CFOs and CHROs Identify Top Factors in Building Sustainable Growth

Despite the ongoing pandemic, labor shortages, and supply chain delays, a majority of midmarket companies enjoyed a rebound in 2021, according to AchieveNEXT’s global survey of CFOs and CHROs.

In the survey, titled“Building the Road to Sustainable Growth”and sponsored by Workday, 74% of respondents said their company’s overall performance improved in 2021, with 48% of CFOs noting double-digit revenue increases. And the outlook remains optimistic for 2022: 80% predict this year will be even better, with 42% of CFOs projecting at least 10% growth over 2021.

Conducted from November 2021 through early January 2022 with more than 500 finance and human resources (HR) leaders from emerging and midmarket enterprises, the study found that executives are eager to improve upon the gains of the past year to create steady, sustainable growth. While 2020—and at least part of 2021—were dedicated to quickly pivoting and improvising solutions to stay afloat, 2022 will be a year of formalizing strategies and processes for the future.

To do that, companies will need to attract, train, and retain a reliable workforce—something that has proven to be challenging during the“Great Resignation”talent exit and a push for moreflexible work arrangements.

Indeed, 32% of CFOs and CHROs list “talent” as one of their top concerns for 2022, according to the survey.

Other issues keeping these executives up at night:

• Revenues (14.3%).
• Efficiency of operations (13.4%).
• Expenses (9.2%).
• Change or disruption of industry dynamics (8.9%).
• Inadequate and outdated systems (7.3%).
• Cyberthreats (5.6%).

To ensuresustainable growthinto 2022—and beyond—finance and HR professionals will need to invest in people, plans, and processes.

Staffing to Support Strategy

For midmarket CFOs and CHROs, the No. 1 obstacle in executing their growth plans for 2022 is findingthe right strategy. In fact, the survey found a 13-point gap between executives’ confidence in their strategic planning process (79%) and their confidence that the strategy will actually work (66%).

Shoring up this confidence gap will require CFOs to improve theirforecastingabilities, by using state-of-the-art analytics to pull data and insights to obtain the most reliable numbers. Thisfinancial planning and analysis(FP&A) approach may require additional training for finance teams, as it tops the “hard skills” gap for the second year running (right above “critical thinking”).

Another even larger cause for the strategic confidence gap is uncertainty over staffing. After all, to plan and execute a high-impact initiative, organizations not only need to know they have enough talent, but that they have talent with the right skills to pull it off.

Open headcounts make immediate and long-range planning tricky, which is why CFO and CHRO offices must align on talent cultivation. That’s especially true considering that nearly 4 out of 10 midmarket companies expect to increase their headcount by at least 10% this year.

The survey also shows that midmarket companies are using a multipronged approach to personnel: taking actions to address urgent hiring needs while also fostering a forward-looking talent agenda to create a more engaged workforce for the long run. The survey found that these longer-term agenda items include:

• Implementing training and development programs to give employees a sense of personal growth and a vision of a career path in the organization.

• Strengthening the top team, so managers and staff have better leaders. Research shows that ineffectual bosses are a primary driver of employee resignations.

• Improving culture to enhance teamwork and create the sense of belonging that is a leading source of retention.

• Advancingdiversity, equity, and inclusionnot just in recruiting but throughout the “employee life cycle,” which can expand talent pools, ensuring that all employees have a chance to achieve success. Having a sense of value and purpose at work is especially critical for younger employees.

Solidifying and Streamlining Processes

The pandemic forced many midlevel enterprises to be more agile and nimble than they normally would—and many emerged the better for it. Experimentation and novel approaches allowed companies to try a host of strategies and solutions, and they now have a ton of data upon which to make decisions about what worked and what didn’t.

But with rising costs and continued supply chain concerns, CFOs are prioritizing those processes that will increase efficiency and lower risk, to avoid squandering the gains of the past year. Technology will play a big role in these efficiency pushes. In fact, 40% of CHROs have already outsourced or automated some HR activities—and 30% expect to do more in 2022.

Greater investments will also be made in people processes to allow for smoother remote management of and collaboration among teams. For finance, the goal this year is to acquire new programs and platforms (rather than investing in existing technology as was the case in 2021) to aid in more and better FP&A, which will, again, allow them to make more confident decisions. (Currently 32% of midmarket enterprises use advanced FP&A tools, while 45% say they plan to implement them this year.)

Technology investments won’t be limited to back-office operations: Customer behaviors changed rapidly during the pandemic, with many consumers now expecting a higher level of digital integration and touchless service. B2C companies are more likely to make an investment in customer experience over B2B companies.

Prioritizing a Growth Mindset

While midmarket companies mostly performed well during 2021, the AchieveNEXT survey revealed a smaller subset of companies who recorded above-and-beyond revenue growth in the double digits. These so-called “fast growers” behaved differently than their peers, who recorded single-digit or zero percent growth.

For one, these companies prioritize growth: They are 16% more likely than their peers to say that organic growth is their top priority, and about 11% less likely to emphasize efficiency and productivity gains. They are more likely to fund the growth with equity—28% more likely than the midmarket as a whole—and correspondingly less interested in adding debt capital to their balance sheets.

This group also puts a greater emphasis on customer experience than others in the survey: 1 in 4 have a formal and consistent customer relationship or customer experience process. For the midmarket as a whole, the number is just under 1 in 5. And when it comes to supporting the sales team, 50% of fast growers make adding to their sales force a top priority versus 41% for the overall group.

Of course, this group is not immune to challenges: Fast growers report finding the right people as their top concern at a rate of 12 points higher than those enterprises growing less than 10%. This figure once again underlines the importance of staffing to support strategy for immediate—and long-term—sustainable growth.

Read the full AchieveNEXT report,“Building the Road to Sustainable Growth.”

To learn more, listen to theAchieveNEXT webcast.