Summer 2020 Survey: Why Finance Teams Are Change Agents

In short:

• Our quarterly survey of business leaders finds that spending priorities have shifted from “cut everything” to “invest carefully.”
• Normally conservative finance leaders are now pushing to change business as usual, including advocating for a larger product set and technology investments.
• One problem: Priorities for finance team retention and training are not shared by other executives.

Finance executives are feeling pretty good about their teams and their organizations’ prospects. There are no illusions about the times we’re in, but there is a can-do attitude.

That’s a topline finding from our Brainyard Summer 2020 Finance Priorities Survey, which sought to learn both how finance teams are faring today and whether their nonfinance counterparts are in agreement on prospects and priorities for the rest of the year.

Perhaps the biggest surprise is that normally conservative finance executives are now much more likely to say that adding products or services is a necessary reaction to COVID-19. For managers outside the finance department, it’s a split decision, with 28% wanting to increase the number of products and 25% favoring a decrease. Among the finance team, 43% say it’s time to increase the number of products on offer versus just 9% favoring a decrease.

Whether it’s the CFO’s constant exposure to cash flow realities and accounts receivable challenges or a forward-looking, agile reassessment of the business, we can’t say. But something has moved the finance team to be a catalyst for change.

Data-Driven and Action-Oriented

Our previous quarterly surveys were in the field in December and March. Taken together, the three polls illustrate pre-COVID-19 aspirations and the functional response since. It’s no surprise that in December, when prospects were bright, customer satisfaction and revenue growth were top-of-mind for the vast majority of executives, with concerns centered around finding and retaining staff in a very tight labor market.

In March, there wasn’t much talk of talent retention, as 47% said they’d cut payroll versus 21% hiring. Now, 32% say they’ll decrease payroll, while 23% see an increase.

Across the three surveys, we see priorities edging back to where they were in December, with one notable exception: That more proactive stance taken by finance.

In December, finance executives were more reluctant to spend than their nonfinance counterparts, and in March they were even more aggressive budget cutters.

At that time, finance executives were eager to slash spending across the board, while other executives wanted to cut more surgically, particularly around technology, product support and other areas deemed key to the ongoing health of the business.

To say there’s been a lot of learning since March would be an understatement.

Finance leaders are proving malleable in their thinking as it becomes clearer what works and what doesn’t. For example, they’re now champions for the IT team: Just 14% of finance executives want to reduce technology spending, while 28% of nonfinance execs want cuts.

For finance pros, there are two clear drivers. The first is a desire for an improved toolset that allows for better remote work and better clarity into the details of the business, particularly for their own teams. The second is ecommerce as the dominant sales channel. McKinsey & Company research shows a stunning decade’s worth of growth in ecommerce market penetration in just one quarter.

Ignoring such a sea change in buying behavior is clearly a bad idea, and catching this wave has implications for the entire organization. For example, think about how we shop when we anticipate buying online. The process virtually always starts with a search engine and may never involve a salesperson. That’s certainly been true in the consumer world, and now it’s becoming the norm in B2B markets.

Increasingly, sales success means being easily found via search and in relevant online marketplaces.

Short-Staffed and Under-Trained

While the rapidly changing nature of business is a preoccupation for every leader now, it’s more acute for finance. We asked about expected actions in the finance department as a result of COVID-19. New training was high on the list for 57% of finance execs; however, it made the cut for just 35% of line-of-business executives.

That’s a 63% swing between the two audiences, indicating that CFOs need to be talking more with colleagues about their team’s needs.

Training was the most commonly cited action finance execs plan to take in light of their experiences during the pandemic. The second most common response, topping the list for both groups, is increasing investments in cloud-based software for finance.

One point where they don’t agree: staffing levels. Just 11% of finance leaders anticipate cutting staff, while 28% of other execs are sharpening the ax. It’s clear that CFOs and their peers need to get on the same page — increased staffing and more training won’t happen without agreement on the benefits.

The good news is that business leaders are squarely behind the finance team. Almost without exception, nonfinance commenters enthusiastically expressed confidence in their finance leadership.

“We have an extremely competent team who can roll with the changes, and a great leader in our CFO,” said a VP at a nonprofit. From the CEO at a consulting services company: “Excellent. Positive attitude to move with change. The team is moving into the ongoing pandemic, head-on.”

Negative comments largely came from companies in more distressed industries or that are having a tough time moving to new business models. A COO for a retailer summed it up: “Accounting and finance are overwhelmed due to the increased needs driven by growth in the ecommerce sector. Every area, HR, AP, cost accounting, purchasing are struggling to keep up.”

KPIs: What’s In a Name?

Finally, most respondents agree that the finance function is now both more important and more challenging. That’s hard to argue, given teams working remotely while managing cash flow, accounts receivable and in some cases, prioritizing accounts payable.

Our respondents also agree that the finance team needs to find savings: 70% of nonfinance executives listed it as a priority, as did 72% of finance executives. A close second for finance executives, at 70%, is producing better reporting on KPIs. But it was only the sixth most common response from their peers, with just 32% saying reporting is a top priority.

Back in December, KPI reporting was again the second most common choice from the finance team (59%), right after “use data more effectively” and just behind those two, “identify savings.” Nonfinance managers then were more bullish on financial KPIs, with 47% listing this data as top priority.

Why does this shift stand out?

CFOs were hungry for deeper insights even before COVID-19. The response likely would have been different had we asked about, for example, reporting cash flow, net and gross margins and accounts payable. It may be the term “KPI” more than it is the actual reporting, but now as in December, finance appears to be the primary customer for its own reporting.

The takeaway: Think of KPIs as the building blocks that support actions when certainty is hard to come by. Those finance is delivering, with recommendations on product mix, paths to market and more gaining traction with business leads.