CFOs of large North American companies were more likely to be optimistic than pessimistic in Q4 2010, although job stresses have reduced CFO optimism since Q2 2010, according to a new study from Deloitte. The Deloitte CFO Signals quarterly survey for Q4 2010 indicates that overall, 53% of surveyed CFOs at North America’s largest companies are more optimistic than they were in the previous quarter.
CFO Optimism Up from Q3, Down from Q2
This figure is slightly improved from Q3 2010 but down from Q2 2010, when approximately 60% of CFOs (based on MarketingCharts visual estimate of Deloitte chart) were more optimistic than in the previous quarter. In addition, 21% of CFOs claimed declining optimism in Q4, up from 17% in Q2 but down from 36% in Q3.
Macro Factors Help Boost CFO Optimism
After dragging down total optimism during Q3 2010, companies’ assessment of the macro business environment buoyed optimism in Q4 2010. Nearly 35% of CFOs are now more optimistic because of factors external to their companies, meaning that more than 60% of the total rise in optimism is driven by factors in the broader economy.
Similar to the case in previous quarters, external factors drive roughly 85% of companies’ pessimism. Pessimism rose most markedly in manufacturing where nearly 40% of CFOs are less optimistic and only 19% are more optimistic (meaning that a 43% indicate no change in sentiment after a very pessimistic third quarter). Q4 has the highest proportion of “no change” over the past three quarters at 26%.
During Q3 2010, rising pessimism was much less pronounced for companies with less than $1B in revenues. Q4 2010 is similar, with 60% of these companies more optimistic and only 8% less optimistic.
Change Causes CFOs Stress
As it has been for the last three quarters, change is at the heart of CFOs’ top job stresses. The same three job stresses have boiled to the top each quarter (changing regulatory requirements, major change initiatives and strategic ambiguity) with the rank order changing only slightly each quarter.
Changing regulatory requirements are the top concern for Q4 2010, with survey data indicating they are highly dominant within energy/resources and healthcare/pharma, and a top concern for financial services, telephony/media/entertainment (TME) and services.
Major change initiatives are just behind, driven largely by heavy weighting within the manufacturing and technology sectors. Data shows strategic ambiguity is also a top stress, especially within financial services, TME and the services sector, and particularly within companies below $5B in revenues.
Concerns about excessive workload/responsibilities rose during Q4 and are highest within the largest companies (where nearly half of CFOs cite this stress). More than one-quarter of CFOs cite pressures from poor company performance, driven mostly by TME, technology and manufacturing (most prevalent in companies earning less than $1B).
Other notable Deloitte findings include that internal power struggles are most common within the smallest companies; companies below $5B are much less likely to complain of insufficient support staff. Internal power struggles are most prevalent within the technology sector.
Fewer CFOs Cite Revenue Growth, But Remains Top Strategic Focus
In Q3 2010, 46% of companies’ strategic focus was on revenue growth and preservation (up from 36% in the second quarter). The shift toward revenues last quarter largely reversed, although revenue growth remained the top strategic focus, and the relative focus of company attention during Q4 2010 looks very much like it did back in the second quarter. Deloitte suggests Q3 results may have been an anomaly, or Q4 results may indicate a renewed focus on profitability as competition heats up in slow-growth economies.
Small Biz Owner Optimism Surges
Small businesses also show signs of increasing optimism as the Wells Fargo/Gallup Small Business Index, a measure of small-business owners’ perceptions of their operating environments, surged 24 points in November 2010, from -28 to -4. This represents a sharp improvement from the previous index score in July 2010 and suggests that small business owners, though still more pessimistic than optimistic overall, are the most positive they have been since hitting roughly zero in April 2009.
About the Data: Ninety-two CFOs responded to the survey during the two weeks ended November 30, 2010.