us cfo cfo signals 080410
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CFO Signals
What North Americas top financeexecutives are thinkingand doing
2nd Quarter 2010
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CFO Signals
CFO Signals tracks the thinking and actions of leading CFOs representing North
Americas largest and most influential companies every quarter. Seventy five percent
of the CFOs are from companies with more than one billion US dollars in annual
revenues. Seventy five percent are from publicly-traded companies.
Each quarterly report analyzes CFOs opinions in five areas: CFO career, finance
organization, company, industry, and economy.
This is the second quarter report for 2010. We invited 240 CFOs to participate, and a
total of 136 responded during the two weeks ending on May 31.
For more information about CFO Signals, please contact NACFOSurvey@deloitte.com.
IMPORTANT NOTES ABOUT THIS SURVEY REPORT:
All participating CFOs have agreed to have their responses aggregated and presented.
Please note that this is a pulse survey intended to provide CFOs with quarterly information regarding their CFO peersthinking across a variety of topics; it is not, nor is it intended to be, scientific in its number of respondents, selection ofrespondents, or response rate especially within individual industries. Accordingly, this report summarizes findings for thesurveyed population but does not necessarily indicate economy- or industry-wide perceptions or trends. Except where
noted, we do not comment on findings for segments with fewer than ten respondents. Please see the appendix for moreinformation about survey methodology.
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting,business, financial, investment, tax, legal, or other professional advice or services. This publication is not a substitute forsuch professional advice or services, nor should it be used as a basis for any decision or action that may affect your
business. Before making any decisions that may affect your business, you should consult a qualified professional advisor.
mailto:NACFOSurvey@deloitte.commailto:NACFOSurvey@deloitte.com -
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Contents
In brief 4
Topical highlights 6
Appendix
Industry highlights 27
Detailed findings 44
About this survey 61
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In brief (continued)
Now that health reform is underway within the United States, CFOs generally expectthe cost of employee health care to increase and at a rate that outpaces wage
growth. Although a large proportion of CFOs do not expect reform to significantlyaffect the benefits they provide to employees, there are notable factions who expectbenefits to increase or decrease for at least some staff and some who expect both.Industries with high concentrations of temporary workers expect the biggestincreases in benefits, while manufacturing-oriented firms are most likely to decreasebenefits.
Despite their positive business outlook, CFOs expect only modest increases inemployment suggesting that the productivity of current, often-reduced staffing can
support growth in at least the near term. Where there is employment growth, it willlikely be limited to particular industries and dominated by offshore hiring andoutsourcing.
At a personal level, CFOs are focused on emerging from defensive activities andleading their companies into recovered, albeit changed, economies. They indicatestrong ambitions to increase their personal impact on their organizations throughelevated roles (many aspire to be CEOs), through increased work as catalysts andstrategists, and through facilitating others' business decisions.
Though CFOs in different sectors have similar responsibility and ambition, they livein distinct worlds governed to a large extent by the idiosyncrasies of their industries.For example, technology CFOs appear more likely than most to encounter strategicambiguity, internal power struggles, and difficulty attracting the financial talent theyneed. They are also the least likely to desire a move to CEO. Not surprisingly, CFOsin energy and resources, financial services, and health care are considerably morelikely to be feeling the stresses of new and potential government actions.
Who participated?
Responses from top CFOs make this an
unparalleled survey group.
All participating CFOs were invited
specifically because of their experience
and industry influence.
More than 75% of this quarters 136 CFOs
are from companies with over $1 billion in
annual revenues and 75% are from
public companies.
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Topical highlights
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CFO career
CFOs are torn by the challenges of uncertain times
Top challengesChange is at the heart of top CFO concerns
Major change initiative: 44%
Changing regulatory requirements: 38%
Strategic ambiguity: 35%
Pressures from poor performance: 29%
This quarter's top career concerns are predictably influenced by thefallout of economic turmoil over the past two years. Poorperformance is creating substantial pressure on many CFOs,especially in the technology and energy and resources sectors.Changing regulatory requirements and other post-recession shiftshave created ambiguity around go-forward strategies, especiallywithin the manufacturing, energy and resources, andtelecommunications, media, and entertainment (TME) sectors.Major change initiatives were named the top challenge and were inthe top two challenges for six of the eight industries. Technology,TME, and services sectors are particularly affected by thischallenge.
Other notable concerns: internal power struggles 24%, excessiveworkload/responsibilities 22%, poor managerial information 21%,and insufficient internal political influence 21%.
