Now that the halfway mark of the year has passed, crunchtime for goals and preparing for long-term economic uncertainty are colliding; with both calling for different plans of action for their respective success.
In a recent EY survey of 1,000 global finance leaders, including 690 CFOs, this balancing act between what’s good now and long term for the business has become a big part of the CFO's day-to-day. CFOs are being pressured to cut costs while preserving investments and initiatives focused on long-term value creation. EY data shows, however, that CFOs may be taking a step back from bold, strategic efforts aimed at future growth.
Different Strategies For The Same Result
Seventy-eight percent of respondents agreed that effectively balancing trade-offs between short-term and long-term priorities is an essential challenge for finance leaders. A similar percent (76%) also said: "The current challenging market environment is increasing pressure on finance leaders to drive cost efficiencies and hit short-term earnings targets."
In response, nearly all (90%) surveyed finance leaders said they plan to reduce or pause spending even though some areas are long-term priorities. According to the EY data, 50% of respondents said they meet their short-term earnings targets by cutting funding in areas the organization considers a long-term priority.
For CFOs worried about their organizations' future should the macroeconomy or another disruptor wreak havoc on their business, cutting in the long term may be the only option to maintain the status quo. However, over two-thirds (67%) of all respondents cited “tension” within leadership over the approach to balancing short-term success with cuts to long-term priorities.
Limiting drastic business changes, particularly in finance, is another strategy leaders are taking to properly maintain a balance of timely growth. Only 14% of all respondents told EY they plan to pursue a bold transformation agenda over the next three years.
Among the 14% of leaders pursuing bold strategies, more than half (55%) believe that culture change is a pivotal part of their efforts.
Impact of Traditionalism
Hesitancy to change, among leaders and employees, is also impeding a proper long and short-term balance by CFOs. Among all respondents, nearly three-quarters (72%) said “traditional back-office behaviors and mindsets” are slowing the ability of companies to modernize their efforts and subsequently plan. The primary hesitancy among this group concerned changes to company culture.
They EY data showed that the more likely a finance leader is to pursue drastic change now, the more likely they are to include company culture as part of that t change. Among the 14% of leaders pursuing bold strategies, more than half (55%) believe that culture change is a pivotal part of their efforts.
Defining Goals and Identifying Strengths
CFOs building their companies for both the long and short term are also doing the same for their careers, whether intentionally or not. Although EY researchers know that CFOs are now in positions where their traditional finance skills may be of little use, these moments may help define where a particular leader will end up. Nearly half (45%) of CFOs surveyed said they aspire to be CEOs, so any experience outside of traditional finance may be beneficial.
Upskilling and learning are the biggest challenges for finance leaders, EY says. According to researchers, the number one challenge for a CFO is “finding time to build knowledge and expertise through exposure to external expertise and access to thought leadership.”
Despite a portrayed lack of resources or means to get better themselves, many finance leaders who have big plans to overhaul their companies are still confident in their ability to identify quality talent.
In their efforts to build sustainable, high-quality teams, 58% of finance leaders implementing a bold strategy are confident in identifying a quality employee early in that employee's career.
That rate drops significantly for those leaning toward a more conservative approach, with just 43% of those leaders confident in their abilities to do the same.