the 2020 mandate€¦ · the 2020 mandate: maximizing the performance & value of your most...

THE 2020 MANDATE:MAXIMIZING THE PERFORMANCE & VALUE OF

YOUR MOST CRITICAL ASSET: PEOPLE

POWERED BY:

© 2020. The CFO Alliance & CHRO Alliance. All Rights Reserved.

PUBLISHED JANUARY, 2020

THE 2020 CFO/CHRO SENTIMENT STUDY2 © 2020 ACHIEVENEXT PEER ADVISORY NETWORKS

TABLE OF CONTENTS

ABOUT THE STUDY 3

THE 2020 MANDATE: MAXIMIZING THE PERFORMANCE & VALUE OF YOUR MOST CRITICALASSET: PEOPLE 4

SURVEY PARTICIPANT DEMOGRAPHICS 5

WATCHFUL, BUT NOT WAITING: INVESTING WITH GROWTH & OPPORTUNITIES IN MIND 6

FOUR FORCES DRIVE CFO AND CHRO PERFORMANCE 7

FINANCE AND HR WILL CENTRALIZE THE VALUE IN ITS PEOPLE-CENTERED FUNCTIONS 9

THE MOST CRITICAL DIRECTIVE IN 2020: TO UPSKILL AND ENABLE TALENT TO WIN 11

IMPROVING OPERATIONAL DECISION MAKING WITH DATA 13

MODERN FINANCE AND HR LEADERS: COMPETING IN THE 2020’S AND BEYOND... 14

ABOUT STUDY SPONSOR 15


ABOUT THE STUDY

AchieveNEXT, a leading provider of Peer Advisory Networks and specialized Career, Coaching, Training & Development Services conducted its 10th Annual CFO Sentiment Study and its first including CHRO Sentiment, to provide insights into the strategic planning, outlook, and financial objectives in 2020 for the enterprises that they lead and serve. This Study captures the sentiments and intentions of The CFO Alliance, the leading peer advisory network for more than 8,000 Finance leaders representing middle market and emerging enterprises from diverse industries and markets, and adds the opinions and insights from the newest AchieveNEXT Network, The CHRO Alliance, a peer advisory network for senior HR leaders. This Study offers comparisons and contrasts between how modern Finance and HR leaders plan to best position their enterprises to address challenges and to capitalize on opportunities as a new decade begins.

More than six-hundred Finance and HR leaders from across North America participated in this year’s Study, offering in-depth perspectives on how they plan to drive growth and performance in their enterprises in the face of modest risk of recession, escalating talent shortages, and increasing technology-driven disruptions to industry, business model, and cultural norms in 2020.

Following are the primary findings from the Study.


THE 2020 MANDATE: MAXIMIZING THE PERFORMANCE & VALUE OF YOUR MOST CRITICAL ASSET: PEOPLE

Increasing speculation regarding the timing of a recession, a presidential impeachment, increasing unrest in the Middle East, and global economic uncertainty/pessimism have not tempered optimism from over 600 Finance & HR leaders from across North America.

As world-renowned business advisor, author, and speaker, Ram Charan pointed out in 2016, ‘Businesses don’t create value; people do.’ And while many factors contribute to business success, including having a sound strategy, having a marketable and salable product or service, and having efficient and effective operational processes in place, it falls to the people to actually execute on these strategies, plans, and processes and to make the business whole.

With this in mind, Finance and HR leaders believe that enterprise success in 2020 will be defined in part by their ability to embrace and execute these five (5) critical areas of opportunity and issue:

1. FINANCE AND HR LEADERS ARE WATCHFUL, BUT NOT WAITING FOR RECESSION.

2. FOUR FORCES WILL DRIVE BOTH CFO AND CHRO PERFORMANCE THIS DECADE.

3. ALL ENTERPRISES WILL NEED TO ALIGN CUSTOMER AND EMPLOYEE EXPERIENCES.

4. A CRITICAL DIRECTIVE FOR FINANCE AND HR LEADERS IN 2020 WILL BE UPSKILLING AND ENABLING TALENT.

5. FINANCE AND HR MUST WORK TOGETHER TO IMPROVE OPERATIONAL DECISION MAKING.


SURVEY PARTICIPANT DEMOGRAPHICS

TYPES OF ENTERPRISES

ENTERPRISE REVENUE REPRESENTATION

EMPLOYEE SIZES

More than six-hundred Finance and HR leaders from across North America participated in this year’s Study, offering in-depth perspectives on how they plan to drive growth and performance in their enterprises in the face of modest risk of recession, escalating talent shortages, and increasing technology-driven disruptions to industry, business model, and cultural norms in 2020.

