Business leaders are tackling the challenges of the downturn head-on, albeit confidence is at an all time low – according to PwC’s 2009 CEO Pulse Survey

CEOs are taking decisive action to tackle the challenges of the downturn head-on, albeit confidence is at an all time low - according to the PricewatehouseCoopers’ 2009 CEO Pulse survey released today. Undertaken in January and February 2009, the survey provides a snapshot of the views of 220 business leaders on Ireland’s economy and operating environment. Headline findings are:

With only 3% of Irish CEOs indicating the outlook for the future prospects of the Irish economy to be favourable, confidence in Ireland’s economy is at an all time low. Over half (55%) of Irish business leaders are expecting a decline in revenue and net profits;
An overwhelming majority (84%) are unhappy with the overall cost of doing business in Ireland, with the cost of labour being a major concern; However, three quarters of CEOs expect cost levels in their own businesses to either decline or remain the same over the next 12 months, compared to just 17% this time last year;
The majority of business leaders are taking decisive action to tackle the challenges head-on; For example the majority will have undertaken cost reviews (86%) and restructured their organisations (60%) by the time the year is out;
The impact of the turmoil in the capital markets is having its greatest impact on investment plans (58%) and access to finance (55%);
With 77% being satisfied with Ireland’s corporate tax regime, Ireland remains a location of choice for investment; For example, the majority of MNC CEOs indicated that Ireland is capable of attracting certain forms of investment going forward. However, reflecting global investment sentiment, only one third (32%) said that they are considering additional investment in Ireland;
Half (49%) said that introducing more favourable intellectual property tax rules would further promote Ireland as a place to do business; 22% said that the availability of R&D tax credits helped to promote Ireland as a location to do business;
Motivating employees is the top people challenge in the downturn. The majority (65%) of Irish CEOs are confident that they are effectively managing talent in terms of identifying and retaining high performers.

Launching the report, Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan said:

"This survey provides us with the views from Irish CEOs on a range of key business issues. It will help bring greater insight in developing a plan to restore Ireland’s competitiveness as well as building a strategy for the return to economic prosperity in this very challenging economic and business environment”.

Speaking at the launch, Ronan Murphy, Senior Partner, PwC said:

"While cost levels are a clear challenge, the survey suggests that businesses are taking decisive action to tackle this head-on. There are a number of positive sentiments emerging which can ensure Ireland remains an attractive location in which to invest and do business. For example, the survey highlights the importance of Ireland’s favourable tax regime and, with our strong talent pool, confirms that the fundamentals for continued investment in Ireland remain strong.”

Ann O’Connell, Partner, Strategy Advisory Services, PwC added:

"The survey shows that business leaders are taking fundamental action to navigate their way through the difficult environment. This includes reviewing the cost base right across all the areas of business; taking decisions on core and non-core assets; looking at new and more efficient ways of working and leveraging from new technology. Having undertaken profound reviews of their cost base, we expect a more cost effective platform to emerge by the time the year is out. While there will be a lot of pain in getting there, especially on the people side, Ireland will have substantially recalibrated its cost base, and in so doing, will have gone a long way to restore its competitiveness for the future.

Business leaders are taking decisive action to tackle the challenges head-on
The majority of survey participants (75%) confirmed that controlling costs will be their single most important challenge in the year ahead. The survey indicates that business leaders are taking decisive action within their own organisations to tackle the challenges. For example, combining the actions already taken in 2008 and those being planned in 2009, an overwhelming majority of survey participants expect to have undertaken extensive cost appraisals (86%); 79% will have reviewed procurement arrangements; three quarters (75%) will have restructured their businesses and nearly two thirds (60%) will have undertaken workforce reduction initiatives. Thus, by the end of 2009, according to the survey, we can expect to see a substantially reformed business models across all industry sectors.

Speaking at the survey launch, Paul Tuite, Advisory Leader, PwC added:

"With the economic downturn continuing, the survey highlights a refocus of the mindset of Irish CEOs, rebalancing short term survival with long term ambitions. The survey suggests that businesses are responding by making plans to control and reduce their cost base and restructure their operations so as to keep their businesses on track.

