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Widespread ‘margin blindness’ crippling financial performance

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A WIDESPREAD lack of insight into margin and how to affect it is damaging the financial performance of European organisations, with nearly half of CFOs unable to increase margin quickly.

A poll of 200 C-level executives from across Europe, undertaken by Cranfield School of Management and profit performance adviser Vendavo, found “a worrying lack of insight into margin” among many organisations, and a clear link between low level of margin insight and company underperformance.

The research found that 80% of respondents reported inconsistencies in the way margin is defined across their business, while CFOs that have made low gains for shareholders are most likely to report that their sales team base prices on gut feeling and personal relationships.

“While eking out margin gains is incredibly tough in most industries, the report suggests that many C-level executives feel their organisation is under-equipped to affect it,” said Patrick Reinmoeller, professor of strategic management, Cranfield School of Management.

“Yet it’s quite simple – if you don’t have the insight into margin, then there’s only a limited amount you can do to influence it strategically. And when it’s impacting financial performance, executives need to instill an even greater focus on margin across the organisation, and better insight to inform those crucial decisions driving profitability.”

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