The CFO'S Perspective

With so much economic uncertainty the employment landscape in 2022 will likely remain tumultuous. Information about how many people are employed, where, and for how much is going to continue to dominate the business news headlines. And much like last year, compensation will be at the forefront of many employees’ minds as they watch their cost of living increase and worry whether their pay will keep pace.

Of course, for the nation’s unemployed, discussions about how compensation may fluctuate this year remain inconsequential. And for small businesses that have been doing their best to absorb rising costs without laying people off or shutting down, the idea of giving raises this year is likely going to be a moot point. But for middle management, executive leadership, and HR personnel at mid-sized to large companies, the question of what to expect in the way of raises remains critical to business planning.

So, what should you plan for a raise this year?

Import shipping from Asia has become a nightmare. According to McKinsey & Company, shipping costs for a 40-foot container have increased over five-fold in 2021, from $2,000 per container to $13,000. Container ships that finally arrive on the West Coast often have to wait offshore for a dock to open to offload their cargo. Once unloaded, containers can spend days or weeks in the Port of Los Angeles, Port of Long Beach, or Port of Seattle until rescued by a truck or intermodal train.

At CFO Selections, we work with many types of companies, from the large and complex to those more straightforward and easier to understand. They have vastly different finance and accounting structures. One size or type certainly does not fit all.

Back office operations are not always glamorous, but they are some of the most important daily functions for a company. Back office areas like IT, accounting, finance, HR, compliance, legal, and administrative activities work behind the scenes, making up the backbone of a company’s brand promise. Despite being non-customer-facing, the back office portion of an organization is every bit as important as the front office (which is made up of departments like sales, marketing, and customer support).

As such, investing in improving your company’s back office can result in both internal and external wins. Internally back office improvements can increase employee retention and enhance the workplace culture, while externally these improvements can boost profitability and revenue.

But with so many areas falling under the back office umbrella, uniting them under a single set of improvement initiatives is a difficult premise.

Knowing when to hire employees and how much to pay them can make or break a hiring strategy. However, this is not the entire picture. Benefits are just as important to your strategic hiring plan. In light of the growing number of people leaving their jobs in recent months, which has been dubbed The Great Resignation, understanding this concept has never been more important than it is these days.

COVID 19 has made a significant impact on everyone. Those who are close to retirement and those who feel uneasy about their employers' plans to return to the office cannot stop talking about it. They are trying to answer the looming question – "What do I want to do with my life, especially if this pandemic may curtail it?"

COVID-19 has been a significant disrupter to the traditional “work until you're 65, then retire” path. Now that the world is opening, we are expecting a flood of job changes, working fractionally, changing careers, and retiring because everyone has come face to face with the realization that life is short. With this realization, many are planning to make dramatic changes in their lives.

Filling this workforce gap will be challenging. Statistics show that 28.6 million Baby Boomers (born 1946 to 1964) are now out of the workforce in 2020. According to a Pew Research report, that's 3.2 million more than those who said they were retired during the same period in 2019. That may seem average but consider that there is a deficit of about 5 million fewer Generation X (born 1965 to 1980) professionals that could be ready to step into the Baby Boomers' vacant roles.  I have a friend who is 55, who quit his more than full-time, high-paying, executive job in 2020. He invested in a business overseas and plans to move there with his spouse and work part-time.

With a large segment of the workforce still working from home, what does this mean for the future of commercial real estate? According to recent data, office vacancy rates are over 16% right now (up from 9% in late 2019) and subleased space is coming back on the market. This has led many analysts to wonder whether companies still need the offices they had before and what will happen to all the vacant office space if companies do not return.

What does the future hold? Will the office building survive COVID-19, or is office space now obsolete?

A business owner should always have a succession plan, yet at the same time be ready when a member of their executive team is ready to implement their own exit strategy, i.e., retirement. The Great Recession caused many people to need to work longer until retiring because of the loss of income and value of retirement assets. But now, a decade has passed, which has given some the time to replenish their retirement savings. As a result of the COVID19 pandemic many people are re-evaluating what is important to them, and in many instances, it means retiring a few years sooner than originally planned.