Gartner said recently the number of companies furloughing staff as well as cutting salaries and workforce in May and June will have more than doubled since the end of March.
According to results of a Gartner survey of 161 finance executives on May 3, 2020, 25% plan to reduce staff in May and June, compared with 11%of respondents having plans to do the same in March.
CFOs are unsure what reopening will look like and have little visibility into when revenue will start to normalise, said Alexander Bant, practice vice president, research, for the Gartner Finance Practice, adding that this is driving CFOs to look for the next round of structural cost cuts to preserve cash for the coming months.
Companies are conducting robust analysis about which of their business lines and products sets they will rescale, reinvest, return, reduce, and retire, he pointed out.
As they do this, they are determining which sets of staff they need to succeed in the short-and-long-term, he added
“CFOs want to optimize costs but still be able to come out fighting when restrictions are loosened,” Bant observed. “Companies are being deliberate about rapidly reducing headcount in areas of the company they do not believe will return to normalised revenues anytime soon. They are protecting roles in parts of the organization that will be necessary to meet a return of demand across the coming two quarters.”
Spend will increase in RPA, cloud, and advanced analytics
At the same time, CFOs might invest in technologies that they believe could drive cost optimisation, according to Gartner.
Survey results show that 24% of finance executives anticipate more spending on robotic process automation (RPA), 20% anticipate more spending on cloud-based ERP technologies, and 19% anticipate more spending on advanced analytics.
“COVID-19 shifted the way work is done by most organizations overnight. Companies are now operating in remote environments, with less staff to run key processes, and under immense cost pressure. This has resulted in companies moving more quickly to the cloud, applying more robotics to their processes, and exposing the need for advanced analytic technologies to plan effectively in this environment,” said Bant.
Of the areas that had been cut back the most there were three clear favorites among CFOs to reintroduce once revenues return, Gartner observed.
Open hiring (49%) T&E (46%) and capex investments (41%) were the most common costs that CFOs indicated they intend to reintroduce.
“Conversely, we see several areas that CFOs tell us they will not bring back spend right away. Notably, real estate spend, sales reward trips, social media marketing and service provider contracts do not look like they will be making a rapid return to previous expenditure levels,” Bant said.