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CFOs Foresee Bleak Job Picture Until 2011

Amidst growing fears of a double dip in global economy, recent CFO surveys indicate poor employment prospects this year

Continuing with the negative business sentiment, finance executives, especially CFOs at some of the mid-sized U.S. firms, believe that their companies are still in no mood to recruit people until some time next year.

Combined with a negative hiring mood, recent CFO surveys are also highly doubtful of an economic stability, with majority of them expressing fears of a double dip in U.S. and world economies.

A survey of CFOs by Business Performance Innovation Network and Adaptive Planning Inc., a Mountain View, CA-based financial firm offering SaaS financial planning, revealed that a majority of the respondents don’t expect to see jobs growing until 2011 or later, as businesses see tighter control over budgeting, revenue recognition and cost controls without investing in higher head counts.

The 2Q10 quarterly poll found that 75 percent of the polled CFOs were pessimistic about job prospects, while 21 percent of them believed the economy would still worsen in 2H10 and head for a double dip, which is a 100 percent increase in the negative mood from the 1Q10 sentiment when only 10 percent of the surveyed CFOs felt this way.

Additionally, 46 percent said they expect a W-shaped or double-dip recovery, while 24 percent said their companies’ revenue will decrease—again a 10 percent increase from the first quarter polling.

The survey, which represented a majority of respondents from mid-market U.S. firms, said that the latest bouncing around of the major stock indices considerably below their highs for the year, along with European debt problems and the Gulf oil disaster, only add to the gloom

“People expected improvement, but clearly it is not happening as fast as they hoped,” commented Bill Soward, Adaptive Planning CEO in a recent media release.

Additionally, in the survey 60 percent reported experiencing high or very high levels of economic uncertainty. Uncertain businesses want to stay agile and gain tighter controls over their budgeting, forecasting, reporting, revenue recognition and cost-downs—not invest in higher headcount, IT infrastructure upgrades or other major commitments.

Soward suggests that there are steps financial managers should take to navigate this bumpiness. According to him, CFOs should rethink the way they plan and forecast. He believes the annual planning, forecasting and budgeting cycle is not responsive enough to rapidly changing market conditions. He thinks CFOs have to adopt more dynamic means of planning and forecasting.

Meantime, another CFO survey by Duke University in association with CFO Magazine also revealed similar CFO sentiment, with a majority of U.S. chief financial officers saying they have limited hiring plans over the next 12 months, and nearly 60 percent won’t return their staffing to pre-recession levels until 2012 or later.

The Global Business Outlook Survey asked 1,102 CFOs from a broad range of global public and private companies about their expectations for the economy, and the CFOs expected to increase domestic employment by just under 1 percent during the next 12 months. They said it may be several years before employment returns to pre-recession levels.

Likewise, in the European market, especially in the UK, the negative CFO sentiment is loud and clear. A recent study from Deloitte indicated that the recent volatility in financial markets and concerns about fiscal tightening at home and abroad have weighed on UK CFO sentiment. Optimism among UK CFOs has slumped for the second quarter running, recording a 12 month low. CFOs think there’s an increased risk of a double dip in the global economy, with 38 percent of those surveyed seeing chance of a “double dip,” up from 33 percent in the first quarter of this year.

“CFOs are more bullish about prospects for their own operating cash flow than at any time in the last two years. Financial risk appetite among CFOs has not, so far, been dented by doubts about the recovery,” the Deloitte survey said.

About fayazuddin a. shirazi