Leading Bay Area CFOs Advise on How to Navigate High Costs, Long Commutes, Changing Workforce Dynamics

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FEI-SV Voices Survey Surfaces Most Critical Issues Facing Silicon Valley Businesses and Potential Solutions to Them

The Silicon Valley chapter of Financial Executives International (FEI-SV), the leading professional organization for finance professionals, unveiled the results of its comprehensive “Voices” survey, which revealed the extent to which Silicon Valley’s soaring cost of living, long commutes, evolving workforce and financing landscape have challenged the region’s businesses.

This survey of the Bay Area’s leading CFOs analyzed the broadest trends and biggest issues facing companies today in four major categories: 1) business environment, 2) financing, 3) employee issues and 4) technology. The Voices survey also surfaced what companies feel are Silicon Valley’s most valuable assets and greatest business opportunities lying ahead.

FEI-SV members expounded on how CFOs can lead their companies in using the region’s strengths to capitalize on these market opportunities and overcome the unique hurdles presented by the Bay Area’s business climate in an accompanying report “Reaching for New Heights.”

Company Leaders Still High on Silicon Valley Despite Unprecedented Costs

Respondents confirmed that the exorbitant costs and long commute times associated with making ends meet in the Bay Area are plaguing operations. When asked how well Silicon Valley is performing in several key areas, 77 percent said the region “does not do well at all” at “delivering an affordable cost of living,” while 58 percent said the same for “enabling reasonable commuting time,” by far the biggest areas of dissatisfaction. Cost of living was far and away “the biggest detriment to business” (79 percent), according to the group.

However, the benefits still clearly outweigh the costs in the minds of CFOs. Nearly three-quarters of respondents said that they either “absolutely would” (28 percent) or “probably would” (46 percent) base their company in Silicon Valley if they were to start over again, while only 13 percent said they “absolutely would not." The area’s “highly educated workforce” was seen as “critical” (51 percent) or “very important” (40 percent) to 91 percent of respondents, while the “availability of resources to support growing companies” was “critical” (30 percent) or “very important” (57 percent) to 87 percent of CFOs. Silicon Valley’s well-documented “culture for innovation and risk-taking” came in a close third, with 86 percent deeming this characteristic as “critical” (44 percent) or “very important” (42 percent). When asked to identify the single most important factor in basing a company in Silicon Valley, the innovative culture came in at No. 1 (38 percent), with the educated workforce as runner-up with a quarter of the votes.

“The CFO is often the one that will view things with a longer-term perspective that Silicon Valley’s ‘gunslinger’ culture oftentimes precludes,” said Bob Worthington, managing partner at Hardesty, LLC and second chapter vice president at FEI-SV. “We as a community have our hands full with the current costs of doing business in the region, and we may potentially have larger challenges ahead if we enter an economic slowdown, as many experts predict. It’s up to senior finance leaders to provide that pivotal counterbalance that has an eye on fiscal responsibility and what could be in store three to five years from now.”

Capital Is Abundant, but Not as Easily Accessible for Startups

The region is awash in capital again — 11 percent of respondents “strongly disagree” that the “amounts raised in equity rounds are smaller than in previous years.” Large organizations are having no problem raising money, with 72 percent of public companies having either “excellent” (28 percent) or “very good” (44 percent) access to capital. The same is true for 74 percent of large private companies (24 percent “excellent,” 50 percent “very good”).

Some smaller outfits, however, have to work harder today than in past Bay Area booms to secure funding. Twenty-six percent of startups with little to no revenue say access to capital is either “fair” (14 percent) or “poor” (12 percent), while the same is true for 15 percent of early-stage growth companies with less than $1 million in revenue (10 percent “fair,” 5 percent “poor”).

The source of today’s funding rounds appears to confirm that it’s easy money for larger corporations these days. Sixty-four percent see investments from private equity (PE) firms — which tend to be associated with public companies and larger private outfits — as “increasing strongly” (20 percent) or “increasing somewhat” (44 percent). Individual PE investors are not far behind at 55 percent (12 percent “increasing strongly,” 43 percent “increasing somewhat”). Conversely, 22 percent of financial executives “strongly agree” that IPOs are declining as an exit strategy.

Discrimination Lurks in Silicon Valley

In its examination of larger workplace issues, the Voices survey unearthed a sentiment among senior finance executives that barriers exist in the workplace along ethnic, gender and age lines. According to survey results, 28 percent of CFOs “strongly disagree” that black and Latino employees “have an equal footing to other population groups in Silicon Valley companies,” by far the greatest rate of dissent of each statement presented to respondents.

On its heels is the idea that “women have equal footing at Silicon Valley companies,” a statement with which 22 percent “strongly disagree.” Moreover, according to those polled, 77 percent of senior management roles are filled by men, which tracks consistently with national trends.

Silicon Valley’s penchant for gravitating toward brash, young leaders seems to have had a trickle-down effect on age-related workforce demographics. An overwhelming 82 percent either “strongly agree” (42 percent) or “somewhat agree” (40 percent) that “older, experienced workers routinely face age discrimination.”

