Sixty-four percent of finance executives expect the overall economy in 2011 to fare better than in 2010 — an optimistic outlook reflected by reports of improving economic conditions, reduced fears of a “double-dip” recovery and increased expectations for revenue growth. These results are part of the findings of a quarterly poll of finance executives conducted in December 2010 by Adaptive Planning and the Business Performance Innovation Network.
The Q4 2010 Business Volatility and Variables Survey revealed that fears of a double-dip recovery are falling — 36 percent predict a “W-shaped” recovery, down from last quarter’s 41 percent. In parallel, predictions for a “U-shaped” recovery have risen to 34 percent from 29 percent last quarter. The majority view current economic conditions to be the same (43 percent) or better (42 percent) than they were six months ago.
At the same time, 52 percent of finance executives believe economic conditions will improve over the next six months — the first optimistic majority recorded since the quarterly survey began in 2008. Expectations have risen significantly from last quarter, when only 36 percent expressed optimism. At the same time, only 10 percent anticipate a worse economy in six months — a significant drop from 20 percent last quarter.
Unemployment remains the single greatest concern for the overall US economy, with 64 percent citing it among the top challenges. And the expected timeframe for a meaningful improvement in jobs growth continues to be pushed back — only 41 percent expect meaningful jobs growth will occur in 2011, compared with 62 percent last quarter.
Respondents from small companies are more guarded in their optimism than those from larger companies. While pessimism is low across companies of all sizes, only 43 percent from small companies (under $10 million in annual revenue) expect conditions to improve over the next six months, compared to 55 percent from midsized or large companies (over $10 million in annual revenue).
“We are enthusiastic about finance professionals’ increased optimism,” said Greg Schneider, Vice President of Marketing for Adaptive Planning. “In addition to the optimistic expectations for the overall economy, the highly positive outlook for respondents’ own companies is especially notable. After all, as finance professionals, respondents have very well-informed and credible perspectives of their companies’ future growth prospects.”
When asked about the outlook for their own companies over the next 6 months, finance executives expressed significant optimism. Nearly double the number of respondents expect jobs growth at their companies (31 percent) versus jobs losses (17 percent). A full 62 percent expect revenue growth over the next six months, up from only 49 percent in Q3 2010, and 39 percent expect increased profit margins, an increase from 29 percent in the prior quarter.
Finance executives from manufacturing industries were particularly bullish about the future of both the overall economy and their respective companies. Sixty-eight percent from this sector expect economic conditions to be better in six months, compared to 50 percent of non-manufacturing finance executives. Also in six months, 79 percent anticipate that their company will have higher revenues and 50 percent expect higher profit margins, compared to 60 percent and 38 percent from other respondents.
However, despite the growing optimism the economic outlook continues to be uncertain, with 42 percent of finance executives reporting high or very high levels of uncertainty. This uncertainty continues to drive frequent re-forecasting and scenario planning. In fact, 35 percent re-planned or re-forecast on a monthly or more frequent basis in Q4 – the highest level in the history of the poll — and 53 percent expect to increase the frequency of their re-planning and what-if analysis next quarter.
The survey also captured the top challenges that finance teams would like to address in 2011. The top three responses were managing performance against key metrics (e.g., cash, margins, etc.), revenue management / growth, and revenue planning / forecasting. Nine of the top 12 challenges are addressed by business performance management software solutions.
The online poll surveyed financial professionals from companies in over twenty industries and ranging in size from under $10 million to over $1 billion in revenues. This is the eighth quarterly poll examining perspectives on key economic conditions, individual company performance, and the role of planning and forecasting in the current economic downturn.
The Business Volatility and Variables Survey is conducted once per quarter, with results tallied against those of previous quarters to identify trends in overall economic conditions and planning practices. For more information on the summary report of the findings, visit: www.adaptiveplanning.com.