Firms with CFOs who followed efficient growth principles have emerged from the previous recession well-ahead of other companies. As per Gartner, Inc., it has identified nine traits CFOs should implement for better performance during the coronavirus pandemic. Gartner 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 behaviors that have worked out well for CFOs after the last recession.”
The nine key traits from CFOs of efficient growth companies:
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 best performing companies fight the tendency to hedge their bets in the growth investment process, instead making riskier investments in identified growth opportunities,” Ms. Ellison said.
2. Fighting “scope creep”
It’s also important to maintain control over scale and understand the hidden cost of complexity. Gartner 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.
4. Removing obstacles to growth bets
It’s not enough to simply incentivize the right kind of risk-taking: the best-performing CFOs constantly reevaluate 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,” Ms. 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. In fact, they currently spend nearly 5% of their time with customers and intend to increase that to 10%.
6. Knowing when to cut losses
An important dimension to taking bigger, riskier bets is knowing when to exit from these investments. Efficient growth CFOs plan out timelines with associated exit triggers mapped to each stage of an initiative, long before they make such investments.
7. Protecting costs that support competitive advantages
“In particular right now, avoid spending cuts that threaten remote working,” says Ms. Ellison. “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.”
8. Involving the entire business in finding savings
Centralized corporate cost optimization campaigns have limits. “Finance can’t always reach front-line, operational processes where efficiency opportunities may be hiding” said Ms. Ellison. “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 incentivize more participation in cost optimization.”
9. Using a mix of budget models
Top finance teams look at different budget models to ensure they have aligned resources properly. 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 Ms. 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.