Please note that there were only nine responses each to this question for the technology,TME, and services industries.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Major change initiative (e.g., M&A, IT systems change, IPO)
Changing regulatory requirements
Strategic ambiguity
Pressures from poor company performance
Excessive workload/responsibilities
Poor quantity/quality/reliability of information
Internal power struggles
Insufficient internal political influence/authority
Insufficient support staff (skills or number)
Other
Expansion of job role/responsibility into areas of less comfort
Insufficient pay
Challenges with external service providers
Personal liability
Percent of respondents who placed each option in their top three
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CFO career
Why CFOs would change roles
CFOs have their eye on expanded influence and the CEO role
Elevated role: 57%
Expanded CFO role: 30%
Better pay and benefits: 28%
Better work-life balance: 28%
Retirement: 26%
A majority of top CFOs have ambitions to increase their influence,either through expanding their CFO role or by becoming a CEO.More than half said they aspire to a CEO role the top choice forall sectors except technology, where joining a larger company ledthe responses. Roughly a quarter of CFOs would also consider achange for a bigger company.
Relatively few leading CFOs are looking for a lower pressure role(only 10%), and even fewer for a more stable company (less than8%). Roughly 25% of all CFOs said they would consider a move forbetter pay and benefits, and for a better work-life balance.
A quarter also said they are contemplating retirement as their nextcareer move including nearly 45% in retail and wholesale.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Elevated role (e.g., CEO)
Expanded CFO role
Better work/life balance
Better pay and benefits for similar role/responsibility
Retirement
Bigger company
Higher-growth company
Better culture
Different form of ownership
Different industry
Lower stress/pressure
Other
More stable company
Percent of respondents who placed each option in their top three
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CFO career
Personal sounding boards
CFO use of internal sounding boards is rational and necessary
Member of own staff: 75%
Peer within company: 69%
CEO: 69%
CFOs overwhelmingly depend on internal networks to test theirthinking. They are comfortable reaching out not only to their ownstaff and peers, but also to their chief executives.
Internal interaction significantly eclipses utilization of externalresources. Only 24% use external CFO peers as sounding boards,and less than 10% utilize each of the external specialists.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Percent of respondents who placed each option in their top three
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Finance organization
As operations and results stabilize,finance organizations are challenged toinfluence organizational decision-making
Top challenges
Finance organizations are being pushed to directly and indirectlycontribute to good business decisions
Influencing business strategy and operating priorities: 57%
Providing metrics, information, and tools needed for sound
business decisions: 54% Supporting a major change initiative: 30%
Allocating financial resources to maximize ROI: 29%
The top challenges for finance organizations are primarily forward-looking. Facilitating and influencing decisions around businessstrategy and operational priorities is the dominant challenge, withCFOs expected to contribute both directly through personalparticipation and insight and indirectly by providing information,
analysis, and metrics. This trend is dominant across seven of theeight industries whose CFOs were surveyed. Allocating financialresources and forecasting and reporting business results are othersubstantial forward-looking challenges, each cited by more than aquarter of CFOs.
Roughly a third of finance organizations are challenged insupporting major change initiatives. The retail and wholesale andhealth care and pharma sectors cite the most prevalent challenges
in this area.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Influencing business strategy and operational priorities
Providing metrics, information, and tools needed for sound business decisions
Supporting a major change initiative (e.g., M&A, IT systems change, IPO)
Allocating financial resources to maximize ROI
Forecasting and reporting business resultsEnsuring investments achieve desired business outcomes
Ensuring funding, liquidity, and acceptable costs of capital
Ensuring compliance with financial reporting and control requirements
Addressing changes in tax laws and/or accounting standards
Securing and retaining finance talent
Managing finance organization's costs
Meeting service levels
Communicating with external stakeholders
Other
Percent of respondents who placed each option in their top three
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Finance organization
Measures of bottom-line operational performance
Earnings are still the benchmark performance metric
Despite the perceived shortcomings of performance measuresbased on income statements, earnings (both current and projected)dominate when it comes to measuring operational performance.More than 60% of CFOs report a heavy focus on earnings-basedmetrics, with less than one-third using economic measures such asROIC1 and CFROI2.
Among economic performance measures, ROIC was the most
frequently cited at 10%. Only the TME sector displays a biastoward economic measures (mostly ROI and ROIC) at 55%, withretail and wholesale and manufacturing just behind at 40%.
There does seem to be a correlation with company size: companiesover $10 billion (USD) in annual revenues cite economic measures(especially ROIC) at roughly triple the rate of companies $5 billionor less. Also, private companies appear more inclined than publiccompanies to use economic metrics perhaps because they arenot as pressured for quarterly earnings projections.
