To find out how some companies have thrived during the last five years of difficult trading conditions while other have simply languished, Ernst & Young commissioned a research project that during the last five years has surveyed about 1,500 senior executives. Their report – Growing Beyond: How high performers are accelerating ahead – is now available and has some valuable insights for Finance.
The study compared the relative high and low performance in various sectors based on EBITDA and revenue growth over the last two years and set out to identify differences between the two groups as well as commonalities within each group. Ernst & Young land on four distinctive factors that underpin the relative success of the high-performers over the last five years:
Being outward looking to understand and address their customers’ changing needs, finding new markets, (high performers were three times more likely to generate sales in new markets), and prioritizing innovation, (nearly twice as many high performers generated 10% or more of their sales from products and services introduced in the last 3 years).
What this means for Finance: Focused control over spending rather than across the board cutbacks so as to give sales, marketing and development colleagues the resources they need – coupled with a rigorous prioritization of Capex and development programs to ensure that those that have the potential and probability to deliver significant commercial benefits have the resources they need.
Smart and speedy response to change
High performers are quick to respond to change and make better decisions by balancing risk and with opportunity. They rapidly adapt to fast-changing circumstances by deploying technology, devolving decision-making and ensuring they always have the capacity and resources to execute fast.
What this means for Finance: Improved monitoring to detect the first signs of changes in both the external and internal environments with faster analytics that give decision makers faster insight coupled with fast and flexible planning and budgeting.
High performers understand what drives their end-to-end costs as well as what drives value for their customers. They focus on efficiency rather than simply cutting costs or reducing headcount and are more confident about increasing prices.
What this means for Finance: Improved product and customer profitability reporting that reliably reflects indirect costs.
External and Internal Stakeholder confidence
High performers engage more with stakeholders by making the value they create visible to their external stakeholders through more transparent and more frequent reporting, while motivating staff by devolving decision-making and paying for performance.
What this means for Finance: Improved integrated reporting and disclosure to external stakeholders and cascaded communication of strategy and monitoring of performance for managers and staff.
The writers of the report acknowledge that we are still in what is already one of the longest periods of economic retrenchment in [recent] history and note that even the high performers see difficult times ahead with faltering demand in some of the rapid-growth markets. But what is clear from this E&Y report is that sitting and waiting for the global economy to recover is not an option while high-performing peers have developed capabilities that will allow them to sustain their momentum and increase their lead for a while yet. There is work to be done and for Finance most of it revolves around enterprise performance management and analytics.