Why many top CFOs faced with cost cutting choose to lead by example: ‘It usually starts at home’
Good morning. CFOs know they have to manage long-term offensive strategies alongside short-term defensive strategies—just as they know striking the right balance can be challenging—and a new report by U.S. Bank, "Leading the return to growth," is taking a closer look at how top finance professionals are juggling those responsibilities.
The report's findings are based on a survey of 2,030 senior finance leaders—half of whom are CFOs—who work for a U.S. business that generates at least $100 million in annual revenue, while 30% of respondents work for a firm that generates at least $2 billion. Some 44% of respondents said they're focused on cutting costs in the finance function, with 37% focused on cutting costs company-wide.
In working closely with CFO clients, Stephen Philipson, head of global markets and specialized finance at U.S. Bank, has found the finance function often leads by example on cutting costs. “When the CFO’s team is directing the rest of the company, saying, ‘We need to watch expenses and cut costs,’ it usually starts at home."
The trick is balancing that with investing in growth—and in new technology like AI to improve efficiencies—part of what Philipson referred to in our conversation as "that long-term strategic growth mindset."
About one-third (34%) of respondents said they're currently exploring emerging technologies, up from 27% in 2023. After data analytics (52%), AI (51%) is the second-highest-ranking priority when it comes to investing in the finance function, with automating payments another worth noting. About 80% said they're expecting to use fintech platforms or systems for payments in the next two years compared with just 37% currently.
“Years ago, the role of a CFO had more to do with compliance,” Michelle Hook, CFO at the restaurant group Portillo’s, told U.S. Bank. “But we’re now more focused on growth.”
I asked Lauren Cooks Levitan, CFO of Faire, a wholesale marketplace that connects independent retailers with global brands, her perspective. "My responsibility as a CFO is to drive sustainable growth that ensures we can support our customers for the long term," Levitan said. "To do this, I also need to ensure that we have a capital structure and overall resource allocation strategy that allows us to continue investing in what our customers need to succeed."
More finance leaders said they're confident about balancing short- and long-term responsibilities: About 43% of respondents said they struggle to balance mitigating risk and driving growth, down from 51% in 2023 and 49% in 2022.
“You must always have a long-term view, but you won’t be here for the long term if you don’t manage the short term," U.S. Bank CFO John Stern said in a statement.
Those surveyed said the biggest current risks include talent shortages, uncertainty around the Federal Reserve's rate path, inflationary pressure, and geopolitical tension. And while only 37% of respondents said they were optimistic about the U.S. economy over the next 12 months, that figure increased to 58% when asked about an outlook for the next three years.
“We expect positive economic growth and only put the chance of recession at 25% to 30%," Matthew Schoeppner, senior economist at U.S. Bank, wrote in the report, "which is about half of the probability at this point last year."
Sheryl Estrada
sheryl.estrada@fortune.com
María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.
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This story was originally featured on Fortune.com