1 Return on Invested Capital
2 Cash Flow Return on Investment
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Economic measures
Earnings-based measures
Bottom-line measure of companyoperational performance
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Finance organization
Shifts in capital structure
Despite turmoil in credit markets and de-leveraging across theglobal economy, most CFOs are satisfied with their current mix ofdebt and equity.
Sixty percent of CFOs do not expect their capital structures tochange over the next year. For some, there may be a belief thatthere is no need to make adjustments because current capitalstructures successfully weathered recent storms, becausecompanies believe they can absorb the risk of higher interest rates(and current rates are as good as it gets), or because other factors
are simply more important right now. For others, it may be thecase that their companies have already changed their capitalstructures to account for new capital market realities.
Approximately 23% of CFOs expect a moderate or strong shifttoward equity, and 16% a shift toward debt. Manufacturing andenergy and resources companies are the most likely to shift towardequity at 35% and 33%, respectively. Manufacturers are also themost likely to shift toward debt (30%), behind the services sector at
33%.
Please note that there were only nine responses to this question for the services industry.
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Strong shifttoward equity,
6%
Moderate shifttoward equity,
17%
No significantchange, 60%
Moderate shifttoward debt,
13%
Strong shifttoward debt, 3%
Impact of the downturn on levels of corporate debt and equity
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Company
Despite widespread change in a stabilizing economy,CFOs are mostly optimistic about their companies
prospects
Top challenges
Companies are challenged to get their feet back underneath themas their economies stabilize
Improving or maintaining margins: 59%
Framing and adapting strategy: 58%
Prioritizing investments: 45%
CFOs indicate a heavy focus on improving and maintaining marginsas their companies and economies emerge from two years ofturmoil. Their other key challenges are adjusting their strategiesand determining where to make investments. (Remember, strategicambiguity is a top career concern for CFOs as well.)
Challenges around adapting strategies are particularly strong in the
technology, energy and resources, TME, and financial servicessectors with roughly 70% of CFOs citing this challenge. Marginchallenges are particularly evident in the manufacturing and healthcare and pharma sectors, where 75% of CFOs cite this challenge.Prioritizing investments is a consistent challenge for all sectorsexcept health care and pharma.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Improving/maintaining margins
Framing and/or adapting strategy
Prioritizing investments
Addressing government policy and regulation
Talent (availability and cost)
Raising/maintaining customer demand
Managing operations and supply chain risks
Managing assets and working capital
Sourcing capital (availability and cost)
Morale and staff reductions
Projecting and reporting results
Other
Managing corporate responsibility and sustainability
Percent of respondents who placed each option in their top three
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Company
Own-company optimism
For reasons both internal and external, CFOs have growingoptimism about their companies
CFO optimism has improved over the past quarter, with nearly two-thirds of those surveyed saying they are more optimistic about theircompany's prospects. In explaining their improved optimism, 37%cite primarily improvements in external conditions and 27% citeprimarily internal improvements. Fewer than one in five CFOs isless optimistic.
The manufacturing, technology, and TME sectors lead the way withroughly 80% of CFOs citing improved optimism.
Health care and pharma show less optimism and moreambivalence but did not indicate particularly high pessimism.
Energy and resources show the greatest trend toward pessimism,with 31% of CFOs indicating lower optimism driven by externalfactors.
Companies over $10 billion in annual revenues are much morelikely to anticipate no change than the rest and are much moreoptimistic than pessimistic when there is a change.
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less optimistic, primarilydue to external factors (e.g.,economy, industry, andmarket trends)
Less optimistic, primarilydue to internal/company-specific factors (e.g.,products/services,operations, financing,
assets)
No notable change
More optimistic, primarilydue to internal/company-specific factors (e.g.,products/services,
operations, financing,assets)
More optimistic, primarilydue to external factors (e.g.,economy, industry, andmarket trends)
Company optimism compared to last quarter
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Company
Companies are loosening their purse strings
On the whole, CFOs are projecting dividends to rise 6.5% andcapital spending to rise 12%, with high variation across industries.This reinforces companies general optimism regarding operational
performance and may also indicate broader stabilization ofcompany financing.
Consistent with their strong earnings expectations, manufacturingCFOs are projecting 18% increases in dividends and 14%increases in capital spending. Strong technology sector earningsare not expected to translate into dividends, but are projected to
boost capital spending by 13%.
Energy and resources is the sector projecting the lowest dividendincrease at under 2%, but it still projects capital spending increasesof nearly 18%.
