Gartner outlines four tactics behind efficient growth

Gartner has identified four financial strategies that it says separated a small set of US-listed companies from their peers over the past decade, delivering a 51% total shareholder return premium.

The advisory firm said its analysis covered more than 1,500 companies across the S&P 500, S&P 400, and S&P 600. It identified 105 "efficient growth" firms that outperformed between 2014 and 2024.

Gartner defined efficient growth as the ability to achieve above-industry revenue growth, margin expansion, and capital efficiency at the same time. The group's four strategies link liquidity management, cost structure choices, overhead redesign, and selective debt use, according to the research.

"Volatility and economic shifts make profitable growth increasingly elusive for most CFOs," said Randeep Rathindran, Distinguished Vice President in the Gartner Finance practice, Gartner. "To succeed, CFOs should try to emulate efficient growth companies by linking liquidity management, structural cost of goods sold (COGS), and sales, general and administrative (SG&A), and disciplined debt use into a self-reinforcing growth strategy."

The findings land as finance leaders face persistent cost pressures and uncertainty. Gartner framed the strategies as interconnected decisions that shape both short-term cash management and longer-term cost and investment capacity.

Supplier payments

One of the more counterintuitive findings centred on working capital. Gartner said the efficient growth group typically showed a longer cash conversion cycle than companies outside the group.

"Counterintuitively, efficient growth companies exhibit a longer Cash Conversion Cycle (CCC) than their non-efficient growth companies," said Rathindran. "While this may appear to be a weaker liquidity discipline, the underlying strategy is intentional."

Gartner said some companies accelerated supplier payments as part of a broader procurement and supply strategy. It said this approach could secure more favourable supply terms in markets where volatility and inflation create pressure on availability and pricing.

The research cited an example in semiconductors, where a company agreed to shorter payment terms and paid premiums and deposits. Gartner said the company sought to secure future capacity and reduce the risk of shortages that could disrupt revenue plans.

Cost of goods

Gartner also pointed to cost of goods sold as an area where the efficient growth group differed from peers. It said these firms lowered COGS as a percentage of sales and then redirected resources into areas seen as harder for competitors to replicate.

"Efficient growth companies are more successful than peers in lowering their cost of goods sold (COGS) as a percentage of sales and reallocating those resources towards value-driving areas, such as R&D, customer experience, or AI transformation," said Rathindran.

The report described levers that can shift COGS structurally over time. These included divesting higher-cost operations and consolidating manufacturing footprints. Gartner also cited the use of advanced analytics and automation in production and operations. It said companies used these tools to improve throughput and reduce waste.

The research positioned these moves as distinct from short-term cost cutting. Gartner described them as changes that can alter the cost base and free spending for product development, service, and technology programmes.

Overhead redesign

A third area focused on selling, general and administrative costs. Gartner said efficient growth companies began the decade with higher SG&A as a proportion of revenue than both non-efficient growth companies and control peers with similar revenue profiles.

It said the pattern shifted materially after the pandemic period. Gartner reported that the efficient growth group reduced SG&A from 20% of revenue in 2014 to about 15% in 2024. It said other companies reduced SG&A by one percentage point over the same period.

Gartner attributed the change to a structural rethink rather than annual budgeting discipline. "This wasn't a result of zero-base budgeting, but rather zero-based design - a fundamental rethink of SG&A function structures, processes, and teams in the light of AI-native workflows," said Rathindran.

Gartner said the changes included adjustments to corporate real estate footprints in response to hybrid work patterns. It also cited selective adoption of AI in operational workflows. The research referenced headcount optimisation informed by productivity analytics.

Debt use

The fourth strategy focused on capital structure and the role of debt. Gartner said the efficient growth group carried lower total debt-to-equity ratios than non-efficient growth firms across the analysis period.

"Efficient growth companies consistently maintained lower Total Debt-to-Equity ratios than non-efficient growth companies throughout the period of this analysis," said Rathindran. "However, low leverage does not mean zero leverage; these firms still carry debt-to-equity ratios of around 50%."

Gartner drew a distinction between borrowing used to cover operating shortfalls and borrowing used for specific initiatives. It said the efficient growth group used debt selectively for acquisitions, capital investment, and transformative projects.

Gartner said this approach treated debt as part of a broader view of capital structure. It described a balance between risk and opportunity, with borrowing applied where leaders held higher confidence in returns and timing.

The advisory firm said the four strategies form an interlocking model. It said payment terms, structural cost changes, and overhead redesign can shape investment capacity and resilience. It also said disciplined leverage can provide flexibility when companies face attractive opportunities that exceed the pace of organic cash generation.

"To succeed, CFOs should try to emulate efficient growth companies by linking liquidity management, structural cost of goods sold (COGS), and sales, general and administrative (SG&A), and disciplined debt use into a self-reinforcing growth strategy," said Randeep Rathindran.

Gartner said finance leaders will discuss efficient growth themes at its Finance Symposium/Xpo events in Sydney, National Harbor, and London.