CFO Signals What North America’s top finance executives are … · 2016-09-26 · What North...

CFO SignalsWhat North America’s top finance executives are thinking – and doing

2nd Quarter 2010

2 CFO Signals

CFO Signals

CFO Signals tracks the thinking and actions of leading CFOs – representing North

America’s largest and most influential companies – every quarter. Seventy five percent

of the CFOs are from companies with more than one billion US dollars in annual

revenues. Seventy five percent are from publicly-traded companies.

Each quarterly report analyzes CFOs’ opinions in five areas: CFO career, finance

organization, company, industry, and economy.

This is the second quarter report for 2010. We invited 240 CFOs to participate, and a

total of 136 responded during the two weeks ending on May 31.

For more information about CFO Signals, please contact [email protected].

IMPORTANT NOTES ABOUT THIS SURVEY REPORT:

All participating CFOs have agreed to have their responses aggregated and presented.

Please note that this is a “pulse survey” intended to provide CFOs with quarterly information regarding their CFO peers’

thinking across a variety of topics; it is not, nor is it intended to be, scientific in its number of respondents, selection of

respondents, or response rate – especially within individual industries. Accordingly, this report summarizes findings for the

surveyed population but does not necessarily indicate economy- or industry-wide perceptions or trends. Except where

noted, we do not comment on findings for segments with fewer than ten respondents. Please see the appendix for more

information about survey methodology.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting,

business, financial, investment, tax, legal, or other professional advice or services. This publication is not a substitute for

such professional advice or services, nor should it be used as a basis for any decision or action that may affect your

business. Before making any decisions that may affect your business, you should consult a qualified professional advisor.

mailto:[email protected]

3 CFO Signals

Contents

In brief 4

Topical highlights 6

Appendix

• Industry highlights 27

• Detailed findings 44

• About this survey 61

4 CFO Signals

In brief

Optimism in a time of ambiguity

As the second quarter of 2010 draws to a close, optimism prevails. CFOs of top

North American companies are predominantly optimistic about their companies’

prospects despite considerable change and uncertainty. This optimism is prevalent

on a personal level as well, where CFOs are focused on raising their impact on

their firms.

Across industries, leading CFOs are projecting substantial growth in both revenues

and earnings (9% and 17%, respectively), while costs are expected to be held in

check. Dividends are expected to rise 6.5% and capital spending by 12%. This view

is consistent with positive trends in GDP and credit markets across the continent.

The calm and optimism in North America stands in sharp contrast to Europe, where

sovereign debt turmoil is substantially disrupting economies and capital markets.

CFO optimism shines against a backdrop of ambiguity and uncertainty – especially

around business strategies and the selection of new investments. There is a

general wariness of the increased role of governments in post-recession

economies, with CFOs in most industries already taking action to influence, plan

for, or adapt to government action. Social and environmental policy, regulation, and

health reform topped CFO lists of major challenges – not only at company and

industry levels, but also a personal career level. Moreover, CFOs frequently rank

government-related challenges ahead of other concerns like unemployment, cost of

capital, capital availability, and currency exchange rates.

Although most CFOs regard recent government actions as negative for their

industries, this skepticism does not appear to translate into dominant levels of

pessimism.

Survey highlights

CFO optimism is mostly on the rise

despite a challenging business

environment and increasing

government action

All surveyed industries project revenue

and earnings growth (9% and 17% year

over year on average, respectively)

while keeping both costs and

employment in check

Social and other policy concerns are

notable across most industries – not just

financial services, health care, and

energy

CFO job stresses and finance

organization challenges are primarily

related to growth and strategic

ambiguity

Turmoil has pulled CFOs deeper into

their operator and steward roles, and

most look forward to expanding their

work as catalysts and strategists

CFOs are much more likely to change

positions for expanded responsibility

than for any other reason

5 CFO Signals

In brief (continued)

Now that health reform is underway within the United States, CFOs generally expect

the cost of employee health care to increase – and at a rate that outpaces wage

growth. Although a large proportion of CFOs do not expect reform to significantly

affect the benefits they provide to employees, there are notable factions who expect

benefits to increase or decrease for at least some staff – and some who expect both.

Industries with high concentrations of temporary workers expect the biggest

increases in benefits, while manufacturing-oriented firms are most likely to decrease

benefits.

Despite their positive business outlook, CFOs expect only modest increases in

employment – suggesting that the productivity of current, often-reduced staffing can

support growth in at least the near term. Where there is employment growth, it will

likely be limited to particular industries and dominated by offshore hiring and

outsourcing.

At a personal level, CFOs are focused on emerging from defensive activities and

leading their companies into recovered, albeit changed, economies. They indicate

strong ambitions to increase their personal impact on their organizations – through

elevated roles (many aspire to be CEOs), through increased work as catalysts and

strategists, and through facilitating others' business decisions.

Though CFOs in different sectors have similar responsibility and ambition, they live

in distinct worlds governed to a large extent by the idiosyncrasies of their industries.

For example, technology CFOs appear more likely than most to encounter strategic

ambiguity, internal power struggles, and difficulty attracting the financial talent they

need. They are also the least likely to desire a move to CEO. Not surprisingly, CFOs

in energy and resources, financial services, and health care are considerably more

likely to be feeling the stresses of new and potential government actions.

Who participated?

Responses from top CFOs make this an

unparalleled survey group.

All participating CFOs were invited

specifically because of their experience

and industry influence.

More than 75% of this quarter’s 136 CFOs

are from companies with over $1 billion in

annual revenues – and 75% are from

public companies.

6 CFO Signals

Topical highlights

CFO career

CFOs are torn by the challenges of uncertain times

Top challenges

Change is at the heart of top CFO concerns

• Major change initiative: 44%

• Changing regulatory requirements: 38%

• Strategic ambiguity: 35%

• Pressures from poor performance: 29%

This quarter's top career concerns are predictably influenced by the

fallout of economic turmoil over the past two years. Poor

performance is creating substantial pressure on many CFOs,

especially in the technology and energy and resources sectors.

Changing regulatory requirements and other post-recession shifts

have created ambiguity around go-forward strategies, especially

within the manufacturing, energy and resources, and

telecommunications, media, and entertainment (TME) sectors.

Major change initiatives were named the top challenge and were in

the top two challenges for six of the eight industries. Technology,

TME, and services sectors are particularly affected by this

challenge.

Other notable concerns: internal power struggles 24%, excessive

workload/responsibilities 22%, poor managerial information 21%,

and insufficient internal political influence 21%.

Please note that there were only nine responses each to this question for the technology,

TME, and services industries.

7 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Major change initiative (e.g., M&A, IT systems change, IPO)

Changing regulatory requirements

Strategic ambiguity

Pressures from poor company performance

Excessive workload/responsibilities

Poor quantity/quality/reliability of information

Internal power struggles

Insufficient internal political influence/authority

Insufficient support staff (skills or number)

Other

Expansion of job role/responsibility into areas of less comfort

Insufficient pay

Challenges with external service providers

Personal liability

Percent of respondents who placed each option in their top three

CFO career

Distribution of time

Economic turmoil has required CFOs to concentrate on their

steward role

Now Desired

• Catalyst: 22% 29%

• Strategist: 20% 31%

• Steward: 34% 22%

• Operator: 24% 18%

In the aftermath of economic turmoil, CFOs are spending a large

proportion of their time as stewards within their organizations,

focused on preserving the value of their companies. This role

consumes nearly 35% of their time, while the other three roles

consume roughly 20% each.

