- Thirty percent of CFOs said they may trim their workforce through layoffs in the event of a downturn during the next six months, according to the Q2 2022 CFO Survey report recently released by accounting network Grant Thornton LLP.
- CFOs’ outlook has darkened as the year unfolds, with 26% of financial heads reporting a pessimistic stance regarding the state of the U.S. economy over the next six months. Only 16% reported they were “very optimistic” in their outlook, while 23% said they were optimistic.
- Yet CFOs and employees should be careful of utilizing workplace cuts as a cost-saving measure — the effects of layoffs “can linger for employers,” Tim Glowa, principal of human capital services for Grant Thornton said in a statement included with the study. “Companies that were quick to cut headcount at the beginning of the pandemic suffered in the intense competition to rebuild workforces during the recovery,” he said.
CFOs are evaluating a host of cost-cutting measures as economic conditions continue to weaken, according to the study, which was fielded in July when June 2022 data showed inflation inching up to 9.1%. New economic data has not assuaged executives’ concerns despite a slight slowing in consumer price gains in July, with the most recent data from the Department of Labor showing inflation is continuing to spread.
The core Producer Price Index (PPI) rose 0.4% last month and 7.3% year-over-year despite an easing in inflation for some goods, according to Department of Labor data, indicating inflation is bleeding into parts of the economy with less vulnerability to pricing pressures.
The majority of CFOs indicated inflation as a top reason behind their negative economic outlook for the next six months, with many flagging increased costs for goods and services and energy as factors that contributed to such an outlook.
Seventy-three percent said increased costs of goods and services was a reason behind their negative economic stance, while 64% said rate hikes causing a recession was a factor and 57% pointed to an inflationary wage-price spiral, according to the study.
Layoffs and other workforce reduction strategies are therefore falling under close scrutiny by CFOs seeking to buffer their companies against inflationary pressures as managing costs becomes top of mind.
Many are examining their real estate holdings and benefit costs as well as potential layoffs, according to the study — though a high number of CFOs are also looking to bump up employee training and development as they face workforce retention struggles.
Sixty-two percent of financial heads said they expect continued challenges to attracting and retaining workers in the face of a pending economic downturn over the next six months, compared with the 30% who said they expect potential workforce contraction via layoffs, according to the study.
Investment in workforce training and development — which 49% of financial executives anticipate conducting compared to last quarter’s 35% — would therefore be a smart play for CFOs, according to Glowa.
“Employees, especially higher paid employees, value training — it’s one of the keys to building engagement,” he said in a statement included in the study.
CFOs anticipate other challenges would spring up before a recession in addition to workforce retention challenges or potential layoffs. They pointed to cybersecurity and digital footprint vulnerabilities, supply chain issues and remote workforce challenges as well as cash and liquidity hiccups as the top problems their businesses were likely to face over the next six months, the study found.
Forty-one percent of financial executives pointed to cybersecurity as their key worry, a minor increase from the 40% who noted the same during the year’s first quarter.
Concerns over remote work and cash and liquidity saw higher jumps, with 32% of CFOs reporting it as a top challenge for the quarter compared to the 25% of those who indicated the same in the year’s first quarter.
Meanwhile, 31% of CFOs believe cash and liquidity issues will be their businesses’ main challenge for the next six months, a sharp uptick from last quarter’s 19%.
The study surveyed 249 CFOs, Grant Thornton shared in an email.