Survey: Companies Shifting From Recovery to Growth, but Domestic Hiring Will Likely Continue to Lag

Chief financial officers are markedly shifting their focus from cost cutting to revenue growth, but they remain wary of increased hiring at home, according to the results of the Deloitte CFO Signals quarterly survey for the first quarter of 2011. Specifically, the CFOs surveyed said nearly half of their companies’ strategic focus is on revenue growth -- substantially ahead of their 30 percent focus on cost reduction.

Overall, optimism among CFOs rebounded during the quarter with 62 percent of respondents indicating a more positive outlook regarding their companies' projects, up from 53 percent in the fourth quarter of 2010. Furthermore, CFOs are upbeat about performance, projecting average year-over-year gains of 8.2 percent for sales (compared to 6.5 percent last quarter), 12.6 percent for earnings (compared to 12 percent in the fourth quarter 2010), and 11.8 percent for capital spending (compared to 8.7 percent last quarter). The projections for both revenues and earnings, however, are substantially lower than estimates from the second and third quarters of 2010 -- possibly indicating that many of the strongest recovery gains have already been achieved.

The obstacles to growth that CFOs cite are mainly external. Survey results revealed that 52 percent of respondents view regulation as their industry's top concern.

The Deloitte CFO Signals quarterly survey also revealed the following results (estimates are adjusted averages to reduce the effect of outliers):

-- Only 16 percent of CFOs are less optimistic than they were the previous quarter

-- the lowest level recorded in the four quarters of the Deloitte survey.

-- CFOs expect significant changes in their sources of growth over the next year as compared to the period prior to the financial crisis and recession. Almost three quarters (73 percent) of CFOs expect increased revenue from new products and services, and 68 percent expect foreign markets to generate more revenue.

-- More than half of CFOs (56 percent) expect their companies’ prices to increase over the next year than prior to the recession, driven in part by expectations of rising commodity prices. More than 80 percent of CFOs expect commodity price increases over the next year.

-- Revenue growth from existing markets is the most prevalent company challenge, cited by more than half of CFOs (55 percent) as a top three concern. One-third of CFOs cite revenue growth from new markets as a top challenge, and another third cite framing and/or adapting strategy.

-- CFOs are very concerned about government’s impact on their growth plans, particularly tax policies (especially around the tax code and the repatriation of earnings) and health care reform, which they view as unnecessarily burdensome.

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