Gartner for Finance Leaders

4 CFO Actions to
Drive Operational
Resource Reallocation
As strategic priorities shift in response to economic disruption, finance must play
a more active role in enabling the business to realign operational resources. CFOs
should use this research to help the business navigate making resource trade-offs
to execute capital shifts.

Overview
Key Findings
• Over two-thirds of CFOs (68%) report their organizations’ operational resources are
insufficiently responsive to capital shifts.
• Because the majority of business leaders (71%) have significant autonomy over how
their operational resources are allocated, finance needs cooperation from the business
to realign operational resources in support of new strategic priority execution.
• Finance must resolve the lack of visibility into the business’s operational resource
availability, as well as the business’s lack of visibility into capital shifts, to be able to
effectively guide the business.

Recommendations
To equip the business to realign operational resources as multiyear investment priorities
change in response to economic shocks and disruption, CFOs should:
• Weight business incentives toward enterprise performance to overcome resistance
to shifting operational resources.
• Track resource utilization by services and skills rather than budget categories to
increase finance’s visibility into operational resource deployment.
• Classify operational expenses into strategic categories to analyze resource use against
strategic objectives.
• Use metrics cascades to put resource trade-offs in perspective for business leaders.

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Introduction
Enterprises need economic capital responsiveness to realize enterprise value in a
disruptive environment. Even when CFOs succeed at driving enterprise-level capital shifts,
their organizations still struggle to realize returns because operational resources —people,
technology and other capabilities — do not flow to support execution (see Figure 1). Only
32% of CFOs say their organization’s operational budgets are highly responsive to changes
in capital allocations.

Figure 1: How Disruptive Events Trigger Operational Resource Realignment

Capital Capital Initial Highest-Return Uses of Capital

Planning Pivot
• Asset maintenance
Disruptive Event:
Entrance of new • Geographic expansion
digital-native
competitor Aligned Operating Resources

Initial Highest-Return Uses of Capital

• New digital technologies

• Asset maintenance

Operating Resource Realignment

Source: Gartner

This challenge is more pronounced because 71% of business leaders say they are largely
in control of how their business unit’s (BU’s) budget is allocated. This means finance can’t
“decree” or “process” its way into aligning operational resources with capital pivots without
cooperation from the business. Budget owner autonomy is equally relevant whether
budget owners are actively resistant to shifting operational resources or are willing but
unsure how to do so.
To overcome the challenge of making operational resources responsive to capital shifts,
finance must play a more active role in enabling operational resource flexibility to help
both willing and unwilling business leaders make operational resource trade-offs.

3
Analysis
Weight Business Incentives Toward Enterprise
Performance to Overcome Resistance to Shifting
Operational Resources
Sometimes, autonomous business leaders are unwilling to shift operational resources
because their performance incentives lead them to prioritize their BU’s performance
targets over the performance of the enterprise as a whole. To incentivize a less-siloed
approach to allocating operational resources, finance can recommend to the CEO and
the board that business leaders be more heavily compensated for enterprise performance
relative to individual BU performance.

Take Four Actions to Enable Willing Business

Leaders to Align Operational Resources With
Strategic Capital Shifts

1 Communicate Capital Shift Implications to the Business

Even if incentives are in place to make business leaders willing to reallocate their
operational resources, they may struggle to do so effectively without visibility into
why capital shifts are happening or an understanding of what action is required.
Finance must recognize the information that flows naturally to business leaders is
different from what flows to finance. To address these barriers, finance needs to regularly
offer the business visibility into capital shifts. Finance business partners, in particular,
can increase enterprisewide visibility by communicating to their BUs when capital pivots
occur that are likely to affect their operational resources. Finance leaders and business
partners should provide the context (market changes, strategic shifts) for each pivot
and clearly articulate the enterprise outcomes the organization is seeking to achieve to
help business leaders better understand the role they should play. By making this kind of
communication around capital shifts the norm, finance also creates more opportunities
for the business to communicate which operational resources they can reallocate to
support new strategic priorities.

4
2 Track Resources by Services and Skills Rather Than Budget Items to
Increase Finance’s Visibility Into Operational Resource Deployment

Beyond opening up communication lines around operational resources, finance can

increase its visibility into how business leaders are deploying their operational resources
by helping them track operational resources by services and capabilities rather than
simply as budget line items.
Given that employee compensation makes up a large proportion of SG&A spend in
most organizations, it is useful for finance to have insight into how the business allocates
talent. To more flexibly manage talent, many organizations have adopted skill pools to
ensure enterprise priorities are adequately resourced. Rather than relying on current
headcounts to place talent or hiring new talent based on rigid job descriptions, skill
pools provide both a quantitative and qualitative overview of the professionals who
already work in the organization. Additional benefits of skill pools include greater insight
into soft skills, higher employee satisfaction, improved productivity, greater distribution
of knowledge, and even the potential to optimize organizational structures.

3 Classify Operational Expenses Into Strategic Categories to Analyze

Resource Use Against Strategic Objectives

Finance needs visibility into how operational resources are being used as a foundation
for helping the business navigate resource trade-offs. To facilitate conversations with the
business about operational resource availability, finance should analyze resource use
against the business’s strategic objectives.
Strategic pillars should be based on the organization’s points of competitive
differentiation — capabilities that drive superior outcomes while being irreplicable
by competitors.

4 Use Metrics Cascades to Put Resource Trade-Offs in Perspective for

Business Leaders

Finance leaders generally have a level of enterprise visibility that business leaders do
not. To better equip the business to make resource trade-offs, CFOs should shift finance
business partner responsibilities to focus on transferring their enterprise knowledge to the
business leaders who need to make decisions about operational resource reallocation.

5
Take an Active Role in Realigning Operational
Resources to Shifting Strategic Priorities
Whenever disruptive events trigger new strategic priorities and the need to reallocate
capital, those capital shifts don’t make a difference unless the business can flexibly realign
its operational resources to successfully execute on new uses of capital. Finance must
take an active role of continuously working with the business to understand operational
resource availability and reinforce the need for BUs to value the enterprise’s strategic
priorities above their own. By weighting business targets toward enterprise performance,
actively communicating capital shifts to the business, tracking resources by services and
skills rather than budget categories, analyzing resource use against strategic objectives,
and using metrics cascades, finance can adequately resource capital shifts every time.

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Actionable, objective insight
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