RHMR CFO Concerns 2011

CFO Concerns
What Are The
Top Challenges Facing Today’s
Financial Executives

Headline

Table of Contents
1 Overview: Top Concerns
2 Healthcare: Top of List, Top of Mind
6 Pressures to Control Costs and Boost Profits
7 Need to Retain and Motivate Top Performers
9 Conclusion: Responses to Tough Challenges
Showcase Importance of CFO Role
11 Endnotes
12 About Robert Half International

Robert Half CFO Concerns What Are The Top Challenges Facing Today’s Financial Executives ‹ ›

Overview: Top Concerns
Chief financial officers (CFOs) have had no shortage of challenges over the past few years. The
global recession has required them to use every tool available to guide their companies through
a business downturn of unprecedented scope and into a still-recovering economy.

To better define the concerns of today’s finance executives, Robert Half International conducted
a survey of 1,400 CFOs from a stratified random sample of U.S. companies with 20 or more
employees. We asked CFOs to rank the most pressing concerns facing their company. Their top
three issues were:

1. Healthcare costs
2. Controlling spending and improving profitability
3. Staff morale and motivation

Many concerns that emerged through the survey and in selected interviews with financial
executives are perennial ones – controlling spending, improving profitability, increasing the
demand for products and services, and monitoring risk – yet they seem magnified today amid
a backdrop of persistent uncertainty.

One CFO noted that what’s troubling about the nascent economic recovery is that it seems likely
to be a prolonged one, rather than a more dramatic “snapback,” as in past recoveries that had
clear catalysts for growth and job creation.

Moreover, certain issues facing CFOs – in particular, the rising cost of healthcare insurance –
remain as problematic as ever, even if the nature of the concern has changed somewhat. Other
of-the-moment challenges mentioned by CFOs in interviews include the need to drive topline
growth, the potential for increased regulation, higher fixed costs, competition from outside the
United States, the macroeconomic outlook, pricing pressures, high unemployment and risks
related to doing business in emerging markets.

Robert Half CFO Concerns What Are The Top Challenges Facing Today’s Financial Executives ‹1›

Healthcare: Top of List, Top of Mind
When Robert Half Management Resources conducted a similar survey of top CFO concerns in
2006, executives ranked rising healthcare insurance premiums as their top concern. In 2011,
this remains their most worrisome issue, though much of the current uneasiness stems from the
still-uncertain effect of recent healthcare reforms on their businesses.

One public company CFO who said he
expects his firm’s costs to rise even more
than in past years as a result of healthcare Increased Share of Healthcare Costs for
reforms reflects the assessment of most Employers and Employees
financial executives. Like many, he is (1999-2009)
concerned that no one seems completely
Annual premiums for employer-sponsored family
certain about what the full impact of
healthcare coverage rose over four times the rate of in-
reforms will be on businesses or what
flation and nearly four times the average wage increase
unintended consequences may result.
during the last decade:
Another interviewee, a CFO of a small
private company, noted that while it re-
• Average employer premium: +119%
mains unclear exactly how healthcare re-
• Inflation: +29%
forms will affect a small industrial manu-
• Wage earnings: +34%
facturing business such as his, it also is Due to the size of these dramatic increases, many em-
not desirable to keep paying more every ployers have had to pass a portion of costs to workers.
year for a healthcare plan that doesn’t As a result, employees have seen their share of job-based
meet employees’ needs. The firm’s premi- coverage increase at nearly the same rate as employers
ums climbed 37 percent this year, partly during the last decade – jumping from $1,543 to $3,354.
because of employee health problems.
Despite the fact that the manufacturer is The average cost of employer-sponsored premiums in
paying more than ever for healthcare, he 2009 was now close to $13,100 a year for a family of
said, staff members are dissatisfied with four. And employees contributed roughly 27 percent,
their insurance plan. On average, about on average, toward the premium.1
10 percent of the company’s overall com-
Source: National Coalition on Healthcare
pensation costs goes toward healthcare.


Conclusion: Responses to Tough Challenges
Showcases of List, Top of of
Healthcare: TopImportanceMindCFO Role

Addressing Rising Healthcare Costs
When it comes to managing rising healthcare insurance costs, there’s no easy answer. (See Figure
1.) More than one-third (34 percent) of CFOs said their companies are responding by increasing
employees’ contributions to their premiums; 28 percent said their companies are assuming the
higher costs, and 20 percent said they’re reducing healthcare benefits in the face of higher costs.
Many respondents are likely using multiple strategies to offset increases.