To a large extent, CFO focus on the steward and operator roles has

crowded out activity in catalyst and strategist roles. This is

especially evident in the technology and financial services sectors,

where CFOs report spending only 38% of their time in these two

roles. The causes of time shortages in catalyst and strategist roles

varies: In financial services, extra time has gone toward the

steward role (38%). In technology, it has gone toward the operator

role (35%).

Looking ahead, CFOs would prefer to spend a total of just 40% of

their time in steward and operator roles and split the remaining 60%

equally between their catalyst and strategist roles. A notable outlier

is the financial services sector, where CFOs prefer to keep an

elevated steward role at a relatively high 26%.

8 CFO Signals

Percent of time respondents report spending

(or preferring to spend) in each role

Current Preferred

Please see slide 46 for additional information on CFO roles.

CFO career

Why CFOs would change roles

CFOs have their eye on expanded influence and the CEO role

• Elevated role: 57%

• Expanded CFO role: 30%

• Better pay and benefits: 28%

• Better work-life balance: 28%

• Retirement: 26%

A majority of top CFOs have ambitions to increase their influence,

either through expanding their CFO role or by becoming a CEO.

More than half said they aspire to a CEO role – the top choice for

all sectors except technology, where joining a larger company led

the responses. Roughly a quarter of CFOs would also consider a

change for a bigger company.

Relatively few leading CFOs are looking for a lower pressure role

(only 10%), and even fewer for a more stable company (less than

8%). Roughly 25% of all CFOs said they would consider a move for

better pay and benefits, and for a better work-life balance.

A quarter also said they are contemplating retirement as their next

career move – including nearly 45% in retail and wholesale.

9 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Elevated role (e.g., CEO)

Expanded CFO role

Better work/life balance

Better pay and benefits for similar role/responsibility

Retirement

Bigger company

Higher-growth company

Better culture

Different form of ownership

Different industry

Lower stress/pressure

Other

More stable company


CFO career

Personal sounding boards

CFO use of internal sounding boards is rational and necessary

• Member of own staff: 75%

• Peer within company: 69%

• CEO: 69%

CFOs overwhelmingly depend on internal networks to test their

thinking. They are comfortable reaching out not only to their own

staff and peers, but also to their chief executives.

Internal interaction significantly eclipses utilization of external

resources. Only 24% use external CFO peers as sounding boards,

and less than 10% utilize each of the external specialists.

10 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%


Finance organization

As operations and results stabilize,

finance organizations are challenged to

influence organizational decision-making

Top challenges

Finance organizations are being pushed to directly and indirectly

contribute to good business decisions

• Influencing business strategy and operating priorities: 57%

• Providing metrics, information, and tools needed for sound

business decisions: 54%

• Supporting a major change initiative: 30%

• Allocating financial resources to maximize ROI: 29%

The top challenges for finance organizations are primarily forward-

looking. Facilitating and influencing decisions around business

strategy and operational priorities is the dominant challenge, with

CFOs expected to contribute both directly through personal

participation and insight and indirectly by providing information,

analysis, and metrics. This trend is dominant across seven of the

eight industries whose CFOs were surveyed. Allocating financial

resources and forecasting and reporting business results are other

substantial forward-looking challenges, each cited by more than a

quarter of CFOs.

Roughly a third of finance organizations are challenged in

supporting major change initiatives. The retail and wholesale and

health care and pharma sectors cite the most prevalent challenges

in this area.

11 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Influencing business strategy and operational priorities

Providing metrics, information, and tools needed for sound business decisions

Supporting a major change initiative (e.g., M&A, IT systems change, IPO)

Allocating financial resources to maximize ROI

Forecasting and reporting business results

Ensuring investments achieve desired business outcomes

Ensuring funding, liquidity, and acceptable costs of capital

Ensuring compliance with financial reporting and control requirements

Addressing changes in tax laws and/or accounting standards

Securing and retaining finance talent

Managing finance organization's costs

Meeting service levels

Communicating with external stakeholders

Other



Centralization vs. decentralization

The prevalence of centralized finance process responsibility may be a consequence of increased uncertainty and risk

• Planning and forecasting: evenly split between centralized and hybrid

• Capital management: overwhelmingly centralized, with 80% either mostly or highly centralized

• Business analysis: mostly hybrid, little at the extremes

• Stakeholder management: heavily centralized with 80% either mostly or highly centralized

• Record-to-report: mostly centralized with significant hybrid

• Procure-to-pay: mostly centralized with significant hybrid

• Order-to-cash: mostly centralized with significant hybrid

• Risk management: overwhelmingly centralized with nearly 75% either mostly or highly centralized

• Tax strategy and compliance: overwhelmingly centralized (95%), with 67% highly centralized

• Product/service pricing and costing: leaning toward decentralization; most decentralized of all functions by far

Overall, the energy and resources sector is the most likely to decentralize functions (or at least to utilize hybrid structures). The TME

sector shows the greatest propensity to centralize functions.

12 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Planning and forecasting

Capital mgmt/ optimization

Business analysis Stakeholder mgmt

Record-to-report Procure-to-pay Order-to-cash Risk mgmt Tax strategy/ compliance

Pricing and costing

Highly centralized Mostly centralized Hybrid (or even) Mostly decentralized Highly decentralized

Distribution of finance processes


Measures of bottom-line operational performance

Earnings are still the benchmark performance metric

Despite the perceived shortcomings of performance measures

based on income statements, earnings (both current and projected)

dominate when it comes to measuring operational performance.

More than 60% of CFOs report a heavy focus on earnings-based

metrics, with less than one-third using economic measures such as

ROIC1 and CFROI2.

Among economic performance measures, ROIC was the most

frequently cited at 10%. Only the TME sector displays a bias

toward economic measures (mostly ROI and ROIC) at 55%, with

retail and wholesale and manufacturing just behind at 40%.

There does seem to be a correlation with company size: companies

over $10 billion (USD) in annual revenues cite economic measures

(especially ROIC) at roughly triple the rate of companies $5 billion

or less. Also, private companies appear more inclined than public

companies to use economic metrics – perhaps because they are

not as pressured for quarterly earnings projections.

1 Return on Invested Capital

2 Cash Flow Return on Investment

13 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other

Economic measures

Earnings-based measures

Bottom-line measure of company

operational performance


Shifts in capital structure

Despite turmoil in credit markets and de-leveraging across the

global economy, most CFOs are satisfied with their current mix of

debt and equity.

Sixty percent of CFOs do not expect their capital structures to

change over the next year. For some, there may be a belief that

there is no need to make adjustments – because current capital

structures successfully weathered recent storms, because

companies believe they can absorb the risk of higher interest rates

(and current rates are as good as it gets), or because other factors

are simply more important right now. For others, it may be the

case that their companies have already changed their capital

structures to account for new capital market realities.

