareholders about the forecast.
Steven Gallucci (23:08):
And you know, there is still a bit of uneasiness around the ability to properly forecast, just because of the nature of the pandemic. And that is often the most cited concern going forward is the impact of the pandemic. The fact that it's very hard to pin down. You know, when there might be spikes in a particular geography or globally and how the repercussions that would have on its ability to do business in a particular space or geography. So there's that speak to the caution that I referenced earlier about CFOs expressing that in our survey
Hannah Munro (23:46):
And how concerning is the thought of a second wave for a lot of CFOs?
Steven Gallucci (23:51):
Well, I think there certainly is a concern. You know, I think CFOs, or certainly you know, taking time to get advice from epidemiologists their own teams, advisors clearly, it's not something that CFOs have ability to control if you will, but the concern is still there. There's also some other factors that were cited around you know, the, obviously the fact that we're, you know, we're in an election year in the US this is a very much a US centred survey. So sort of a certain uncertainty around, you know, what the results of the November election will be, how that will impact policy that wasn't as sighted as a pressing concern as was the road of the pandemic, but certainly it was mentioned.
Hannah Munro (24:45):
And what do you think obviously this means for the CFO role itself going forward, do you think there'll be any changes to the responsibilities or the way that the CFO is viewed as part of the organization?
Steven Gallucci (24:59):
Well, we think it's a real opportunity for CFOs to really step up and be front and centre. I mean, we use that term, you know, again and again. And, and we think that that CFOs are well positioned to answer the call on this. I think they'll continue to be a focus on CFOs making sure that finance strategy is very highly aligned to the business strategy, to the IT strategy. It's all intertwined, you know, focusing on the same things. There will continue to be an ask of a CFO, to be a partner with the business leaders, to understand how we can intertwine forecasting capability getting good data and analysis to decision makers in a real-time basis, as we touched on earlier. So, we think this is a really exciting time for financial organizations across the board.
Hannah Munro (25:59):
Yeah. And I guess that might also change what, you know, CEOs and boards are looking for in a CFO of the future as well. And that's something that a lot of our audience that are certainly searching for new roles perhaps, or looking for that next step need to consider. And from your perspective, what do you think in terms of what organizations are going to be looking for in a CFO certainly moving forwards?
Steven Gallucci (26:27):
Yeah. And again, we've seen this trend for a couple of years, and I think in, in light of the pandemic and what finance organizations have been asked to do, I said, we, we see this trend, this trend being expedited, if you will. The traditional CFO for the most part came from, you know, one of, a couple of worlds many from the traditional County and finance background perhaps they spend time, you know, with one of the bigger firms like ours or they came through, you know, the controllership function, if you will perhaps a business unit finance leader What we're seeing more and more are finance leaders, more and more coming from the world of investment banking and finance, you know, all being asked to come with a keen understanding of how it impacts finance and how it will go and forward. We're seeing, you know, more finance CFOs coming from leading businesses, if you will. Which we think is very, very positive. We think it continues to be a very attractive place in a career progression and, or a career destination.
Hannah Munro (27:46):
And in terms of what's coming next for CFO signals. So, this is a quarterly report. So, when's your next one due out?
Steven Gallucci (27:53):
Yeah, we we're ramping up right now. We'll be launching our, what would we call it our fourth quarter CFO signals, I believe we'll probably launch it in the November timeframe and publish it in early December. We'll obviously continue to pull CFOs on the key elements that we do on each and every quarter about what they're seeing trends, how they're focused cost control, revenue growth. And then we'll certainly get into some Q and A about the ongoing impact of the pandemic. We're looking forward to seeing what we get out of that it'll certainly be telling. I think you'll certainly see some of the trends we saw in the second quarter continue. We think we'll certainly, you know, hopefully get a clear picture of how some of the sectors and sub sectors continue to work through the pandemic.
Hannah Munro (28:51):
Brilliant. Well, thank you so much, Steve. It's been fantastic. And for those that are interested, I will post the link to the CFO signals report in the podcast notes, so they can have a look on. And yeah. Thank you so much for joining us. It's been an absolute pleasure. Brilliant. Thank you very much, Steve.
Steven Gallucci (29:09):
I enjoyed it. Bye bye.
Hannah Munro (29:12):
Thanks for listening. And I hope you enjoyed this episode. I actually have a favor to ask reviews and shares are incredibly important to the success of any podcast. If you could spare a minute to share this episode on your social network or leave us a comment, tell us what you liked. I would really appreciate it. Feel free to tell me what topics interest you most. I would really love to hear your feedback. Don't forget to check out our latest CFO 4.0 webinar on budgeting and planning in a volatile environment. Click the link in the show notes or visit www.itassolutions.co.uk and click on our events page for more info and great content. And if you want to reach out at any point, tell us what you liked. Tell us what we can do better then feel free. Just email us that [email protected]. Thank you and speak soon.