What is on the Minds of CEOs?

By Patricia Van Arnum - DCAT Editorial Director

February 1, 2017

A recent PwC study of nearly 1,400 CEOs asked for their input on the impact of globalization and technology on business growth, talent, and their outlook for the future. So what did they have to say?

Thirty-eight percent of CEOs said they are very confident about their companies' growth prospects in the next 12 months, and 29% believe global economic growth will pick up in 2017. Business leaders, however, said that their levels of concern about economic uncertainty (82%), overregulation (80%) availability of key skills (77%) remain very high. DCAT Value Chain Insights delves into the findings.

Confidence levels in economic and company growth
The PwC study, which was conducted between September and December 2016 with input from 1379 CEOs from 79 countries, showed that although they had concerns, they were confident of their own companies’ growth prospects as well as the global economy as a whole, showing slightly more confidence than in the 2016 study.

The study showed that 38% of survey respondents in the 2017 CEO study (35% in 2016) are “very confident” about their companies’ growth prospects in the next 12 months while 29% (27% in 2016) believe global economic growth will pick up in 2017. While business leaders are more positive in their outlook, their levels of concern about economic uncertainty (82%), over-regulation (80%), availability of key skills (77%) remain very high., according to the study. Also worries about protectionism are growing, with 59% of CEOs concerned about protectionism, increasing to 64% for CEOs in the United States and Mexico, according to the study.

”Despite a tumultuous 2016, CEO confidence is moving back up, albeit slowly and still a long way from the levels we saw back in 2007,” said Bob Moritz, global chairman, PwC, in commenting on the study “But there are signs of optimism right across the globe, including in the UK and US, where despite predictions of a Trump slump and a Brexit exit, CEOs confidence in their companies’ growth are up from 2016. And that mood is reflected elsewhere, with more CEOs across the world targeting the US and UK for investment than a year ago."

In evaluating these confidence from previous PwC studies, the highest levels of confidence in 12-month growth for companies was recorded in 2007, when 52% of CEOs said they were very confidence of growth in the next 12 months. The lowest was in 2009 (21%). The highest levels of three-year confidence previously recorded was 51% of CEOs (very confident) in 2011, similar to this year’s survey. 2014 recorded the highest ever levels of CEO confidence in global economic growth improving (44%).

CEO’s confidence in their own one-year revenue growth is on the rise in nearly every major country, according to the PwC study. On country level, CEOs said that they were “very confident” of short-term revenue growth with the most optimistic view from CEOs from India, where  71% of respondents, said that they were "very confident" of short-term revenue growth. In Brazil, confidence levels of CEOs have more than doubled (57%) and were also strong in Australia (43%), and the UK (41%). Confidence also rose by 11 points in China to 35%, six points in the US to 39%, and three points in Germany to 31%. In Switzerland, confidence levels have more than doubled to 34%, according to the study. Bucking the confidence trend are Mexico and Japan, where confidence levels have dropped, markedly in Japan where confidence has plunged from 28% in 2016 to 14% today.

When asked what drives growth, organic expansion tops the agenda for more than three quarters of CEOs (79%) in the coming year, according to the PwC study, while 41% are planning new merger and acquisition activity in 2017. Also nearly a quarter (23%) of all CEOs intend to strengthen their innovation capabilities to capitalize on new opportunities.

In terms of company growth prospects on a country level, CEOs were most bullish on the US, followed by Germany, the UK, and Japan. This year’s survey shows the US, Germany, and the UK have become larger priorities while enthusiasm for investing in Brazil, India, Russia and Argentina has lessened from three years ago. Shanghai, New York, London, and Beijing were also identified as the top four cities most important to an organization’s overall growth prospects over the next 12 months.

Talent development and management
Concern about skills has more than doubled in 20 years (from 31% concerned in 1998, the year of the first PwC CEO study, to 77% in 2017), and human capital is a top-three business priority, with diversity and inclusiveness and workforce mobility among the strategies being used to address future skills needs. Skills availability is a concern for over three quarters (77%) of business leaders and is highest for CEOs in Africa (80%) and Asia Pacific (82%).

More than half of CEOs (52% in 2017 compared with 48% 2016) expect to increase headcount over the next 12 months. The UK (63%), China (60%), India (67%), and Canada (64%) are among those with the most ambitious hiring plans, according to the PwC study. Looking by industry,it is CEOs in the asset management (64%), healthcare (64%) and technology (59%) that have the most ambitious hiring plans, with CEOs in the government and public sector (32%) having the least, according to the study.

While only 16% of business leaders surveyed expect to reduce their overall employee base, CEOs say that 80% of those affected jobs will be impacted in some way by the use of technology or automation. Business leaders in Canada (100%), the US (95%), Germany (93%), Australia (92%), and Brazil (91%) see technology having the greatest impact.

"CEO's are concerned that key skill shortages will impair their company’s growth potential, relevance and sustainability, said PwC’s Moritz. “And it's soft skills that they value the most. Innovation and relationship skills can't be coded. So to drive the change CEOs need, thinking carefully and actioning accordingly, a balance between technology and irreplaceable skills in their people is key. Managing expectations with stakeholders will help enable the needed trust to survive and thrive. Bottom line, prioritizing the human element in a more virtual world will be a pre-requisite for future success.”

Other issues at play
CEOs also raised concerns about larger societal issues. While positive on the benefits of globalization in building the free movement of capital, goods, and people, CEOs raised some converns whether globalization has done anything to close the gap between rich and poor or mitigated the issue of climate change. This is in contrast to the first PwC CEO survey in 1998 when CEOs were positive about the drivers of globalization.

“While CEOs are more confident in the opportunity for growth, this year they told us these three concerns that were top of mind: a people and technology strategy that creates a workforce fit for the digital age; preserving trust in their businesses in a world of increasingly virtual interactions; and making globalization work for everyone by engaging ever more with society and collaborating to find solutions,” said PwC’s Moritz.

The study found that 58% of business leaders think it has become harder to balance globalization with rising trends in protectionism. For the past 20 years in earlier PwC studies, CEOs have been largely positive about the contribution of globalization to the free movement of capital, goods, and people, but this year survey shows growing concern. Only 38% of the public believed globalization has had a largely positive impact on improving the movement of capital, people, goods and information, according to another PwC study, compared with 60% of CEOs. Almost two thirds (64%) of the public believe globalization has helped create full and meaningful employment, contrasting with over three quarters of CEOs (76%). The public are also less convinced than business leaders that globalization has created, to a large extent, a skilled and educated workforce (29% of the public compared to 37% of CEOs), according to the PwC studies.

“Public discontent has the potential to erode trust which is needed for long term sustainable performance. The real challenge here though, isn’t just one of how CEOs navigate, it’s about the need for CEOs to have a deeper, two-way relationship with stakeholders, customers, employees, and the public,” said PwC’s Moritz in commenting on the findings. “Understanding the root cause of the potential discontent or perception is a critical first step towards communicating the benefits of business for society. There’s a lot at stake if we do not achieve inclusive global growth,” said Moritz.