Conflicting signals on the economy and related uncertainty should be
looked upon by CFOs as an opportunity to accelerate growth and
innovation strategies, according to Gartner, Inc.
During the opening keynote at the Gartner
CFO & Finance Executive Conference today, Gartner experts
highlighted the key differences between firms that use uncertainty to
accelerate business performance and those that stall, and the specific
behaviors of CFOs that allow their firms to accelerate during times of
economic and industry uncertainty.
“Far from being something to dread, changing economic cycles and
disruption are where winning CFOs set their firms apart from the
competition,” said Mark Wiedemer, group vice president in the finance
practice at Gartner. “They accomplish this by operating with a different
mentality regarding the opportunities external change presents and
focusing their organizations on growth that leads to competitive cost
Gartner’s research is based on a long-term study of the S&P Global 1200,
which identified key differentiators of the 5% of companies that were
able to achieve top-quartile performance in long-term revenue growth,
cost-management, and maintain a balance between growth and expanding
margins. Gartner found that the performance of these companies actually
accelerated through the last recession, sustaining their competitive
advantages from their lower-performing industry peers over the long
term. Gartner refers to this rare combination of achievements as
A different view of the economic cycle
CFOs of the Efficient Growth companies displayed a key difference in
mindset when approaching economic turns compared with peers. While most
companies are managed for either “boom” or “bust” periods, winning CFOs
approach economic cycles in four distinct phases: stable growth, peak
growth, recessionary transition and trough.
“There were two key insights from studying how the highest-performing
CFOs approached the business cycle,” Mr. Wiedemer explained to the more
than 400 CFOs and finance leaders in the audience. “The first is that
they refused to see business cycles as binary and displayed a more
nuanced understanding of the different phases of their organization’s
growth. Perhaps more importantly, they understood that different parts
of their business may be experiencing different phases of the cycle,
with some business units experiencing markedly different levels of
This elongated view of the business cycle resulted in a different type
of planning, focused less on seeing around the corner of macroeconomic
cycles and more tightly focused on the realities of their business.
These CFOs were able to plan out two economic phases ahead and manage
Scale vs. scope
“Another key lesson from Efficient Growth CFOs was their approach to
cost management and their realization that not all growth is created
equal,” said Mr. Wiedemer. “In practical terms this played out in their
relative approach to the question of ‘scale vs. scope’ within their cost
structures. The best CFOs in this area recognized the good costs that
led to growth and were unafraid to scale them, focusing on generating
greater gains from fewer industries, business lines and geographies.”
Gartner found that Efficient Growth companies operated in 20% fewer
industries than peers, choosing to focus on a few core industries where
they maintained a high degree of expertise and maintained technological
and competitive advantages. These companies also operated 24% fewer
lines of business than rivals. A tighter focus on core business lines
led to a 9% variable cost advantage over peers as growth and reduced
complexity drove down costs. Finally, these companies also generated 20%
more revenue from their largest geographic segment. Focusing on the
right geographies led Efficient Growth companies to improving the
customer experience for their most valuable segments, thereby protecting
those relationships from competitive threats.
By focusing on how scale contributed to growth, Efficient Growth CFOs
were able to distinguish between good growth and good costs that
How finance leaders can accelerate in the turns
Mr. Wiedemer shared three key areas of focus for CFOs who want to better
prepare for accelerating company performance during times of
uncertainty. Each area of focus is being explored in more detail with
dedicated learning tracks during the Gartner CFO and Finance Executive
Focus on Personal Effectiveness — The most effective CFOs
prioritize their time differently, have a customer-centric focus,
strong relationship with their sales leaders and go beyond the numbers
to know their business.
Create Team Readiness — In order to seize opportunities
presented by an economic turn, CFOs must have teams ready for the
challenge. This means achieving clarity on what skills can be taught
vs. bought and adjusting hiring and training processes accordingly.
Aligning finance teams to better meet the needs of the business
through a decision-support
model is also increasingly critical.
Become Digitally Relevant — Finance leaders must own and create
the digital strategies that will enable better performance from the
data that accounting, financial planning and analysis and their risk
Gartner for Finance clients can access relevant research and insights in Winning
in the Turns.
About the Gartner CFO & Finance Executive Conference 2019
CFOs and senior finance executives wanting to learn more about the
trends that will shape finance, company performance and personal
leadership are invited to attend the Gartner
CFO & Finance Executive Conference 2019, to be held from June
10-11 in Washington, D.C., U.S. Follow news from, and updates on, the
conference on Twitter at #GartnerFinance.
About Gartner for Finance Leaders
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support clients’ individual success and deliver on key initiatives that
cut across finance functions to drive business impact. Learn more at https://www.gartner.com/en/finance/finance-leaders.
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