Four existential issues CEOs need to address now

PwC’s new 26th Annual Global CEO Survey makes clear this dual imperative. CEOs see profound near-term disruptions: inflation, macroeconomic volatility, geopolitical conflict and a deeply pessimistic outlook for the global economy. Seventy-three percent of CEOs expect economic growth to decline in the next 12 months.

However, CEOs also see the need for deep, long-term transformation—transformation that truly delivers results. Shockingly, almost four in ten leaders think their organisation will no longer be economically viable in 10 years if it continues on its current course.

The potential danger is that leaders can be so distracted by near-term waves that they fail to navigate deeper change.

At PwC, through our work with clients and their business partners, and through our CEO Survey, we’re seeing a few of the ways that CEOs are managing today’s turbulence while also reinventing their businesses for the future. Here are four of those ways, along with actions business leaders can take to get the balance right.

1. CEOs are pursuing profound reinvention. As we’ve seen, 39% of CEOs believe their companies will not be viable in 10 years’ time without a sharp change in direction. This finding holds true across sectors, from tech to healthcare to manufacturing. CEOs see a range of forces—such as changing customer demand, regulatory changes, skills shortages, and tech disruption/data explosion—that will sweep away those who do not adapt. We’re seeing far-sighted CEOs rethink their company’s place in a world that’s changing under our feet. For example, at PwC we have helped a global retailer reinvent itself from a chain of offline stores into an online multichannel company, and we’ve helped a global automaker diversify into car subscriptions to meet changing customer demands. 

Action: Reimagine the firm’s value proposition. Reinventing a company for long-term success requires a willingness to re-ask the most elemental questions about a company, such as ‘What unique value do we contribute in today’s world—and tomorrow’s?’ 

2. CEOs are cutting costs, but not people. Fifty-two percent of CEOs we surveyed said they were cutting costs in response to near-term economic pressures, but only 16% are currently reducing the size of their workforces. The rationale was clear: leaders told us they expect employee attrition to stay the same or worsen, suggesting they see no end in sight to the “great resignation” and the consequent competition to attract talent with the right skills for the future. As a result, CEOs—with an eye to keeping their companies afloat in the longer term—are maintaining their investments in people despite acute near-term cost pressures. I believe this is the right approach; at PwC, despite economic headwinds, we invested more than half a billion dollars last year in building our highly skilled workforce.

Action: Attract and retain talent by delivering what today’s workforce truly wants. Last year, we asked 52,000 workers across the world why they choose and change jobs. We found compensation is important, as always, but employees also want flexibility/hybrid working, new skills to remain relevant, and the chance to contribute to a larger purpose (75% said they want to work for an organisation that makes a positive contribution to society). The lesson for CEOs? Keep investing in everything it takes to attract and keep great people.

3. CEOs are building supply chain resilience. Our CEO Survey shows that leaders who believe their companies are exposed to geopolitical risks are taking actions; 46% are adjusting their geographic footprint or supply chains. Companies are not simply exiting the territories in question en masse; for example, the 2022 China Business Report, developed in partnership with PwC, confirms that only 17% of US companies are considering moving operations out of China in the next three years. This suggests some CEOs are seeking to mitigate potential impacts from geopolitical tensions while keeping their eyes on the long game of China’s economic importance. So instead of leaving, many business leaders are applying a range of strategies to build supply chain resilience.

Action: Storm-proof the supply chain. We’re seeing companies build diversification and redundancy into their supply chains and expand their reserve inventory (moving from just-in-time inventory to just-in-case). Firms are making their supply chains cleaner and greener, and they are embedding data and technology into them more than ever before—for example, with AI-enabled control towers that enable nimble adaptation to shifting risks.

4. CEOs are realising that climate change is not an issue for the distant future—it’s an issue for today. In contrast to our 2021 CEO Survey, when a minority (40%) of CEOs told us they had factored climate change into their risk management strategies, our latest survey shows a clear majority (58%) of CEOs are developing a data-driven, enterprise-level strategy for reducing emissions and mitigating climate risks. Perhaps this is because 50% of today’s CEOs expect their cost profiles to be impacted by climate change— not far off in the future, but in the next 12 months.

Action: Adapt now to a hotter world while mitigating emissions. At PwC, we’re helping many clients map and manage their climate risks from disrupted supply chains to lost staff productivity from heat stress, and in the process, often uncovering opportunities to innovate ahead of competitors while protecting the bottom line.

In my nearly 40 years of working with business leaders, time and again I’ve seen the payoffs for leaders who are far-sighted, looking past near-term issues to make long-term moves. I’ve seen the most perceptive CEOs recognise that what might appear to be far-off challenges—like climate change—are in fact among the deepest currents changing the game now, and must be addressed starting today. Though we should be under no illusions about the seriousness of the challenges we face, the future belongs to those who can manage the short term with speed, scale and a results orientation, thereby enabling and fueling the investments needed for longer term opportunities.

This piece is based on an article that originally appeared on the World Economic Forum Agenda blog.