Gartner experts recommend CFOs follow four cost management tactics:
CFOs should consider more than simply reducing headcount or making across the board cuts. Gartner research shows that leading companies consolidate their products and services into 24% fewer lines of business, building on the foundation of a narrower industry footprint.
“Where there is excess scope in their organization’s product or service portfolios, the hidden costs of complexity drag down profitability,” said Mr. Gannon. “The best CFOs will use COVID-19 as the catalyst to derive significant operating leverage from their most profitable lines of business without destroying value.”
Involve the business
Hard choices and cost-cutting initiatives cannot be entirely led by the finance team. Business and functional leaders have greater understanding of their own departments and are therefore better positioned to identify the most effective cost-saving opportunities
“To facilitate this, CFOs and their teams should assign a business leader to every significant cash-based cost item on the P&L,” said Mr. Gannon. “The business leader should then assemble operational, financial and process design expertise to develop and enact real cash savings strategies in their area.”
Establish new leading indicators
To anticipate the extent of the slowdown caused by COVID-19 and its impact on their organization, CFOs should continuously monitor economic indicators to identify changes in the business cycle.
“Link trends in external market and customer data to internal business performance and KPIs,” said Mr. Gannon. “The organizations that will come out of this crisis in leadership positions are those that quickly move resources to emerging areas of opportunity while competitors are still ducking for cover.”
Create a recurring headwind and tailwind cost report
Set up a recurring report for business leaders to capture performance headwinds and tailwinds by naming and quantifying the uncertainties in the external environment arising due to COVID-19. This will highlight the full financial implications of the pandemic and ensure a collective focus on the right indicators.
“CFOs should charge their forecast owners with producing this type of report,” said Mr. Gannon. “This will help ensure that they understand what external factors might impede or aid business performance and prepare accordingly.”
Gartner clients can read more in CFO Actions in Response to COVID-19: Week of 30 March 2020.
Non clients can read more here and find a selection of coronavirus-related resources here.
*About Gartner CFO Cohorts
In response to urgent CFO demand, Gartner Finance is holding weekly CFO cohorts as a forum for CFOs to discuss emerging COVID-19-related areas of concern and what actions they are taking or not taking. The findings in this release are from a poll of CFOs and their direct reports leading up to the second cohort, hosted Monday, March 30.
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