Gartner said recently that it has identified nine traits CFOs should implement for better performance during the coronavirus pandemic.
According to the research firm, its experts base the recommendations on findings from the past 20 years of Gartner research into how CFOs of efficient growth companies guide their organizations through periods of crisis and uncertainty.
“We’re currently facing a downturn that could be even bigger than 2008 due to COVID-19,” said Samantha Ellison, senior principle, advisory for the Gartner Finance practice. “CFOs and finance leaders must look carefully at these behaviours that have worked out well for CFOs after the last recession.”
The nine key traits from CFOs of efficient growth companies according to Gartner are as follows:
1. Taking bigger, riskier growth bets
Gartner research showed that efficient growth leaders were 1.4 times more likely to gain first mover advantage with transformational innovations.
They made M&A deals that were 21% larger, and reintroduced R&D spending nearly 2 times faster than the control group, the firm said.
“The best performing companies fight the tendency to hedge their bets in the growth investment process, instead making riskier investments in identified growth opportunities,” Ellison noted.
2. Fighting “scope creep”
It’s also important to maintain control over scale and understand the hidden cost of complexity, Gartner pointed out, adding that its research has shown that efficient growth CFOs had 24% fewer product or service lines and 18% fewer industry groups compared to their peer average.
3. Ensuring funds for critical strategic initiatives
Efficient growth CFOs build consensus on the most important strategic initiatives and make sure there are extra resources in case they are required to expand or expedite the initiatives, the research firm observed.
4. Removing obstacles to growth bets
It’s not enough to simply incentivise the right kind of risk-taking, said Gartner, adding that the best-performing CFOs constantly re-evaluate process and cultural “anchors” that hold back willingness to make smart growth bets.
“Finance department bureaucracy is often a good place to start looking, but short-termism and ‘it’s-too-dangerous-to-fail’ attitudes can also be anchors, as are capacity issues from ill-judged cuts,” Ellison said.
5. Developing a theory of the customer
The most effective CFOs build their own hypotheses about what drives customer value instead of deferring the topic to marketing or sales, Gartner said.
In fact, those CFOs currently spend nearly 5% of their time with customers and intend to increase that to 10%, the firm noted.
6. Knowing when to cut losses
An important dimension to taking bigger, riskier bets is knowing when to exit from these investments, according to Gartner.
Efficient growth CFOs plan out timelines with associated exit triggers mapped to each stage of an initiative, long before they make such investments, the firm added.
7. Protecting costs that support competitive advantages
CFOs need to avoid spending cuts that threaten remote working, Ellison pointed out.
“CFOs should be careful they aren’t cutting the very things their business needs to recover from this downturn; an indiscriminate approach to cost optimization can do that,” she advised.
8. Involving the entire business in finding savings
Centralised corporate cost optimisation campaigns have limits, Gartner said.
“Finance can’t always reach front-line, operational processes where efficiency opportunities may be hiding” Ellison observed. “Efficient growth CFOs get creative about engaging the business in finding these savings. For example, using a system of future-winbacks to reward departments for savings found, helps to incentivise more participation in cost optimisation.”
9. Using a mix of budget models
Top finance teams look at different budget models to ensure they have aligned resources properly, Gartner pointed out, adding that zero- and driver- based budget models seek to identify the activities that truly create business value.
“CFOs should seek to emulate theses 9 traits of winning CFOs,” said Ellison. “These proven practices have distinguished the winners from the losers after the last recession and will prepare organizations for many challenges they face today.