Making effective decisions and choices between short-term performance and long-term priorities can have implications in areas ranging from the right governance to the advanced analytics that support trade-off decisions. CFOs should update their strategies and performance indicators to reflect changing circumstances while maintaining their long-term vision.
What's driving CFOs to pursue cuts in these areas?
The CEO and C-suite are primary sources of pressure for organizations planning short-term cuts in long-term priority areas, while activist investors and institutional investors rank as the highest sources of pressure for those seeking short-term cuts in non-long-term focus areas.
Effectively balancing short-term demands with long-term value can require collaboration and cooperation, and trust between finance leaders and the executive team. However, tensions and disagreements can undermine this collective effort – 67% of finance leaders surveyed say there are tensions and disagreements within their leadership teams regarding the balance between short-term and long-term priorities.
Fulfilling this role will likely require a CFO with the credibility and influence to challenge the CEO and executive team. However, the 2023 DNA of the CFO research suggests that not all finance leaders are willing to voice their opinion all of the time. Less than one-third of respondents (32%) “always” speak up when their opinion differs from the consensus, and only 30% of respondents “always” strongly challenge members of the executive team when they disagree on a key issue.
To help manage stakeholder expectations and better communicate decision-making, robust performance reporting can be essential. CFOs and their finance teams can play an important role in this reporting process, including integrating ESG disclosures into an enhanced corporate reporting model. That integration could address a gap identified by the EY Global Corporate Reporting and Institutional Investor Survey: A significant number of investors surveyed (80%) said many companies fail to properly articulate the rationale for long-term investments in sustainability.1
In addition, the CFO can help resolve tensions and balance short-term and long-term priorities. They can provide valuable insight on decision-making, navigating trade-offs, fostering consensus across the C-suite and helping to align decisions with the organization’s long-term value strategy.