Good morning.
CEOs and CFOs are strategic partners, but that doesn’t mean they never disagree.
“One of the areas where we see a little bit of friction is with A.I., where we see CFOs being much more cautious with adoption and usage,” says Marko Horvat, a VP in Gartner’s research and advisory practice. I talked with Horvat about Gartner’s new report, “What Matters to CEOs and CFOs Right Now.”
“The best CFOs in the best organizations," says Horvat, who has been a CFO, controller, and head of financial planning and analysis, "take situations like this one to create constructive tension with CEOs, by addressing and challenging underlying assumptions to create a mutual foundation of understanding."
Overall, the C-suite execs are aligned on three key priorities through 2023 and 2024: technology, growth, and talent. This comes according to Gartner's "CEO and Senior Business Executive Survey for 2023," which includes responses from more than 350 executives.
CEOs and CFOs do tend to agree that A.I. will most significantly affect their business over the next three years. However, it's most likely not in play yet, according to Horvat. About 80% of the financial functions to include A.I. have done so just in the past two years, the survey found.
When it comes to generative A.I., boards and chief executives expect C-suite leaders, including the CFO, to protect the company while driving broad use-case adoption. And investors expect new sources of growth and much better margins, which then places pressure on leaders to deliver results, according to Gartner.
Top-line growth
Speaking of growth, 45% of the CEOs surveyed rank growth among their top three strategic priorities, down from 53% in 2022. Meanwhile, 62% of finance chiefs put it in their top three, up from 59%.
“This speaks to CFOs having spent the last several quarters focusing on cost cutting and efficiency in reaction to, and preparation for, an economic downturn,” Horvat says. “As those initiatives have matured, CFOs are focusing more on top-line growth to enhance profitability.”
McDonald's is a company where the CFO sees marketing as a growth center, not a cost center. During the fast-food giant's Q2 earnings call on July 28, Ian Borden pointed to the results of a focus on top-line growth. "Our strong top-line performance across each of our segments drove adjusted earnings per share of $3.17 for the quarter, an increase over the prior year of 25% in constant currencies," said Borden, adding that it also helped operating margins.
According to Horvat, profitable growth through capital responsiveness will require CFOs to "ruthlessly" prioritize projects in alignment with strategic business priorities, make significant changes to where capital is allocated, and shift capital from low-value to high-value uses.
Regarding talent, CEOs rank workforce issues as the second-most-pressing priority for their companies, while CFOs rank it fourth. According to Horvat, CFOs have been "focusing on reviewing the competencies and capabilities of talent as part of their overall digital transformation," and most CEOs' focus is "beyond talent as it relates to strategy," but "as that gets settled, the focus then moves towards organization structure and the execution of the transformation strategy.”
Whatever “constructive tension” CFOs and CEOs must power through, it's because they ultimately have the same goal in mind: to push their business forward.
Sheryl Estrada
sheryl.estrada@fortune.com
