The number of companies furloughing staff and cutting salaries and workforce will have more than doubled by June since the end of March, a Gartner survey of 161 finance executives finds. Eleven percent of respondents reduced staff in March, and 25% plan to reduce staff in May and June.
"CFOs are unsure what reopening will look like and have little visibility into when revenue will start to normalize," said Alexander Bant, Gartner finance practice research vice president. "This is driving CFOs to look for the next round of structural cost cuts to preserve cash for the coming months."
Companies are analyzing which of their business lines and products sets would be best to rescale, reinvest, return, reduce, and retire. As they do this, Bant said, they determine which employees they need to succeed over the short- and long-term.
"CFOs are in wait and see mode to determine if and when revenue will return during the reopening phase, and, as part of that, they're looking at additional cost reduction efforts related to employees," Bant told CFO Dive in an email. "However, CFOs are certain technology investments must continue through the volatility. Making the right digital investments now will be important for getting work done in a remote environment, and running better digitized business."
"CFOs want to optimize costs, but still be able to come out fighting once restrictions are loosened," Bant said. "Companies are deliberately rapidly reducing headcount in areas they don't believe will return to normalized revenues anytime soon."
Instead, Bant said, CFOs are moving to protect roles in areas of the organization that will be necessary to meet a return of demand in the coming two quarters.
In the wake of broad-based cuts, CFOs are funneling money into technologies they believe will drive cost optimization. Survey results showed 24% of finance executives anticipate more spending on robotic process automation (RPA), 20% on cloud-based ERP technologies, and 19% on advanced analytics in the coming year.
"COVID-19 shifted the way work is done by most organizations overnight," Bant said. "Companies are now operating in remote environments, with less staff to run key processes, and under immense cost pressure. This has resulted in companies moving more quickly to the cloud, applying more robotics to their processes, and exposing the need for advanced analytic technologies to plan effectively in this environment."
Earlier Gartner research has shown well-implemented RPA, cloud ERP and data analytics have driven extensive cost benefits, explaining why CFOs may prioritize these systems.
Of the areas that had been cut back the most, three whose funding CFOs are expected to reintroduce once revenues return are open hiring (49%), travel and expenses (46%), and capital expenditures (41%).
"Conversely, we see several areas CFOs tell us they will not bring back right away," Bant said. "Notably, real estate spend, sales reward trips, social media marketing and service provider contracts." These, he said, "do not look like they will be making a rapid return to previous expenditure levels."