In a recent survey conducted by Deloitte, it was revealed that a significant majority of companies are falling short of their margin improvement targets. The findings highlight the challenges faced by businesses in navigating a complex landscape marked by inflation, talent shortages, and supply chain disruptions.
Key Takeaways
Over 70% of companies are not meeting their margin improvement goals.
Inflation, talent shortages, and supply chain issues are the top barriers to success.
Companies are shifting focus from cost-cutting to investing in technology and capabilities.
Nearly 90% of organizations are prioritizing permanent transformation initiatives.
The Current Economic Landscape
Businesses today are grappling with unprecedented levels of disruption, including technological advancements, geopolitical tensions, and regulatory changes. These factors, combined with persistent inflation and rising interest rates, have created a challenging environment for Chief Financial Officers (CFOs) who must balance margin pressures with the need for investment in new technologies.
Survey Insights
Deloitte’s 2023 MarginPlus survey, which included over 300 senior business executives worldwide, sheds light on the current state of margin improvement efforts. Key insights from the survey include:
Margin Improvement Goals: More than 70% of respondents reported failing to achieve their margin improvement targets, with nearly one-third achieving less than half of their goals.
Top Barriers: Executives identified inflation, talent shortages, and supply chain constraints as the primary external barriers to success.
Focus on Growth: Nearly two-thirds of organizations prioritize sales growth over cost reduction, indicating a shift in strategy towards developing new capabilities.
The Shift Towards Technology
As companies face ongoing challenges, there is a notable shift in focus from traditional cost-cutting measures to investing in technology-driven solutions. The survey found that:
Organizations are increasingly looking to automation and cognitive solutions, such as artificial intelligence and machine learning, to drive transformation.
Nearly 90% of surveyed companies are investing in permanent transformation capabilities to enhance their chances of success.
Talent Shortages and Their Impact
Talent shortages continue to pose significant challenges for business leaders. The survey revealed that:
42% of companies cited the inability to attract and retain key talent as a major barrier to success.
Nearly 90% of organizations are experiencing adverse operational effects due to talent shortages, impacting their ability to scale and take on special projects.
Strategies for Success
To achieve better bottom-line results, companies must adopt a comprehensive approach to margin improvement and transformation. Key strategies include:
Designing Effective Processes: Establishing solid tracking and reporting processes to monitor progress.
Clear Business Cases: Developing clear business cases for initiatives to ensure alignment and support.
Change Management: Implementing effective change management activities to raise awareness and acceptance of initiatives.
Technology Investments: Investing in technology improvements to enhance data availability and decision-making processes.
Dedicated Leadership: Appointing dedicated leaders to drive efficiency and cost-improvement initiatives.
Conclusion
The findings from Deloitte’s MarginPlus survey underscore the urgent need for companies to adapt to a rapidly changing environment. By balancing traditional margin improvement methods with investments in new technologies and capabilities, organizations can enhance their resilience and achieve sustainable growth in the face of ongoing challenges.