TOP TEN INDUSTRY REPRESENTATION

Banking/Investment: 7.49%

Non-Profit: 7.29%

Professional Services: 7.09%

Software/SaaS: 6.28%

Construction, Engineering & Architecture: 5.87%

Distribution, Logistics and Warehousing: 5.26%

Manufacturing - Industrial: 4.86%

Real Estate: 4.66%

Legal, Accounting: 4.45%

Hospital & Health Care: 3.85%

Information Technology and Services: 3.64%

Oil & Energy: 2.63%

Biotechnology and Pharmaceutical: 2.23%


WATCHFUL, BUT NOT WAITING: INVESTING WITH GROWTH & OPPORTUNITIES IN MIND

With the risk of recession expected to remain relatively low for the next 12 months, trade war impact receding, monetary easing providing continued support, and the 2020 election noise lacking immediate implications, Finance and HR leaders continue their press to invest enterprise cash with growth and opportunities in mind.

Increasing speculation regarding the timing of a recession, a presidential impeachment, increasing unrest in the Middle East, and global economic uncertainty/pessimism have not tempered optimism from over 600 Finance & HR leaders from across North America.

More than two thirds (⅔) of the 600+ North American Finance and HR Leaders surveyed by AchieveNEXT between November 6 and December 31, 2019 remain bullish on the growth and performance of the U.S. economy in the year ahead. In addition, survey respondents are even more confident in the performance of their industry sectors, with ¾ of them characterizing their industry sector health as Strong to Extremely Strong. This confidence carries over to their belief that this will be a year for continued top line revenue growth for their enterprises, as most CFOs are keeping their feet on the revenue accelerator in 2020.

Where will the majority invest to drive revenue? 56% will invest in new market entries and increased customer spend to drive the top line in 2020.

More than 80% of the survey participants remain extremely confident in their ability to access capital and/or credit, if needed, which is slightly higher than last year.

For almost one third (⅓) of the survey participants, the focus is to just keep going at full speed on their acquisition-fueled strategy for aggressive growth in 2020.

For some Finance leaders, uncertainty may influence their 2020 cash-allocation plans. While some finance leaders are not spending down their cash reserves and are strengthening their P&Ls to

make sure that they can be self-sufficient, should they experience a sudden or abrupt downturn, this does not mean that the majority intend to sit tight in 2020.

Many CFOs are building their cash war chests not simply to outlast any perceived slow period coming, but to be in a position to seize opportunities when others cannot. For some, that could mean acquiring a stifled competitor at a more reasonable valuation. For others, it could mean adding premium talent at more affordable prices. For even more, it could mean taking customers from a weakened competitor.

PROJECTED YOY PERFORMANCE 2020


As the new decade begins, four forces will drive both CFO and CHRO performance. Their value will be defined by how well they align and balance Strategy, People, Technology & Risk to drive enterprise performance in the midst of the Fourth Industrial Revolution.

As Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, first raised in his 2016 book, The Fourth Industrial Revolution, the global economy is in the midst of a new industrial revolution. This “Fourth Industrial Revolution” or, “Industry 4.0”, is driven by the convergence of computing, data, artificial intelligence, and universal connectivity. This revolution is reshaping operations in every enterprise, and as a result, Finance and HR leaders everywhere are operating now in a world characterized by new technologies that are impacting all disciplines, economies and industries.

While The Fourth Industrial Revolution offers Finance and HR leaders huge opportunities to shape enterprise strategies, enhance operational efficiencies, and more ways to connect people to data and information than ever before, it also creates new competitors, threatens old established modes of operation, and creates new risks to security and reputation that they must mitigate and address.

As Schwab puts it, Finance and HR leaders must “shape a future that works for all by putting people first, empowering them and constantly reminding ourselves that all of these new technologies are first and foremost tools made by people for people.” For our survey respondents, that future is now.

When asked to identify the top operational challenges that their enterprises would face in 2020, the Four Forces dominated the survey participants’ answers. Over 43% said that People would be their top challenge, followed by 32% who stated issues with their enterprise Strategies would be a top priority to address, and 25% who listed Technology as the greatest source of operational concern in the year ahead. Associated Risks lie within each of these Forces, with 36% of survey participants stating their top risk concern was loss of talent and/or inability to find talent needed to compete to win in 2020.

How will Finance and HR leaders address these operational challenges in 2020?