Approximately 23% of CFOs expect a moderate or strong shift

toward equity, and 16% a shift toward debt. Manufacturing and

energy and resources companies are the most likely to shift toward

equity at 35% and 33%, respectively. Manufacturers are also the

most likely to shift toward debt (30%), behind the services sector at

33%.

Please note that there were only nine responses to this question for the services industry.

14 CFO Signals

Strong shift toward equity,

6%

Moderate shift toward equity,

17%

No significant change, 60%

Moderate shift toward debt,

13%

Strong shift toward debt, 3%

Impact of the downturn on levels of corporate debt and equity

Company

Despite widespread change in a stabilizing economy,

CFOs are mostly optimistic about their companies’

prospects

Top challenges

Companies are challenged to get their feet back underneath them

as their economies stabilize

• Improving or maintaining margins: 59%

• Framing and adapting strategy: 58%

• Prioritizing investments: 45%

CFOs indicate a heavy focus on improving and maintaining margins

as their companies and economies emerge from two years of

turmoil. Their other key challenges are adjusting their strategies

and determining where to make investments. (Remember, strategic

ambiguity is a top career concern for CFOs as well.)

Challenges around adapting strategies are particularly strong in the

technology, energy and resources, TME, and financial services

sectors with roughly 70% of CFOs citing this challenge. Margin

challenges are particularly evident in the manufacturing and health

care and pharma sectors, where 75% of CFOs cite this challenge.

Prioritizing investments is a consistent challenge for all sectors

except health care and pharma.

15 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Improving/maintaining margins

Framing and/or adapting strategy

Prioritizing investments

Addressing government policy and regulation

Talent (availability and cost)

Raising/maintaining customer demand

Managing operations and supply chain risks

Managing assets and working capital

Sourcing capital (availability and cost)

Morale and staff reductions

Projecting and reporting results

Other

Managing corporate responsibility and sustainability


Company

Own-company optimism

For reasons both internal and external, CFOs have growing

optimism about their companies

CFO optimism has improved over the past quarter, with nearly two-

thirds of those surveyed saying they are more optimistic about their

company's prospects. In explaining their improved optimism, 37%

cite primarily improvements in external conditions and 27% cite

primarily internal improvements. Fewer than one in five CFOs is

less optimistic.

The manufacturing, technology, and TME sectors lead the way with

roughly 80% of CFOs citing improved optimism.

Health care and pharma show less optimism – and more

ambivalence – but did not indicate particularly high pessimism.

Energy and resources show the greatest trend toward pessimism,

with 31% of CFOs indicating lower optimism driven by external

factors.

Companies over $10 billion in annual revenues are much more

likely to anticipate “no change” than the rest – and are much more

optimistic than pessimistic when there is a change.

16 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less optimistic, primarily due to external factors (e.g., economy, industry, and market trends)

Less optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

No notable change

More optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

More optimistic, primarily due to external factors (e.g., economy, industry, and market trends)

Company optimism compared to last quarter

Company

Projected operational results

Earnings, investment, and employment projections are in line with

companies’ improving optimism

Companies are digging out of their holes and keeping costs in

check.

Across industries, CFOs are projecting sales improvements of more

than 9% and earnings improvements more than 17%. These

optimistic projections incorporate relatively modest cost increases

for wages, benefits, and non-labor inputs of 3%, 4%, and 3%,

respectively. The cost of benefits is expected to outpace the cost of

wages, especially in sectors with a high proportion of temporary or

part-time workers. This could indicate projected impacts of health

reform in the U.S.

Technology sector CFOs project 49% earnings improvements on

the heels of 22% sales increases. (Technology sector sales

projections are the result of 11 responses, two of which are high

outliers on the sales front. Five of the 11 CFOs project earnings

improvements more than 50% and three project 100% growth.)

Behind technology is the manufacturing sector at 8% sales growth

and 18% earnings growth. The TME sector is expecting the most

conservative gains at roughly 7% sales growth and 10% earnings

growth. No sectors are projecting year-over-year sales declines or

losses.

17 CFO Signals

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Sales Earnings

Income and earnings (year-over-year change)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Wages/salaries Employee benefits Non-labor input costs

Costs (year-over-year change)

Company

Companies are loosening their purse strings

On the whole, CFOs are projecting dividends to rise 6.5% and

capital spending to rise 12%, with high variation across industries.

This reinforces companies’ general optimism regarding operational

performance and may also indicate broader stabilization of

company financing.

Consistent with their strong earnings expectations, manufacturing

CFOs are projecting 18% increases in dividends and 14%

increases in capital spending. Strong technology sector earnings

are not expected to translate into dividends, but are projected to

boost capital spending by 13%.

Energy and resources is the sector projecting the lowest dividend

increase at under 2%, but it still projects capital spending increases

of nearly 18%.

18 CFO Signals

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Dividends Capital spending

Dividends and capital spending (year-over-year change)

Company

Employment will be held in check

Despite the positive earnings outlook, CFOs project only modest

increases in employment. The number of domestic personnel is

projected to increase just 3%, which roughly matches the projected

change in offshore personnel and the use of offshore third-party

personnel. The TME sector projects a 12% increase in domestic

personnel.

Where employment is projected to grow, offshore employment will

outpace domestic hiring. Aside from the anomalous TME sector,

the manufacturing and health care and pharma sectors project the

highest domestic employment gains at 4% and 5%, respectively,

and also the largest gains in employment abroad (8% and 7%).

Energy and resources CFOs project a slight decline in domestic

employment. The technology and manufacturing sectors project the

highest increase in outsourced/offshore labor at 8% and 5%,

respectively.

19 CFO Signals

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Number of domestic personnel

Number of offshore personnel (internal company personnel)

Use of outsourced/offshore third party services (contracted personnel)

Projected employment increases (year-over-year)

Company

Strategic focus

Revenue growth and cost reduction drive the agenda

Optimism and forward-looking sentiment is evident in companies’

strategic focus as well. Nearly 36% of companies' strategic focus is

on revenue growth for the year ahead, with only the technology

(50%) and energy and resources (22%) sectors showing

substantial variation from the average.

Twenty eight percent of companies' strategic focus is on cost

reduction, split roughly evenly between direct cost reduction and

overhead cost reduction. All industries are within approximately four

percentage points of this average, with energy and resources the

lowest at 24%.

Asset efficiency (9%), capability development (13%), and

funding/liquidity (11%) split the remaining third of strategic focus,

and it is within these areas where some of the most significant

industry differences lie. For example, asset efficiency appears to be

a somewhat stronger focus for industries with high fixed assets,

inventory, and receivables (manufacturing, energy and resources,

TME) and lower for low-asset industries (technology, financial

services). Financing and liquidity is in the 4% to 6% range for

technology and services, but in the 15% to 21% range for

manufacturing and energy and resources.

.

