Digitisation and the skills crunch: no CEO left unfazed

Hungarian CEOs are confident about their company’s growth prospects over the next 12 months, but are less optimistic about Hungarian and global economic growth. Looking at target markets, the US and China have grown in importance, while Germany remains the country CEOs view as the most important. CEOs identified innovation and human capital as the two areas they most want to strengthen in order to capitalise on new opportunities. They are concerned that key skills shortages, which have become more acute in recent years, could impair their outlook. In fact, 92% of CEOs say this is the single biggest obstacle to their company’s growth.

This is the sixth year that PwC Hungary has gauged the opinions of Hungarian CEOs. The survey was conducted in cooperation with the Confederation of Hungarian Employers and Industrialists (MGYOSZ).

This year 89% of Hungarian CEOs are confident that their company’s revenue will grow in the next 12 months. At the same time, 39% are less optimistic about global economic growth and 56% about Hungarian economic growth. (Figure 1)

“This is the sixth occasion on which we have asked Hungarian CEOs to share their thoughts on growth, threats to growth, and on finding and retaining talent. We also endeavoured to discover what they think about managing the relationship between man and machine, and the pros and cons of globalisation. Overall, this year’s survey shows that Hungarian and global CEOs are very much of the same mind on these issues. They are planning to increase headcount, while they continue to be challenged by skills shortages and overregulation. They are largely positive about the impacts of globalisation, but many of them also say that globalisation has not helped to close the gap between rich and poor,” says Nick Kós, PwC Hungary’s Country Managing Partner.

Where do Hungarian CEOs see opportunities for growth?

While Hungarian CEOs continue to focus on Germany as their most important foreign market, the US and China have grown significantly in importance compared to the previous year (Figure 2). Hungarian CEOs consider the US the second most important country for their company’s overall growth prospects, while globally the US ranks first. After Germany (41%) and the US (23%), Hungarian CEOs are looking at Romania (22%), Russia (19%) and Slovakia (17%) for growth.

In the survey, we also asked CEOs about what areas they are planning to develop in order to increase competitiveness. Both in Hungary and globally, prioritising innovation and human capital development are key to future success, in addition to technology and digital capabilities (Figure 3). In particular, the importance of innovation was underlined by financial and automotive CEOs, while human capital ranked higher than average in retail, technology and telecoms.

What keeps CEOs awake at night?

More than ever before, CEOs worry about the shortage of qualified professionals, which now affects virtually every business (Figure 4). Over-regulation also continues to be a top concern for both Hungarian and global CEOs. Organisations have already begun addressing this challenge, and think that ensuring availability of a skilled workforce should be a top government priority. A clearly understood, stable and effective tax system is also high on CEOs’ wish lists.

“Skills shortage is a pressing concern. Yet despite this, the majority of respondents plan to increase headcount over the next 12 months, both globally and in Hungary. In Hungary, technology and telecom companies and privately owned businesses have the most ambitious plans to increase their staff numbers. Globally, only 16% of CEOs plan to cut their company’s headcount over the next 12 months; in Hungary, 13% expect to do so,” said Anita Mekler, Partner at PwC Hungary’s Tax and Legal Services practice.

CEOs still need people

In the survey, we also asked CEOs about how they are addressing skills shortages, and what skills they are looking for when recruiting. For both global and Hungarian CEOs, the most important skills are problem solving, collaboration, and adaptability (Figure 5).

“We see that in addition to technical business expertise, skills that are still difficult to measure and cannot be performed by machines will gain in significance, while the importance of skills such as mathematical and digital competences that could be replaced by technology will diminish. Hungarian CEOs have the greatest difficulty in recruiting people with creativity, innovation and leadership skills,” added Anita Mekler.

Managing man and machine

Having witnessed the rapid technological advances of recent years, the overwhelming majority of Hungarian CEOs say technology will be impacting them in the next ten years. Three years ago only 62% said so. According to Hungarian CEOs, digitisation will have the greatest transformative effect on transportation, communication, and the automotive industry. Personal attitudes are also changing: Hungarian CEOs regard themselves as having a high degree of digital literacy, which is also apparent in their media consumption habits. However, unlike digital natives, only a small portion of them are active on social media or make most of their purchases online.

Based on their experience of technological and security issues encountered in recent years, many CEOs worry about a variety of digital risks and their negative impact on trust in their industry. These risks include IT outages and disruptions, cyber security breaches affecting business information or critical systems, and breaches in data privacy and ethics (Figure 6). Risks from the use of social media are also among the top threats that will impact negatively on stakeholder trust levels.

“I believe the top think tanks in the world all agree that technological development is unstoppable. A major shift in the world economy that is happening right now is also related to this: a few years ago, everything was determined by oil prices, and it was not inconceivable that oil prices could hit $200 a barrel, which would have profoundly altered the face of business. However, technological development and new extraction methods made it possible, and over time increasingly cost-efficient, to extract shale gas and shale oil. All in all, we can say that technological development has placed even the question of the Earth’s energy reserves in an entirely new context,” added Dr. Péter Futó, President of MGYOSZ.

Globalisation – pros and cons

Hungarian CEOs have been largely positive about the impacts of globalisation. The vast majority (97%) believe that globalisation has helped to free up flows of money, people, goods and information, and facilitate universal connectivity. However, a high percentage say that globalisation has not helped to close the gap between rich and poor, and over half of CEOs also expressed doubts about the fairness and integrity of global tax systems.

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We conducted our sixth Hungarian CEO Survey based on PwC’s Annual Global CEO Survey. The aim of the research we conducted in parallel to the global survey was to gain a more comprehensive picture of what Hungarian senior executives think, and what their market expectations and growth prospects are.