R&D projects take undeserved spot at front of line for cuts

Many companies would rather cut these R&D projects than reduce services or institute layoffs.

Research and development (R&D) is a key component of business practices. Without adequate R&D, businesses render themselves unable to innovate properly, which could curtail a company’s ability to grow and improve its offerings. Considering the explosion of businesses – especially in technology sectors – consumers will always have options to receive better products or services from other companies.

Companies need to be careful with how they plan for long-term R&D projects. While these initiatives may seem to represent expenditures at first glance, some businesses consider them to be assets since they provide direct financial benefits to companies. Accountants should also consider the duration of time that a company receives a direct benefit from the project.

Given the challenging landscape of today’s economy, many organizations have come to view R&D projects as extraneous expenses that can be near the front of the chopping block when costs need to be cut. After all, the benefits of R&D initiatives are never guaranteed, along with net gains that are derived from these projects. Many companies would rather cut these projects than reduce services or institute layoffs.

According to a recent Harvard Business Review article, this is precisely the wrong direction a company should take as it tries to rebound from years of difficulties. HBR estimated that had the top 20 companies in the United States enhanced their R&D expenditures, they would have added $1 trillion to their coffers.

“R&D is the basic engine of economic health,” according to the article. “Ill-advised cuts in research spending for the sake of a short-term bottom-line improvement stifle growth that would otherwise benefit the company – and society – over the long term.”

When trying to find business professionals who are well-versed in long-term financial planning and understand the substantial benefits of R&D work, companies should work with finance recruiters that have experience in a number of different industries.

Leadership seen as reason for talent retention woes

Nearly 30 percent of respondents viewed talent retention as the top issue this year.

Companies may finally be starting to realize the full burden of the recession, as years of operating with fewer resources has begun to overburden some business professionals.

That is according to a study by emotional intelligence service Six Seconds, which determined that leaders are increasingly seen as being more to blame for business woes – 58 percent of respondents mentioned leaders as being the top personnel-related problem this year, compared with only 51 percent in 2010. A separate question determined that nearly 30 percent of respondents viewed talent retention as the top issue this year.

Paradigm Learning whitepaper – "Developing Critical Thinking in Today's Leaders: No Room for Old-School Leadership in the New Normal" – tackled leadership from another angle, finding that as businesses emerge from a deep recession, their leaders must be able to think critically and constantly reassess their organizations if they are to return to their former levels of success.

"Now, more than ever, business acumen is foundational to effective leadership," paper author Catherine Rezak said in a press release. "It is impossible to apply critical thinking skills to the business of making money without an understanding of the business drivers that connect day-to-day decisions and actions to key financial and strategic performance goals of the organization."

In order to find employees with these skills and retain the ones that already have them, many companies are turning to in-house training programs to teach managers skills related to accountability, big-picture thinking and analytical skills.

These skills may be especially important among companies recruiting for auditing positions and other vacancies related to financial management. Corporate recruiters and job search firms have the requisite experience to identify candidates with these unique qualities and help businesses expedite their financial professional search.

Yahoo tries for market repositioning amid layoffs, declining profits

Instead of being a market leader that sets the tone – as it once was – Yahoo must now respond to fluctuations over which it has little control.

At the dawn of the internet era, Yahoo became one of the first stalwarts of this new process for accessing information and communicating in real time. A generation later, the company has lost its market positioning, ended its most recent CEO’s brief tenure through a phone call and instituted layoffs affecting more than 10 percent of its workforce.

Simply put, Yahoo is in the midst of an identity crisis, as it seeks to operate in an internet space where it has been surpassed by Google and Facebook in both traffic numbers and advertising pull. Compounding these challenges is the fact that the internet is constantly evolving, so instead of being a market leader that sets the tone – as it once was – Yahoo must now respond to fluctuations over which it has little control.

"It all adds up to an identity problem for Yahoo, a company that began as a portal to the web," David Rosenbaum writes for CFO.com. "Today, the very idea of a portal seems anachronistic, replaced by apps that immediately serve up whatever anyone is seeking. The difficulty of defining what Yahoo is today, and what it may become tomorrow, may make challenges like Big Data, mobile and new computing platforms seem trivial."

In order to successfully complete its ascent back to the lofty peak of internet dominance, Yahoo needs to begin thinking long-term, which means, in part, catering to consumers who prefer to access its services through mobile devices. Yahoo will also focus solely on its most popular services, which include news, sports, finance and email. Despite this leaner business structure and a 1 percent increase in profits year-over-year, the company’s expenses still outpace its profits.

By working with headhunting firms that have experience recruiting managers and accountants, companies like Yahoo can begin to think more strategically about their organizations and institute more effective long-term plans. Similarly, a financial project consulting service can bolster staffing positions in the short-term as needed.

Lifelong skeptics: Auditors must question all information they are provided

Businesses lack a significant degree of control over contextual and environmental effects that can have a lasting impact on a particular entity.

By the very nature of the job, auditors are expected to be skeptical of the information they are presented, although according to a recent study, some may have lost their way.