20 CFO Signals

0

5

10

15

20

25

30

35

40

Revenue growth

Direct cost reduction

Overhead cost reduction

Asset efficiency

Capability development

Financing and liquidity

Industry

While many express skepticism regarding

governments’ impacts on their industries, CFOs

are still optimistic about their industries’ prospects

Top challenges

Specific challenges vary by industry, but all are largely focused on

government actions and changing competitive environments

• Industry regulation/legislation: 53%

• Pricing trends: 52%

• Market growth: 48%

Taken together, the top three industry challenges indicate

considerable turmoil and change. Industry regulation and legislation,

pricing trends, and market growth are far and away the dominant

concerns, with roughly 50% of CFOs citing each.

While most sectors followed this general trend, several anomalies are

worth noting. Retail and wholesale and the services sectors are

particularly challenged by market growth. The technology and services

sectors are heavily affected by pricing trends. Not surprisingly, all of

the financial services CFOs named industry regulation a top concern.

More than 65% of the energy and resources, health care and pharma,

and TME CFOs did as well.

New domestic market entrants are a major concern for health care

and pharma and TME CFOs, but not for those of other sectors.

Foreign competition is the major concern for manufacturing CFOs.

Please note that there were only nine responses to this question for the services industry.

21 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Industry regulation/legislation Pricing trends

Market growth Mergers and acquisitions

Overcapacity/excess inventory New competitive tactics

Input prices Availability of people/skill sets

Foreign competition Changing cost structures

New market entrants (domestic) Product substitutes

Other


Industry

Industry optimism

Very little pessimism regarding industries’ prospects

Across industries, half of CFOs are more optimistic about their

industries than they were a quarter ago, with 37% unchanged and

the balance (only 13%) less optimistic. Leading the pack are the

technology and TME sectors at 73% and 64% more optimistic,

respectively. Financial services changed the least, with 54%

unchanged and 33% of CFOs more optimistic this quarter. Energy

and resources was strongly split, with 47% more optimistic and

20% less optimistic. This could reflect differing outlooks of the

business types within the sector (e.g., petroleum companies versus

utilities).

22 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Considerably less optimistic

Less optimistic

No change

More optimistic

Considerably more optimistic

Optimism regarding your firm’s industry

Industry

Impact of policy changes

Twice as many CFOs think policy changes have been negative for

their industries than think they have been positive

Nearly 45% of CFOs regard their governments' policy changes as

neutral or mixed for their industries. Another 34%, however, regard

the changes as negative with nearly 13% citing strongly negative.

This contrasts with just 18% who regard the changes as positive

and only 3% as strongly positive.

Companies above $10 billion in annual revenues are especially

pessimistic, with 43% negative and only 14% positive. This is likely

driven by the industry representation among very large companies.

Energy and resources CFOs are the most pessimistic – 53%

negative. Health care and pharma is the next most pessimistic at

roughly 45%. Canadian and Mexican CFOs are much less

pessimistic than US CFOs.

23 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strongly negative

Negative

Neutral/mixed

Positive

Strongly positive

Government response to economic crises

Economy

All eyes on government

Top challenges

Policy decisions are top of mind

• Social policy/spending/investment: 57%

• Environmental policy: 34%

• Currency exchange rates: 34%

• Unemployment: 31%

• Corporate tax policy: 28%

• Capital cost and availability: 28%

The top economic challenges voiced by CFOs highlight the attention

companies are paying to increased government regulation. More than

half of all CFOs name “social policy, spending, and investment” in their

top three concerns, and six of the eight industries name it in their top

two. More than 90% of health care and pharma CFOs name social policy

a top challenge, and nearly 70% of financial services CFOs do the same.

The importance of environmental policy is clear, but its high placement in

cross-industry results is substantially driven by the 100% of energy and

resource CFOs who name it a top concern. Unemployment, currency

exchange rate, and capital cost/availability challenges are secondary to

policy challenges for many industries.

Currency exchange rate challenges are stronger in Canada and Mexico

than in the US, as are concerns about inflation. Social policy challenges

are greater in the US and Mexico than in Canada, and the US is the most

challenged by environmental policy. Accounting, reporting, and controls

policy is a stronger challenge in Canada than in the US and Mexico.

24 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Social policy/spend/invest (health care, education, infrastructure, etc.)

Environmental policy (regulation, carbon reporting/tax, etc.)

Currency exchange rates

Unemployment

Capital cost/availability

Corporate tax policy

Accounting/reporting/controls policy

Inflation

Intellectual property policy

Personal income tax policy

Other

International trade policy

Military/defense policy


Economy

Impact of health reform

Most companies and industries see little change in benefits

provided to employees, but there may be some unintended

consequences

A majority of CFOs say health reform will neither increase nor

decrease the health benefits they provide to employees. Around

13% say they will increase the benefits they provide, but nearly

double this number (23%) say they will actually decrease health

benefits they provide to at least some employees. Companies over

$5 billion in annual revenues appear considerably more likely to

decrease their benefits to employees than to increase them.

Less than 10% of CFOs expect health reform to significantly impact

executive compensation packages. Twenty eight percent expect it

to significantly impact the way they manage taxes, rising to half for

the manufacturing and services sectors (both comparatively high-

labor).

25 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Decrease health benefits we provide to some employees

Increase health benefits we provide to some employees

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Change our executive compensation packages

Increase our strategic tax planning

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

26 CFO Signals

Appendix

27 CFO Signals

Industry highlights

CategoryExpected Net

Change YOY

Sales 7.94%

Earnings 18.00%

Wages and salaries 3.00%

Employee benefits 3.79%

Non-labor input costs 3.71%

Dividends 18.20%

Capital spending 14.00%

Number of domestic

personnel 3.88%

Number of offshore

personnel 7.81%

Use of outsourced/

offshore third party

services 5.06%

Manufacturing

Sample size: 20

Economy

• Economy challenges: High for currency exchange rates (45%); highest for

capital cost/availability (40%); below average for social

policy/spend/investment (40%); average for environmental policy (35%) and

corporate tax policy (30%); highest for international trade policy (25%)

• Impact of US health care reform: Average for decrease in benefits to

employees (26%) and high for increased benefits to employees (25%); low

impact on executive compensation (11%); high impact on tax planning (37%)

Industry

• Industry challenges: Average around pricing trends (55%) and market

growth (45%); highest for foreign competition (35%) and input prices (35%);

above average for excess inventory/capacity (25%) and M&A (25%); among

lowest for new competitive tactics (10%)

• Impact of government’s response to economic turmoil: Among highest for

neutral (55%); highest for positive (30%); lowest for negative (15%)

• Optimism regarding industry: High optimism (60%); low pessimism (5%)

28 CFO Signals

Explanatory note: Relative terms like “highest,” “low,” and “above average”

denote comparisons to other industries, not comparisons to other challenges.

Manufacturing

Company

• Company challenges: Among highest in improving/maintaining margins (75%) and prioritizing investments (55%); highest around

talent availability/cost (45%); second-lowest around framing and/or adapting strategy (45%); among highest in managing operations

and supply chain risks (25%); among lowest around raising/maintaining customer demand (15%)

• Company optimism: Highest of all industries for external reasons. Optimism due to external factors (65%) and internal factors

(20%).