“CFOs and their C-suite colleagues need to lead the charge in applying cutting-edge practices that help unearth and eliminate unconscious biases that might stymie hiring, developing, promoting and rewarding employees of all backgrounds and ages,” said June Rumiko Klein, vice president for business affairs and CFO at Palo Alto University and FEI-SV chapter president. “Our region’s diversity could be another differentiating strength for our business environment, but it is up to senior leadership to ensure that corporate cultures are optimized to tap the full potential of our entire employee bases.”

Years of Outsourcing Have Shaped Silicon Valley’s Workforce Composition

The continuing practice of outsourcing customer support and basic technology functions, which has been ingrained in Bay Area companies for several years now, has affected the region’s talent pool. Unsurprisingly, 84 percent said it is “critical” (38 percent) or “very important” (46 percent) to base executive management in the region — more than any other function. Customer support was seen as least urgent to employ locally, with over half insisting that it is either “not too important” (36 percent) or “not important at all” (15 percent).

The pace isn’t slowing down when it comes to reducing local headcount in job functions that have traditionally been targeted for cheaper labor markets. According to survey respondents, companies are cutting back on the number of customer support (47 percent), back-end development (32 percent) and hardware engineering (29 percent) personnel based in the region to a higher degree than other functions.

This has shaped the current Bay Area labor market, at least somewhat. Front-end software, back-end development and hardware engineering talent is a bit harder to come by in the area — 32 percent said front-end software technicians are either "somewhat difficult" or “extremely difficult” to find, while 29 percent said the same of the latter two functions.

AI Will Bring Greater Riches—if Data Privacy Regulations Allow It

Silicon Valley CFOs are as caught up in the artificial intelligence (AI) craze as the rest of the business world. Almost half of respondents selected AI as the most transformative technology today (44 percent), four times that of autonomous vehicle technology (11 percent), the next-hottest technology area, in their estimation. Expectations are high for AI as nearly one-fifth of respondents think AI will “impact everything” (19 percent). Of course, the finance community also acknowledged AI’s potential negative ramifications — 19 percent noted that it would “reduce jobs.” When asked which sectors should fear job losses the most, almost half (49 percent) said AI would have a “great impact” on testing and quality assurance, outpacing the one-third who said the same of the customer support function.

Of all of the most pressing issues facing the tech industry today, more people saw “data privacy concerns” as having a “critical impact” on the current business environment (28 percent), than any other development, double the total that selected “autonomous driving technology for personal vehicles.” When asked to single out the issue that will have the greatest impact on the region, two and a half times more people chose data privacy (38 percent) than the next-most impactful issues, “autonomous driving technology for personal vehicles” and “displacement of workers through AI” (15 percent).

“As our Voices survey confirmed, we know we have the knowledge, capital, drive and intangible resources to overcome the challenges of high costs, long commutes, workplace inequities and forthcoming regulation that face Silicon Valley,” said Jan Robertson, managing partner and CEO at SiVal Advisors, LLC and FEI-SV president-elect and first chapter vice president. “From its vantage point as the controller of company finances, the CFO can (and must) influence strategy and vision as it relates to human capital, technology innovation and, of course, charting the broader course for the organization.”

The methodology, execution and analysis of the “Voices” survey was provided by response:AI. The survey was underwritten by global law firm Baker McKenzie. FEI-SV and response:AI polled 144 of the former’s members over the course of several months in putting together the Voices survey. FEI-SV’s full report on the survey, “Reaching for New Heights,” which includes perspectives and actionable advice from some of the region’s most accomplished CFOs, can be downloaded from the organization’s web site.

About FEI Silicon Valley
Financial Executives International (FEI) Silicon Valley chapter is the leading professional organization for finance professionals in the Bay Area. With close to 300 members, it has been named one of the most innovative chapters of its parent organization — Financial Executives International (http://www.financialexecutives.org) — which has more than 10,000 global members.

FEI Silicon Valley provides unique opportunities for members to continually develop their education, career and connections. The organization provides a truly unique forum to meet at live events; attend general peer-to-peer networking events or webinars; gain access to the rest of the FEI members; and benefit from advocacy efforts, research and the organization's career center. FEI Silicon Valley is found online at http://www.feisv.org.

About FEI
Financial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its more than 10,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, research and publications. Members participate in the activities of more than 65 chapters in the U.S. FEI is located in Morristown, NJ. Visit http://www.financialexecutives.org for more information.

About response:AI
response:AI is a next-generation survey research platform. Leveraging automation for survey data collection and analysis, response:AI enables quantitative market research studies to be performed quickly and efficiently by non-technical users. The platform contains over 120 pre-defined survey templates with the ability to also create fully customized questionnaires. Data validation, cross tabulations and report generation are powered automatically by an AI engine that evaluates responses and generates charts, tables and descriptive text. The company can be found online at http://www.response-ai.com.

About Baker McKenzie
Baker McKenzie helps clients overcome the challenges of competing in the global economy. We solve complex legal problems across borders and practice areas. Our unique culture, developed over 70 years, enables our 13,000 people to understand local markets and navigate multiple jurisdictions, working together as trusted colleagues and friends to instill confidence in our clients. (http://www.bakermckenzie.com)

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