26 January 2011
Focus on innovation, talent, and workplace issues in PwC Survey
DAVOS, Switzerland, 25 Jan 2011 - Two years removed from the depths of recession, CEOs' confidence in future growth has returned to nearly pre-crisis levels, according to PwC's 14th Annual Global CEO Survey. In the worldwide poll of 1,201 CEOs, 48% said they were “very confident" of growth in the next 12 months. That's a major shift from the 31% last year who were "very confident" last year and approaches the 50% reached in 2008 before the onslaught of the economic crisis.
In total, 88% of CEOs said they now have some level of confidence for prospects in the next 12 months, up from 81% last year. Longer term, 94% now are confident of growth three years from now, an increase of two percentage points.
Renewed confidence was spread across all continents, with CEOs in India, Austria, Colombia, Peru, China, Thailand and Paraguay particularly upbeat about near term growth. Regionally, CEOs in Western Europe were the least confident. German CEOs were an exception, with nearly 80% of CEOs "very confident," up from about 20% last year. The survey results were released at the World Economic Forum annual meeting in Davos.
CEOs said they considered China the most important country for future growth. China was named by 39% of CEOs, followed by the US, 21%; Brazil, 19%; and India, 18%. And China, the US and India were seen as the most important future sources for products and raw materials. Regionally, 90% of CEOs said they expect their operations to grow in Asia in the next 12 months, followed by Latin America, 84%; Africa, 75%; the Middle East, 72%; and Eastern Europe, 70%. But just a third of respondents said the country in which they are based offers high growth potential.
Strategically, the best opportunities for growth in the next 12 months will come from the development of new products and services and from increasing share in existing markets, both cited by 29% of CEOs, and by penetration of new markets, 17%. Mergers and acquisitions and joint ventures and alliances trailed as growth strategies.
"CEOs have emerged from the bunker mentality of surviving the recession. They now see renewed opportunity for growth, even in the near term, and are determined to take advantage of better global economic conditions and increased customer demands," said Dennis M. Nally, Chairman of PricewaterhouseCoopers International.
"The post-recession global economy is recovering on two-tiers. Emerging economies like China, India and Brazil are growing at rates that far surpass the developed nations. The shift in the economic balance of power creates challenges for CEOs in deciding how and where to invest in facilities, people and innovation. Companies that understand and capitalize on the diverging growth patterns of the developed and emerging economies will be the winners in the years ahead," he added.
The positive momentum in CEO confidence was reflected in hiring plans; more than half (51%) of CEOs worldwide said they expected to add jobs in the next 12 months, up from 39% in the last survey. CEOs in Central Europe, Asia Pacific and Africa were particularly bullish about hiring. Significantly, just 16% of CEOs said they expected to cut their workforce in the coming year, down from 25% last year.
The impact of the recession on strategy was also evident in the survey results. Most CEOs – 84% – said they had changed their company's strategy in the past two years, and about a third said the change was fundamental. Strategic changes were driven primarily by economic uncertainty, customer requirements, and the post-recession dynamics in their industry. Most CEOs said they plan to change their strategies for managing talent (83%), risk (77%), investments (76%), and organisational structure (74%).
Fewer CEOs, 64%, said they planned to cut costs in the next 12 months, down from about 70% last year. And 34% said they would complete a merger or acquisition, half expect to form a new strategic alliance or joint venture, and 31% said they would outsource a business function. Western Europe, Asia and North America were the most popular venues for M&A.
Nearly three-fourths of CEOs cited uncertain or volatile economic growth as a potential threat to their business, up from 66% last year. And nearly a third of CEOs said they were “extremely concerned" about economic prospects. Other commonly mentioned threats included government response to fiscal deficits, 61%; and over-regulation, 60%; trailed by exchange rate volatility, 54%; unstable capital markets, 52%; and protectionism, 40%. The spectre of inflation was cited by less than a third of respondents.
Among business threats, 56% named the availability of key skills, followed by increasing taxes, 55%, and permanent shifts in consumer behaviours, 48%. A potential talent shortage was a particular concern in Asia Pacific, Central and Eastern Europe, the Middle East and Africa.
Global risks cited by CEOs included political instability, 58%, scarcity of natural resources, 34%, climate change, 27% and natural disasters, 25%.
Nearly half of CEOs said the priority of government should be improving the country's infrastructure. It was followed by creating and fostering a skilled workforce, 47%, and ensuring the stability of the financial sector and access to affordable capital, both 45%. More than 60% of CEOs agreed that public spending cuts or tax increases would slow their country's economic growth, and 53% said their company's taxes would rise because of government reaction to increasing public debt. Just over a third of CEOs said that their company was making strategic changes because of public spending cuts or tax increases either at home or abroad.
In the continuing war for talent, CEOs identified the major challenges over the next three years as: a limited supply of candidates with the right skills, 66%, recruiting and integrating younger employees into the workforce, 54%, losing top people to competitors, 52%, and providing attractive career paths, 50%. The top strategies they identified to meet those challenges were: using more non-financial rewards as motivation,65%, deploying more staff on international assignments, 59%, and working with government and academia to improve skills, 54%.
For PwC's 14th Annual Global CEO Survey, 1,201 interviews were conducted in 69 countries during the last quarter of 2010. By region, 420 interviews were conducted in Western Europe, 257 in Asia Pacific, 221 in Latin America, 148 in North America, 98 in Eastern Europe and 57 in the Middle East & Africa.
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