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0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Dividends Capital spending
Dividends and capital spending (year-over-year change)
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Company
Employment will be held in check
Despite the positive earnings outlook, CFOs project only modestincreases in employment. The number of domestic personnel isprojected to increase just 3%, which roughly matches the projectedchange in offshore personnel and the use of offshore third-partypersonnel. The TME sector projects a 12% increase in domesticpersonnel.
Where employment is projected to grow, offshore employment willoutpace domestic hiring. Aside from the anomalous TME sector,the manufacturing and health care and pharma sectors project the
highest domestic employment gains at 4% and 5%, respectively,and also the largest gains in employment abroad (8% and 7%).Energy and resources CFOs project a slight decline in domesticemployment. The technology and manufacturing sectors project thehighest increase in outsourced/offshore labor at 8% and 5%,respectively.
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0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Number of domestic personnel
Number of offshore personnel (internal company personnel)
Use of outsourced/offshore third party services (contracted personnel)
Projected employment increases (year-over-year)
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Company
Strategic focus
Revenue growth and cost reduction drive the agenda
Optimism and forward-looking sentiment is evident in companiesstrategic focus as well. Nearly 36% of companies' strategic focus ison revenue growth for the year ahead, with only the technology(50%) and energy and resources (22%) sectors showingsubstantial variation from the average.
Twenty eight percent of companies' strategic focus is on costreduction, split roughly evenly between direct cost reduction andoverhead cost reduction. All industries are within approximately fourpercentage points of this average, with energy and resources thelowest at 24%.
Asset efficiency (9%), capability development (13%), andfunding/liquidity (11%) split the remaining third of strategic focus,and it is within these areas where some of the most significantindustry differences lie. For example, asset efficiency appears to bea somewhat stronger focus for industries with high fixed assets,inventory, and receivables (manufacturing, energy and resources,
TME) and lower for low-asset industries (technology, financialservices). Financing and liquidity is in the 4% to 6% range fortechnology and services, but in the 15% to 21% range formanufacturing and energy and resources.
.
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0
5
10
15
20
25
30
35
40
Revenue growth
Direct cost reduction
Overhead costreduction
Asset efficiency
Capabilitydevelopment
Financing andliquidity
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Industry
Industry optimism
Very little pessimism regarding industries prospects
Across industries, half of CFOs are more optimistic about theirindustries than they were a quarter ago, with 37% unchanged andthe balance (only 13%) less optimistic. Leading the pack are thetechnology and TME sectors at 73% and 64% more optimistic,respectively. Financial services changed the least, with 54%unchanged and 33% of CFOs more optimistic this quarter. Energyand resources was strongly split, with 47% more optimistic and20% less optimistic. This could reflect differing outlooks of thebusiness types within the sector (e.g., petroleum companies versus
utilities).
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Considerablyless optimistic
Less optimistic
No change
More optimistic
Considerably
more optimistic
Optimism regarding your firms industry
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Economy
All eyes on government
Top challengesPolicy decisions are top of mind
Social policy/spending/investment: 57%
Environmental policy: 34%
Currency exchange rates: 34%
Unemployment: 31%
Corporate tax policy: 28%
Capital cost and availability: 28%
The top economic challenges voiced by CFOs highlight the attentioncompanies are paying to increased government regulation. More thanhalf of all CFOs name social policy, spending, and investment in their
top three concerns, and six of the eight industries name it in their toptwo. More than 90% of health care and pharma CFOs name social policya top challenge, and nearly 70% of financial services CFOs do the same.
The importance of environmental policy is clear, but its high placement in
cross-industry results is substantially driven by the 100% of energy andresource CFOs who name it a top concern. Unemployment, currencyexchange rate, and capital cost/availability challenges are secondary topolicy challenges for many industries.
Currency exchange rate challenges are stronger in Canada and Mexicothan in the US, as are concerns about inflation. Social policy challengesare greater in the US and Mexico than in Canada, and the US is the mostchallenged by environmental policy. Accounting, reporting, and controls
policy is a stronger challenge in Canada than in the US and Mexico.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Social policy/spend/invest (health care, education, infrastructure, etc.)
Environmental policy (regulation, carbon reporting/tax, etc.)
