Subdued growth, focus on internal initiatives
Ninety-two percent of CEOs reported that finding the right talent has become increasingly difficult over the past year
CEOs’ confidence in global and Hungarian economic growth is subdued compared to last year. Despite this, they are still confident about their own organisations’ success, which they aim to ensure by focusing on operational efficiencies, innovation and human capital. Both globally and in Hungary, there is consensus on the key role data plays in decision-making. However, few CEOs are satisfied with the quality and scope of their data. While the majority of global and Hungarian CEOs agree that AI will dramatically change their business over the next five years.
This is the eighth 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). In parallel with the Hungarian survey, which was based on in-person interviews, PwC conducted nearly 1,400 interviews with CEOs worldwide. This enables comparison with the thinking and strategic direction of Hungarian CEOs.
“The findings of our survey conducted at the end of 2018 show that, both globally and in Hungary, CEOs are optimistic about their own organisations’ revenue prospects, but their confidence has declined regarding global and local economic growth. Nine out of ten CEOs in Hungary, and eight out of ten globally expressed confidence about their own organisations’ revenue growth prospects for 2019,” said Dr. Barbara Koncz, Director at PwC Hungary’s Tax and Legal Services (see Figure 1).
Plans for 2019
The overwhelming majority of both Hungarian (87%) and global CEOs (77%) are planning operational efficiencies to drive revenue growth. The next two items on global CEOs’ list of activities are organic growth (72%) and launching a new product or service (62%). In Hungary, launching a new product (56%) precede organic growth (51%) (see Figure 2).
“CEOs’ confidence about their own organisations’ performance appears to be based on process optimisation, innovation, and human capital expansion. I think the current period of prosperity is encouraging for CEOs, and affords them excellent opportunities to take action towards concrete goals. Although clouds are gathering over the horizon, there is still time to act in order to prepare and bolster companies,” said Dr. Tamás Lőcsei, PwC Hungary’s CEO since July 2018.
Top markets for growth
The effect of trade conflicts is already being felt globally: 70% of global CEOs expressed concern about the impact of trade conflicts on their businesses. The turn away from the US market and shift in Chinese investment to other countries are reactions to those conflicts. Changes regarding top markets for growth are not felt as strongly in Hungary: Germany, Romania, and the United States continue to top the list, with no significant drop in the rankings (see Figure 3).
Changing concerns
Hardly any business or political factors have increased in ranking on global CEOs’ list of top concerns compared to last year. Globally, CEOs’ top concern is the availability of key skills (79%), followed by geopolitical uncertainty (75%) and over-regulation (73%) (see Figure 4).
In Hungary, the top concern is the availability of key skills, followed by changing workforce demographics (83%), rising employee benefits (72%), and over-regulation (71%). The most significant change has been in the level of concern about exchange rate volatility: 63% of Hungarian CEOs report they are affected by it compared to 46% last year. Concern about climate change among CEOs has risen by 16 percentage points, while concern about volatile energy costs has also increased by 15 percentage points (see Figure 4).
What impact is the skills gap having on companies’ growth prospects?
CEOs affirmed that the unavailability of key skills affects their growth prospects. Among the impacts noted are higher people costs, deteriorating customer experience, missed market opportunities, and not being able to innovate effectively. As a consequence, 44% of global CEOs and 37% of Hungarian CEOs believe they are missing their growth targets (see Figure 5).
Ninety-two percent of Hungarian CEOs reported that finding the right talent has become increasingly difficult over the past year. The most frequently cited solution to the skills gap – selected by every fourth CEO (27%) – is establishing a strong pipeline direct from education. Twenty-three percent see significant retraining/upskilling as the answer, while every fifth CEO (19%) considers hiring from competitors as an as option. Globally, the results were less scattered: nearly every second company (46%) sees retraining/upskilling as the solution.
