Concerns about fiscal cliff negotiations cut deeply into CFO sentiment in the fourth quarter of 2012, helping to put a damper on the outlook for a range of company metrics, including capital spending and hiring, according to Deloitte's most recent CFO Signals survey. The quarterly survey tracks the thinking and actions of CFOs representing North American companies averaging more than $5 billion in annual revenue.

Although only one in five CFO respondents expected Washington to "go over the cliff," worries around both the risks and implications of the political stand-off over taxes and spending cuts caused CFOs to temper expectations on several fronts in the year ahead. Indeed, their outlook for capital investment growth sank to a new survey low, at 4.2%*, compared with 4.6%* the previous quarter. CFOs also scaled back expectations of R&D investment growth to its lowest rate in the survey's 11-quarter history, at 2.7%*, from 3%* in the previous quarter. Expectations for 2%* spending growth in marketing/advertising represented another survey low. (*Estimates are adjusted averages to reduce the effect of outliers.)

The view on employment expectations rose only slightly, with domestic hiring rising to just 1%, up slightly from 0.6%* in the third quarter. Meanwhile, 28% of CFOs -- a new survey high -- indicated employee cuts were on the horizon.

Sales and Earnings Outlooks Show Promise

CFOs' positive year-over-year projections, while modest, may bode well for what will happen as we get better clarity on some fronts. In addition, the picture brightens when looking at their sales and earnings outlooks. Expectations for year-over-year sales growth rose to 5.6%* in the fourth quarter, up nearly a full percentage point from the third quarter. Expectations for earnings growth ticked higher as well, to 10.9%* from 8%* in the previous quarter.

A New Focus on Tax Policy

Worries about the fiscal cliff put a new focus on individual and corporate tax policy for many CFOs, although they ranked social policy, including healthcare, education and infrastructure, as their top economy-level concern. When asked, "Which policy area should be lawmakers' first priority for providing better clarity," CFOs ranked tax policy second, behind fiscal/spending policy and ahead of regulatory policy.

Concern over Euro Crisis Persists

The eurozone crisis still ranked in CFOs' top three "most worrisome risks," but expectations for a continuing status quo may be stifling preparation for other scenarios. In fact, about 60% of CFOs indicated no plans for addressing changes in the European situation -- either because they have planned only for the status quo, or because they have no specific plans for any particular scenario. There appears to be little belief that Germany's departure from the euro or the total collapse of the euro is the most likely scenario.

New Goal: Improving Finance's Strategic Planning Capabilities

CFOs' expanding role as strategists is prompting them to seek improvement in finance's strategic planning capabilities, while also shaping how they want to be perceived by their CEOs, peers and finance teams. While CFOs appear mostly satisfied with their finance organization's capabilities in core areas such as corporate finance, treasury and audit, many indicated they are seeking improvements in competencies that support finance's strategic and facilitative roles. Topping the list of competencies where CFOs want to see finance improve are strategic planning, IT/information management, and budgeting and financial planning.

When asked about their finance organizations' top three challenges, CFOs zeroed in on influencing and enabling business decisions -- in keeping with the growing portion of time they are spending on influencing business strategy and operational priorities. Providing information and tools for business decisions remained a priority, as it has been for more than a year. The fourth-quarter results also revealed an increasing focus on financial reporting and controls requirements.

Not surprising, finance organizations were more focused in the fourth quarter on ensuring current initiatives deliver results rather than on selecting or aligning new initiatives, especially in the manufacturing, technology and services sectors. Similarly, M&A and business expansion didn't capture as much of CFOs' attention in the fourth quarter as in previous quarters.

Redefining the CFO Brand

As CFOs of large companies play broader and more visible roles, they are inevitably redefining their personal brand with their CEOs, their executive peers and their finance staff -- deliberately or not. When CFO respondents were asked how they want to be regarded by their CEOs, executive peers and finance staff, most wanted to be recognized first and foremost as strategic and business-savvy thinkers. They also want to be regarded for personal values, such as loyalty and responsibility.

Among CEOs, CFOs want to be recognized as a leader and change agent. But among peers, CFOs most often said they want to be thought of as a team player, collaborator and problem solver. When it comes to their finance staff, CFOs would like to be seen as an agenda-setter and standard-setter, but also as a mentor, motivator and coach.

Clearly, CFOs need and want to be many things to a broad range of people. This almost certainly requires CFOs to work outside their natural comfort zones and to develop formidable skills, versatility and maturity as they rise through their careers. This explains why top CFOs are in such short supply and also why succession planning is so important.

About the Survey

The Deloitte CFO Signals survey was conducted for the fourth quarter of 2012. Seventy-seven percent of the 86 CFO respondents were from companies with more than $1 billion in annual revenues, and three fourths were from publicly traded companies. Each quarterly CFO Signals report analyzes CFOs' opinions in five areas: CFO career, finance organization, company, industry and economy.

Greg Dickinson, director, North American CFO Survey, is the leader of CFO Signals, Deloitte's quarterly survey of top North American CFOs. The survey, launched in the second quarter of 2010, focuses specifically on the full range of issues facing top-flight CFOs. The goal of the survey is to facilitate the exchange of perceptions, priorities and ideas among top CFOs. Dickinson has spent 15 years helping large organizations align their operational activity, improvement efforts and measurement approaches with their business strategies. He is the founder of Deloitte's Value Initiative and led the development of Deloitte's Enterprise Value Map, a shareholder value framework utilized by many large organizations to improve linkages between operational activity and shareholder value.