Currency exchange rates
Unemployment
Capital cost/availability
Corporate tax policy
Accounting/reporting/controls policy
Inflation
Intellectual property policy
Personal income tax policy
Other
International trade policy
Military/defense policy
Percent of respondents who placed each option in their top three
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Appendix
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CategoryExpected Net
Change YOY
Sales 7.94%
Earnings 18.00%
Wages and salaries 3.00%
Employee benefits 3.79%
Non-labor input costs 3.71%
Dividends 18.20%
Capital spending 14.00%
Number of domestic
personnel 3.88%
Number of offshore
personnel 7.81%
Use of outsourced/offshore third party
services 5.06%
Manufacturing
Sample size: 20
Economy Economy challenges: High for currency exchange rates (45%); highest for
capital cost/availability (40%); below average for socialpolicy/spend/investment (40%); average for environmental policy (35%) andcorporate tax policy (30%); highest for international trade policy (25%)
Impact of US health care reform: Average for decrease in benefits toemployees (26%) and high for increased benefits to employees (25%); lowimpact on executive compensation (11%); high impact on tax planning (37%)
Industry Industry challenges: Average around pricing trends (55%) and market
growth (45%); highest for foreign competition (35%) and input prices (35%);above average for excess inventory/capacity (25%) and M&A (25%); amonglowest for new competitive tactics (10%)
Impact of governments response to economic turmoil: Among highest forneutral (55%); highest for positive (30%); lowest for negative (15%)
Optimism regarding industry: High optimism (60%); low pessimism (5%)
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Explanatory note: Relative terms like highest, low, and above average
denote comparisons to other industries, not comparisons to other challenges.
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Retail and wholesale
Company
Company challenges: Highest for prioritizing investments (56%) and among highest for talent availability/cost (44%); below averagearound improving/maintaining margins (56%); lowest around framing/adapting strategy (39%); by far the highest around managing
assets and working capital (33%); lowest for managing operations and supply chain risks (6%) Company optimism: Highest optimism for internal reasons. Optimism due to internal factors (50%) and external factors (11%); less
optimistic due to external factors (22%) and internal factors (6%)
Projected operating results: Lowest sales expectations; relatively low earnings expectations (3rd lowest); high dividendsexpectations (2nd highest behind manufacturing)
Finance Organization
Finance organization challenges: Average for influencing business strategy and operational priorities (56%); below average around
providing metrics, information, and tools needed for sound business decisions (50%); among highest around supporting major changeinitiatives (39%) and allocating financial resources to maximize ROI (33%); among lowest for ensuring funding, liquidity, and cost ofcapital (11%)
Measure of operational performance: Primarily earnings, with some ROIC
Change in debt-to-equity: One of least likely industries to make a shift (only 27%), roughly split equally between shifting toward debt(11%) and toward equity (17%)
Career
Career concerns: Below average around major change initiative (39%); average around strategic ambiguity (39%); highest aroundexcessive workload/responsibilities (33%) and highest around expansion of role into uncomfortable areas (21%); low around changingregulatory requirements (28%) and pressures of poor company performance (17%)
CFO time allocation: Average
CFO reasons to change roles/company: Average for elevated role (56%); highest for retirement (39%); above average forexpanded CFO role (33%); average for work/life balance (28%); among least likely to shift to different industry for better culture ordifferent ownership structure (6%)
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CategoryExpected Net
Change YOY
Sales 22.00%
Earnings 48.64%
Wages and salaries 3.53%
Employee benefits 2.64%
Non-labor input costs 7.36%
Dividends 2.20%
Capital spending 13.36%
Number of domesticpersonnel 2.75%
Number of offshorepersonnel 6.30%
Use of outsourced/offshore third partyservices 7.60%
Technology
Sample size: 11
Economy Economy challenges: Average for social policy/spend/investment (55%) and
highest for currency exchange rates (55%); highest for intellectual propertypolicy (36%); lowest for accounting/reporting/controls policy and inflation (both0%)
Impact of US health care reform: One of highest for decreasing benefits toemployees (36%) and low for increasing benefits to employees (10%); lowimpact on executive compensation (10%); moderate impact on tax planning(20%)
Industry
Industry challenges: Highest for pricing trends (82%) and new competitivetactics (36%); among lowest for market growth (36%); high for M&A (27%) andexcess capacity/inventory (27%); by far lowest for industryregulation/legislation (9%), foreign competition (9%), and availability ofpeople/skill sets (0%)
Impact of governments response to economic turmoil: Highest for neutral(73%); more negative (18%) than positive (9%)
Optimism regarding industry: Most optimistic industry (73%); littlepessimism (9%)
32 CFO Signals
Explanatory note: Relative terms like highest, low, and above average
denote comparisons to other industries, not comparisons to other challenges.
