Sustainable growth ranks as global companies’ No. 1 strategic planning challenge – in which chief financial officers will be playing a major role, says a study.
Global executives say sustainable growth is their most salient planning challenge and their chief financial officers will help lead the effort. But how CFOs will respond remains to be seen.
Those were the main conclusions from the 2013 McKinsey Global Survey, which included responses from senior executives and CFOs.
“Regardless of which sources of growth their companies pursue, the results indicate that, in the coming years, CFOs will need to up their game in a wide range of growth-related activities,” wrote the authors in McKinsey & Company’s New York office.
Aside from the researchers’ point about CFO capabilities, the study raised these salient questions:
- What are CFO perceptions about growth?
- How will they achieve it?
- Will growth come through mergers and acquisitions or organic growth?
— 86 percent of CFOs admit difficulty in identifying new opportunities – organic and otherwise
— 77 percent of CFOs regard another dilemma is long-term growth vis-à-vis pressures from short-term investors
— 72 percent of executives agree it’s difficult to determine the best growth strategy – whether its organic or inorganic
— 70 percent of executives concur it’s challenge to identify and implement long-term growth strategies while keeping short-term investors happy
— For the next five years, 45 percent of CFOs and 36 percent of executives specify organic growth as the most likely in importance
— “CFOs are also less likely to see shifting of resources within the portfolio as the most important driver.”
There wasn’t a consensus on M&A or organic growth. In reading between the lines, it does appear that there will be a healthy debate on the two growth options.
Aside from the researchers’ point about CFO capabilities, the study raised these salient questions: What are CFO perceptions about growth, and how will they achieve it? Will growth come through mergers and acquisitions or organic growth?
Satisfaction with effectiveness
The researchers say the executives expect to be content with their organizations’ efficacy in handling their growth drivers and matters relating to “portfolio management, including capital allocation, capital-expenditure approval, and profit-and-loss management…”
But there is an area of concern:
“Yet nearly half of non-CFO executives report less satisfaction with their companies’ effectiveness at processes that drive M&A, as well as expansion into new markets and organic growth (such as new-product development and expansion to adjacent products and services),” wrote the researchers. “Not surprisingly, these are the same areas where non-CFO respondents think CFOs could more effectively spend their time.”
The McKinsey researchers: Ankur Agrawal, an associate principal; Kaustubh Joshi, a consultant; and Ishaan Seth, a partner.
You can see the report here. (You’ll probably have to register to view this and other McKinsey reports.)
From the Coach’s Corner, related information:
Strategic Planning – Profit Lessons from Companies That Focus Long Term — To alleviate uncertainty in business and to grow profits, it’s increasingly clear that businesspeople must keep an open mind to seek opportunities, be bold and plan long term. In other words, companies that change their business models in order to become sustainable enjoy higher profits.
How to Avoid Failure in Risk Management and Strategic Planning — Incredible as it might seem, companies fail because they underestimate strategic risks – yes, strategic blunders instead of common sense – according to an authoritative study.
Are You up-to-date on Opportunities in Emerging Markets? Most Managers Aren’t — Seventy-six percent of business managers at global companies don’t have information for their needs – even though it’s necessary for productive decisions in expanding into emerging markets. Some 86 percent agree that data – market sizing and growth estimates – is vital. However, only 24 percent say the information isn’t available at their companies.
Vision in Setting Goals with 8 Best Practices — Whatever your entrepreneurial dreams, focusing on the right details is a skill conducive for setting goals strategically. However, if management doesn’t ponder enough on action-oriented details, goals are inordinately difficult to achieve. That’s really true in our new economy in which ever-increasing change makes for surprises in a dynamic marketplace.
“There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.”
– Ronald Reagan