A CFO Survey: Payroll Cuts Are Imminent

Our poll illustrates the hard choices finance chiefs will have to make in the coming year – and provides some candid advice for Secretary Paulson.
Marie LeoneOctober 17, 2008

More than half of the CFOs participating in a recent survey (56 percent) said they expect the credit crisis to force them to cut payroll in the coming year. Further, 57 percent anticipated slashing operating costs by more than 5 percent, while 50 percent said they predict a decline in company revenues.

The survey — which polled more than 100 executives who attended CFO magazine’s CFO Rising West conference in Las Vegas last week — included reaction from chief financial officers, vice presidents and directors of finance, and controllers.

Managing cash flow was named one of the top finance priorities for the first half of 2009 by survey participants. Forecasting and implementing adjustments was also highlighted as another key priority.

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In fact, 64 percent of the executives said they readjusted their 2009 forecasts in light of the current banking crisis. Other crisis reactions ranged from cutting expenses to reworking banking relationships. For example, 48 percent of respondents scaled back capital spending, while 40 percent strengthened their scenario-planning procedures. Further, 40 percent instituted a hiring and/or spending freeze, while 34 percent shored up credit and 21 percent changed banking relationships. Only 7 percent extended payment terms to customers.

Over the long-term, 50 percent of the executives thought the credit crunch would affect their ability to implement strategic initiatives, while 42 percent said the crisis would affect access to short-term financing.

Asked what one piece of advice they would give Treasury Secretary Henry Paulson if they got the chance, responses from finance executives ran the opinion gamut. Many called for letting the free market work, and not bailing out the banks. Others called for more banking regulation, as long as it is reasonable. “Act swiftly, face losses quickly, and put them behind us when moving forward,” wrote another respondent.

Many counseled Paulson to “think long term” and avoid short-term decisions, while others wanted to see more of a focus on small businesses and homeowners. Still others wanted to see the recovery plan defined. Several respondents asked for more honesty in communicating the plan and its success, and one finance executive simply noted: “Good luck.”