Forty-one percent of executives said they are not making any changes to their plans, and 8 percent
said their companies are eliminating healthcare benefits altogether. Companies that implemented

Figure 1: Strategies to Address Rising Health Insurance Costs
CFOs were asked, “Which of the following strategies, if any, is your company using
to adapt to the rising cost of healthcare insurance?” Their responses*:

34% Increasing the employees’ contributions
to their healthcare insurance

28% Increasing the company’s contribution
to employees’ healthcare insurance

20% Reducing healthcare benefits

8% Eliminating healthcare
benefits

7% Don’t offer healthcare benefits
to employees

* Multiple responses allowed.


Showcases of List, Top of of
Healthcare: TopImportanceMindCFO Role

pay cuts or freezes during the recession may be reluctant to pass the cost of higher premiums on
to employees. One private company CFO interviewed said his firm felt that it could – and should
– bear the cost increase because employees had already been dealt across-the-board salary cuts
and the elimination of bonuses and overtime pay.

A different solution was voiced by the CFO of a publicly held consumer goods company who
said his firm might have no choice but to pass costs through to the marketplace. Employees
may not be able to shoulder the added expense and the company has to maintain profitability,
but “somebody’s got to pay for it at the end of the day,” he said.

Effect of New Legislation and Regulations
Although businesses are generally averse to the prospect of increased regulation, they may be
especially wary when the details are still in flux, as is the case with several pending reforms.
The uncertainties surrounding new and proposed regulations may serve to heighten CFO anxiety.

When asked about their concerns in the regulatory arena, healthcare again topped the list, with
62 percent of CFOs indicating they believe recently passed healthcare reforms will have the
greatest impact on their organizations this year. (See Figure 2.) CFOs seemed most concerned about
the unknown variables still attached to healthcare, such as the extent of government intervention,
implementation issues and the broad nature of reforms. In addition, unlike other pending regulations,
healthcare reform has more of a direct impact on every business, regardless of size or industry.

By contrast, 7 percent of respondents cited the possible conversion to International Financial
Reporting Standards (IFRS) as the regulatory issue that could have the most significant bearing
on their accounting and finance department. IFRS are the principles-based financial reporting
requirements adhered to by more and more countries worldwide, with conversion to these standards
well under way in many nations.2

Despite the fact that there is not yet a clear timeline or path for IFRS adoption in the United
States, a separate Robert Half survey of 200 financial executives found that 11 percent used
IFRS in 2010, compared to 5 percent the previous year.3 Almost 40 percent of companies surveyed
had both domestic and international operations, which may suggest that some felt they had


Healthcare: Top of List, Top of Mind

sufficient international exposure to warrant voluntary adoption of IFRS, perhaps in addition
to local or U.S.-based Generally Accepted Accounting Principles (GAAP).

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 represents a press-
ing issue as well. The legislation is considered the most significant financial services reform in
the United States in the last 70 years, though it is not just U.S.-headquartered financial institu-
tions that will feel the effects of the law.4 By some counts, as many as 350 new rules will need
to be put into effect over the next four years to accomplish the reform changes mandated by the
Dodd-Frank Act. Although the law is aimed at banks and other financial institutions, some busi-
nesses wonder how additional regulation could affect them as bank customers.

Figure 2: Impact of Various Regulations
CFOs were asked, “Which one of the following new or proposed regulations will have the
greatest impact on your accounting and finance department in 2011? Their responses:

Healthcare reform — 62%
IFRS — 7%
Dodd-Frank Act
(financial reform law) — 3%
Basel III — 1%
XBRL — 1%
None — 24%
Don’t know/refused — 2%


Showcases Importance of CFO Role Profits
Pressures to Control Costs and Boost
Even as many companies prepare to capitalize on improving conditions, the realities of everyday busi-
ness challenges are keeping CFOs focused on controlling spending and improving profitability. This
need ranked second on respondents’ list of priorities.

Especially during the downturn, CFOs were keenly aware that allowing spending to remain high when
revenues were falling would cut directly into profits. Now as the economy is rebounding, CFOs are often
tasked with helping their companies avoid the temptation to return to pre-recession spending levels
before revenues have had a chance to catch up.

Gaining Staffing Flexibility
One way more and more businesses are actively managing costs is by making use of flexible staffing
strategies. By using interim staff, companies can convert a portion of one of their largest fixed costs –
labor – into a variable expense that’s tied to actual workload highs and lows. This option provides staff-
ing flexibility for companies that are worried about the ability of their teams to meet rising workloads,
yet are still uncertain whether the long-term outlook justifies full-time hiring.

