CEOs are working hard to grow their business while keeping a tight rein on costs. Explore how they’re improving operational effectiveness to meet these goals.
Video: CEO views on operations
Infographic: Operational effectiveness
Under pressure to meet growth targets within tightly defined investment strategies, CEOs know they have to change the way their companies function. That’s why nearly half of CEOs say improving operational effectiveness is one of their top-three investment priorities this year.
Cost-cutting is still high on the agenda, with 70% of CEOs planning to do this in 2013. But companies are trying to balance efficiency with agility. For example, many discovered that their quest to maximise supply chain efficiency severely affected their ability to cope with disruption. Businesses are also wary about cutting value along with costs. This probably explains why nearly half of CEOs increased their headcount in the past year and why 77% of CEOs plan to change their talent strategies in 2013.
CEOs are also putting more power in more hands. Nearly a third encourage all their staff to get involved in strategic planning. 79% include managers below board level in strategic decision-making in order to develop - and most CEOs see it as the best way to develop their leadership pipelines. That said, there are pronounced regional variations in behaviour, so using different decision-making styles in different cultures makes good business sense.
The way organisations interact with each other is also changing. CEOs have moved well beyond the ‘build or buy’ dichotomy, with nearly half looking to form a new strategic alliance or joint venture in 2013 – only slightly less than those planning to a new merger or acquisition. Global M&A activity has dropped sharply since the start of the global financial crisis, and while we believe this is due to current levels of uncertainty rather than a major change in emphasis, we’re also seeing a move by businesses toward ‘sharing’, by forming partnerships or networks.
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"The key in this environment is the people agenda. I think it’s one of the easier things to cut in terms of investment when you’re in a tough environment, but I think it’s essential that companies continue to invest in their people."
"...I think that geographical diversity and also portfolio diversity is probably something that needs to be done and actively managed for companies to be able to tackle these sudden changes in economic growth of some of the regions to which they are exposed."
"I prefer a management style based on openness and cooperation at every level; one that does not necessarily obey or respect hierarchy at all times. I believe in leadership that can stay flexible."
Sándor Csányi Chairman and Chief Executive Officer of OTP Bank Plc.
"So it’s important to apply our resources selectively to areas where we can have the largest impact. Doing that requires a good deal of sensitivity and judgment. There is simply a limit to what one company can do by itself."
Yasuchika Hasegawa President and Chief Executive Officer of Takeda Pharmaceutical Company Ltd.
"Given that the global economy and the global pace of life are getting faster in all aspects, one needs to become more agile and efficient about everything - including running a company. It’s essential that you streamline operations and become leaner wherever you can so as to be able to react more quickly to changing market conditions."
Anders Nyrén President and Chief Executive Officer of Industrivärden AB
"Large organisations tend to have too many intelligent people spending too much time on predicting the future. We feel it’s more practical to spend time on improving our execution."
Alex C. Lo President of Uni-President Enterprises Corporation
"Part of becoming agile is creating a culture that invests its people with trust. Guidance from the centre revolves around business objectives and resource planning. But there isn’t command-and-control from the centre."
"I think leadership has definitely changed in many companies and in ours in particular. It’s changed because we’ve become a more horizontal company. In the culture that we had previously, the company was more vertical and hierarchical."
"Besides focused growth, we definitely need to keep our costs under control ... banking will be a tough environment to operate in. And we need to preserve our capital position or even increase the capital that we employ in our business."
Martin Blessing Chairman of the Board of Managing Directors of Commerzbank AG