CFO decisions slowed by collegiate attitude in recession

European chief financial officers took longer to make crucial decisions amid the recession because they have become more inclusive of other executive opinions ­ but they were also slowed down by mulling potential consequences of their decisions.

According to a survey of 327 CFOs and treasurers conducted by the Economist Intelligence Unit on behalf of ING Commercial Banking, to find out about the type of issues confronting financial decision makers during the downturn and how they were handled, CFOs admitted they took more time to make decisions than in more prosperous economic times. “Intense discussion and openness to contrary views characterised the debate. Due to the increased sense of urgency, extreme measures were readily considered,” EIU says.

The survey revealed that CFOs felt under additional pressure because major decisions carried a knock-on effect that could put the existence of the business at risk ­ and because they often lacked experience of managing through a recession.

The survey concludes that most decisions taken during the downturn focused on the short term at the expense of long-term plans ­ only a minority told EIU that they took strategic decisions with a longer-term view on issues such as investments in financial planning software and the transformation of business units.

“It’s a good thing that CFOs and treasurers are not inclined to take hasty decisions under pressure,” said Annerie Vreugdenhil, head of corporate clients at ING Commercial Banking. “But because it is difficult to look ahead in uncertain times, there is the risk that necessary changes may be made too late. The longer you wait, the bigger the chance that you will be forced to take far-reaching measures.”

The benefit of experience is also demonstrated by the fact that half the respondents indicated decisions “would have turned out better had they been taken sooner” according to EIU. However, many said that they based their decisions on the best information available at the time and that taking action sooner would not have been possible.

Although it slowed down the decision-making process, improved internal communications and collaboration was seen as having improved decision making. It was deemed important to have strong personal ties within the management team and of collaboration to tackle problems jointly.