Contracting interim professionals can also help boost morale. Bringing in reinforcements can alleviate
demands on existing staff, increasing job satisfaction and, in turn, retention.


Need to Retain and Motivate Top Performers
Executives also are concerned about employee engagement and retention: Third on their list of
top concerns was staff morale and motivation.

The growing possibility of losing loyal employees may prompt businesses to take steps to strength-
en bonds with their most indispensable team members. If employees fail to find satisfaction and
sufficient motivation in their work, they may be prepared to seek greener pastures if they can find
them. Forty-four percent of U.S. workers surveyed for a separate Robert Half study said they are
more inclined to look for new opportunities outside their firms as a result of their experiences dur-
ing the recession.5

When CFOs were asked about the perks they plan to offer or are already offering to strengthen
employee retention and motivation, subsidized training and education topped the list, followed by
flexible schedules or telecommuting and mentoring programs. (See Figure 3.)


Need to Retain and Motivate Top Performers
Showcases Importance of CFO Role

Figure 3: Power of Perks
CFOs were asked, “What perks, if any, is your company offering or planning to offer
in 2011 in an effort to attract and retain employees?” Their responses*:

29% Subsidized training/education

24% Flexible work hours or
telecommuting

24% Mentoring programs

13% Matching gift programs

11% Free or subsidized lunch or
snacks

11% On-site perks such as childcare, dry
cleaning, fitness center, cafeteria

10% Subsidized transportation

9% Subsidized gym memberships

8% Sabbaticals

7% Housing or relocation
assistance

* Multiple responses allowed.


There is no question financial executives are faced with myriad challenges, from coping with
the lingering effects of the recession to trying to maintain service and productivity levels with
smaller employee teams and static budgets to uncertainty about new regulations. Perhaps not
surprisingly, then, more than 80 percent of CFOs said they believe it’s more difficult to be a
company leader in today’s business environment than it was five years ago. (See Figure 4.)

Figure 4: Business Environment
CFOs were asked, “Do you think it’s more or less challenging to be a company leader
in today’s business environment versus five years ago?” Their responses:

Significantly more
challenging — 31%
Somewhat more
challenging — 50%
No change — 14%
Somewhat less
challenging — 3%
Much less challenging — 1%
Don’t know — 1%



“This has been the toughest two to three years of my career, and I’ve been working some 35
years,” said a consumer goods company CFO. He added that the challenges CFOs face are more
multidimensional than in the past. “We’re facing a lot of headwinds on many fronts.”

But if there has been a silver lining to this difficult period, it may be that the importance of
the role of financial executives has been underscored. Indeed, those companies that weathered
the downturn most successfully undoubtedly had highly resourceful financial leadership at the
helm. As the economy recovers, financial executives will be on to their next challenge: fueling
and sustaining growth.

Robert Half CFO Concerns What Are The Top Challenges Facing Today’s Financial Executives ‹ 10 ›

Showcases Importance of CFO Role
Endnotes
1. National Coalition on Health Care, www.nchc.org/issue-areas/insurance.

2. Guide to International Financial Reporting Standards, Protiviti, 2009, www.protiviti.com.

3. Benchmarking the Finance Function, Financial Executives International and Robert Half
Management Resources, www.roberthalfmr.com/benchmarking.

4. Successfully Complying with Regulatory Reforms – Start the Journey Now, Protiviti, 2010,
www.protiviti.com.

5. Workplace Redefined: Shifting Generational Attitudes During Economic Change, Robert Half
International, www.roberthalf.us/WorkplaceRedefined.


About Robert Half International
Founded in 1948, Robert Half International is a global leader in specialized consulting and staffing
services and has a network of more than 400 locations worldwide. The company’s financial staffing
divisions include Accountemps, Robert Half Finance & Accounting and Robert Half Management
Resources, for temporary, full-time and senior-level project professionals, respectively. Robert Half
International also is the parent company of Protiviti, a global business consulting and internal
audit firm composed of experts specializing in risk, advisory and transaction services.

In addition to CFO Concerns: What Are the Top Challenges Facing Today’s Financial Executives,
we offer managers a number of complimentary advice booklets, white papers and resource guides
that can help them hire, motivate and retain highly skilled professionals, as well as grow their
own careers. To obtain copies of these materials or learn more about our industry-leading service,
please visit www.roberthalf.com.

Accountemps® Robert Half ® Robert Half ®
accountemps.com Finance & Accounting Management Resources
1.800.803.8367 roberthalf.com roberthalfmr.com
1.800.474.4253 1.888.400.7474


RHMR CFO Concerns 2011

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