What is the CFOs role in a layoff decision?
A recent article by Grace Noto on CFODive explores how CFOs are navigating layoffs as many expect a recession to be imminent at this point.
The process of mapping out the financial outcomes of a layoff fallback to the FP&A team. Whether it has been approved and entered into the budget or analyzed as an alternative scenario is another question. A layoff could be entered into a final budget if it has been approved or analyzed as part of a worst-case scenario. The mechanics of this decision and analysis can differ from company to company.
Managing the financial plan, budget or forecast falls within the domain of the CFO. The CFO is also responsible for advising the company on this sensitive decision. The Board of Directors, CEO and other business unit leaders need the CFOs analysis in order to make this final decision and understand the possible financial implications.
Grace summarizes the difficult decision regarding layoffs faced by CFOs:
It is “very difficult and it weighs because these are people’s careers,” Omar Choucair, CFO of software-as-a-service (SaaS) company Trintech, said in an interview.
As dreaded as the decision to perform layoffs are, they need to be backed by careful and accurate analysis. Layoffs are a scenario within labor planning or some may refer to it as human capital planning. Organizations facing the prospects of a recession lacking a modern FP&A platform to perform dynamic labor plan analysis risk falling behind their peers, missing out on opportunities, and ultimately making the wrong decision regarding layoffs.