As the economy improves, CFOs refocus on productivity
With advancements in automation and streamlined processes, there’s a growing opportunity to realign roles in ways that could potentially increase productivity.
Productivity is a term that has permeated recent discussions at every level of business and government. With inflation slowing, lifting productivity is viewed as the next piece of the puzzle that will drive higher growth, profits and living standards over the coming years.
Deloitte’s latest edition of its biannual CFO Sentiment report paints a picture that businesses are refocusing on productivity initiatives and aligning them with broader business goals to boost efficiency, support innovation, and strengthen long-term performance.
This renewed emphasis on productivity has coincided with internal business challenges supplanting external economic concerns as the top perceived risks of CFOs, indicating that the economic environment is now stable enough for their focus to shift to business transformation.
Of the more than 60 surveyed CFOs, around two-thirds said their businesses are making longer-term strategic or transformational investments to improve efficiency.
But seeing that investment translate into higher productivity is very much a case of easier said than done. Looking at CFO Sentiment report, there are two key levers CFOs expect will make a difference when pulled.
The first is reimagining, modernising and simplifying operations, which was nominated as a high priority by 62 per cent of CFOs. At the heart of this is using technologies to streamline processes, reduce costs, and transition to digital-first operations. While this does require significant upfront investment, the potential gains are vast.
The second is people, productivity and performance, with just under half of CFOs naming this a high priority. In this context, CFOs are thoughtfully re-evaluating their workforce strategies to unlock greater productivity and adapt to evolving business conditions.
With advancements in automation and streamlined processes, there’s the growing opportunity to realign roles in ways that enhance performance, support innovation, and empower teams to focus on higher-value work.
To deliver this value uplift, CFOs are prepared to reprioritise spend and, in some cases, increase investment. Nearly half of respondent CFOs (48 per cent) expect capital expenditure to increase over the next 12 months, up from 35 per cent six months ago.
This is an important consideration, as it suggests that private sector investment, which has been challenged for several quarters, may be about to improve. Access to capital is critical to fund the projects and changes needed to improve efficiency and drive long-term gains that CFOs are chasing, so it may be a sign that capital market activity will also increase.
However, it’s not all about spending more. In the light of the less-than-ideal trading conditions over the past 12 months, cost control and operational efficiency has emerged as a top priority for CFOs. As such cost management is being reimagined through the guise of efficiency.
Instead of treating cost control as a defensive strategy to create short-term savings, CFOs are now engaging it as a growth enabler, aligning cost initiatives with goals to increase operational efficiency and support growth over the longer-term.
According to the report, 80 per cent of CFOs say cost control and operational efficiency is a high priority for their organisation, while 75 per cent say it’s a high priority for their finance function, proving that there is a strong synergy right now across the business to find or create efficiencies.
When taking this alongside the expected increase in capital expenditure, it signals that businesses are looking to plan for the long-term, prioritising the right increases in efficiency and productivity through disciplined investment and fiscal restraint, rather than quick fix cost cutting.
Productivity is key
And for many, this path has begun. More than half of CFOs view their organisations’ cost control and operational efficiency efforts as being well beyond quick wins, positioned instead within longer-term, high-impact initiatives.
44 per cent of respondent CFOs say they are pursuing longer-term strategic cost control and operational efficiency opportunities, while 21 per cent are executing transformative plans that will fundamentally change how they do business.
This reinforces the move toward deeper, more innovative shifts in how businesses operate. While these approaches often require greater upfront investment and a longer horizon to realise returns, they are seen as essential to unlocking lasting value and delivering broader organisational benefits.
Low productivity growth has been a persistent issue that has weighed down both business and Australia’s economic performance for years and has always been high up the list of the CFO agenda.
As external economic concerns retreat amid a relative economic recovery, CFOs seem in agreement that now is the right time to execute on plans to reassess and streamline workforce strategies while simplifying operations.
Giselle Hodgson is National Market Leader - Operational Efficiency & Resilience and Partner at Deloitte Australia.
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