A survey of chief financial officers by Gartner, Inc. found that 60% of employers experienced wage inflation in the second quarter – almost double the amount reported to the previous quarter.
Nearly three in four of the CFOs polled cited the risk of lower profitability as their top concern in the face of broad-based input price inflation.
While wages ranked at the top of input inflation, raw materials and commodities (59%), freight costs (51%) and salaries (50%) rounded out the top four types of input price inflation they cited.
Gartner urges CFOs to:
Improve insight into supply chain dynamics: Go beyond diversifying supply chain partners to deepen their visibility through the supply chain to better identify and alleviate bottlenecks, Gartner advises.
“In some cases, forming strategic partnerships to secure supply and making capital investments in suppliers could significantly decrease margin pressures over the longer term,” Gartner says.
Make more principled price-setting decisions: Avoid reflexively passing on costs to customers. Assess whether input price inflation is transitory and if competitors are raising prices.
CFOs need a clear understanding of their customer bases’ price sensitivity and profitability to avoid making a misstep in raising customer prices that could further erode margin profitability.
Recalibrate talent recruitment and retention: Reduce the impact of salary inflation for critical skills by tapping the “total skills market,” by looking beyond traditional talent pools to part-time workers, freelancer, and contingent talent, including the self-taught and career restarters who previously were out of the labor market.
CFOs also can approach recalibrating salaries for remote and hybrid workers who choose to relocate to a lower cost of living area.