Strategy: Over 30% are committed to entering new markets to find new ways to drive top line, bottom line, and shareholder performance in the year ahead.People: 40% will address how they motivate and challenge their current employees.Technology: Over 50% will implement technologies that will help their enterprises to identify future revenue trends with advanced forecasting, planning models and predictive analytics leading the way.

FOUR FORCES DRIVE CFO AND CHRO PERFORMANCE

WHAT IS THE TOP OPERATIONAL CHALLENGE YOUR ENTERPRISE WILL FACE IN 2020?


TECHNOLOGY-LED/SAAS ENTERPRISES

Even with concerns about lagging growth in mind, most Finance leaders from technology-lead companies who participated in the survey remain less concerned about profit. For most, the non-GAAP metric of free cash flow has replaced GAAP earnings as the “gold standard” indicator of their financial health, and the “Rule of 40%” rules their days. (A healthy company’s growth rates for revenue and profit should add up to at least 40%. For example, if your top line revenue is growing at 20%, you should be generating a profit of 20%. If you are growing the top line at 40%, you should be generating a 0% profit. If you are

growing at 50%, you can lose 10%). Simply stated, if you are outperforming the Rule of 40, then you are in great shape.

Still, most Finance leaders from technology-lead enterprises who participated in the survey acknowledged that their enterprises must have some source of cash readily available to them to respond to an unintended outcome.

TOP PRIORITY FOR DRIVING PROFITABLE GROWTH IN 2020 FOR INDUSTRIAL MANUFACTURING/WHOLESALE

DISTRIBUTION ENTERPRISES

INDUSTRIAL MANUFACTURING/WHOLESALE DISTRIBUTION ENTERPRISES

PLANNED TRANSACTIONS IN 2020 FOR TECHNOLOGY-LED/SAAS ENTERPRISES

TOP OPERATIONAL CHALLENGES TECHNOLOGY-LED/SAAS ENTERPRISES

WILL FACE IN 2020

PLANNED TRANSACTIONS IN 2020 FOR TECHNOLOGY-LED/

SAAS ENTERPRISES

Wondering about the ever-critical Capital Expenditures in 2020? Well, any sense of slow-growing revenue will undoubtedly cause many finance leaders from industrial manufacturing and wholesale distribution companies to look more closely at their 2020 cash allocations and spending. However, many survey respondents hope that all of the bad talk about tariffs- specifically with China- ends, and that this good news, coupled with continued lower tax rates, will spur additional capital expenditures in 2020 which could make it once again the critical economic driver it has been in economic booms of the past.

INDUSTRYSHARE FOCUS: ENTERPRISE PERFORMANCE


In order to compete to win in the 2020s, all enterprises – regardless of their starting positions – will need to align their customer and employee experiences - and Finance & HR leaders will need to work together to centralize the value in its people-centered functions: the people outside the enterprise (customers) with the people inside (employees).

Given the rapid pace of innovation and change that drive today’s economic, business, and industry environments, Finance and HR leaders agree that a differentiated and valued customer experience (CX) is not just a “nice to have,” it’s a “must-have,” and that it must be a critical part of every enterprise’s business strategy and culture in the year ahead. Over 90% of the survey participants ranked customer relationships as Important/Very Important to their enterprise growth and success each year.

In order for the customer experience to truly take hold throughout an enterprise, today’s Finance and HR leaders must correlate financial performance to their customer experience success, and must be able to communicate this alignment with consistency and clarity to a diverse group of connected - but at times, disparate - groups of people. Only then will they be successful in getting all requisite customer experience stakeholders (both internal and external) on board to work together to achieve an authentic, holistic, and differentiated experience and to deliver an effective engagement strategy based upon a shared understanding of their customers’ needs and behaviors. Yet, less than 50% of the survey participants have a formal process in place to plan, manage, and grow customer relationships to drive revenue growth in 2020. And, over ⅔ have no formal KPI that quantifies the strength of their relationships with their customers.

FINANCE AND HR WILL CENTRALIZE THE VALUE IN ITS PEOPLE- CENTERED FUNCTIONS

“Acknowledging the importance of relationships, but not acting to close the process and measurement gaps create significant risk to top line, bottom line, and shareholder value,” says Ed Wallace, President of AchieveNEXT Human Capital and respected author of Fares to Friends, Creating Relational Capital, Business Relationships That Last, and his most recent #1 Bestseller, The Relationship Engine.

But the customer is only one half of the experience equation. The employee experience (EX) is similarly important, and it can often go overlooked. An increasing number of Finance and HR leaders have identified this vital link between customers and employees and the need for their enterprises to align these experiences holistically. More than 50% of the survey respondents list their top operational challenges in CX and EX.

