Mergers and acquisitions (M&A) and improving sustainability are the first areas your peers are looking at when it comes to cost control cuts, according to a recent Gartner survey of CFOs and CEOs.
In a press release, Randeep Rathindran, vice president of research in the Gartner Finance practice, said cost control cuts in M&A makes good business sense due to higher financing costs directly linked to rising interest rates.
However, the choice to make sustainability and environmental impact cost control cuts first is surprising, he said, because Gartner research from earlier this year had CEOs rating sustainability as a “top strategic priority” for the first time ever.
What also makes it surprising is cutting sustainability spending could be risky in light of the Securities and Exchange Commission possibly approving a climate risk disclosure rule for publicly traded companies. Demonstrating that ESG is a low priority could potentially hurt a business in the eyes of its investors.
In the face of a triple whammy of rising inflation, talent shortages and supply constraints, here’s where cost control cuts are most likely to be made by businesses, according to the survey:
- M&A, 41%
- Improved sustainability and reduced environmental impact, 39%
- Workforce and talent development, 33%
- Capital investments for physical network expansion, 32%
- Product innovation, 27%, and
- Technology, 23%.
Where cost control cuts are least likely to happen
If economic disruption has you re-evaluating investment priorities, it’s also helpful to know the areas businesses are most reluctant to make cuts.
Strangely, two of the categories most likely to be on the chopping block are also the top two areas most likely to be protected. Forty-six percent of execs said workforce and talent development spending would be cut last. And 45% of respondents said digital investments would be the last thing they’d cut because they improve reporting ability and boost efficiency and worker productivity.
Rathindran commented that what side of the fence you’re on when it comes to tech and employee development spending depends on your industry.
“Companies in service-based industries are most likely to reduce their investments due to the high proportion of labor costs. Meanwhile, product-based industries protect these investments as a source of advantage, helping them to maximize human capital,” he said.
