44% of chief financial officers cited cost optimization as a top area of focus
A new survey from Grant Thornton LLP, one of America’s largest audit, tax and advisory firms, revealed that chief financial officers (CFOs) are heavily focused on two areas that could lead to revenue gains: building and preserving a workforce that can help drive them toward growth; and investing in technology that has the potential to deliver efficiency and revenue gains.
“It’s hard enough to find talent right now. If you have to reduce expenses, look at other non-workforce areas such as projects that can wait — and look at streamlining operations and leveraging technology.”
Because finance leaders are pushing hard for revenue growth in an environment where discretionary spending is tight, they are increasingly focused on cost optimization. In fact, the firm’s 2023 Q2 CFO survey found that cost optimization was the top area of focus for the next six months, according to 44% of respondents.
Further, the survey identified vendor or supplier costs as 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 from the previous quarter, and the highest decrease in travel spending reported since the first quarter of 2021.
“Companies are laser-focused on topline sales growth while at the same time reducing costs unless those costs are sales or marketing related,” said Sean Denham, regional managing partner of the Atlantic Coast at Grant Thornton.
Aligning revenue growth and talent retention
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. However, increasing revenue while also making workforce cuts would be challenging, and the survey data reflects that. Just 27% of CFOs forecasted potential layoffs, down from 40% the previous quarter.
“It’s a different environment than it was in the past,” said Margaret Belden, People & Organization director at Grant Thornton. “It’s hard enough to find talent right now. If you have to reduce expenses, look at other non-workforce areas such as projects that can wait — and look at streamlining operations and leveraging technology.”
Belden also points to talent as a focus area for CFOs, and the survey shows that 58% of CFOs see attracting and retaining talent as a priority for the next 12 months.
Kim Jacoby, People & Organization director at Grant Thornton, added that CFOs need to be very clear and articulate their employee value proposition.
“They need to ask what their organization is offering in terms of benefits, rewards and overall experience, and how it’s unique and different from what someone can get elsewhere,” said Jacoby.
Investing in technology is key
For the first time since the fourth quarter of 2021, more than half of CFOs (53%) expect their spending on IT and digital transformation to increase in the next 12 months. That makes IT and digital transformation the second-most popular area for spending increases in technology, followed by cybersecurity.
Chris Lilley, Technology Transformation principal at Grant Thornton, said spending in this area is strong because integrated technology has become a cornerstone of every aspect of an organization, including finance, supply chain, operations, human capital, payroll and workforce management.
“Take the healthcare industry, for example,” said Lilley. “Every device in a patient’s room is connected to their technology systems. You have to prioritize spending on technology so you can stay competitive. And the flip side is that you’re getting a tremendous return.”
Chris Schenkenberg, Corporate Tax national managing partner at Grant Thornton, said technology is also the answer for what he sees as the “new normal” in workforce development. The shift toward employee empowerment that started with the entrance of millennials into the workforce intensified during the Great Resignation, and it hasn’t abated.
“Now you’ve got to leverage technology to keep your productivity high,” added Schenkenberg. “Workforce productivity is something that companies are going to have to wrestle with now and in the future.”
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Keeping an eye on AI
Artificial intelligence (AI) has caught the eyes of CFOs as a potential game-changer in several areas within their organizations — specifically for tasks such as content creation and summarization, responding to queries and writing software code. Nearly one-third (30%) of CFOs said their organizations are already using this technology, and an additional 55% said they are exploring potential uses for it.
In addition to its potential to help an organization grow and innovate, AI poses risks: There’s a danger that what AI “learns” will result in outputs that are undesirable or even harmful.
While some of the CFO survey respondents who are using AI are addressing those risks, some are not. Just 52% of those using generative AI have clearly defined acceptable use policies, and 44% say their board of directors have taken an active role in understanding governance over AI.
“Every board is asking about it,” Lilley concluded. “They want to know what’s going on with it and how it’s being applied. We have to step back and say: ‘We’re going to use it, but let’s make sure we have a policy in place with informed, educated individuals applying that policy and using that technology.’”
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