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Do CEOs’ goals diverge from company goals?

PwC's 11th Hungarian CEO Survey 2022

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Last autumn, we conducted 262 interviews with CEOs, the largest participant pool to date, which gives our results greater validity than ever before. However, we have had to scale back some of our findings; what was valid at the beginning of February –the macroeconomic outlook, key threats and their likelihood, and prospects for 2022 – have now been reassessed, with a radically different outlook in the shorter term.

That is why this year we are looking at the longer-term outlook, beyond annual planning cycles, which is crucial for companies’ business goals and survival.

Four-fifths of Hungarian companies have ranked digitalisation and automation, customer satisfaction and employee engagement as their top strategic objectives. However, only half of them have set targets to reduce their environmental impact, and even fewer have addressed gender diversity in their company’s operations.

The overall picture becomes clearer when we look at how much responsibility CEOs take for the implementation of their company’s strategy.

Although the above objectives are shared by 98% of the companies surveyed, 34% of CEOs said they are not responsible at all for their implementation. Or at least they don’t hold themselves accountable.

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As these strategic objectives are espoused by 82% of the companies, credibility would be better achieved if the same proportion of CEOs considered them to be their personal objectives as well.

Inaction on climate change is widespread, despite the fact that both clients and employees are calling on companies to take urgent and decisive steps.

In the survey, we asked CEOs about the importance of reducing carbon emissions and whether they have made any carbon-neutral or net-zero commitments. Net zero is the stronger commitment because it aims to reduce emissions to as close to zero as possible, while carbon neutrality means offsetting necessary emissions by purchasing quotas or financing decarbonisation projects.

Responses show that 38% of companies are already addressing the issue in a meaningful way. In addition to curbing climate change, the main reason for action is to meet client and investor expectations. Employees’ needs are seen as less important in this regard.

For companies that are not yet offsetting or reducing carbon emissions, the most common reason for inaction is that their greenhouse gas emissions are insignificant. Another common response is that they are unable to measure their emissions or there are no best practices for offsetting in their industry.

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In Hungary, before the outbreak of the war in Ukraine, most respondents were concerned about health risks, followed by macroeconomic volatility and cyber risks. In the global survey, CEOs ranked cyber risks as the top threat to growth, followed by health risks and macroeconomic volatility. Other risks such as geopolitical conflict, social inequality and climate change, although no less serious in their impact, were perceived as less of a threat at the time. These rankings have been largely upended by the current situation.

When asked about the potential business impact of the above threats, CEOs responded that cyber risks could inhibit innovation as well as sales, while health risks and macroeconomic volatility could inhibit their ability to attract and retain key talent and to sell products and services. Those who worry about geopolitical conflict anticipate that sales could be impacted, followed by the ability to develop services.

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To offset these threats, 75% of Hungarian CEOs draw on their company’s specific assets, capabilities and relationships for value creation; 70% trust the industry’s long-term trends, and 60% rely on macroeconomic forces.

The war in Ukraine has reshaped the geopolitical and economic outlook. Yet it is worth taking a look at what the near-term expectations were at the end of 2021.

Hungarian CEOs’ confidence in global economic growth usually moves in lockstep with that of global CEOs; however, the results of our interviews late last year paint a different picture. Hungarian chief executives are much more cautious than their global peers. While 77% of global CEOs said they expect global economic growth to improve during the year ahead, only 46% of Hungarian CEOs said they expect more growth (down from 65% in the previous year), and the majority of them expect growth to stagnate or decline. Optimism about Hungarian economic growth has waned, with more than 50% of Hungarian CEOs saying that a slowdown or stagnation is more likely. The proportion of those expecting revenue growth in the next 12 months has also declined.

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Credibility is all important. For example, CEOs have become key players as employers: according to the 2021 Edelman Trust Barometer, CEOs remain the link of trust between the private and public sectors. They are the ones who are accessible and can be held accountable for their words and actions. But how does this transform leadership roles? How many areas are there where CEOs have to make decisions but are not adequately prepared to do so? What should a new situation-adaptive strategy be about, and to what extent are CEOs responsible for it?

In the interviews, we also discussed CEOs’ roles and responsibilities. Two-thirds of Hungarian CEOs oversee roughly six to 15 initiatives for up to five overarching strategic objectives, which they evaluate several times a year and adjust at least annually. At 43% of the companies surveyed, an idea can be given the green light within three months, and the resources to implement it are made available within six months.

Management planning cycles are still mostly based on one-year periods. For the past year, one-third of CEOs received a forecast of financial indicators that deviated by 6% or more from the actual results. It was a difficult year to plan, as shown by these figures, given that CEOs’ performance is still assessed mostly on the basis of financial metrics.
 

Lőcsei Tamás, a PwC Magyarország vezérigazgatója

“In an increasingly volatile economic environment, members of the business community have gradually risen above other players in terms of the trust placed in them. CEOs and other business leaders remain the link of trust between the private and public sectors. They are the ones who are accessible and more directly accountable for their words and actions, especially in today’s tight labour market. Meeting these expectations requires more responsibility and new roles from us leaders,”

said Tamás Lőcsei, PwC Hungary’s CEO.

Summary

The challenges are manifold: while strategy is still primarily driven by business metrics, CEOs also need to focus on ESG in order to build lasting trust. They need to redefine their company’s objectives on the go to meet new expectations for long-term business survival.

This requires closing the gap between managers and employees, clients and investors, and paying close attention to expectations that can only be met by investments that pay off in the long term.

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Survey methodology

We conducted our tenth Hungarian CEO Survey based on PwC’s Annual Global CEO Survey. The aim of the research we conducted in parallel with the global survey was to gain a more comprehensive picture of what Hungarian senior executives think, how they see the market, and what expectations and growth opportunities they have.

In the Hungarian survey, we collected data through in-person interviews: PwC’s experts interviewed the CEOs of 262 Hungarian companies between October 2021 and January 2022. During the interviews, we collected quantitative data by means of questionnaires. We contacted companies that PwC industry groups selected from the automotive, pharmaceutical and health, energy and utilities, retail and consumer industries, financial services, the technology, information, communications and entertainment sectors, the public sector, and manufacturing.


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Dr. Barbara Koncz

Dr. Barbara Koncz

Partner, PwC Hungary

Katalin Simon

Katalin Simon

PR Senior Manager, PwC Hungary

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