In May and June the number of companies furloughing staff, as well as cutting salaries and workforce will have more than doubled since the end of March.
According to a Gartner survey of 161 finance executives on 3 May, 11% 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. This is driving CFOs to look for the next round of structural cost cuts to preserve cash for the coming months,” says Alexander Bant, practice vice-president: research for the Gartner Finance Practice.
“Companies are conducting robust analysis about which of their business lines and products sets they will rescale, reinvest, return, reduce, and retire. As they do this, they are determining which sets of staff they need to succeed in the short-and-long-term.
“CFOs want to optimize costs but still be able to come out fighting when restrictions are loosened,” says Bant. “Companies are being deliberate about rapidly reducing headcount in areas of the company they do not believe will return to normalized revenues anytime soon. They are protecting roles in parts of the organization that will be necessary to meet a return of demand across the coming two quarters.”
An interesting anomaly to this picture of broad-based cuts was around specific technologies which CFOs believed may drive cost optimisation.
The Gartner survey showed that 24% of finance executives anticipate more spending on robotic process automation (RPA), 20% anticipate more spending on cloud-based ERP technologies, and 19% anticipate more spending on advanced analytics.
“Covid-19 shifted the way work is done by most organisations overnight. 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,” says Bant. “Gartner research has shown well-implemented RPA, cloud ERP and data analytics have driven extensive cost benefits.”
Of the areas that had been cut back the most there were three clear favorites among CFOs to reintroduce once revenues return. Open hiring (49%) T&E (46%) and capex investments (41%) were the most common costs that CFOs indicated they intend to reintroduce.
“Conversely, we see several areas that CFOs tell us they will not bring back spend right away. Notably, real estate spend, sales reward trips, social media marketing and service provider contracts do not look like they will be making a rapid return to previous expenditure levels.” Bant says.