With political instability, falling corporate profits and fluctuating commodity prices taking hold, it is more important than ever that organisations place a greater emphasis on understanding and improving margin.
Based on conversations with C-level executives, and by analysing the results of a survey of 200 CFOs and CMOs, a new in-depth report reveals that those who report growth ahead of market expectations are more likely to say that maintaining or increasing margin is vitally important (41%) to their organisation, in comparison to those behind (4%).
Despite striking evidence that a lack of insight into margin is damaging shareholder value and the financial health of organisations, more than a third (38%) would not know how to affect an increase in margin tomorrow. To help organisations take positive steps, this report offers an Eight Actions model outlining how to regain control of margins at the practical level to beat market expectations.
“With wider economic uncertainty exacerbated by the Brexit vote, understanding how to regain control of margins should be a top priority for businesses,” said Patrick Reinmoeller, Professor of Strategic Management, Cranfield School of Management. “To make real change, leaders must overcome barriers to data, communication and collaboration, and create a company culture which is focused on raising profits. Organisations which give margin the attention it deserves will be best positioned to outperform their competitors.”
“Business conditions are not always predictable, but companies can learn from past trends and build new capabilities to take more strategic action to what is happening in the market,” commented Robert Irwin, Vice-President, Business Consulting, Vendavo Europe. “Those that can accurately measure and report profit and margin up-to-the-minute will improve decision making and advance faster in their chosen markets.”
The Eight Actions Model, which the report outlines in detail, are:
1. Increase awareness of growth drivers
2. Focus on margin
3. Create a common ground
4. Analyse how to increase margin
5. Open the data vault
6. Offer data that matters
7. Help client facing employees exert better judgment
8. Ensure that awareness, analysis and action are linked