Chronic occurrence of poor operational decisions by midlevel managers is eroding margins and costing firms upward of 3 percent of profits, according to Gartner, Inc. As digital and other business transformations (such as merger and acquisition [M&A]) drive a greater volume and variety of operational decisions, it is vital to the organization’s bottom line that CFOs ensure those decisions are financially sound.
CFOs seeking to better support these managers should redefine the role of their finance business partners — those assigned to support decisions from business unit managers — to more specialized positions focused on individual decision types.
“Managers tell us that they have faced a significantly higher volume of financial decisions over the past three years,” said Randeep Rathindran, research vice president at Gartner. “This increased volume has exposed the lack of rigor employed by most midlevel managers in reaching material decisions that impact the bottom line.”
Gartner surveyed 469 business decision makers and 128 senior finance executives globally across various industries as part of its 2018 study. Sixty-one percent of respondents noted an increase in operational decision volume, with 57 percent indicating that these types of decisions materially impact business profitability. In summary, the volume of decisions with material business impact has grown, and those decisions are being made with a high rate of exceptions to operational decision rules put in place by finance (see Figure 1).