Mirror, mirror on the wall? Or, perhaps a crystal ball is a better indicator? Whichever your preference, I’m confident there have been days in recent years when CFOs have felt like turning to one of these classics for guidance. One of my favorite barometers is Deloitte’s CFO Signals, the firm’s regular polling of CFOs of major national corporations. In my work as a national site location consultant and incentives negotiator, one of the primary decision-makers I’m regularly involved with is the CFO. Although the CEO, COO, CFO, CRE, and HR all play key roles in the site relocation or expansion process, it is the CFO that touches all facets through the financial insight he or she provides.
So what does the latest CFO survey have to say? Like the rest of us, about half of all CFOs polled share the continued concern about the U.S. economic recovery and the global economic conditions that impact us all. From my discussions with colleagues in the industry, we are all encouraged by the increased activity, but the due diligence period can be a long one. That being said, U.S. unemployment concerns rose sharply to 58 percent among those polled. And it makes for an interesting political environment when one-third of the American CFOs prefer to raise taxes and still substantially cut spending.
One of my more regular blog topics—availability of labor with qualified skill sets, especially in areas involving manufacturing and engineering—continues to be a top-three industry-related concern. Increased pricing is now the No. 1 industry concern, especially in the fields of manufacturing, technology, and financial services. Industry regulation and legislation come in at No. 2 (46 percent), making it another hot spot in the political arena. The encouraging news is that 39 percent of the CFOs polled had a positive outlook.
One of the CFOs made a particularly interesting comment: “With still more macro uncertainty and volatility, companies are turning toward what they can control.” This brings us back to the significance of the role CFOs play in the decision-making process when it comes to site expansions and relocations.
The uncertainties of election-year gridlock, with its focus on national debt issues, coupled with international economic instability, has turned the corporate executive’s attention to what can be “controlled.” Among these are availability of working capital, inventory levels, efficiency gains, and cost-saving measures.
Although they continue to identify ways to cut costs and bolster performance, CFO’s continue to remain concerned. Deloitte’s 2nd quarter 2012 poll indicated another hit in terms of their outlook—more so in the United States than in Canada and Mexico. Although out of the ‘red’ reported in 2011, the U.S. CFOs’ optimism now sits at zero, as of second quarter 2012. Thus, the continued impact on all our clients when it comes to making decisions on consolidation, down-sizing or right-sizing, relocations, or expansions.
I’m one of those who feel little will change with the outcome of the upcoming elections. We’ll continue to hope the legislators will support industry regulation and legislation to encourage increased manufacturing and other business activity around the country.
Linda Burns is a national site consultant based in the Dallas area who specializes in incentive negotiations and economic development location strategies, including the incentive practice of Wadley-Donovan-Gutshaw Consulting. Contact her at [email protected]