The economy is steaming ahead, but it’s going so fast that workforce planning, talent gaps, and the logistics of hybrid work environments have become key talking points in FP&A circles. While companies continue to cut back on office space, they’re also struggling to find talent amid a surge in hiring that’s also pulling current employees away. It puts FP&A in the spotlight to fund the digital transformation, training, and workforce flexibility initiatives workers increasingly demand. To keep you up to speed on the latest FP&A thinking, below is a quick recap of these and other topics we’ve found helpful over the past month.
The financial benefits of reducing or eliminating offices have been promoted since the pandemic sent everyone home. Now, as companies navigate the logistics of hybrid work and expect future cost savings, many are taking one-time charges related to their office reduction plans due to subleasing at a loss. “More than a year into the pandemic, demand for office space has decreased significantly. During the first quarter, the amount of U.S. office space that became vacant exceeded the amount of space that was leased by 34.8 million square feet.”
CEOs of the biggest companies expect GDP growth to hit 5% this year, driving them to boost hiring in an already tight labor market. U.S. unemployment has fallen to under 6%, and Fed Chairman Jerome Powell recently stated it’s expected to hit 4.5% by the end of 2021, and continue to fall through 2023. “CEOs at the biggest companies…plan record hiring during the next six months.”
Workers are unsurprisingly attracted to companies that use modern technologies, and are less likely to tolerate slow, glitchy software that adds to their daily workload. It’s a good time to revisit digital transformation decisions, since the cost-benefit analyses may have changed dramatically over the past year. “It’s not about chasing the newest shiny objects or large-scale transformation; it’s about matchmaking technology enablement and employee empowerment for maximum impact and minimum investment.”
WSJ-Deloitte: Economy’s Liftoff Fuels CFO Optimism
CFO optimism is high, with three-quarters saying the North American economy is good or very good, according to a Q2 survey by Deloitte. However, looking out a year from now, the percentage of CFOs predicting an even better economy has shrunk a bit from Q1. Inflation and threats to economic stability were cited as risks, as were talent recruiting and retention. But, to mitigate future risks, CFOs are backing digital transformations in earnest. “When asked to identify the most important transformation their companies were taking, CFOs’ responses fell into two broad categories: technology/systems upgrades, mentioned by 40%, and shifts in strategies, business model, and offerings, indicated by 35%.”
At the end of May, the number of unfilled positions equaled the number of unemployed workers. That signals a huge skills gap, which should be pushing CFOs to invest in training and education programs. The gap is driven mostly by technology, according to the World Economic Forum, and research shows that about one-third of workers lack the digital skills valued by employers. FP&A can lead the charge by reaching out to human resources, collaborating with the business on needs, and identifying internal gaps. “CFOs can help lead the charge in creating reskilling and upskilling programs to build a stronger workforce for today and tomorrow.”
Last year was an abrupt and all-consuming test of organizational resilience. But, as the economy steams ahead, there are many lessons to be learned to help companies better prepare for, and react to, the next black swan event. FP&A should consider the potential impact of scenarios like another pandemic, disrupted supply chains, climate-related regulations, and even inflation. “At any point in time, each business will have to manage a unique configuration of dependencies, vulnerabilities, resource availability, positive outcomes, and negative external impacts. Accounting systems must reflect all elements of this configuration.”
Check back for these occasional resource roundups with links to timely, helpful, and thought-provoking content for FP&A and CFOs. If you have comments, questions, or suggestions, please engage with us on Twitter, LinkedIn, and Facebook.