What a difference a year makes. We finished 2010 cautiously optimistic that we were putting the recession behind us, looking forward to a stable, growing, global economy. Now, as 2011 is coming to a close, many North American and global companies again are grappling with the impacts of continuing market volatility, economic instability and the threat of a double dip recession.
How most CFOs are responding to this rocky ride is elucidated by their responses over the past year to Deloitte's CFO Signals survey series. Each quarter, CFO Signals tracks the thinking and actions of CFOs representing many of North America's largest companies (three quarters are from companies with $1 billion or more in annual revenues). Throughout the year we observed that even though different issues came into play each quarter, talent concerns continue to be top of mind. Let's "run the tape" and revisit the CFO's talent agenda and its evolution over the 12 months.
The last quarter of 2010 seemed to mark the turning point for the economic recovery and at the beginning of 2011 CFOs were gearing up for the post-recession world. Companies appeared to be shifting their focus away from cost cutting and toward revenue growth, with new products and services, newly-acquired entities, and foreign markets seen as major growth drivers. Moving into the first quarter of 2011, the survey showed potential investment and execution missteps were among CFOs' top worries, but they were also increasingly concerned about attracting and retaining the talent necessary to execute on these growth strategies.
In the first quarter of 2011, talent availability rose to a top-four concern and with the finance organization's depth and scope of responsibility growing, CFOs recognized that there was clearly a need for new, highly skilled talent. In the 2011 Q1 survey, 45% of surveyed CFOs said they were actively recruiting. However, identifying skilled finance talent remained elusive; one out of three surveyed CFOs said they were having trouble filling open positions and nearly 60% were taking new steps to keep top performers.
The availability of talent and its critical role in supporting and driving growth continued as a top concern in Q2. Despite continuing positive financial expectations, the survey showed that CFOs' optimism dropped, and approximately half of the rising pessimism was driven by internal concerns. Nearly 56% of CFOs reported a significant shift toward major change initiatives -- driven by factors including a rise in M&A activity, shifts in organization strategies and structures, and a host of new investments.
This trend -- moving from optimism early in the year towards a less rosy view -- continued in the third quarter. The combined impacts of the U.S. debt deal, the downgrading of U.S. debt ratings by Standard &Poor's (S&P), rising sovereign debt troubles in the Eurozone, global economic malaise, and governments' struggles to find solutions rattled CFOs and turned sentiment solidly in the direction of pessimism for the first time during the year. Despite their rising concerns, the surveyed CFOs appeared pragmatic and focused on both near- and longer-term solutions.
Extraordinary recent volatility is now leading many companies, CFOs and business executives generally to battles, and change, on multiple fronts. As these pressures create the need for broader and deeper assistance from CFOs and their finance organizations, the result is often rising and competing demands for limited finance experience. While CFOs and finance organizations have clearly not ceded responsibility for any of their traditional functions, they appear to be taking on broader and deeper roles in the wake of considerable capital-markets and economic turmoil. As changing business environments force companies to evolve and focus their strategies, select and execute major change initiatives, and manage a broad range of risks, CFOs appear to be playing bigger and more formal roles in each of these areas. CFOs are now frequently responsible for a broad range of functions, including investor/public relations; strategic planning; corporate development/M&A; IT/systems; risk/compliance; and internal audit.
While few CFOs indicate formal authority for customer service/support, marketing, sales, or pricing, feedback from survey comments and CFO forums indicate that the finance organization is being involved earlier and more frequently in decisions relating to these areas. In summary, as the going gets tough, the demands on CFOs and their finance teams get tougher. And with these tough demands come trying times for finance leaders and talent.
So as 2011 comes to a close we now see that the year may resemble the month of March, only in reverse. We started the year expecting a lamb and instead the economy is more like an untamed lion. Throughout the year, the challenges facing CFOs have evolved from planning for the upturn, to managing regulatory, compliance, growth and integration initiatives, and now back to the vagaries of the long, uneven, slow recovery.
A constant theme through all this has been pressures on finance leaders to continue to motivate, attract and (where possible) develop finance talent at every level. In 2011 the finance and talent agenda has been a roller coaster. The outlook for 2012 may be no different. In this environment, despite high unemployment, skilled finance talent and leaders are still in short supply. Holding on to the finance talent you have, and finding ways to develop them to grow and take on new roles and responsibilities, is likely to be a front burner issue in 2012.
Jeff Schwartz is a principal with Deloitte Consulting LLP's Human Capital practice. He is a regular contributor to Business Finance, sharing his perspective on executive talent development, where the next generation of finance leaders will come from and some of the best practices organizations are applying in addressing these issues.