"The survey also shows that nearly a third (28%) of CEOs said that they had either engaged in, or planned in 2009 to commence, asset disposal processes. This demonstrates that for businesses which have funding available and which are prepared to pursue acquisitions there will be plenty of opportunities in the marketplace”.

"By recognising the need to restore competitiveness, Irish businesses are responding to the challenges facing them. In doing so, their focus is to withstand the short term difficulties that are facing virtually every business and, where necessary, to define a new business model to ensure their future sustainability.”

Investment sentiment remains positive
An overwhelming majority (88%) of survey participants said that Ireland’s favourable tax regime continues to be the most influencing factor for attracting foreign direct investment. With this favourable tax regime, CEOs remain positive that Ireland continues to be a location of choice for investment. For example, over three quarters (78%) of participating CEOs of Irish headquartered companies indicated that Ireland forms part of their future expansion plans. Furthermore, 85% of these CEOs are not considering relocating Irish activities overseas. But most notably, 71% of MNC CEOs believe that Ireland remains well placed to attract certain investment going forward. However, given global investment sentiment, only one third (32%) said that they are currently considering additional investment in Ireland.

Liam Diamond, Tax Partner, Inward Investment Leader added:

"The survey indicates that our 12.5% corporate tax regime remains crucial in continuing to attract and retain foreign direct investment. The stability of Ireland’s low corporate tax rate remains an important advantage for rebuilding Ireland’s competitiveness in the long term. And with our tax-efficient holding company regime, Ireland is an attractive joint venture location and this may be another area of investment opportunity in a very challenging environment.

"However, the survey shows that more needs to be done if Ireland is to realise its vision as a knowledge economy. Much progress has been made with incentives for R&D, but we now need to put in place appropriate measures to own and hold intellectual property. For example, half of the survey participants said that introducing more favourable intellectual property rules would further enhance Ireland’s attractiveness as a place to do business.”

ENDS

Notes to the editor

The survey was undertaken in January/February 2009. A total of 220 CEOs from Ireland’s top companies participated. 70% of survey participants represented multinational CEOs with the remainder representing Irish indigenous companies. Sectoral representation included 40% Services; 23% Financial Services; 13% Manufacturing; 13% Consumer and Industrial Products and 11% Technology.

DETAILED FINDINGS FROM THE SURVEY ARE:

On the outlook for Irish economy – Confidence at an all time low

97% of Ireland’s business leaders view the outlook on the future prospects for Ireland’s economy to be unfavourable (2008: 86%);
Over half (55%) expect revenues and net profit to decline (2008: Revenues 21%, Net Profits 27%);
Almost half (46%) of survey participants expect capital investment to decline (2008: 14%);
81% expect employment levels to fall or remain the same (2008: 64%);
75% of Irish business leaders expect costs within their own organisations will either decline or remain the same over the next twelve months, confirming a clear focus to control costs (2008: 17%);

On satisfaction with the business environment - Costs a key challenge

An overwhelming majority (84%) are unhappy with the overall cost of doing business in Ireland (2008: 75%);
In particular, 81% of Irish CEOs are unhappy with labour costs (2008: 77%). The majority, however are satisfied with the availability (2009: 90%; 2008: 74%) and quality (2009: 80%; 2008: 76%) of this labour;
Less than half are happy with the cost of telecoms (2009: 40%; 2008:37%) and transport (2009:33%; 2008:10%).

On Inward and Outward Investment – Ireland remains a location of choice

88% of MNC CEOs said that Ireland’s favourable tax regime was the most important influencing factor in the decision to operate in Ireland;
Over three quarters are satisfied with the corporate tax regime (2009: 77%; 2008: 88%);
Over three-quarters of Irish headquartered companies indicated that Ireland forms part of their future expansion plans (2009: 78%; 2008: 74%);
The majority of these companies are not considering relocating Irish activities overseas (2009: 85%; 2008: 81%);
Nearly three-quarters of MNC CEOs believe that Ireland is well placed to attract certain investment going forward (2009: 71%; 2008: 71%);
However, only a third (32%) of MNC CEOs said that they are currently considering additional investment in Ireland (2008: 61%);
More than two-thirds (68%) confirmed Ireland’s holding company regime helped to promote Ireland as a location of choice;
Half (49%) said that introducing more favourable intellectual property rules would make Ireland a more attractive investment location;
Only one in five of survey participants (22%) believed that the availability of R&D tax credits has helped to promote Ireland as a place to do business.

