Maintaining the Status Quo Characterizes CFO Hiring Plans in 2009

The worsening economy continues to batter U.S. companies, forcing many CFOs to alter their hiring plans for 2009.  However, few CFOs are stating outright that they will reduce or even freeze hiring in 2009, preferring instead to take a strategic approach that allows them to make the right hires when and if they are needed.

“Our needs may come down a bit, and we’ll have to be careful about making the right hire,” said Brian Zolkos, CFO, RedZone Robotics, Inc.  “We know we will have to make some hires, but we are planning to dial it back a bit.  We won’t be working in an attrition mode, but we will be establishing hiring triggers.”

Zolkos notes that, in 2008, RedZone Robotics focused its hiring efforts on the operations and engineering side of the house.  In 2009, that focus will shift to sales and technicians as the company begins working to establish a direct sales structure to maintain its growth rate despite the trying economic times.

To fill those needs in the most efficient manner, the company leverages recruitment firms for identifying top talent, in particular to ensure they can access the best candidates for their needs.

“We are a small company that is growing very quickly, and we’ve struggled a bit with hiring engineering talent.  We began utilizing recruiters and found that developing a good relationship with them is important.  They may not have the perfect candidate today, but they might have what we need in a month,” said Zolkos.  “Hiring in 2009 will be very strategic, and we’ll need to examine the affordability of utilizing recruiters, but we believe it will be important to do so to ensure we have a good selection process in place to find the best candidates.”

Declining Optimism

Not every CFO shares RedZone Robotics’ optimism that they will be able to proceed with plans to fill necessary positions in the coming year. 

According to the most recent quarterly survey of CFOs by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business, optimism toward both the U.S. economy and their own companies has sunk to all-time lows.  As a result, many respondents indicated they will take precautionary measures to initiate cutbacks in technology and capital spending, as well as hiring and inventory, over the coming year.

“Our survey shows a continued, increasing loss of confidence by these CFOs and, for the first time in several years, they are actually reporting year-over-year reductions in capital investments, technology spending and hiring,” said John Elliott, Dean of the Zicklin School of Business at Baruch College.  “While expected allocations have been trending down for several quarters, they had continued to report planned increases in these categories through the first half of 2008.”

The CFO Optimism Index for the U.S. economy continued its plummet past last quarter’s all-time low to 41.73, a 7.19 point plunge that was the largest quarterly decline in the history of the survey.  CFOs’ outlook toward their own businesses, while higher than their overall economic outlook, also experienced a sharp decline as the CFO Optimism Index for their own companies fell 5.32 points to 61.74.

The third quarter 2009 Duke University/CFO Magazine Global Business Outlook survey also found that optimism over any quick economic recovery was low among CFOs, with 60 percent saying they would reduce investment or hiring in response to the adverse economic conditions.

However, more than half of the CFOs surveyed also indicated that they believe the economy will rebound by mid-2009.

“The U.S. economy is struggling, but there are signs that we are bottoming out,” said John R. Graham, director of the survey and a finance professor at Duke's Fuqua School of Business.  “Pessimistic CFOs outnumber optimists, capital spending will be weak, employment will fall and the credit crisis continues to affect the economy.  However, there are signs that the economy will not deteriorate further; the ratio of optimists to pessimists has improved.”

Graham added:  “In addition, CFOs expect the economic downturn to end by next summer, the same timing they forecast in June’s survey.  This is important because it indicates the end of the difficult period is in reach – the end is not moving farther away like a mirage in the desert, staying forever out of reach.”

CFOs expect to reduce domestic workforces by 1.6 percent, while prices of their own products will rise by 3.6 percent over the next 12 months.  Capital spending is expected to increase by only 0.6 percent, while earnings are expected to grow modestly at 5.5 percent, an improvement over last quarter’s 3 percent expectation.

“Our results are consistent with a business cycle shaped like a bathtub, with a gradual slide into an extended slowdown followed by a gradual slope upward,” said Campbell Harvey, Duke international business professor and founding director of the Global Business Outlook survey.  “The halt in capital spending and the evidence of a slash in employment are consistent with a prolonged period of lethargic growth.”

Strategic Hiring, Consultant Use

Though surveys indicate workforce reductions, at least until the economy begins to rebound, some CFOs aren’t including cutbacks or even committing to hiring freezes in their staffing plans for 2009.  Instead, they intend to take a highly strategic approach, one that will allow them to secure top talent if and when it is needed.

“We really have no plans on changing our staffing strategies even though it’s a bad economy,” said the CFO with a division of a publicly traded Real Estate Investment Trust Firm with more than $1 billion in real estate assets.  “We had a great 2008 and hope to continue that in 2009… We are doing pretty well and we are growing.  We don’t need to increase now, but if the firm keeps growing, we may need to.  Again, it depends upon the economy.”

And while they don’t typically utilize consultants to fill gaps in their talent pool, they will do so if it becomes necessary to meet their needs for credentialed professionals with college degrees.

“We have a strong staffing team in-house that can [fill gaps] when we need it,” said the CFO.  “We’re not afraid to use consultants, if needed, but right now we have no plans to.”

For other companies, the use of consultants is integral to their 2009 staffing strategies, particularly when highly specialized skills sets are needed.  For these organizations, consultants allow them to fill gaps in their skill sets while keeping headcount down.

“It’s not often that we have to, but we do use consultants, primarily in our technical positions.  We’ve had projects where we really needed a few more hands on deck or resources with specific technical competencies,” said Valerie Wheatley, CFO of the YWCA of Greater Pittsburgh.  “It’s a way to maximize staff resources but not increase our costs in doing so.”
 

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