"Because of the scare of our lives, the baby boom generation is effectively out of the market from a consumer standpoint. This is part of why social and mobile technology is so important, because it targets the younger generations who are backing the market spending," said one CFO who attended the 10th Strategic CFO Roundtable in McLean, Virginia, this spring.
The gathering, sponsored by the University of Virginia Darden School of Business, ILEX Leadership Associates LLC and McGuire Woods LLP, convened leading CFOs from public and private companies based in the Washington, D.C., region. The CFO Strategic Roundtable meets several times per year. The event's hosts recently released the full report of their latest pre-meeting survey results and roundtable discussions.
According to Professor Kenneth Eades, chair of Darden's Finance area and the moderator of the event, the roundtable continue to be a venue for rigorous discussion. The 10th roundtable event - a milestone of sorts - was no exception. In 2009 when the roundtable began, the CFOs examined issues of cost cutting and maintenance of market share. Since then, they have grown steadily optimistic about the state of their own firms.
Consumer Spending and Political Uncertainty
"Over the years, the CFOs have become more and more confident in the ability of their companies to show strong profits with their lean cost structures," said Eades.
However, the CFOs continue to lament the decrease in consumer spending, and therefore hesitate to spend their own funds.
"Cash flows have been strong, but basic consumer demand has failed to rebound as they originally had expected," Eades added.
"I think, again, in the general economy, a lot of people are waiting to see a turn," voiced one CFO. "We're waiting to see consumer spending change, and then we'll start thinking about deploying our cash. Why think about deploying it now, when we're worried about the macro trends, especially if you're in that consumer space?"
The survey results collected from the CFOs provide areas for greater discussion. The U.S. government's response to the national debt crisis and the annual deficit were among some of the points discussed during the roundtable.
"It is difficult to make business decisions when the rules are changing and there is no clear sense of how to interpret the new rules, such as Dodd-Frank. When the government has a bias toward either incremental decisions or inaction, it is difficult to foster a business environment with leaders who want to take risks and create jobs," said Eades. "Sadly, the concern about government policy and ineffectiveness has been a consistent theme during the roundtable discussions."
Growth and a Return to Lower Unemployment
Not all of the talk was of gloom, however. The CFOs reported increased confidence in the economy and in the future growth of their own firms. The CFOs also reported that they see their firms increasing capital spending, entering new markets and adding new employees. Reasons for this optimism relate to the successful acquisition of other companies.
"Over the past three years, CFOs have changed from 'considering' acquisitions as growth vehicles to 'executing' those acquisitions," Eades said. "Many acquisitions have been smaller companies, but some of the deals have substantially changed the size of the acquiring companies."
The pre-meeting survey also asked the CFOs to predict how many months will pass before the U.S. employment rate returns to pre-crisis (year end 2007) levels. Their thoughts on the matter have not changed much in the last six months.
One CFO summed up these results by reflecting on his own answers over the past three years of attending the roundtable. "I've actually been saying three years now for the last three years!"
At the ninth Strategic CFO Roundtable, the CFOs predicted 34 months for a rebound to 2007 employment levels; this time the CFOs' expectations averaged 33 months.
According to the report, the D.C. area CFOs have done well managing their own employment levels, but their predictions regarding U.S. unemployment continue to suggest a long recovery period.
The Strategic CFO Roundtable will reconvene in September 2012.
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