Gartner Research

Executive Pulse: Bigger Budgets Are on the Horizon

Summary

In stark contrast to last year’s cost-cutting mode during the thick of the pandemic, functional leaders in six areas expect to increase investment in 2022 to support their organizations’ engines of growth — talent, finance, strategy, innovation and digital capabilities.

Published: 21 October 2021

ID: G00760614

Analyst(s): Finance Research Team

>>: Succinct and timely executive sentiment on cross-cutting critical issues using our survey data, quick webinar polling and conversations with enterprise leaders.

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This budgeting season is different from the last. In 2020, 71% of executives reported pandemic-fueled spending cuts. Now, leaders tell us they expect to increase investment and support their organizations’ engines of growth: talent, finance, strategy and innovation, and digital capabilities.

For executives who are still in the throes of their budgeting process, these preliminary findings from six of our functional surveys can serve as a sanity check.

More than three-quarters of HR leaders report that their organization’s total workforce size will increase next year(see Figure 1).

  • A plurality (32%) expect a modest increase (less than 5%).

  • A quarter say the total number of staff at their company will likely jump by a double-digit percentage.

Figure 1. Expected Changes to Overall Company Headcount

In 2022, 23% of HR leaders expect to increase enterprise bonus payout budgets and 29% plan to increase their merit budgets for the general workforce. Only 6% say they will decrease budgets in both categories.

Companies plan to hire more contingent workers, too:

  • Forty-four percent of HR leaders say temporary or contract hiring will increase by up to 10%.

  • Sixteen percent expect an increase of more than 10%.

As for their own function, 64% of HR leaders expect a bigger budget in 2022 (see Figure 2).

  • This is nearly double the percentage (34%) from last year’s projections for 2021 and it marks a return to the level of expectations during 2019.

  • Half of this year’s respondents say their HR budget will increase by 10% or less.

  • Fourteen percent believe their budget will go up by more than 10%.

Figure 2. Expected Changes to HR Budget for 2022

The budget projections for finance are even more optimistic. More than eight in 10 (83%) finance executives report that their functional budget will increase next year. Over a quarter (27%) expect it to grow by 10% or greater (see Figure 3). On average, finance budgets are expected to go up by 5.3%.

Figure 3. Expected Changes to Overall Finance Budget for 2022

Compared to other spend categories, more finance executives report an increase in talent budgets (see Figure 4).

  • Eighty-four percent say they will have more money to spend on in-house staff salaries, bonuses and benefits.

  • Sixty-five percent will have more for training and development.

  • More than half (52%) of them anticipate double-digit growth in travel and expense budgets.

Figure 4. Expected Changes to Finance Budgets by Category

Understanding what’s next for the business model and customers is critical to post-pandemic expansion. Functions such as strategy and R&D are getting more money to fund their big bets.

Among the heads of strategy we’ve polled:

  • Fifty-five percent expect a budget increase from 2021 to 2022, compared to just 13% a year prior.

  • One-third (34%) expect a budget increase of more than 10%.

  • Four in 10 say their budget will not change from last year (see Figure 5).

Figure 5. Expected Changes to Strategy Budget for 2022

More than half (56%) of R&D leaders also expect an increase in budget (see Figure 6).

  • An even higher percentage, 63%, expect to expand their team.

  • Only 5% of respondents will cut staff.

Figure 6. Expected Changes to R&D Budget for 2022

Overall, 61% percent of technology leaders expect a larger IT budget for their enterprise in 2022 (see Figure 7). That’s a turnaround story; in the crisis year of 2020, roughly the same percentage of IT executives (60%) reported cutting spending. Still, the average increase for next year 3.6% is lower than the average revenue increase of 4.9% that they expect.

Figure 7. Expected Changes to IT Budget for 2022

Most CIOs expect to increase investment in cyber/information security (66%) and business intelligence/data analytics (51%) (see Figure 8).

  • One-third of respondents (33%) report that their organization will not decrease spending in any technology category.

  • The technologies that these leaders cite most often as candidates for less investment are modernizing legacy applications (22%) and legacy infrastructure and data center technologies (42%).

Figure 8. Expected Changes to Technology Investments for 2022

Technology is a focus for customer service leaders, too. It is the only one of five spend categories where three quarters of them expect to get a budget increase (see Figure 9).

  • Over one-third (36%) plan to increase technology spending by as much as 9%.

  • One in 10 plan to add to investments in technology for their function by 25% or more.

Figure 9. Expected Changes to Customer Service Budget by Category

Compiled by Steve Shapiro and Dian Zhang

Contact with any questions or comments.

Contributions from the following Gartner teams:

  • Human Resources Research Team

  • Finance Research Team

  • CIO Research Team

  • Corporate Strategy Research Team

  • Research and Development Research Team

  • Customer Service and Support Research Team

  • PRM Research Team

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