In addition, they recognize that if they emphasize EX over CX, they could end up with well-meaning employees who have no consistent idea of how best to serve customers — or employees who are engaged and happy but whose efforts do not produce the right results. Enterprises that focus on CX without attending to EX could struggle with high labor costs due to increasing employee turnover and a lack of diverse thinking.


An enterprise leader could also wake up to find his or her enterprise in the headlines because an unhappy employee decided to broadcast on social media detailing the terrible work environment and culture that they have to endure each day.

Given the expanding and increasingly visible roles of the CFO and CHRO, together they are uniquely positioned to develop and unleash the combined power of both disciplines.

Together, the CFO and CHRO can lead others to become both morecustomer- and employee-centered by:

• Increasing the understanding of customers among all employees• Increasing the understanding of employees among enterprise leaders• Driving consistent, disciplined design and delivery of experiences to customers

and employees• Creating connections between CX and EX, and advocating for the integration

they require, whether technical or not• Championing customers’ and employees’ perspectives in the enterprise’s

strategy, short and long-term decision-making and overall business performance• Measuring the impact of CX on employees, the impact of EX on customers, and

the impact of both on the enterprise’s most critical and talked-about KPIs

By integrating and aligning CX and EX, the CFO and CHRO and their respective teams can ensure that their enterprises centralize the value in its people-centered functions— people outside the enterprise (customers) and people inside (employees).

*For a deeper look into how Finance leaders are leading others to become both more customer- and employee-centered, access the recent CFO Alliance Special Task Force Report -- The CFO’s Role in Understanding, Enhancing, and Communicating Value in the Customer Experience.


Finance and HR leaders share a critical directive in 2020: To upskill and enable their overall talent to win.

As Industry 4.0 gathers momentum, technology’s potential impact on talent is becoming clearer.

THE MOST CRITICAL DIRECTIVE IN 2020: TO UPSKILL AND ENABLE TALENT TO WIN

WITHIN YOUR ACCOUNTING/FINANCE TEAM, WHICH OF THE FOLLOWING MOST REPRESENTS

THE GREATEST SKILL GAP RELATIVE TO YOUR NEEDS IN 2020? RESPONSE PERCENT

WITHIN YOUR HR TEAM, WHICH OF THE FOLLOWING MOST REPRESENTS THE GREATEST SKILL GAP RELATIVE TO YOUR NEEDS IN 2020?

RESPONSE PERCENT

What is also becoming more apparent is the severity of the challenge Finance and HR leaders face in ensuring they have the right talent and skill sets.

“This year’s survey suggests that more Finance and HR Executives recognize the growing skills gap and are taking dramatic steps to address these issues. I believe this is also a confirmation that CFOs and CHROs across enterprise sizes, structures, industries, and markets understand this dynamic shift as the future of work becomes their current reality versus an issue that can only be addressed by others in the future,” says Nick Araco, CEO of AchieveNEXT and the Alliance Networks.

These clashing perspectives suggest that businesses must strive for a delicate balance in combining capabilities.

As a leading Diversity & Inclusion Business Leader, Robyn Pollack, Managing Director at AchieveNEXT points out, “In order to compete to win, Finance and HR leaders must

seek employees with both IQ and emotional intelligence (EQ). Of course, you’re going to need math, science, and technology skills,” she says, “but you can’t hire that as a replacement for EQ. In addition, workforces, much like your customer bases, must become more diverse and inclusive. More than 60% of survey respondents say that diversity and inclusion is Very Critical/Critical to the future financial performance and sustainability of their enterprises.”


In our Survey, we found that Finance and HR leaders both recognize that work is becoming digital, and this new environment requires updated skills.More specifically, they shared that:

• Training and development of new hard and soft skills are necessary to ensure continued growth and profitability. The current skills gap that survey participants are most apt to invest in training, developing, and upskilling in 2020 reside in financial planning and analysis, leadership and change management, and critical thinking.

• The war for talent will rage on 2020. Over 2/3 of survey participants believe that they have a skills gap that they intend to address by adding new talent to their enterprises in 2020.

• Many enterprises continue to miss the mark on their approach to upskilling. While the dollars and time may be allocated to this effort in 2020, many Finance and HR leaders lack confidence that their investments in training and development will result in maximum ROI for the time and dollars spent. Most Finance and HR leaders agree that before implementing any sort of hard or soft skills training, they need to consider the employee journey and how a selected skill developed or technology tool offered will impact them.