• Projected operating results: Highest anticipated dividends and use of outsourced/offshore third party services

Finance Organization

• Finance organization challenges: Average for providing metrics, information, and tools needed for sound business decisions

(55%); lowest for influencing business strategy and operational priorities (45%); average for allocating financial resources to

maximize ROI (30%); among highest around forecasting and reporting business results (35%); highest around ensuring investments

achieve desired business outcomes (25%) and managing finance organization’s cost (20%)

• Measure of operational performance: Primarily earnings, with some EVA

• Change in debt-to-equity: Most likely industry to make a shift (65%), about equally split between shifting toward debt and toward

equity (roughly 30% each); highest shift toward debt of all industries, and among highest in shift toward equity

Career

• Career concerns: Among highest of all industries around strategic ambiguity (53%); regulatory requirements (42%); major change

initiative (42%)

• CFO time allocation: Average

• CFO reasons to change roles/company: Average for elevated role (60%); among highest for bigger company (40%) and for

higher-growth company (30%); highest for different industry (25%); lowest for better work/life balance (10%)

29 CFO Signals


Change YOY

Sales 4.44%

Earnings 13.17%




Dividends 8.19%


Number of domestic

personnel 1.44%

Number of offshore

personnel 0.56%

Use of outsourced/


services 1.38%

Retail and wholesale

Sample size: 18

Economy

• Economy challenges: By far highest for unemployment (67%) and inflation

(39%); among highest for currency exchange rates (50%) and corporate tax

policy (39%); below average for social policy/spend/investment (50%)

• Impact of US health care reform: Below average for increasing benefits to

employees (17%) and average for decreasing benefits to employees (12%);

very low impact on executive compensation (6%); very low impact on tax

planning (0%)

Industry

• Industry challenges: Second-highest for market growth (61%); average for

pricing trends (56%); high for new competitive tactics (33%) and excess

capacity/inventory (28%); among lowest for industry regulation/legislation

(28%); lowest for M&A (11%)

• Impact of government’s response to economic turmoil: Among highest for

neutral (50%); highest for negative (nearly 40%); one of the lowest for positive

(11%)

• Optimism regarding industry: Much more optimistic (44%) than pessimistic

(12%)

30 CFO Signals



Retail and wholesale

Company

• Company challenges: Highest for prioritizing investments (56%) and among highest for talent availability/cost (44%); below average

around improving/maintaining margins (56%); lowest around framing/adapting strategy (39%); by far the highest around managing

assets and working capital (33%); lowest for managing operations and supply chain risks (6%)

• Company optimism: Highest optimism for internal reasons. Optimism due to internal factors (50%) and external factors (11%); less

optimistic due to external factors (22%) and internal factors (6%)

• Projected operating results: Lowest sales expectations; relatively low earnings expectations (3rd lowest); high dividends

expectations (2nd highest behind manufacturing)


• Finance organization challenges: Average for influencing business strategy and operational priorities (56%); below average around

providing metrics, information, and tools needed for sound business decisions (50%); among highest around supporting major change

initiatives (39%) and allocating financial resources to maximize ROI (33%); among lowest for ensuring funding, liquidity, and cost of

capital (11%)

• Measure of operational performance: Primarily earnings, with some ROIC

• Change in debt-to-equity: One of least likely industries to make a shift (only 27%), roughly split equally between shifting toward debt

(11%) and toward equity (17%)

Career

• Career concerns: Below average around major change initiative (39%); average around strategic ambiguity (39%); highest around

excessive workload/responsibilities (33%) and highest around expansion of role into uncomfortable areas (21%); low around changing

regulatory requirements (28%) and pressures of poor company performance (17%)


• CFO reasons to change roles/company: Average for elevated role (56%); highest for retirement (39%); above average for

expanded CFO role (33%); average for work/life balance (28%); among least likely to shift to different industry for better culture or

different ownership structure (6%)

31 CFO Signals


Change YOY

Sales 22.00%

Earnings 48.64%




Dividends 2.20%


Number of domestic

personnel 2.75%

Number of offshore

personnel 6.30%

Use of outsourced/


services 7.60%

Technology

Sample size: 11

Economy

• Economy challenges: Average for social policy/spend/investment (55%) and

highest for currency exchange rates (55%); highest for intellectual property

policy (36%); lowest for accounting/reporting/controls policy and inflation (both

0%)

• Impact of US health care reform: One of highest for decreasing benefits to

employees (36%) and low for increasing benefits to employees (10%); low

impact on executive compensation (10%); moderate impact on tax planning

(20%)

Industry

• Industry challenges: Highest for pricing trends (82%) and new competitive

tactics (36%); among lowest for market growth (36%); high for M&A (27%) and

excess capacity/inventory (27%); by far lowest for industry

regulation/legislation (9%), foreign competition (9%), and availability of

people/skill sets (0%)

• Impact of government’s response to economic turmoil: Highest for neutral

(73%); more negative (18%) than positive (9%)

• Optimism regarding industry: Most optimistic industry (73%); little

pessimism (9%)

32 CFO Signals



Technology

Company

• Company challenges: Highest in framing and/or adapting strategy (73%); among the highest around prioritizing investments (55%);

by far the highest around morale and staff reductions (46%); among the lowest around improving/maintaining margins (36%); lowest

in talent availability/cost (9%)

• Company optimism: Among most optimistic industries. Optimistic due to external factors (36%) and internal factors (46%).

• Projected operating results: Very high sales and earnings expectations; high increase in non-labor input costs


• Finance organization challenges: Among lowest for providing metrics, information, and tools needed for sound business decisions

(46%) and influencing business strategy and operational priorities (46%); highest around securing/retaining finance talent (36%);

among highest around allocating financial resources to maximize ROI (36%), forecasting and reporting business results (36%), and

meeting service levels (18%)

• Measure of operational performance: Heaviest earnings focus of all industries, with some ROIC

• Change in debt-to-equity: Significant likelihood of making a shift (around 37%); largest shift of any industry toward equity (about

27%)

Career

• Career concerns: Highest around major change initiative (64%); very high in stresses from poor company performance (46%);

among highest in internal power struggles (27%) and insufficient support staff (27%); low in strategic ambiguity and changing

regulatory requirements (both 27%)

• CFO time allocation: Much more time as operator (relative to average); somewhat higher preference for larger ongoing operator

role

• CFO reasons to change roles/company: Lowest for both elevated role (37%) and expanded CFO role (18%); highest for bigger

company (46%), higher-growth company (36%), and better culture (36%); among lowest for work/life balance (18%) and retirement

(9%)

33 CFO Signals


Change YOY

Sales 10.87%

Earnings 15.36%




Dividends 1.79%


Number of domestic

personnel -0.21%

Number of offshore

personnel 2.00%

Use of outsourced/


services 0.64%

Energy and resources

Sample size: 15

Economy

• Economy challenges: Highest for environmental policy (100%) and capital

cost/availability (40%); among highest for accounting/reporting/controls policy

(27%); lowest for social policy/spend/investment (20%)

• Impact of US health care reform: Around average for decreasing benefits to

employees (21%) and very low for increasing benefits to employees (0%); low


(21%)

Industry

• Industry challenges: Second-highest for industry regulation/legislation (80%)

after financial services; among lowest for pricing trends (40%); high for excess

capacity/inventory (27%) and input prices (27%); lowest for market growth

(27%) and lowest for new competitive tactics (7%)

• Impact of government’s response to economic turmoil: Among lowest for

neutral (40%); highest for negative (53%); lowest for positive (7%)

• Optimism regarding industry: Mostly optimistic (54%); less pessimism

(23%)

34 CFO Signals



Energy and resources

Company

• Company challenges: Highest around framing and/or adapting strategy (73%) and addressing government policy and regulation

(53%); average for prioritizing investments (47%); highest in sourcing capital (20%) and projecting/reporting results (20%); lowest

around improving margins (27%) and raising/maintaining customer demand (7%)

• Company optimism: Among least optimistic of industries. Optimistic due to internal factors (27%) and external factors (20%); less

optimistic due only to external factors (27%).

