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Finance chiefs are learning that job cuts and growth are, at some point, incompatible.
Kate O'Sullivan, CFO Magazine
March 1, 2011
For the first time since early 2008, finance chiefs are hiring. In the most recent Duke University/CFO Magazine Global Business Outlook Survey, our long-running quarterly study of finance executives around the world, CFOs reported that they planned to increase their full-time workforces by 2% on average over the next 12 months (see "Back in Business," January/February). A modest figure, to be sure, but nonetheless the highest expected increase since 2006.
But how confident are they in these numbers? And what other plans do they have for their workforces?
To answer these and related questions, CFO and Duke have launched a quarterly Deep Dive survey, which will delve into a single key issue uncovered by the venerable Business Outlook survey. In this inaugural edition, we focus on employment.
As it turns out, hiring plans have further strengthened since we last polled CFOs (see "Reinforcing the Workforce" at the end of this article). Finance executives now plan to boost their domestic, full-time workforces by almost 4% on average over the next 12 months, while holding temp hiring steady and scaling back planned increases in offshore outsourced staffing. More tellingly, 44% of the 418 finance executives surveyed say it is either "certain" or "very likely" that they will increase full-time employment at their companies this year compared with 2010.
For those currently employed, the picture is brightening as well. More than half of CFOs plan to dole out bigger raises this year than last year, and some 40% say bonuses will grow. Finance chiefs also plan to increase training and development budgets.
Sam Allison, vice president of finance at Murray Building Co., a small commercial construction company in Birmingham, Alabama, says the company has bucked the nationwide downward trend in the construction industry and is growing and hiring. Thanks in part to new projects from the University of Alabama hospital system and local city schools, "we're five months out on our backlog and we've been able to keep everyone busy," says Allison.
The company is considering adding another project manager, but the finance chief is wary of getting too far ahead of demand. "If we don't win any bids in the next couple of months, things could change. We're trying to avoid having to let anyone go," he says. Murray Building has hedged its bets by contracting with some site superintendents on a temporary basis, signing them on only for the duration of a particular project.
A Murky Picture
At the macro level, improvement is evident. Layoffs have declined and the unemployment rate fell to 9% in January, from 9.4% the month before. But there are nowhere near enough new jobs opening up to absorb the millions of unemployed. In January, the U.S. economy added just 36,000 jobs, according to the Bureau of Labor Statistics, well short of the 145,000 jobs economists were expecting, although a string of severe winter storms may have had an impact on hiring.
Finance chiefs, too, offer mixed views on the employment situation. More than half of CFOs report their workforces are smaller today than in mid-2008, and many are still unsure when they will be able to improve on those numbers.
One controller at a small biotechnology firm says management thought the business would come out of the recession relatively unscathed, but the company had an unexpectedly disappointing 2010. While there were no layoffs during the recession, management had to delay some planned hiring during the past year. "We didn't experience the growth we thought we would," says the controller. "We expected to increase our R&D budget last year and we just didn't."
The company's clients, which include research labs and hospitals, faced budget constraints of their own last year and cut back on the testing supplies they buy. Now, "we are being conservative in our forecasts." Still, the company will probably hire "a couple" of full-time employees this year, the controller says.
At Gibraltar Construction Group, a real estate development firm in Clearwater, Florida, CFO Kathleen Wolf describes the business as "still in survival mode." She does not expect to hire this year, and is focusing instead on cross-training existing employees to keep them busy, fill any staffing holes, and help retain her best people.
As one example, the company expanded an estimator's job duties from merely calculating the cost of future projects to a more comprehensive budgeting-and-planning role. Wolf has also charged some of the marketing staff with rethinking stalled projects and developing plans for alternative uses for the land or buildings in question. In one case, the company built a hotel in downtown Tampa on a parcel that was originally slated for condominiums.
Wolf says Gibraltar needs a number of projects to move forward before she can begin to think about hiring. In that regard she is far from alone: 66% of her peers say increasing revenue will play the greatest role in determining whether and when their companies will add workers.
But she also says her perspective on hiring has changed permanently since the financial crisis and recession. "What you look for in somebody is definitely different," she says. "And the amount of automation and virtualization we are using has decreased the need for human capital."
In other words, companies have figured out how to do more with less — forever, in some cases.
Still, despite their hard-won increases in efficiency, as finance chiefs and their fellow executives once again point their companies toward growth, many are acknowledging that they have finally reached the limit of what they can do with existing staff.
Kate O'Sullivan is a deputy editor at CFO.