CFO Chapter 7: Ambiguous Metrics

As the remit of the CFO continues to expand, they still remain responsible for reporting upon figures and influencing that certain numbers go up, whilst others go down. Historically this has been based upon data such as profit, turnover, etc. but now nuanced, ambiguous metrics are becoming increasingly important.

Why? Because the likes of trust, purpose and transparency are now key indicators of whether or not consumers, employees and investors will engage positively with businesses. So how do CFOs quantify these all-important yet intangible metrics?

What matters to today’s consumers, employees and investors?

What matters to consumers, employees and investors, matters to companies. To ignore their interests would be to go against the most basic principle of business. However, what is important to these stakeholders today is by no means basic. In fact, consumers and investors are placing high value upon trust, purpose and transparency.

Some might argue that this is just a trend but the current strength of it, and how quickly businesses can be destabilised if they fail to move with the times, means that it should certainly be taken seriously. For instance, in 2022 PwC uncovered that 91% of consumers would be likely or very likely to buy from a company that has gained their trust; roughly 75% of investors believe that companies should document their purpose and report upon its implementation; and out of 40,000 workers, transparency was the number one factor contributing to their happiness. Being able to dial up these metrics matters.

How to measure trust

Trust is foundational in many areas of life and now it is proving its worth in business too – 68% of respondents to a 2021 Edelman survey believed that compared to the past, it is now more important for them to trust brands they buy from.

To help companies achieve high trust scores, CFOs can implement procedures which measure trust. Doing so allows for the impact of strategies to be reviewed and metrics to be shared externally to gain acclaim. This might sound tricky to do but fortunately, “measuring trust numerically is possible” according to Biljana Cvetanovksi, Partner at McKinsey.

To transform trust values from a qualitative to a quantitative measurement, CFOs can use the Nine Habits of Trust model. Based upon the formula of ability x integrity x benevolence = trust, the model requires every pillar of trust(each of which has three unique habits) to be strong for companies to record an impressive overall trust score. Creating, sharing and analysing a series of surveys on the nine habits will allow CFOs to discover their corporate trust score. Fortunately, despite consumers and employees usually being reluctant to engage with surveys, given the importance they place upon trust and the benefits they feel they gain from companies proactively seeking to become more trustworthy, the Nine Habits of Trust model is an exception.

Ideally, these surveys should be done regularly throughout the year, especially after new initiatives are launched. Collecting such data at pertinent points will allow CFOs to present their businesses with data which reflects their trust score based on contemporary actions.

How to measure purpose

Living every day with purpose is a great feeling. Recreating it in a corporate context therefore wields a lot of influence. Why? Because purpose is arguably behind everything we do. Every time we have a decision to make, we think, “what is the point in ...” or “what is the purpose in ...”.

These questions regularly spring to mind because everything is a transaction. Either a transaction of time (working 40 hours a week to get paid) or of money (spending to purchase a good or service; or investing to gain a future return). Consumers, employees and investors are all constantly weighing up what to do with their time and money based on whether outcomes align with their values and purpose.

Purpose is therefore a very high motivator; something which companies should keep in mind considering that purpose-led companies significantly outperformed the S&P 500between 1996 and 2011. However, the only way that companies can discern whether their purpose is resonating with key stakeholders is through collaboration between the finance department, and those of marketing and HR.

The involvement of these departments is vital due to the nature of purpose – it is something which is said and only felt when action is taken. Marketing is the voice piece of a company, HR is in tune with how employees feel, and finance is able to understand data like no other. CFOs must therefore direct their teams to:

• Discern from marketing and comms what exactly itis that they wish to project as the purpose of their company. They should also request data from various sources. This could include engagement stats on posts and pages which explicitly promote their purpose, and customer research surveys to understand whether target audiences are resonating with the chosen purpose of a company.
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• Regularly check in with HR staff on whether employees are feeling motivated. More importantly, they should seek to understand what is behind this sense of purpose. Surveys can reveal if it is due to wages, benefits or the company’s purpose.

Taking these actions will deliver stats to finance functions for them to analyse, revealing whether their corporate purpose is resonating and actioned to a level which engenders belief in it within consumers and employees. Moreover, along with looking internally, CFOs can also seek answers regarding their purpose via ESG rating agencies. Due to a lot of corporate purposes being tied to ESG commitments such as reducing emissions or increasing diversity, working with the likes of Dun & Bradstreet will provide them with continuous scores which they can then track against corporate activities.

How to measure transparency

Due to its definition, some might think that transparency could be the most elusive to measure. However, there are in fact various indicators of it which a CFO can refer to in order put a number to this measurement.

This is great news for companies because a low level of transparency can instantly undermine trust and purpose. If customers, employees and investors discover that a business is not entirely transparent, it can lead them to question whether they should be trusted, including over claims of their purpose. For example, despite being known as an inclusive company, 20,000 employees worldwide staged a walkout from Google after a leak revealed that the tech giant was protecting male executives accused of sexual misconduct.

Instances such as this are a prime example of one way for CFOs to gauge transparency levels. By keeping tabs on public relations scandals, assessing how long they last for, how many related posts trend on social media, and how many occur each year, they can gather numbers related to episodes which are damaging to transparency. Another good determiner is evaluating how many customer complaints over being misled are levied. These could arise due to products or services not being as described, additional payments not being forewarned, or payments being activated after trials without proper communication.

Again, to support these examples of gathering data, employee surveys upon transparency can be helpful. This isn’t surprising. After all, trust, purpose and transparency are felt by people – the easiest way to know if they are being fulfilled is to ask.

Contemporary metrics

Trust, purpose and transparency are very much the metrics of today. In a world where there is more choice and access than ever before to products, jobs and investment options, businesses have to work extra hard to retain customers, employees and investors.

This is especially true due to information circulating more freely these days. A single complaint can spread like wildfire over social media, whilst at the same time, 24/7 news agencies are repeatedly reinforcing the importance of ESG. As a result, information access is inadvertently inciting a moral revolution, holding businesses to higher standards. The only way they can stay in control is to measure where they stand when it comes to ambiguous metrics such as trust, purpose and transparency.

Now might just be the beginning of trust, purpose and transparency metrics but in years to come they will experience increased exposure, additional weight and be expected to be seen by all. Business ethics influenced nearly 50% of employment decisions by millennials and Gen Z in 2020 and 2021; soon businesses will be driven by ethical metrics too.

The next chapter

Just like how money keeps moving, so too does the technology surrounding it. Whilst this brings opportunities, regulations inevitably follow. In the next CFO Chapter, examine the latest financial regulations relating to payments and prepare for those in 2024. Find out more about the next chapter and those in 2023 by clicking here.

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