• Projected operating results: Highest increase in wages and salaries; only industry predicting a decrease in domestic personnel


• Finance organization challenges: Highest around providing metrics, information, and tools needed for sound business decisions

(67%) and average around influencing business strategy and operational priorities (53%); among highest in ensuring funding,

liquidity, and acceptable costs of capital (27%); highest around meeting service levels (27%); lowest for forecasting/reporting

business results (0%)

• Measure of operational performance: Mostly EPS with some ROE and ROIC

• Change in debt-to-equity: Significant likelihood of making a shift (around 40%), but among highest in shift toward equity (33%);

minor shift toward debt

Career

• Career concerns: Highest for changing regulatory requirements (53%) and pressures from poor company performance (47%);

among highest around major change initiative (47%) and strategic ambiguity (40%); highest for insufficient support staff (33%);

among lowest for internal power struggles and insufficient political influence (both 13%)


• CFO reasons to change roles/company: Highest for elevated role (80%), better work/life balance (47%), and expanded CFO role

(40%); among highest for higher pay/benefits for similar role (33%); lowest for higher-growth company (7%) and better culture (0%)

35 CFO Signals


Change YOY

Sales 6.90%

Earnings 15.65%




Dividends 3.55%


Number of domestic

personnel 0.68%

Number of offshore

personnel 0.35%

Use of outsourced/


services 1.35%

Financial services

Sample size: 24

Economy

• Economy challenges: Among highest for social policy/spend/invest (67%)

and unemployment (38%); highest around accounting/reporting/controls policy

(38%); by far the highest for personal income tax policy (29%); roughly

average for environmental policy (21%)

• Impact of US health care reform: Average for decreasing benefits to

employees (25%) and very low for increasing benefits to employees (0%); low


(29%)

Industry

• Industry challenges: Highest for industry regulation/legislation (83%); among

highest for market growth (58%) and pricing trends (42%); second-highest for

changing cost structures (21%); among lowest for new competitive tactics

(8%). One of the most pessimistic when it comes to industry impact of

government response to economic crises – probably because of banking

reform fallout.

• Impact of government’s response to economic turmoil: Among lowest for

neutral (38%); more negative (38%) than positive (25%)

• Optimism regarding industry: One of most neutral (57%); more optimistic

(35%); more pessimistic (9%)

36 CFO Signals



Financial services

Company

• Company challenges: Among highest in framing and/or adapting strategy (67%); below average for improving/maintaining margins

(54%); average around prioritizing investments (46%); second-highest in addressing government policy and regulation (38%)

• Company optimism: Among most optimistic due to external factors, but below manufacturing or services. Optimism due to external

factors (42%) and internal factors (25%); less optimism due to only external factors (17%).

• Projected operating results: Low increase in domestic personnel (2nd lowest after energy and resources); low sales increase, but

relatively high earnings increase


• Finance organization challenges: Among highest in providing metrics, information, and tools needed for sound business decisions

(63%) and influencing business strategy and operational priorities (63%); average for supporting a major change initiative (33%); high

for securing and retaining financial talent (21%); low for allocating financial resources to maximize ROI (25%)

• Measure of operational performance: Primarily earnings and ROE

• Change in debt-to-equity: Low likelihood of making a shift (roughly 30%), but substantial shift toward equity (25%); negligible shift

toward debt

Career

• Career concerns: Among highest for changing regulatory requirements (50%); by far the highest around insufficient internal political

influence/authority (42%); average for major change initiative (42%); lowest around pressures from poor company performance

(13%) and insufficient support staff (4%)

• CFO time allocation: Somewhat more time as steward (relative to average); somewhat higher preference for larger ongoing steward

role

• CFO reasons to change roles/company: Average for elevated role (58%) and expanded CFO role (33%); among highest for

higher-growth company (29%) and better culture (25%); average for work/life balance (29%); fewest would leave for a different

industry (0%)

37 CFO Signals


Change YOY

Sales 11.22%

Earnings 11.67%




Dividends 5.40%


Number of domestic

personnel 5.06%

Number of offshore

personnel 7.44%

Use of outsourced/


services 4.47%

Health care and pharmaceuticals

Sample size: 19

Economy

• Economy challenges: Highest for social policy/spend/invest (95%) and

intellectual property policy (32%); among highest for

accounting/reporting/controls policy (32%); average for environmental policy

(32%); among lowest for currency exchange rates (16%) and unemployment

(11%)

• Impact of US health care reform: Most neutral, below average for

decreasing benefits to employees (17%) and for increasing benefits to

employees (6%); low impact on executive compensation (12%); moderate

impact on tax planning (24%)

Industry

• Industry challenges: Among highest for pricing trends (58%); high for

industry regulation/legislation (58%) and market growth (53%); among highest

for new market entrants (32%); among lowest for excess capacity/inventory

(11%) and availability of people/skill sets (5%)

• Impact of government’s response to economic turmoil: Lowest for neutral

(37%); second-highest for negative (47%) after energy and resources; among

lowest for positive (16%)

• Optimism regarding industry: Mostly optimistic (44%); lower pessimism

(21%)

38 CFO Signals



Health care and pharmaceuticals

Company

• Company challenges: Among highest for improving/maintaining margins (74%); above average around framing and/or adapting

strategy (63%); highest for raising/maintaining customer demand (37%); among highest in addressing government policy and

regulation (32%); highest for managing operations and supply chain risks (26%); by far the lowest for prioritizing investments (21%)

• Company optimism: Most neutral of industries, but slant is toward optimism. Optimistic due to external factors (21%) and internal

factors (16%); less optimistic due to internal factors (16%) and external factors (11%).