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CategoryExpected Net
Change YOY
Sales 10.87%
Earnings 15.36%
Wages and salaries 3.77%
Employee benefits 4.07%
Non-labor input costs 2.54%
Dividends 1.79%
Capital spending 17.50%
Number of domesticpersonnel -0.21%
Number of offshorepersonnel 2.00%
Use of outsourced/offshore third partyservices 0.64%
Energy and resources
Sample size: 15
Economy Economy challenges: Highest for environmental policy (100%) and capital
cost/availability (40%); among highest for accounting/reporting/controls policy(27%); lowest for social policy/spend/investment (20%)
Impact of US health care reform: Around average for decreasing benefits toemployees (21%) and very low for increasing benefits to employees (0%); lowimpact on executive compensation (14%); moderate impact on tax planning(21%)
Industry Industry challenges: Second-highest for industry regulation/legislation (80%)
after financial services; among lowest for pricing trends (40%); high for excesscapacity/inventory (27%) and input prices (27%); lowest for market growth(27%) and lowest for new competitive tactics (7%)
Impact of governments response to economic turmoil: Among lowest forneutral (40%); highest for negative (53%); lowest for positive (7%)
Optimism regarding industry: Mostly optimistic (54%); less pessimism(23%)
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Explanatory note: Relative terms like highest, low, and above average
denote comparisons to other industries, not comparisons to other challenges.
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Energy and resources
Company
Company challenges: Highest around framing and/or adapting strategy (73%) and addressing government policy and regulation(53%); average for prioritizing investments (47%); highest in sourcing capital (20%) and projecting/reporting results (20%); lowest
around improving margins (27%) and raising/maintaining customer demand (7%) Company optimism: Among least optimistic of industries. Optimistic due to internal factors (27%) and external factors (20%); less
optimistic due only to external factors (27%).
Projected operating results: Highest increase in wages and salaries; only industry predicting a decrease in domestic personnel
Finance Organization
Finance organization challenges: Highest around providing metrics, information, and tools needed for sound business decisions(67%) and average around influencing business strategy and operational priorities (53%); among highest in ensuring funding,
liquidity, and acceptable costs of capital (27%); highest around meeting service levels (27%); lowest for forecasting/reportingbusiness results (0%)
Measure of operational performance: Mostly EPS with some ROE and ROIC
Change in debt-to-equity: Significant likelihood of making a shift (around 40%), but among highest in shift toward equity (33%);minor shift toward debt
Career
Career concerns: Highest for changing regulatory requirements (53%) and pressures from poor company performance (47%);
among highest around major change initiative (47%) and strategic ambiguity (40%); highest for insufficient support staff (33%);among lowest for internal power struggles and insufficient political influence (both 13%)
CFO time allocation: Average
CFO reasons to change roles/company: Highest for elevated role (80%), better work/life balance (47%), and expanded CFO role(40%); among highest for higher pay/benefits for similar role (33%); lowest for higher-growth company (7%) and better culture (0%)
35 CFO Signals
-
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36/64
CategoryExpected Net
Change YOY
Sales 6.90%
Earnings 15.65%
Wages and salaries 2.95%
Employee benefits 3.04%
Non-labor input costs 1.86%
Dividends 3.55%
Capital spending 7.43%
Number of domesticpersonnel 0.68%
Number of offshorepersonnel 0.35%
Use of outsourced/offshore third partyservices 1.35%
Financial services
Sample size: 24
Economy Economy challenges: Among highest for social policy/spend/invest (67%)
and unemployment (38%); highest around accounting/reporting/controls policy(38%); by far the highest for personal income tax policy (29%); roughlyaverage for environmental policy (21%)
Impact of US health care reform: Average for decreasing benefits toemployees (25%) and very low for increasing benefits to employees (0%); lowimpact on executive compensation (8%); moderate impact on tax planning(29%)
Industry
Industry challenges: Highest for industry regulation/legislation (83%); amonghighest for market growth (58%) and pricing trends (42%); second-highest forchanging cost structures (21%); among lowest for new competitive tactics(8%). One of the most pessimistic when it comes to industry impact ofgovernment response to economic crises probably because of bankingreform fallout.
Impact of governments response to economic turmoil: Among lowest for
neutral (38%); more negative (38%) than positive (25%) Optimism regarding industry: One of most neutral (57%); more optimistic
(35%); more pessimistic (9%)
36 CFO Signals
Explanatory note: Relative terms like highest, low, and above average
denote comparisons to other industries, not comparisons to other challenges.