The report, titled “Professional Skepticism: Establishing a common understanding and reaffirming its central role in delivering audit quality,” was conducted by England’s Accounting Practices Board (APB) and it laid out the steps that companies must take to ensure that their auditors constantly remain skeptical and pragmatic when assessing a company’s financial profile and organizational strategies.

“A bit of history is also thrown into the mix to help auditors understand their origins,” according to a review on Accountancy Age. “Many may be pleased to know part of their role derived from auditing servants in the manorial estates of the 14th century. The auditor was the most trusted servant in the household and all other servants reported to them.”

One of the problems auditors have is that businesses lack a significant degree of control over contextual and environmental effects that can have a lasting impact on a particular entity. These constantly oscillating factors, coupled with the slightest change in a company process or procedure, could produce unintended consequences that spiral into and cause other issues.

Many companies prefer internal auditing services because of the ease of such processes, in lieu of hiring an external service provider. The report recommends that auditors remain insulated from management so that they can best make objective assessments without the filter of biased business decision makers.

To truly enhance skepticism among auditors, businesses should work with an internal audit consultant that knows how to train these individuals to develop a more discerning eye. When recruiting for auditing positions, this expert will understand who can best best perform these responsibilities adequately.

Some events elude risk management strategies

These low-probability, high-impact events are generally very difficult, if not impossible to predict, making any attempt to do so mostly futile.

The number of risks a business faces on a daily basis is nearly endless, with problems ranging from minor hang-ups to devastating disasters. Preparation for these hurdles is critical, but even the most experienced CFO or financial professional may still find risk management to be challenging.

Whether organizations formally address risk through an internal committee, an external auditing service or if risk management is embedded in a company’s culture, what is important is that risk is not ignored entirely. Many companies also emphasize communication throughout the risk mitigation process, as stakeholders are regularly kept in the loop about risk processes.

Writing for Harvard Business Review, three authors advocate business decision makers accepting that harmful incidents will occur and planning accordingly for the consequences. These low-probability, high-impact events are generally very difficult, if not impossible to predict, making any attempt to do so mostly futile.

“Risk management, we believe, should be about lessening the impact of what we don’t understand – not a futile attempt to develop sophisticated techniques and stories that perpetuate our illusions of being able to understand and predict the social and economic environment,” Nassim Taleb, Daniel Goldstein and Mark Spitznagel wrote in October 2009.

Executive teams, particularly CFOs and other financial professionals, need to be well-versed in risk management and long-term planning strategies, as a lack of foresight among members of the finance team can set a company back substantially.

To fill finance and CFO jobs with these strategic thinkers, business should rely on financial recruitment firms that have accessed to experienced industry professionals. A financial professional search accelerates this process and provides business makers with an expanded pool of qualified candidates that they can choose from when making a final hiring decision.

Chief corporate positions only filled for average of eight years

The business world has become increasingly competitive, leaving many business decision makers unwilling to wait for results.

Back in the early 2000s, most CEOs could all but guarantee they would last about one decade in one corner office position. In light of shifting economic conditions over the last 10 years, these business leaders now serve an average of 8.4 years, according to a new study.

The Conference Board’s 2012 CEO Succession Practices report made that determination following a thorough analysis of S&P 500 companies in the last year. Although a nearly endless number of reasons could explain the drop in average tenure, researchers specifically mentioned more CEOs leaving voluntarily due to expanding pressures.

Another explanation has to do with the evolving relationship between corporate officers and the boards to which they are responsible. The business world has become increasingly competitive, leaving many business decision makers unwilling to wait for results.

“You can look at the CEO relationship with their companies as a form of marriage,” executive leadership expert Lauren Mackler told The New York Times in 2008. “And roughly one of every two marriages right now is going to end in divorce. We’ve become a disposable society. Everything is dispensable, including people.”

Mackler’s comments came several years before the most recent populist sentiment that has swept through America, as certain executives have been vilified for the pay they receive relative to their perceived output. Corporate boards are unlikely to be isolated from feedback coming from business stakeholders, including shareholders, so they may be more willing to pull the trigger and dismiss an underperforming CEO earlier in his or her tenure.

If a CEO, CFO or other C-level officer needs to be replaced, businesses may need to turn to a job search firms with experience recruiting managers and financial professionals. The candidates identified by this recruiter will identify high-quality candidates for jobs in finance who can provide value to any business.

Integrated reports indicative of financial professionals

Although these different components of a business have slowly come closer together since then, the IIRC hopes that a more integrated model develops over the next decade.

Regular reports from businesses help company stakeholders – employees, stockholders, board members and customers – stay on the same page with their latest developments. The International Integrated Reporting Council (IIRC) has endorsed a new type of reporting method that would compile all the different aspects of a business, such as financial information and organizational composition, and include how they are interconnected.

According to a new IIRC report, many businesses have expressed support for these integrated reports, which are far more involved than their predecessors from even a decade ago.

“Integrated reporting brings together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social
and environmental context within which it operates,” according to the report. “It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates and sustains value.”

