A Gartner survey of 161 finance executives earlier this month showed that 25 percent either executed layoffs in April or plan to reduce the size of their workforce before the end of June (or both). This is more than twice the proportion that were planning layoffs as recently as March 2020. In addition, 27 percent said they expect to reduce salaries, and more than a third plan to furlough staff. (See Figure 1, below.)
“CFOs have little visibility into when revenue will start to normalize,” says Alexander Bant, practice vice president for research for the Gartner Finance Practice. “Companies are conducting robust analysis about which of their business lines and product 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.”
Gartner research over the years has demonstrated that even during a crisis environment, cost-cutting measures need to be strategic and executed with an eye on long-term business objectives. “Covid-19 shifted the way work is done by most organizations, overnight,” Bant says. “CFOs want to optimize costs but still be able to come out fighting” as the crisis abates, he adds. “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.”
At the same time, the survey revealed that 24 percent of respondents expect to increase spending on robotic process automation (RPA) and 19 percent plan to spend more on advanced analytics. Forty-one percent of respondents said they intend to reintroduce capital expenditures quickly as the economy begins to normalize.
However, there are several areas that companies are cutting now where “CFOs tell us they will not bring back spend right away,” Bant says. “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.”