-
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37/64
-
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38/64
CategoryExpected Net
Change YOY
Sales 11.22%
Earnings 11.67%
Wages and salaries 3.59%
Employee benefits 5.12%
Non-labor input costs 3.67%
Dividends 5.40%
Capital spending 12.50%
Number of domesticpersonnel 5.06%
Number of offshorepersonnel 7.44%
Use of outsourced/offshore third partyservices 4.47%
Health care and pharmaceuticals
Sample size: 19
Economy Economy challenges: Highest for social policy/spend/invest (95%) andintellectual property policy (32%); among highest foraccounting/reporting/controls policy (32%); average for environmental policy(32%); among lowest for currency exchange rates (16%) and unemployment(11%)
Impact of US health care reform: Most neutral, below average fordecreasing benefits to employees (17%) and for increasing benefits toemployees (6%); low impact on executive compensation (12%); moderateimpact on tax planning (24%)
Industry
Industry challenges: Among highest for pricing trends (58%); high forindustry regulation/legislation (58%) and market growth (53%); among highestfor new market entrants (32%); among lowest for excess capacity/inventory(11%) and availability of people/skill sets (5%)
Impact of governments response to economic turmoil: Lowest for neutral(37%); second-highest for negative (47%) after energy and resources; among
lowest for positive (16%) Optimism regarding industry: Mostly optimistic (44%); lower pessimism
(21%)
38 CFO Signals
Explanatory note: Relative terms like highest, low, and above average
denote comparisons to other industries, not comparisons to other challenges.
-
8/6/2019 Us Cfo Cfo Signals 080410
39/64
-
8/6/2019 Us Cfo Cfo Signals 080410
40/64
-
8/6/2019 Us Cfo Cfo Signals 080410
41/64
-
8/6/2019 Us Cfo Cfo Signals 080410
42/64
-
8/6/2019 Us Cfo Cfo Signals 080410
43/64
-
8/6/2019 Us Cfo Cfo Signals 080410
44/64
44 CFO Signals
Detailed findings
-
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45/64
CFO careers Top job stresses
Question: What are your top job stresses?
45 CFO Signals
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Major change initiative (e.g., M&A, IT systems change, IPO) Changing regulatory requirements
Strategic ambiguity Pressures from poor company performance
Excessive workload/responsibilities Poor quantity/quality/reliability of information
Internal power struggles Insufficient internal political influence/authority
Insufficient support staff (skills or number) Other
Expansion of job role/responsibility into areas of less comfort Insufficient pay
Challenges with external service providers Personal liability
-
8/6/2019 Us Cfo Cfo Signals 080410
46/64
-
8/6/2019 Us Cfo Cfo Signals 080410
47/64
CFO careers Reasons to make a change
Question: What circumstances would make you most likely to change your role/company?
47 CFO Signals
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Elevated role (e.g., CEO) Expanded CFO role Better work/life balance
Better pay and benefits for similar role/responsibility Retirement Bigger company
Higher-growth company Better culture Different form of ownership
Different industry Lower stress/pressure Other
More stable company
-
8/6/2019 Us Cfo Cfo Signals 080410
48/64
-
8/6/2019 Us Cfo Cfo Signals 080410
49/64
Finance organization Top challenges
Question: What are your finance organizations top three current challenges?
49 CFO Signals
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Influencing business strategy and operational priorities Providing metrics, information, and tools needed for sound business decisions
Supporting a major change initiative (e.g., M&A, IT systems change, IPO) Allocating financial resources to maximize ROI
Forecasting and reporting business results Ensuring investments achieve desired business outcomes
Ensuring funding, l iquidity, and acceptable costs of capital Ensuring compliance wi th financial reporting and control requirements
Addressing changes in tax laws and/or accounting standards Securing and retaining finance talent
Managing finance organization's costs Meeting service levels
Communicating with external stakeholders Other
-
8/6/2019 Us Cfo Cfo Signals 080410
50/64
Finance organization Centralization vs. decentralization
Question: How is responsibility for the following finance processes distributed within your organization?
50 CFO Signals
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Highly central ized Mostly centralized Hybrid (or even) Mostly decentral ized Highly decentral ized
-
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51/64
Finance organization Impact of downturn on capital structure
Question: To what extent do you believe the downturn will cause your firm to shift toward lower levels ofcorporate debt and higher levels of equity?
51 CFO Signals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Strong shift toward debt
Moderate shift toward debt
No significant change
Moderate shift toward equity
Strong shift toward equity
-
8/6/2019 Us Cfo Cfo Signals 080410
52/64
Finance organization Operational performance metric
Question: What is your company's bottom-line measure of operational performance (excluding metrics drivenby share price)?
