The CFO: A Key Relationship for CX Success

In a previous edition of my newsletter, I discussed the importance of CX being a team sport and having all departments aligned on a shared vision, fact base, and pursuit of better business outcomes through better customer experience. This week I focus specifically on the importance of the relationship between the Chief Customer Officer (CCO) / Chief Experience Officer (CXO) and the Chief Financial Officer (CFO).

There are two obvious reasons this relationship is important. The first is the development of realistic business cases for investments you want to make for the customer experience. And the second is to validate the ROI that is being generated by improved customer experience: through new customer acquisition, higher retention (lower churn), higher lifetime value, and/or reduced cost to sell and serve. In both of these cases, you may not be working directly with the CFO, but with someone on their team that will validate your assumptions, help you obtain the right data, and ultimately sign off on the business case or models to give it finance’s stamp of approval.

But there are two other critical reasons for establishing a strong relationship between the CFO and head of CX. The first is the balance between a short-term focus and a medium-to-long term focus. Because of the nature of their roles, CFOs tend to have a shorter time horizon than many executives. They are tasked with providing boards and, if a public company, Wall Street with quarterly and yearly guidance and estimates of revenue and profitability. And when a significant portion of their total compensation is tied to stock price, it is human nature to manage to those shorter-term outcomes. Plus, when the average tenure of CFOs is only 3.5 years, their incentive to focus on longer-term strategy and outcomes is diminished.

While some customer experience changes may demonstrate quick wins that impact current or next quarter results, most changes take time to develop, implement, and for customers to experience and recognize the change. This may take a couple of quarters to even a year or two depending on the changes being made. And lifetime value changes play out over multiple years. So the CCO or CXO has to provide balance against a pure short-term focus to sustain progress on CX initiatives.

The second reason for the importance of this relationship is to ensure that a focus on cost cutting is not to the detriment of the customer or medium-to-longer term results. Sometimes extreme cost cutting is necessary to save the business—think, for example, about the recent pandemic and moves companies had to make to remain solvent. But Bain has done significant research that shows that companies that invest in new capabilities and strategic M&A activities during downturns are the companies that not only weather the downturns better, but also “win” more over the next decade. So, the CXO and CFO need to be having discussions about what are the right costs to cut and where are the right places to invest.

Some focus on cost cutting (think tech layoff of 2023) is happening today as companies have been talking about and preparing for a downturn that seemingly has been on the horizon for several quarters now. But we also see discussions of anticipated cost savings from the use of new technology and, particularly, AI. The media is filled with articles with wild predictions regarding the savings and efficiencies AI will generate and the jobs that can be eliminated.

One CEO in India has laid off his entire customer support team because he found that a chatbot could respond about 2 minutes faster than humans. Obviously, this is an extreme example, but it is indicative of a company or situation where cost savings are prioritized above all else or where a discussion was not had about the impact on the customer.

There needs to be balance in any discussion of cost cutting and an understanding of the impact it will have on customers and their future loyalty or purchase behavior. As the head of CX, your job is to optimize the customer experience in a way that drives growth for the business. The move to digital and more self-service solutions are good examples of evaluating where new technology capabilities can drive better customer experiences while also driving cost savings.

There is plenty of research that shows that customers still prefer human interactions in many situations or to deal with certain types of issues. The discussions with your CFO need to be focused on what are the right use cases to have technology solutions lead—where cost savings can be captured without diluting the customer experience—and where are the use cases that humans should still lead with an assist from technology. Finding that right balance by working in combination with your CFO and finance leadership is critical to optimizing both the short-term AND the future.

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