• Projected operating results: Second-highest sales increase of all industries; large increase in number of offshore personnel


• Finance organization challenges: Average for providing metrics, information, and tools needed for sound business decisions

(53%); among lowest for influencing business strategy and operational priorities (47%); highest for supporting major change

initiatives (47%); among highest for forecasting and reporting business results (37%); among lowest in ensuring funding, liquidity, and

acceptable costs of capital (5%)

• Measure of operational performance: Primarily earnings and EPS

• Change in debt-to-equity: Significant likelihood of making a shift (roughly 40%), average shift toward debt (26%) and toward equity

(16%)

Career

• Career concerns: Lowest for major change initiative (37%); among highest around internal power struggles (32%) and information

quality/reliability (26%); among lowest around pressures from poor company performance (26%); highest around insufficient pay

(16%); among highest around expansion of job responsibilities into areas of less comfort (16%)


• CFO reasons to change roles/company: Among lowest for elevated role (47%); among highest for work/life balance (42%) and

better pay and benefits for similar role (37%); average for expanded CFO role (32%)

39 CFO Signals


Change YOY

Sales 6.60%

Earnings 9.70%




Dividends 3.13%


Number of domestic

personnel 12.11%

Number of offshore

personnel 1.67%

Use of outsourced/


services 2.14%

Telecommunications, media, and entertainment

Sample size: 11

Economy

• Economy challenges: Average around social policy/spend/invest (55%);

highest for currency exchange rates (55%) and corporate tax policy (55%)

• Impact of US health care reform: Most neutral industry; below average for

decreasing benefits to employees (10%) and increasing benefits to employees

(0%); moderate impact on executive compensation (20%); low impact on tax

planning (10%)

Industry

• Industry challenges: Among highest for industry regulation/legislation (73%);

highest for new market entrants (36%) and M&A (36%); among lowest around

market growth (36%); among highest for new competitive tactics (27%);

highest for product substitutes (27%); by far the lowest for pricing trends (18%)

and lowest for overcapacity (9%)

• Impact of government’s response to economic turmoil: One of highest for

neutral (55%); one of lowest for negative (18%); second-highest for positive

(27%) after manufacturing

• Optimism regarding industry: Mostly optimistic (60%); little pessimism

(10%)

40 CFO Signals



Telecommunications, media, and entertainment

Company

• Company challenges: Above average around framing and/or adapting strategy (64%) and around improving/maintaining margins

(64%); average around prioritizing investments (46%); second-highest for sourcing capital (18%)

• Company optimism: Highest optimism after retail and wholesale. Optimistic due to internal factors (46%) and external factors

(36%); less optimistic due to only external factors (9%).

• Projected operating results: Highest expected increase in domestic personnel; lowest earnings increase and relatively low sales

increase


• Finance organization challenges: Second-highest around providing metrics, information, and tools needed for sound business

decisions (64%); among lowest for influencing business strategy and operational priorities (46%); highest in addressing changes in

tax laws and/or accounting standards (36%) and ensuring funding, liquidity, and cost of capital (27%); above average for

forecasting/reporting business results (27%); average for allocating financial resources to maximize ROI (27%)

• Measure of operational performance: Primarily ROI and ROIC with some earnings

• Change in debt-to-equity: Low likelihood of making a shift (around 27%); biased toward equity (18%)

Career

• Career concerns: Highest of all industries around strategic ambiguity (55%), and among highest for major change initiative (55%);

among highest for excessive workload (27%), poor information quality/quantity (27%), and insufficient support staff (27%); average

for pressures from poor performance (26%); lowest for insufficient internal political influence (0%)


• CFO reasons to change roles/company: Average for elevated role (55%) but among highest for expanded CFO role (36%);

highest for different form of ownership (36%); average for better pay/benefits (27%); second-highest for better culture (27%); among

lowest for bigger company or higher-growth company (both 9%)

41 CFO Signals


Change YOY

Sales 6.00%

Earnings 12.57%




Dividends 8.00%


Number of domestic

personnel 1.86%

Number of offshore

personnel 0.83%

Use of

outsourced/offshore third

party services 1.40%

Services

Sample size: 9

Economy

• Economy challenges: Average around social policy/spend/invest (56%);

above average for environmental policy (44%) and corporate tax policy (44%)

• Impact of US health care reform: Least neutral of the industries, evenly split

between decrease benefits to employees (56%) and increase benefits to

employees (56%) – note that a company can simultaneously increase benefits

for one type of employee and decrease benefits for another; low impact on

executive compensation (11%); highest impact on tax planning (56%)

Industry

• Industry challenges: Highest for market growth (67%); among highest for

pricing trends (67%) and M&A (33%); low for industry regulation (44%);

highest for changing cost structures (22%)

• Impact of government’s response to economic turmoil: Split evenly

between positive, neutral, and negative

• Optimism regarding industry: Mostly optimistic (55%); little pessimism

(11%)

42 CFO Signals

Explanatory notes:

Findings for this industry are based on a comparatively small sample size.

Relative terms like “highest,” “low,” and “above average” denote comparisons

to other industries, not comparisons to other challenges.

Services

Company

• Company challenges: Highest in improving/maintaining margins (89%); average for framing and/or adapting strategy (56%);

second-highest for prioritizing investments (56%); highest for managing assets and working capital (22%); among lowest for

raising/maintaining customer demand (11%)

• Company optimism: Among highest optimism due to external factors (58%); no notable change (43%)

• Projected operating results: Highest expected increase in employee benefits expense and in capital spending


• Finance organization challenges: Highest for influencing business strategy and operational priorities (89%) and by far the lowest

around providing metrics, information, and tools needed for sound business decisions (22%); highest in forecasting and reporting

business results (44%); among highest around supporting a major change initiative (33%); highest for ensuring compliance with

financial reporting and control requirements (22%)

• Measure of operational performance: Primarily earnings and EPS, with some ROIC

• Change in debt-to-equity: Significant likelihood of making a shift (44%)

Career

• Career concerns: Among highest around major change initiative (56%) and changing regulatory requirements (44%); highest for

excessive workload (33%) and internal power struggles (33%); above average pressures from poor company performance (33%);

low for strategic ambiguity (33%)

• CFO time allocation: Considerably more time as catalyst (relative to average)

• CFO reasons to change roles/company: Among highest for elevated role (67%); among highest for better pay and benefits (44%)

43 CFO Signals

44 CFO Signals

Detailed findings

CFO careers – Top job stresses

Question: What are your top job stresses?

45 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Major change initiative (e.g., M&A, IT systems change, IPO) Changing regulatory requirements

Strategic ambiguity Pressures from poor company performance

Excessive workload/responsibilities Poor quantity/quality/reliability of information

Internal power struggles Insufficient internal political influence/authority

Insufficient support staff (skills or number) Other

Expansion of job role/responsibility into areas of less comfort Insufficient pay

Challenges with external service providers Personal liability

CFO careers – Allocation of time

Question: What is your current and preferred division of time between CFO roles?

46 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Operator

Steward

Strategist

Catalyst

Current

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Operator

Steward

Strategist

Catalyst

Preferred

Catalyst – Time spent working as an agent for change: Establishing a value

mindset; aligning groups around strategies; aiding other decision-makers;

establishing accountability.

Strategist – Time spent working as a driver of strategy: Defining the company's

future; providing a financial perspective on innovation and growth; improving

risk-awareness, decision-making, and performance management; translating

expectations of capital markets into business imperatives.

Steward – Time spent overseeing accounting, control, risk management, and

asset preservation: Ensuring company compliance with financial reporting and

control requirements; ensuring information quality and control rationalization.

Operator – Time spent focused on finance organization's efficiency and service

levels/effectiveness: Balancing cost and service levels in delivering services;

defining and evolving finance's operating model; managing issues of talent and

resources offshoring, shared services, etc.

