Category: Management & Leadership

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.

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.

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.

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.

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.

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.

Not since 2007 have companies been willing to hire workers at the rate just observed by a CareerBuilder survey on first quarter hiring trends.

The study, released April 5, finds that about one-third of businesses hired full-time employees in the first quarter of this year, with their decisions to do so likely motivated by sales increases noted by 41 percent of companies. These numbers are reinforced by improving unemployment statistics, which many analysts have predicted will show growth when March figures are released later this week by the Bureau of Labor Statistics.

As companies supplement their workforces, competition for workers has also spiked. According to the survey, job candidates are increasingly turning down offers – 56 percent of companies reported this as occurring last quarter.

Earlier this week, this blog reported on the problems that could be experienced by organizations that are not prepared to engage with competitors in the highly frenetic war for talent. The best workers need to be fought for or they could escape to competitors.

“There is a growing gap between high-skill job openings and available talent that has a larger impact on overall employment,” CareerBuilder CEO Matt Ferguson said in press release. “Fifteen percent of employers reported that, because they can’t fill high-skill positions within their organizations, they’re not able to create lower-skilled positions that are tied to these roles.”

The implications of this skills gap could prove extremely detrimental to organizations that are still in the early stages of developing their financial staffs. By working with headhunting firms with established records of success completing financial professional search processes, a business can stay ahead of competitors hiring for those same positions. Once these senior financial executives are in place, recruiting accountants and other financial professionals then becomes an easier task.

High-level business decision makers rely on rigorous financial reporting to make decisions about future spending practices. Timely and accurate financial reports enable companies to track their profits and expenses, which should allow companies the ability to project down the road.

When organizations are still in their formative stages, many accounting and financial roles  – from accounting to strategic planning – are performed in a piecemeal fashion. It works as long as the company remains small and a few key individuals are able to grasp in one view all of the vital information necessary to maintain accurate financial records.

But, when organizations expand they need to find a better way to process financial information. While some financial professionals think that automated systems expedite the process and ensure more accuracy, others are reluctant to further erode the role of human judgement in accounting .

“Financial reporting will never be fully automated,” CPA firm founder Gabe Zubizarreta told CFO.com earlier this week. “Say you tell a salesman he’s going to get a quarterly bonus if he sells X units. By the second month, he’s halfway there. Should you record that bonus for the quarter? There’s no right accounting answer. Maybe recording that puts you a little below your profit estimate so you don’t record it. Maybe you do. It takes human judgment. You can’t automate that.”

Ultimately, a company’s decision to rely on automated accounting practices depends on the size of the company and the specific practices it engages in. More complicated business transactions could require automated processes, regardless of how hesitant decision makers may be to implement such practices.

A business intelligence analyst can  help CFOs and other C-level decision makers identify and retrieve critical financial information. To find the right business intelligence analysts many  CFOs and accounting professionals turn to executive recruiters to access their networks and to assess candidates for key roles.

The finance field provides an abundance of opportunities to those just getting started with their careers, many of whom face the question of whether a CPA, MBA or both would be most critical toward determining their professional future.

Generally, a CPA is required for any job that requires in-depth analysis of financial statements, from a financial analyst right up to a CFO or controller. An MBA is more beneficial for those interested in investment banking and venture capital, along with any job that requires long-term financial planning.

According to an article late last year on CFO.com, many businesses are increasingly hiring financial professionals that have an eye toward strategic planning and big picture thinking – how investments relate to the company in general.

“The ‘cat’s meow’…is a CPA who then gets an MBA,” according to the article. “Such a person gets grounded in the discipline needed to implement and monitor financial controls, policies, and procedures, and then adds the ability to advise on ‘grayer’ areas such as what projects should be funded, whether something should be acquired, built, or bought and whether products or services should be extended or eliminated.”

Should more companies slash accounting jobs, organizations will need to replace these individuals with financial professionals who may be better equipped to think strategically about the future of a company.

When building financial teams, CFOs should be sure they are surrounded with high-quality subordinates who can help assess past performance while also designing and refining a long-term financial vision. To find these individuals, businesses may consider hiring finance executives search firms with experiencing filling jobs in finance. Finance recruiters can help reduce the workload for CFOs, whose time is often consumed responding to numerous other stakeholders.

As tempting as it may be for company decision makers to throw an exorbitant compensation package toward executive candidates, these businesses may need to temper their expectations and first consider average executive compensation rates.

A study by an executive compensation consultant recently determined that executive compensation increased slightly in 2011, led by a 9 percent increase in long-term incentives. Meanwhile, base salaries only increased 3 percent and bonuses remained relatively unchanged.

The study could have significant ramifications for companies that are about to start searching for great CFOs and other senior executives, but are unsure of how to pay these business leaders for their services.

When determining how much to pay their executives, along with the type of compensation, business decision makers should consider the return on compensation (ROC) of their executives and always ensure that they are being paid a competitive compensation package.

“An organization’s compensation expense is an investment in talent, which requires a return, just like any other investment,” according to CFO.com. “Even though ROC is harder to measure than the return on traditional capital investments, prioritized investments in talent produce better returns than homogeneous or entitlement approaches.”

An executive whose compensation is tied closely to company performance, especially over an extended period of time, has a robust incentive to ensure that his or her long-term vision is formulated properly. Organizational stability, especially among those who hold senior executive positions, can be the difference between a company thriving by building on its prior successes and failing to emerge as an industry leader.

In order to fill executive jobs, particularly senior jobs in finance, businesses should find an organization that has financial professional search experience. These corporate recruiters can help businesses find senior executives and advise them as to proper compensation practices needed to attract and retain these business leaders.