By Jason Bramwell
Despite concerns about the risks and costs associated with health care, US CFOs maintain a more positive perspective as they enter the second half of 2013, especially toward hiring and employment opportunities, according to a new survey.
Of the 226 CFOs of public and private businesses polled for the CFO Quarterly Global Outlook Survey, which was conducted by Financial Executives International (FEI) and the Baruch College Zicklin School of Business in New York City, 61 percent plan to hire within the next six months, and employee compensation is expected to increase by 3.5 percent.
The respondents' optimistic view on hiring and employment at their companies is reflected in their plans to hire mid-career professionals, entry-level college graduates, and experienced and skilled technical workers. In addition to their plans to hire, nearly three-quarters of CFOs (72 percent) said they did not have to reduce their workforce over the past twelve months. CFOs also expect the US employment rate to improve, declining slightly to 7.3 percent one year from now, according to the survey.
Other Key Survey Findings
Other findings from the CFO Quarterly Global Outlook Survey include the following:
- The majority of US CFOs anticipate their businesses will be affected by health care changes, with 58 percent of respondents expecting the new health care regulations will increase the employee copay within their companies, and 43 percent expecting it will reduce the quality of health care packages available and/or reduce benefits for employees. When asked about the impact of the Affordable Care Act within the past six months, companies experienced on average a 4 percent increase in related costs as a result of this regulation.
- CFOs stated they are most commonly accessing capital from banks, with one-third accessing capital from equity and one-quarter from debt markets. While the majority of respondents said they are not using or considering any alternative sources of funding, 16 percent said they are considering asset-backed loans, and 11 percent are considering an acquisition in the next twelve months.
- CFOs expect the rate of inflation will be 2 percent on average six months from now and close to 3 percent one year from now. CFOs continue to carry a low-to-moderate level of concern toward inflation, as evidenced by 75 percent of respondents selecting "three or lower" on a concern scale of one to five. The majority of respondents indicated that this level of concern is consistent with their level of concern in the previous quarter. However, for 61 percent of CFOs, the volatility of energy prices has increased expectations for inflation.
- CFOs expect interest rates to remain below 1 percent over the next six months and increase slightly one year from now. The majority of CFOs are not overwhelmingly alarmed about interest rates this quarter, with 69 percent rating their concern at levels "three or lower" on a scale of one to five.
However, CFOs project a 10 percent increase in costs related to health care during the second half of this year.
"Previous surveys have shown reduction or minimal growth in the number of US CFOs with plans to hire additional staff. However, the results of this quarter's survey could indicate this trend is turning around," FEI President and CEO Marie Hollein said in a written statement. "It is hopeful to know that employment opportunities are expected to increase for professionals across a variety of levels and that health care costs have not deterred many businesses from taking on full-time staff members."
The quarterly optimism index for US CFOs toward their own businesses increased three points, from 67.1 percent last quarter to 70.7 percent. Confidence toward the economy among respondents improved, rising to 61.2 percent from 58.5 percent in the first quarter, with nearly half of all respondents (49 percent) indicating they believe the economy to already be in the midst of a recovery.
In the next twelve months, CFOs anticipate an 11 percent increase in net earnings and an 8 percent increase in revenue. Financial executives plan to increase technology spending by 7 percent. More than half of the CFOs surveyed (53 percent) said they are currently directing investments toward dashboard and performance metrics. Financial executives are also investing in social media marketing and looking at research and development, cybersecurity, and risk management.
CFOs also weighed in on their concerns about various international economies. Their confidence in the global economy showed improvement, up from 50.8 percent in the previous quarter to 53.9 percent. Nearly three-quarters (73 percent) of respondents believe their businesses will be unaffected by a slowdown in China's and India's economy, and more than half of CFOs polled estimate that the current government stimulus program in Japan will be unsuccessful.
Businesses appear to be more vulnerable to the European economy, with 78 percent of respondents rating their concern about the fate of the Eurozone at a "three or higher" on a scale of one to five (with one being "not concerned"). Moreover, 44 percent of respondents do not expect to see a recovery of the European economy until 2015 or beyond.
About the survey:
The CFO Quarterly Global Outlook Survey, conducted by Financial Executives International (FEI) and the Baruch College Zicklin School of Business, interviewed 226 corporate CFOs from the United States electronically from July 26 to August 9. CFOs from both public and private companies and from a broad range of industries, revenues, and geographic areas, including some offshore companies, are represented. The respondents are FEI members.
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