- From Employee Benefits to Business Travel, Companies Balance Cost Cuts
with Investment in Recovery and Growth -
MARKHAM, ON, May 12 /CNW/ - The world's senior finance executives are
focusing on aggressive new methods to reduce and control costs in the face of
the worst economic downturn since the Great Depression. At the same time, many
Canadian businesses are continuing to invest in areas such as advertising,
technology, and R&D to generate revenue and improve their operations once the
These findings were released today in the second annual American
Express/CFO Research Global Business & Spending Monitor, a survey of 285
senior finance executives from Canada, the United States, Europe, Mexico,
Asia, and Australia.
"Companies are focused on cutting where they can, but spending when they
should to become more efficient and keep revenue flowing," said Rob McClean,
Vice President and General Manager of Global Commercial Card at American
Express Canada. "It's encouraging to see that Canadian executives have a more
optimistic outlook than most, and are already working to ensure that they come
out of the recession in a strong financial position."
Despite the fact that a majority (72%) of respondents expect further
economic contraction over the next 12 months, Canadian executives have
remained more positive than most. In fact, nearly a quarter of local companies
expect to see a modest economic expansion in Canada over the next 12 months,
compared to only 2 per cent in the United States.
Canadian companies are in a very good position, continued McClean. They
are maintaining a pragmatic attitude, while remaining hopeful. It inspires
confidence in our economy to see that 39 per cent of Canadian executives
believe that conditions will improve in 2009, compared to only 22 per cent in
the United States.
Companies Make Trade-Offs to Control Costs, Avoid Layoffs
The survey reveals that times certainly are tough, and very few companies
have come out unscathed. While 59% of respondents (58% in Canada) anticipate a
decrease in headcount at their company in the next six months, many companies
are taking actions now to avoid layoffs.
Half the executives polled reported plans to freeze salaries and bonuses,
while 32% (16% in Canada) plan to reduce employee benefits and 29% (23% in
Canada) plan to cut salaries and bonuses. Twenty-four per cent (23% in Canada)
plan to reduce employee work hours or give furloughs and 16 per cent (10% in
Canada) plan temporary office or plant closures.
Cost control strategies also dominated finance executives' sentiments as
they continue to deal with the recession:
- 85% are tightening controls over employee spending (87% in Canada)
- 82% are placing greater emphasis on measuring and monitoring company
financial performance (65% in Canada)
- 71% are improving internal financial controls (68% in Canada)
Sustained Spending in IT, Marketing, and R&D
Despite the weight of the economic downturn, many companies are taking
proactive steps to ride out the storm and position themselves for recovery.
The research revealed a clear divide between investments that companies feel
are vital to controlling costs or increasing revenues, and those that may be
delayed until a recovery begins.
When asked where it would be important to sustain spending, respondents
from Canada identified marketing/advertising/PR (77%), research and
development (71%), information technology (68%), and employee headcount (68%).
Other areas of investment, such as merger opportunities and third-party
consultants, were much less likely to be rated as important categories to
Companies Curb Travel Spending
Travel continues to represent a significant expense for most businesses,
despite the fact that many businesses plan to cut back on travel spending this
year (94% in Canada, 87% globally). To achieve these goals, companies need to
closely scrutinize their employee travel to differentiate between travel that
contributes to the bottom line, and that which does not.
Travel for meetings with new clients or for business development remains
a key priority for businesses, as only 16 per cent of respondents from Canada
say their company plans to cut back in this area. Conversely, travel for staff
meetings and internal business is at the top of the chopping block, with 87
per cent of respondents from Canada saying their company is planning travel
restrictions in this area.
"It's important to communicate honestly and openly with employees about
travel policies," said McClean. "When employees understand the cost of travel
on a companywide level, they are more inclined to stay well within travel
guidelines and restrictions."
New Performance Metrics Steer Decision Making
The precipitous decline of economies around the world, combined with the
expectation that the recession will not reverse itself quickly, have led
companies to explore new ways to measure success.
- Many respondents reported using or considering new metrics for
financial performance (65% in Canada, 55% globally), operational
efficiency (39% in Canada, 54% globally) and cash flow/capital
spending (45% in Canada, 54% globally)
- 68% of respondents from Canada (77% globally) reported that their
company has completed, is executing, or plans to revise their
- 65% of respondents from Canada (70% globally) said their companies
had adopted a formal program to improve employees' understanding of
their contribution to business performance
- 58% of respondents from Canada (64% globally) said their companies
are working to refine or develop new business models to deal with the
One finance executive reported creating a financial "early warning
system" by using forward looking projections linked to performance benchmarks
his company must hit to maintain access to credit. Another said, "We are
measuring return on sales, capital employed, days of working capital, etc.
These are all areas (and several others) that were previously neglected."
Emerging measurement strategies also included:
- Emphasizing return on investment over earnings per share
- Focusing on direct impact on company profitability by line of
- Measuring customer profitability
- Creating a "corporate dashboard" to track changes among a company's
- Examining employee productivity measures such as sales per employee
and value-added per employee
"Companies are adopting measurements that speak to productivity, profits
and ROI," added McClean. "As we've heard from our own clients, a smart mix of
data and insight can help executives make better decisions about strategy and
investment in this challenging economic environment."
About the Survey
CFO Research Services surveyed 285 senior finance executives at large
global companies across a wide range of industries in the United States,
Canada, Mexico, Europe, Asia, and Australia. Company revenues ranged from $500
million to more than $20 billion. The research program, which included an
online survey and interviews with senior financial executives, was completed
in April 2009.
About American Express Global Commercial Card
Through its Global Commercial Card group, American Express provides the
Corporate Card, Corporate Purchasing Solutions, and other expense management
services to mid-sized companies and large corporations worldwide. In the U.S.,
it is the leading issuer of commercial cards, serving more than 60% of the
Fortune 500, as well as tens of thousands of mid-sized companies. American
Express issues local-currency commercial cards in 40 countries, and
International Dollar Corporate Cards in an additional 100 countries. For more
information, visit www.americanexpress.com/corporate.
American Express Company (www.americanexpress.com) is a leading global
payments, network and travel company founded in 1850.
About CFO Research Services
CFO Research is the sponsored research unit of CFO Publishing Corp.,
which publishes CFO magazine in the United States and Europe. CFO Publishing
is an Economist Group business.
For further information:
For further information: For further media information contact: Lauren
Dineen-Duarte, American Express Canada, (905) 474-8169,