52 CFO Signals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
RONA
CROCI
CFROI
ROCE
ROIC
ROI
Economic Margin
EVA
ROE
EPS
Earnings or Earnings Growth
-
8/6/2019 Us Cfo Cfo Signals 080410
53/64
C O i i di
-
8/6/2019 Us Cfo Cfo Signals 080410
54/64
Company Optimism regarding company
Question: How does your optimism regarding your company compare to last quarter?
54 CFO Signals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less optimistic, primarily due to external factors (e.g.,
economy, industry, and market trends)
Less optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations,financing, assets)
No notable change
More optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations,financing, assets)
More optimistic, primarily due to external factors (e.g.,
economy, industry, and market trends)
-
8/6/2019 Us Cfo Cfo Signals 080410
55/64
I d t T h ll
-
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56/64
Industry Top challenges
Question: What are your company's top three industry challenges?
56 CFO Signals
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Industry regulation/legislation Pricing trends Market growth Mergers and acquisitions
Overcapacity/excess inventory New competitive tactics Input prices Availability of people/skill sets
Foreign competition Changing cost structures New market entrants (domestic) Product substitutes
Other
I d t I t f li h
-
8/6/2019 Us Cfo Cfo Signals 080410
57/64
Industry Impact of policy changes
Question: For my industry, government responses to recent economic crises are
57 CFO Signals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Stronglynegative
Negative
Neutral/mixed
Positive
Stronglypositive
I d t O ti i
-
8/6/2019 Us Cfo Cfo Signals 080410
58/64
Industry Optimism
Question: How does your firms optimism regarding your industry compare to last quarter?
58 CFO Signals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Considerably less optimistic
Less optimistic
No change
More optimistic
Considerably more optimistic
E T h ll
-
8/6/2019 Us Cfo Cfo Signals 080410
59/64
Economy Top challenges
Question: What are your company's top three ECONOMY challenges?
59 CFO Signals
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Social policy/spend/invest (health care, education, infrastructure, etc.) Environmental policy (regulation, carbon reporting/tax, etc.)
Currency exchange rates Unemployment
Capital cost/availability Corporate tax policy
Accounting/reporting/controls policy Inflation
Intellectual property policy Personal income tax policy
Other International trade policy
Military/defense policy
Economy US health reform impact
-
8/6/2019 Us Cfo Cfo Signals 080410
60/64
Economy US health reform impact
Question: What will be the effect of US health care reform on your business?
60 CFO Signals
0%10%20%30%40%50%60%70%80%90%
100%Strongly disagree
Disagree
Neutral
Agree
Strongly agree
0%
10%20%
30%
40%
50%60%
70%
80%90%
100%Strongly disagree
Disagree
Neutral
Agree
Strongly agree
0%10%20%30%40%50%60%
70%80%90%
100%Strongly disagree
Disagree
Neutral
AgreeStrongly agree
0%10%20%30%40%50%60%
70%80%90%
100%Strongly disagree
Disagree
Neutral
AgreeStrongly agree
Decrease health benefits we provide to some employees Increase health benefits we provide to some employees
Change our executive compensation packages Increase our strategic tax planning
-
8/6/2019 Us Cfo Cfo Signals 080410
61/64
Demographics
-
8/6/2019 Us Cfo Cfo Signals 080410
62/64
Demographics
N=136
62 CFO Signals
Lessthan$1B
($US),21.8%
$1B -$5B,
39.1%
$5.1B -$10B,18.0%
Morethan
$10B,21.1%
Public,73.1%
Private,26.9%
US,64.9%
Canada, 25.4%
Mexico,9.7%
Manufac-turing,14.9%
ConsumerProducts /Services,
13.4%
Tech,8.2%
Energy
andResources
, 11.2%
FinancialServices,
17.9%
HealthCare /
Pharma,14.2%
Telecom /Media /
Entertain.,8.2%
Services,6.7%
Other,5.2%
No
(HoldingCompany/
Group)85.0%
Yes(Subsid.of North
AmericanCompany)
7.5%
Yes(Subsid.of Non-North
AmericanCompany)
7.5%
Annual Revenues Ownership Country
Industry Subsidiary Company
-
8/6/2019 Us Cfo Cfo Signals 080410
63/64
-
8/6/2019 Us Cfo Cfo Signals 080410
64/64
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting,business, financial, investment, tax, legal or other professional advice or services. This publication is not a substitute for suchprofessional advice or services, nor should it be used as a basis for any decision or action that may affect your business.Before making any decisions that may affect your business, you should consult a qualified professional advisor.
As used in this survey, Deloitte means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a
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