Workforce and technology fuel the drive
CFOs are pushing hard for revenue growth in an environment where discretionary spending is tight. After several quarters of sluggish economic activity and unceasing warnings of impending recession, finance executives responding to Grant Thornton LLP’s CFO survey for the second quarter of 2023 remained more optimistic than pessimistic about the U.S. economy by more than a 2-to-1 margin.
The survey results show that finance leaders are heavily focused on two areas that could lead to revenue gains:
- They are determined to build and preserve the workforce that can help drive them forward when the next growth curve occurs.
- They plan investments in technology that have the potential to deliver efficiency and revenue gains as well.
“A lot of companies are laser focused on topline sales growth right now,” said Sean Denham, Grant Thornton’s Regional Managing Partner — Atlantic Coast. “Companies are investing in these areas because after the Great Resignation, the extreme supply chain difficulties, and an intensity around cost optimization, there is a focus on driving the business again.”
The timing of responses to this survey is an important piece of context, as the vast majority of responses were collected in late May before federal policymakers reached an agreement to raise the debt ceiling and eliminated fears of a government shutdown. The survey also closed before the ensuing Wall Street surge that led to the S&P 500 reaching bull market territory.
Nonetheless, CFOs who were optimistic about the U.S. economy (48%) heavily outnumbered pessimists (21%). The optimism number dropped five percentage points from the previous quarter, but the pessimism number also fell by a percentage point, leading to a gain in the neutral category.
At the same time, cost optimization remains the top area of focus for the next six months for CFOs, cited by 44% of respondents as one of their top two priorities. Vendor or supplier costs is the top area for projected cost savings as supply chain pressures ease just a bit, and 41% of respondents said they expect travel expenses to decrease over the next year. That’s a jump of 17 percentage points over the previous quarter, and the highest decrease in travel spending reported since the first quarter of 2021.
Denham has observed that companies are trying to reduce discretionary spending by delaying long-term projects, revising managed service agreements, and even reducing compliance costs.
But when it comes to workforce and technology spending, CFOs are largely staying on course, and there are revenue and profit motives behind that spending.
High expectations for revenue
Employees flex their muscles
The motivation behind this prioritization of workforce and technology can easily be seen in financial executives’ plans for revenue and profits. More than two-thirds (68%) of respondents said they expect revenue growth at their organizations over the next 12 months.
Meanwhile, 67% expect net profit growth, a dip of just one percentage point from the previous quarter. It would be difficult to increase revenue while also making workforce cuts, and the survey data reflects this. Just 27% of CFOs forecasted potential layoffs, down from 40% the previous quarter.
Margaret Belden, a Director, People and Organization for Grant Thornton, said the firm has been cautioning clients about the repercussions of reducing headcount for short-term savings as it will be difficult to return to needed staffing levels when the economy turns positive.
“It’s a different environment than it was in the past,” Belden said. “It’s hard enough to acquire and retain talent right now. If you have to reduce expenses, look at other areas such as projects that can wait, streamlining operations and leveraging technology.”
Overlaying the results of the CFO survey with Grant Thornton’s recent State of Work in America survey shows the danger of unwanted turnover for finance executives who hope to use a strong workforce to fuel an upcoming growth surge. Almost six in 10 CFOs (58%) said attracting and retaining talent is a priority for the next 12 months.
Meanwhile, 24% of employees in the State of Work in America survey said they are looking for a new job with a new organization, and an additional 51% said they would consider leaving their jobs if a new opportunity comes along. Many employers would be disappointed to see these workers leave, and it’s reasonable to assume that some of the 51% who aren’t actively looking elsewhere could be persuaded to stay.
Effective communication could help keep those employees on board and engaged.
“CFOs need to be very clear and articulate their employee value proposition,” said Kim Jacoby, a Director, People and Organization for Grant Thornton. “What is their organization offering in terms of benefits, rewards and overall experience that is unique and different from what someone can get elsewhere?”
Belden and Jacoby suggest the following strategies for CFOs to consider if they want to keep their people.
- Where possible, offer people flexibility in terms of how, when and where they are going to work.
- Provide transparency into a career development plan, as employees often leave to pursue advancement opportunities.
- Listen to employees, understand their needs and concerns, and use this information to differentiate your value proposition.
- Quite simply, tell them that you care about them and that they are valued.
Attracting and retaining key talent is the top workforce priority for CFOs, according to this bar graph of data from Grant Thornton’s CFO survey for the second quarter of 2023. Maintaining or improving organizational culture is the No. 2 priority.
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