On sustainability – sustainability moving up the corporate agenda
Sustainability is moving up the boardroom agenda but more work needs to be done on embedding sustainability into the business strategy and reporting:

61% said sustainability is important for their business
However, many are struggling to embed sustainability into their business strategies to turn aspirations into reality. For example:
- Less than a quarter (21%) had developed strategic objectives
- Only 10% had developed specific targets, and
- The majority (72%) do not report on sustainability to stakeholders
- Just over a third (43%) have introduced measures to reduce their carbon footprint.

Bartley O’Connor, Senior Manager, PwC Sustainability Practice commented:

"While there are clear challenges and costs involved in embedding sustainability into the business model, it is vital for Irish companies to understand the long-term risks they are exposing themselves to in terms of being uncompetitive if they ignore the sustainability agenda. Many of the world’s leading companies are looking to capture not only the cost savings that can be made from becoming green and efficient, but also the opportunities for growth.

"The survey suggests that much work still needs to be done to fully embed sustainability into the business strategy and a key focus in Ireland will be turning the aspirations into reality. And with Triple Bottom Line reporting (ie People, Profit and Planet) becoming more popular, we expect to see more companies opting to provide assurance on their reporting on sustainability”

On people – motivation is the top people challenge in the downturn

65% of CEOs said that keeping employees motivated is the top people management challenge in the face of the current uncertainties;
However, nearly three-quarters (71%) said that their talent management approach is effective;
The majority said they would review or freeze basic salaries (67%) and bonuses (53%) within their organisations;
No knee-jerk reactions are planned with the majority (88%) of Irish business leaders indicating they do not plan to cut training budgets. However, some refocusing is expected with 41% indicating they would invest more resources on coaching and mentoring;
The majority (56%) said that their top HR challenge is identifying cost effective ways to recruit, retain and develop employees.

Ciara Fallon, Senior Manager, Strategy Advisory Services commented:

"The downturn brings many daunting challenges but also presents opportunities. From the people perspective, these can include a timely review of the value-for-money and business performance impact of human resources. Understanding this dynamic can help an organisation to better harness the value of its people, foster and fast-track genuine talent that can thrive in ambiguity and create an environment where effective people management can help the business to emerge from the downturn fitter and fundamentally stronger than it was when it went in.

"With motivation being the top people challenge, some of the ways in which companies are responding to these challenges include: realigning business and performance objectives; embedding an honest and robust appraisal system, fostering a culture of creativity and engagement and continuing to communicate a consistent set of messages on a timely basis to their people”.

On Executive Coaching and Mentoring – a greater focus

Nearly half (41%) of CEOs said that they will rely more on coaching and mentoring to meet their development needs;
CEOs see personal recommendation (66%) and a specialist agency/professional advisor (45%) as the top means to identify executive coaches and mentors;
The majority (70%) cited references/recommendation and industry/sectoral knowledge (68%) as the two most influencial factors when selecting a coach or mentor.

Selecting the right coach or mentor who understands the business issues and can advise, but may not want to be in the driving seat themselves, is an important part of getting it right and will ensure that today’s problems are tackled.

Ellen Roche, Leader, Executive Coaching and Mentoring, PwC added:

"The survey suggests that executive coaching and mentoring will grow in popularity to support business leaders as they make the tough decisions to restructure their organisations. Many of these CEOs may be experiencing a downturn for the first time and will benefit from the support and advice of a senior executive who understands their business and has managed through recession in the past . We see this flexible, bespoke and solutions focused approach to executive development as one of the oldest, tried and trusted ways of working our way out of adversity.”

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