• Middle Managers are crucial to success. Finance and HR leaders would agree that enabling middle managers - the people in the middle of their businesses, with many at the center of their Customer and Employee Experiences- will be key to addressing any adoption, disruption, and upskilling challenges. At the same time, most Finance and HR leaders would say that their enterprises have not adequately equipped or invested in its middle managers with upskilling resources. This will become an increasingly critical priority for them to tackle in the decade ahead.

Finance and HR leaders expect increased automation to replace the need for people. As a leading Career & Executive Coach, Eric Herrenkohl, offers, “Continued advancements in robotics and automation have actually increased the demand for customer service-oriented employment, meaning that softer skills, such as communication, agility, adaptability, intelligence, and judgment are becoming increasingly critical skills for the workforce of today and tomorrow. Career moves are no longer driven by ladders. Rather, given the opportunities to make a series of moves across, diagonal, up and down, career progression looks more like rock climbing.”


In the competitive environment of the 2020s, Finance and HR leaders must work together to improve operational decision making by turning the rising tide of enterprise data into real-time insights that drive growth and performance across the business.

New technologies and applications are fast-tracking the ‘data views’ for Finance and HR leaders and their teams. However, most Finance and HR teams still struggle to capture and clean data that can be shared to drive informed and robust decision-making across the enterprise. More than half (½) of the survey respondents are currently spending too much time aggregating and reconciling data, leaving little time for analysis. As a result, according to a recent Gartner Study, more than 20% of operational decision-makers do not consider a single financial-soundness criterion in their decisions.

Given the increasingly competitive, volatile, and fast-paced environment that will define this new decade, improving this operational decision-making will require a shift from the current ‘generalist model’ of Finance/HR to a custom, dedicated ‘business partnership’ model that relies on decision expertise.

These shifts will require both Finance and HR leaders to reposition themselves and their teams into true ‘Business Partners’

that specialize in working with people across the enterprise- in Sales, Marketing, Operations, IT- to make data-driven, financially-focused operational decisions that improve outcomes in their areas of expertise.

While Finance and HR leaders and their teams have become increasingly comfortable with their positions on the front line of technology and data, their expansion into Operations, IT, Sales & Marketing will present new challenges that they will need to address. Almost 60% of Finance survey participants will spend more time with Operations and Sales in 2020 to achieve enterprise growth and performance goals. At the same time, almost 80% of the HR survey respondents intend to work more closely with Operations, Finance, and Sales as well.

Delivering on the cultural changes required for enterprises to embrace and embed technologies and data will be a major challenge facing Finance & HR leaders. Lack of leadership and change management skills are the top skills gaps that Finance and HR must address on their teams. In addition, one in five participants state that their current team members lack critical thinking skills, effective communication skills, and/or demonstrated analytical skills needed to drive these changes forward and believe that this skills gap may impact enterprise performance in 2020, if not addressed.

IMPROVING OPERATIONAL DECISION MAKING WITH DATA


As we move into the 2020’s, and the Fourth Industrial Revolution continues to fundamentally change the way we live, work and relate to one another; Finance and HR leaders are being forced to rethink how growth strategies develop, how their enterprises create value, and the impact technology has on human relationships. While this represents a new chapter in human development, enabled by extraordinary technology advances, these advancements present Finance and HR leaders with both huge promise and potential peril.

This Fourth Industrial Revolution is about more than just technology-driven change. It is an opportunity for enterprise leaders to harness converging technologies in order to create an inclusive, people-centered, connected experience for the employees they lead and the customers they serve. The real opportunity for today’s Finance and HR leaders is for them to look beyond technology, and find ways to give the greatest number of people the ability to positively impact and align their professional and personal lives.

In the face of increasing speculation regarding the timing of a recession, a U.S. presidential impeachment, increasing unrest in the Middle East, and global economic uncertainty/pessimism, 2020 will be a year where relationships matter most to Finance and HR leaders: Relationships with their C-Suite colleagues and employees, as well as with key customers and influencers in the markets where winning is the goal, and most, if not all Finance and HR leaders realize that their ability to drive enterprise performance will be dependent upon the relational capital they have amassed with their colleagues, employees, and key customers. For Modern Finance and HR leaders, relational capital is no longer a concept or KPI that can’t be measured; rather, it will be recognized in their top line, bottom line, and shareholder performance in 2020 and beyond.

MODERN FINANCE AND HR LEADERS: COMPETING IN THE 2020’S AND BEYOND…


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and services available in the marketplace. Insperity delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity through its premier Workforce Optimization® solution. Additional company offerings include Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management, Retirement Services and Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2017 revenues of $3.3 billion, Insperity operates in 73 offices throughout the United States.For more information, visit http://www.insperity.com.

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