The IIRC report traces the development of such reports from the 1980s, when information about finances, corporate governance and management, and a company’s environmental efforts were each reported as separate and distinct portals. Although these different components of a business have slowly come closer together since then, the IIRC hopes that a more integrated model develops over the next decade.

As this model evolves, business leaders will be better able to allocate their resources going forward. With a long-term plan in place, executives can see how their company fits into an increasingly global market.

In order for these reports to be successful though, businesses must hire financial professionals who employ long-term, strategic thinking in completing their responsibilities. From those holding CFO jobs to other individuals with jobs in finance, this mindset must be promoted throughout an organization. Financial professional recruiters can help companies identify these business leaders.

Temporary tax help most needed by mid-sized businesses

Small business executives may be able to handle their tax responsibilities without outside help, but as companies expand, tax work may become too complicated.

Although the 2011 filing deadline for taxes looms less than one week away, mid-sized businesses would be best-served to begin thinking about their taxes for this year as soon as possible.

Tax preparation lends itself to outsourced work, since it is only required for a short duration of time. Like all independent contractors, tax and accounting professionals are highly skilled and are experts in their field. Because of the volatile and intricate nature of tax law, many businesses may not have these professionals in-house.

Businesses decision makers also need to analyze the size of their organizations and their profit-and-loss numbers. Small business executives may be able to handle their tax responsibilities without outside help, but as companies expand, tax work may become too complicated to complete without outside assistance.

When recruiting accountants and other financial professionals, companies should be sure to begin the process early. Most years, the demand for tax professionals vastly outnumbers the available supply, so companies may need to scoop up these workers well in advance of next April’s deadline.

Supply may decrease in the near future, according to a recent American Institute of Certified Public Accountants (AICPA) study, which found that many CPAs are heading directly into accounting divisions of companies, instead of remaining independent.

Once businesses settle on a particular tax services provider, it should provide sufficient orientation to allow that financial professional to be successful. No matter how experienced  tax professionals are, they are unlikely to thrive if they are unfamiliar with the procedures and practices of a particular organization.

To expedite this process altogether, businesses can work with experienced finance recruiters during a financial professional search. This will ensure that high-quality candidates are hired.

Study: Male CFOs make 16 percent more than females

The results were so statistically significant that researchers were able to accurately predict the gender of a financial professional about 62 percent of the time.

Much has been made about the recent ascensions of high-profile female executives to C-level positions, including Carol Bartz, Carly Fiorina and Meg Whitman, but companies may still have work to do once women obtain these positions.

A recent study by GMI Research found that male CFOs make about 16.3 percent more on average, or about $215,000, than their female counterparts. The results were so statistically significant that researchers were able to accurately predict the gender of a financial professional – based only on their compensation amount – about 62 percent of the time. Researchers speculated on the reasons for this disparity.

“It is possible that women are more likely than men to advance through promotion from within a single company,” study co-author Kimberly Gladman told CFO.com. “Many firms tend to pay more when making outside hires, which could lower women’s compensation levels.”

The report also speculated that women’s careers are more often interrupted to bear children, but it did not study why so few women were employed as CFOs at both the largest and the smallest companies.

A prior GMI report that found similar results – women made 78 percent of what males made at the median – further speculated that low pay among female CFOs could be attributable to those candidates being more concerned about simply getting a job than haggling for a higher salary amount.

Whatever the reason, businesses that hire financial professionals or are recruiting for auditing positions – either on their own or with the assistance of headhunting firms – need to be aware of compensation trends when determining how much they will pay these workers. An offer must be competitive enough to attract workers to their business without plunging the company to financial turmoil.

Communication from corner office to employees could be improved

Some degree of transparency on the part of the an executive team could help the entire organization better understand the company’s position in the market.

Few top-level business executives have time to get to know every one of their employees, but some organizational benefits could be derived from CEOs and CFOs who interact with other members of their business outside of the executive team.

A CareerBuilder survey released this week found that a considerable number of employees – 40 percent – have never met the CEO of their company. Employees in retail, IT and financial services are even less likely to be familiar with their organization’s CEO, and even fewer workers across-the-board do not know other C-level officers in their business.

“They need to find a level of accessibility that allows them to connect with employees, while on the other hand, dedicate the necessary time for building relationships with outside stakeholders,” Rosemary Haefner, an executive with CareerBuilder. “Employees realize their top leaders can’t know everyone on a first name basis, but they do expect their leaders to be a public symbol that embodies the organization’s values.”

While it may not be important for employees to understand the inner workings of their accounting departments or the exact annual profit-and-loss numbers, some degree of transparency on the part of the an executive team – in the form of communication with workers – could help the entire organization better understand the company’s position in the market.

Workers are likely to feel more invested in a particular company when their superiors engage with them directly and solicit feedback from them from time to time. To find business leaders willing to take on these responsibilities, in addition to their day-to-day tasks, companies can hire headhunting firms to conduct a financial professional search. Accessible CEOs may benefit companies more than CFOs who behave in that way, but such actions may still be appreciated by employees.