“A comprehensive reform of the vocational training system is called for at this time and is crucially important as it would have a major impact on labour market trends and contribute to the sustainability of competitiveness. The Alliance has become familiar with the position of recognized experts in vocational training, developed recommendations, and conducted consultations at county seats throughout Hungary, with business leaders as well as heads of vocational training institutions and their students. These consultations have allowed us to discuss issues specific to local conditions and gather a wide range of experience for moving forward.” – said Dr. Péter Futó, President of the Confederation of Hungarian Employers and Industrialists.
Are there enough data to support decisions?
CEOs seem to be in agreement on the value of data: nearly all respondents indicated a willingness to use data to ensure the long-term success and durability of their business. Despite massive investments in IT infrastructure over the past decade, CEOs report that they are still not receiving the comprehensive data they need to make key decisions. The only exception is financial information, with 51% of Hungarian CEOs saying they receive comprehensive data concerning that area. For all other data types, less than 50% of respondents reported receiving comprehensive data (see Figure 6).
What are the primary reasons for the inadequacy of data received? Globally, most CEOs cited lack of analytical talent in their organisations (54%), followed by data siloing and lack of sharing (51%), with half of them also identifying poor data reliability. Hungarian CEOs see the latter reason as the most important (48%), followed by unwillingness of customers and clients to share information (38%). Inability to quantify external information and data siloing and lack of sharing rank third (33%) and fourth (31%), respectively. Lack of analytical talent was only cited by 29% of Hungarian CEOs.
Despite the above difficulties, 50% of CEOs globally and 41% in Hungary said that their organisation’s ability to make decisions based on data and analytics was ahead of their competitors, with 37% saying they were at about the same level, and only 12% indicating globally and in Hungary that they were behind in this respect.
“Leaders’ expectations have certainly risen as technology advances, but decision-makers are aware that their analytical capabilities have not kept pace with the volume of data which has expanded exponentially. The information gap is also alarming in one of the most critical areas: customer needs. This needs to change as soon as possible in order for companies to play a successful and sustainable role in business and society,” added Tamás Lőcsei.
Artificial intelligence: solution or another problem?
The majority of global (85%) and Hungarian CEOs (60%) agree that AI will dramatically change their business over the next five years. Globally, 69%, while in Hungary, 71% of CEOs agree that AI will have a larger impact on the world than the Internet revolution, and the majority also agree that AI is good for society. However, the overwhelming sentiment among CEOs is of distrust in AI: 85% of Hungarian CEOs and 84% of global CEOs agree with the statement that AI-based decisions need to be transparent and explainable in order to be trusted.
Chief executives are divided on AI’s job displacement effect: 54% of Hungary’s CEOs and 48% of global CEOs believe AI will displace more jobs than it creates in the long run.
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Figure 7
Notes
1. Survey methodology:
We conducted our eighth 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 236 Hungarian companies between October and December 2018. 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.
2. About our survey partner:
The Confederation of Hungarian Employers and Industrialists (MGYOSZ) represents more than 60% of the private sector in terms of invested capital, turnover and number of employees. Its membership includes 6,000 medium-sized and large enterprises, 51 professional and 15 county-level and regional federations. Since 2005, MGYOSZ has been a member of BUSINESS EUROPE, the most influential coalition of employers’ organisations in Europe.
3. The full survey report in Hungarian and English, a promotional video and further details are available on PwC’s Hungarian CEO Survey website. (http://www.pwc.com/hu/ceosurvey)
4. You can find earlier press materials on our website.
5. Our most recent Sustainability Report is available on our Corporate Responsibility website.
6. With offices in 158 countries and more than 250,000 people, we are among the leading professional services networks in the world. We help organisations and individuals create the value they’re looking for, by delivering quality in assurance, tax and advisory services. If you would like to find out more about our firm, please visit us at www.pwc.com.
© 2019 PwC. All rights reserved. In this document, “PwC” refers to the PwC network and/or one or more of its member firms in Hungary, each of which is a separate legal entity. For more information, please visit the http://www.pwc.com/structure website.
