Gartner Research

Executive Pulse: Cost Management Moves From Crisis Response to Supporting Strategic Recovery

Published: 29 October 2020

Summary

Here’s a roll-up of pandemic-related executive sentiment and insights from thousands of functional leaders across the C-suite.

Fast word on tactics and concerns from thousands participating in our conference calls and polls.

More detailed role-specific reports may be available on the website, depending on your subscription.

Executives involved in cost management will continue to shore up cash during this prolonged crisis — but are also now setting the stage for strategic moves aimed at the hoped-for recovery.

The most cited business priorities for CEOs over the next two years are growth (55%) and technology (45%), according to a third quarter survey. Yet, for the rest of this year, most CEOs want CFOs to focus on cost management and reduction. This near-term cost discipline can help free up funds to support digital acceleration, the No. 1 priority for board directors (as reported in 2Q20).

Cash flow and preservation is also a prime concern for the remainder of this year:

Figure 1. CFO Priorities: The CEO View

Among this group of 110 leaders across industries, 43% expect revenue to return to 2019 levels sometime next year. One-third of them don’t expect a return to relative normalcy until 2022.

Figure 2. Revenue Recovery Hope

Sixty-five percent of executives involved in enterprisewide cost management surveyed in 3Q20 say their organization has set up a cost management taskforce in response to the pandemic. Three quarters of these teams include the CFO on the taskforce, who is also most likely to be chosen to lead it. Other regular participants are the CEO (56%), the COO (50%), the CHRO (44%) and the chief sales officer (35%).

Figure 3. Cost Management Taskforce as a Response to the Pandemic

Marketing was the function asked to reduce cost or cut budget most frequently this year (90%). This was followed by sales and HR (78%), and then customer service and operational roles (69%). While a significant proportion of leaders from all functions cited facing cuts, those least likely to be impacted included IT (60%), finance (62%) and supply chain (64%).

Figure 4. Functions Reduced Cost/Cut Budget in 2020 in Response to the Pandemic

These same executives involved in cost management reported that savings were most commonly found by cuts to travel and expenses (81%), external consultants or labor support (65%), freezing hiring (64%) and facilities or equipment (60%).

They were less likely to either replace permanent employees with contingent workers(15%) or replace full-time with part time employees (14%).

Over the next six months, they are introducing a more strategic approach to cost management that focuses on efficiency and changing customer needs, including:

  • Reducing or reengineering internal processes (28%)

  • Reducing or reengineering customer service offerings (24%)

  • Reducing or reengineering product offerings (23%)

Figure 5. Cost Management Measures Over the Next 6 Months

Over 1,800 CIOs and senior IT Leaders across industries were asked in July and August about how their company has fared in the wake of COVID-19. Forty-five percent said that it had reduced sales volume for the entire enterprise, 26% reported boosted sales, and 29% said they remained the same. Responses varied by industry:

Figure 6. Impact of COVID-19 on Sales Volume by Industry

Leaders in the automotive and transportation industries most often reported that the pandemic reduced their ability to fund new initiatives. Those most likely to increase funding were in consumer goods manufacturing, retail, banking and high tech:

Figure 7. Impact of COVID-10 on Ability to Fund New Initiatives, by Industry

Leaders across industries are more confident in their ability to invest in new business initiatives next year, even those that report being hit hard by the crisis.

Figure 8. Expectations for 2021 on Ability to Fund New Initiatives

  • IT

  • CIO Research Group

  • PRM

  • Finance

Compiled by Daniel Ryntjes

Contact with any questions or comments.

Recommended by the Authors

While risk management and audit leaders see the COVID-19 surge and challenges related to remote work as top emerging threats, political divisions in the U.S. are making it difficult for executives there to focus on their jobs. They are discussing politics at work and getting into arguments more often than last year — at higher rates than employees at lower echelons.

Executives continue to invest in data and analytics despite their ongoing discomfort with the results and the practical difficulties of embedding the findings into their decision making.

After navigating through the unexpected storm of COVID-19 change using standard remote support, IT leaders are pressing ahead with more advanced technology — such as the Internet of Things, digital twins and artificial intelligence.

Corporate leaders throughout the organization are starting to gather the lessons of the 2020 crisis to be better positioned to withstand future shocks and pursue new growth. Some have already found ways to roll these take-aways into their operations, risk management and business model changes.

While strategists tell us they are weighing the potential for upheaval along different fronts to affect their company’s future, most executives say their organization lacks a formal process to track and respond to disruptions. That will change. And in finance, sales, R&D and HR, functional leaders are already adjusting the way they plan.

The impacts of COVID-19 need a cross-functional response. Access all of our research to help your partners in assurance, supply chain, HR, IT and others act quickly and confidently. You’ll find tips, toolkits and other planning advice.

Cost optimization can be risky. The wrong moves can result in cuts that impede an organization’s ability to maintain liquidity, retain key talent, keep innovating and prepare for recovery. We’ve provided the research and tools to help leaders make data-driven decisions supported by proven approaches.

Download this new journal for C-suite leaders and their teams; articles in this edition explain how to rebuild better in the face of the global crisis.

Analyst(s): Corporate Strategy Research Team

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