$1-10+ Billion Company Executive Survey Pinpoints Challenges to Profit Growth, Threats to Margins; Women and Under 40 Executives Differ from the Pack on Challenges to SuccessBy Vendavo
December 15, 2015
CFO.com Research and Vendavo Surveys Finance Management and CEOs in Organizations with over $1 Billion in Revenue
MOUNTAIN VIEW, Calif. — Dec. 15, 2015 — CFO Research and Vendavo, a leading provider of margin and profit optimization solutions, today announced the results of a new Financial Executive Survey. The survey polled enterprise finance decision makers from the managerial level up to CFOs and CEOs in organizations with greater than $1 billion in revenue. A majority of those surveyed agreed margin growth is more difficult now than in the past and will continue to increase in difficulty over the next two years. Respondents identified the top challenges for improving profitability as their collaboration with sales, a lack of communication between departments, and external factors such as competitor’s pricing. Internal and external threats are viewed differently in some areas based on gender and age.
The survey asked participants about the effectiveness and understanding of different departments in driving profitability. In particular, respondents emphasized improvement on both fronts in the sales force. While 76% of respondents believe profitability is important to sales, almost six in ten respondents believe the sales team has an average or below average understanding of profitability. Further, a majority of those surveyed answered that sales relies more heavily on their own instincts and skills than information systems.
Finance executives did agree they could do more with roughly three quarters of respondents (74%) believing that better customer data would go a long way towards improving profitability and an overwhelming majority (85%) saying that a stronger relationship between finance and sales is crucial to profitability improvements.
While overall executives are bullish on growth—with a majority reporting higher margins than a year ago and an aggressive growth plan moving forward—they identify internal forces that place margins in jeopardy. In particular, lack of communication between teams/departments, inefficient and outdated internal technology and processes, lack of visibility into cost data and underperforming sales teams were selected as the top internal challenges to margin growth. They identified the top external threats to margin growth as more attractive competitive pricing, fluctuating market conditions and rising costs.
With regards to cost, respondents stated that it is difficult to identify where to cut costs in their organizations and admitted to the temporary success of this method. “Our culture seems to insist on starving our organization in the near term at the expense of the long term. We are crash dieting to fit into a wedding dress, rather than thinking about what sort of life we want to live in the future,” said one respondent.
“This survey supports what we have been seeing with our Fortune 500 customers over the last few years,” said Joe Boissy, Chief Marketing Officer of Vendavo. “Even in healthy economic times, there’s a desire to improve sustainable margin and profit growth. In the past, companies always viewed cost cutting as the best path to that objective, but this survey shows that there’s a growing realization that a mix of innovative financial growth tactics is what drives sales and healthy corporate performance.”
Women and Management under Forty Years Old See Things Differently
Women that participated in the survey tended to be less bullish on most fronts than their male counterparts, and look to less traditional means of profit improvement as opposed to their male counterparts who favored traditional views and processes as the best path.
While women are just as concerned with improving margin levels and projected growth, they are more inclined to be concerned about internal challenges rather than external challenges, including the lack of visibility into cost data and inefficient or outdated processes. They also leaned toward rating their companies lower in terms of the efficacy of the use of relevant data to discover profit opportunities.
Age also played a role in perceptions about profitability, with under forty executives signaling more optimism about profit trends and the ability to improve margins than their over forty counterparts. Both the under forty and over forty groups believe that the rising costs of doing business is the biggest external threat, but the older group is less concerned about rising costs than respondents under forty. When it comes to internal threats to margins and profitability, the younger group believes that the lack of visibility into potential customer defections and internal communications are the biggest challenges. The over forty group is much more concerned about the lack of internal visibility when it comes to cost data.
Company Size and Revenue Also Affect the Results
Participants in the survey were split between companies with under $10 billion in revenue and companies with over $10 billion in revenue. The two groups differed in which internal challenge to profitability they selected most often. Larger companies with over $10 billion in revenue most often found a lack of communication between teams and departments to be a leading obstacle to profitability. Meanwhile, smaller companies most frequently felt that inefficient or outdated internal technology and processes presented the biggest problem.
Just over half (52%) of respondents from the under $10 billion group said that the sales department had an average or below average understanding of company profitability drivers while 70% of the over $10 billion group felt this way.
For more information about the survey results, visit www.vendavo.com/cfo.