The recently passed tax reform legislation has increased optimism among CFOs (Chief Financial Officers) to record highs. This finding is from the recent quarterly Duke University/CFO Global Business Outlook conducted by Duke University. The survey includes information provided by over 800 CFOs of companies from a wide range of industries and sizes. While this survey included CFOs from all over the U.S. and the rest of the world, most of the results are relevant to companies here in the San Francisco Bay Area.
Analysis of past survey results shows that the CFO Optimism Index is an accurate predictor of future economic growth and hiring. Hopefully, this will translate into robust business growth and hiring in 2018.
Additionally, the survey reveals that hiring and retaining qualified employees is increasingly difficult and will potentially lead to higher wages. 43 percent of CFOs call this issue their top concern. The median U.S. firm is planning to increase its employee base by approximately 2 percent in 2018. The labor shortage and tightness includes management levels, skill positions like mechanics and engineers, as well as sales and service positions.
As a result of the tight labor market, U.S. CFOs are planning to have to pay higher wages and salaries, with an increase of about 3 percent in the next year. The growth in wages will be the highest in the tech, energy, and retail / wholesale industries.
In a related concern, the next worrisome issue for CFOs in the U.S. is the cost of employee health benefits. Health care costs are projected to rise by more than 8 percent in 2018. Almost half of U.S. CFOs reveal that the increasing cost of employee health benefits hinders their companies’ abilities to invest in long-term corporate investments.
Another interesting finding from the survey reveals that the workload of a typical CFO continues to grow.
"The role of the CFO has widened over the last two decades," John Graham, a finance professor at Duke’s Fuqua School of Business and director of the survey, said. "CFOs are accountable for the bottom line as well as helping shape corporate strategy. One hopes that finance chiefs are not overworking themselves to the point of jeopardizing their health, which in turn could put the financial health of the company at risk."
The survey also highlights that increasing pace of innovation:
“Sixty-two percent of CFOs indicate the pace of innovation at their firms has grown faster in the past three years. Among these companies, 63 percent indicate the rapid pace of change has caused their firms to focus more on the near-term, and 40 percent say they now choose projects with shorter lives.”
"Given the acceleration in innovation, firms don’t want to be shackled by longer-term investments, especially in technology that can quickly become obsolete," said Cam Harvey, a founding director of the survey, who teaches an innovation course at Fuqua. "You expect companies to pivot, and shorter-term projects allow for flexibility and speed."
Furthermore, 76 percent of CFOs responded that their capital spending (i.e., capex) and investments have increased as a result of more rapid innovation.
The Duke University/CFO Global Business Outlook survey includes a wide range of companies (public and private, small and large, many industries, etc.). The survey includes CFOs from industries such as retail/wholesale, mining/construction, manufacturing, transportation/energy, communications/media, technology, service/consulting and banking/finance/insurance.
Read the full survey here