0

10

20

30

40Catalyst

Strategist

Steward

Operator

Current Preferred

CFO careers – Reasons to make a change

Question: What circumstances would make you most likely to change your role/company?

47 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Elevated role (e.g., CEO) Expanded CFO role Better work/life balance

Better pay and benefits for similar role/responsibility Retirement Bigger company

Higher-growth company Better culture Different form of ownership

Different industry Lower stress/pressure Other

More stable company

CFO careers – Personal sounding board

Question: Who is your personal sounding board when you want to test your thinking around pressing

challenges?

48 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%Percent of respondents who placed each option in their top three

Finance organization – Top challenges

Question: What are your finance organization’s top three current challenges?

49 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Influencing business strategy and operational priorities Providing metrics, information, and tools needed for sound business decisions

Supporting a major change initiative (e.g., M&A, IT systems change, IPO) Allocating financial resources to maximize ROI

Forecasting and reporting business results Ensuring investments achieve desired business outcomes

Ensuring funding, liquidity, and acceptable costs of capital Ensuring compliance with financial reporting and control requirements

Addressing changes in tax laws and/or accounting standards Securing and retaining finance talent

Managing finance organization's costs Meeting service levels

Communicating with external stakeholders Other

Finance organization – Centralization vs. decentralization

Question: How is responsibility for the following finance processes distributed within your organization?

50 CFO Signals

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Highly centralized Mostly centralized Hybrid (or even) Mostly decentralized Highly decentralized

Finance organization – Impact of downturn on capital structure

Question: To what extent do you believe the downturn will cause your firm to shift toward lower levels of

corporate debt and higher levels of equity?

51 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strong shift toward debt

Moderate shift toward debt

No significant change

Moderate shift toward equity

Strong shift toward equity

Finance organization – Operational performance metric

Question: What is your company's bottom-line measure of operational performance (excluding metrics driven

by share price)?

52 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other

RONA

CROCI

CFROI

ROCE

ROIC

ROI

Economic Margin

EVA

ROE

EPS

Earnings or Earnings Growth

Company – Top challenges

Question: What are your company's top three company-specific challenges?

53 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Improving/maintaining margins Framing and/or adapting strategy Prioritizing investments

Addressing government policy and regulation Talent (availability and cost) Raising/maintaining customer demand

Managing operations and supply chain risks Managing assets and working capital Sourcing capital (availability and cost)

Morale and staff reductions Projecting and reporting results Other

Managing corporate responsibility and sustainability

Company – Optimism regarding company

Question: How does your optimism regarding your company compare to last quarter?

54 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less optimistic, primarily due to external factors (e.g., economy, industry, and market trends)

Less optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

No notable change

More optimistic, primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)

More optimistic, primarily due to external factors (e.g., economy, industry, and market trends)

0

10

20

30

40

50

60

Sales Earnings

Company – Operational results projections

Question: Compared to the previous year, how do you expect the following factors to change over the next

year?

55 CFO Signals

0

1

2

3

4

5

6

7

8

Wages/salaries Employee benefits Non-labor input costs

CostsIncome and Earnings

Industry – Top challenges

Question: What are your company's top three industry challenges?

56 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Industry regulation/legislation Pricing trends Market growth Mergers and acquisitions

Overcapacity/excess inventory New competitive tactics Input prices Availability of people/skill sets

Foreign competition Changing cost structures New market entrants (domestic) Product substitutes

Other

Industry – Impact of policy changes

Question: For my industry, government responses to recent economic crises are…

57 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strongly negative

Negative

Neutral/mixed

Positive

Strongly positive

Industry – Optimism

Question: How does your firm’s optimism regarding your industry compare to last quarter?

58 CFO Signals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Considerably less optimistic

Less optimistic

No change

More optimistic

Considerably more optimistic

Economy – Top challenges

Question: What are your company's top three ECONOMY challenges?

59 CFO Signals

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Social policy/spend/invest (health care, education, infrastructure, etc.) Environmental policy (regulation, carbon reporting/tax, etc.)

Currency exchange rates Unemployment

Capital cost/availability Corporate tax policy

Accounting/reporting/controls policy Inflation

Intellectual property policy Personal income tax policy

Other International trade policy

Military/defense policy

Economy – US health reform impact

Question: What will be the effect of US health care reform on your business?

60 CFO Signals

0%10%20%30%40%50%60%70%80%90%

100%Strongly disagree

Disagree

Neutral

Agree

Strongly agree

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Disagree

Neutral

Agree

Strongly agree

0%10%20%30%40%50%60%70%80%90%


Disagree

Neutral

Agree

Strongly agree

0%10%20%30%40%50%60%70%80%90%


Disagree

Neutral

Agree

Strongly agree

Decrease health benefits we provide to some employees Increase health benefits we provide to some employees

Change our executive compensation packages Increase our strategic tax planning

61 CFO Signals

About this survey

Demographics

N=136

62 CFO Signals

Less than $1B

($US), 21.8%

$1B -$5B,

39.1%

$5.1B -$10B, 18.0%

More than

$10B, 21.1%

Public, 73.1%

Private, 26.9%

US, 64.9%

Canada, 25.4%

Mexico, 9.7%

Manufac-turing, 14.9%

Consumer Products / Services,

13.4%

Tech, 8.2%

Energy and

Resources, 11.2%

Financial Services,

17.9%

Health Care /

Pharma, 14.2%

Telecom / Media /

Entertain., 8.2%

Services, 6.7%

Other, 5.2%

No (Holding

Company/Group) 85.0%

Yes (Subsid. of North

American Company)

7.5%

Yes (Subsid. of Non-North

American Company)

7.5%

Annual Revenues Ownership Country

Industry Subsidiary Company

Methodology

63 CFO Signals

Background

The Deloitte North American CFO Survey is a quarterly survey of CFOs from large, influential companies across North America. The

purpose of the survey is to provide these CFOs with quarterly information regarding the perspectives and actions of their CFO peers

across five areas: CFO career, finance organization, company, industry and economy.

Participation

For the launch of the survey in the second quarter of 2010, the survey sought responses from client CFOs across the United States,

Canada, and Mexico. The sample includes CFOs from public and private companies that are predominantly over $3 billion (USD) in

annual revenues. Respondents are nearly exclusively CFOs. Participation is open to all sectors except for government.

Survey Execution

At the opening of each survey period, CFOs receive an email containing a link to an online survey hosted by a third-party service

provider. The response period is typically two weeks, and CFOs receive a summary report approximately two weeks after the survey

closes. Only CFOs who respond to the survey receive the summary report for the first 30 days after the report is released.

Nature of Results

This survey is a “pulse survey” intended to provide CFOs with information regarding their CFO peers’ thinking across a variety of

topics; it is not, nor is it intended to be, scientific in its number of respondents, selection of respondents, or response rate – especially

within individual industries. Accordingly, this report summarizes findings for the surveyed population but does not necessarily indicate

economy- or industry-wide perceptions or trends.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, tax, legal or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decisions that may affect your business, you should consult a qualified professional advisor.

As used in this survey, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Copyright © 2010 Deloitte Development LLC. All rights reserved.

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