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Top Management Perspective on 2023, exclusive Insights from NZZ & FuW

TOP BOARD AND CEO PRIORITIES FOR THE SECOND HALF OF 2023:

IS YOUR COMPANY PREPARED FOR WHAT IS COMING?

TOP CHANCES & CHALLENGES IN THE SECOND HALF OF 2023

 

 

We talked with the NZZ,
Peter Fischer, NZZ Chief Economist, and Michael Ferber, Editor Economy, about their views on the priorities for the Board and the CEO until the end of 2023. Read their views here:

We see the priorities for boards of directors and the C-level of Swiss companies in the second half of 2023 in the following areas:
Inflationary pressure in Switzerland is expected to continue at a moderate level and the shortage of skilled workers in the Swiss economy is expected to ease only slowly. This poses the challenge for companies to structure next fall's wage round in such a way that they do not lose top performers and at the same time keep costs under control. 
Another major challenge will be dealing with a potential energy shortage in the coming winter. Depending on the weather and the further course of the Ukraine war, there may well be bottlenecks in electricity and gas supplies again. Consequently, company managements will have to consider how to deal with possible austerity measures or a quota system in a shortage situation.
Geopolitical uncertainty remains high, especially in business with China. Boards of directors and management must consider how they would deal with a further intensified decoupling between China and the USA.

 

 

and with the FuW (Finanz und Wirtschaft)
Dr. Rainer Weihofen, editor, FuW (Finanz und Wirtschaft)
What can happen if a company's top personnel are not selected carefully enough is shown quite clearly by the example of Credit Suisse. 
The challenges are currently getting tougher, and not just for banks. As a result, the terrain on which members of the Group Executive Board and the Board of Directors operate is becoming rougher.

People in management positions have a role model function that goes far beyond the professional. This role model function is particularly important when employees have to cope with major changes. If the much-vaunted specialists are unable to identify with their managers, they are likely to leave. 
In the recruitment process, therefore, great attention should be paid to the question of whether a candidate fits in with the company culture. This does not mean that an internal candidate is automatically the best choice. A breath of fresh air from outside can be inspiring.

 

Based on the survey data, the top 4 Chances & constraints to growth in the second half of 2023 are:

 

1. Inflation:

Inflation has been fueled by disruptions to global supply chains during the pandemic and rising prices across the board. According to a survey by the Boston Consulting Group, inflation is the No. 1 risk facing companies in North America, Europe and Asia. The same survey shows that 82% of CEOs expect inflation and high interest rates to impact their company's performance in 2023.

 

At the same time, 63% of CEOs are confident or very confident in their ability to manage inflation, according to a Deloitte survey.

 

2. Economic uncertainty:

Last year's optimism, based on hopes for economic improvement as the global pandemic eased, was shattered by various shocks in 2022. These included the largest land war in Europe since World War II, knock-on effects such as soaring energy and commodity prices, and rapid wage and price inflation. These events have contributed to the prevailing economic uncertainty facing CEOs in the current business environment. According to the Deloitte survey, the most significant immediate challenge facing CEOs is undoubtedly the state of the global economy. Nearly three-quarters of CEOs expect global economic growth to decline over the next 12 months, leading to market uncertainty due to factors such as inflation, interest rates and geopolitical tensions.

3. Workforce shortages:

Amid ongoing economic challenges, CEOs are cautious about layoffs due to the impact of the recent "Great Resignation" phenomenon, which resulted in increased employee turnover rates.

 

According to a Gartner survey, workforce issues, including retention, training, and hiring, are among the top strategic business priorities for boards in 2023-2024.

 

4. Climate change:

According to a PwC survey, the majority of global CEOs expect some level of impact from climate change in the next 12 months, primarily on their cost profiles and supply chains. As environmental, social and governance (ESG) pressures continue to grow, they are having a significant impact on companies.

 

As a result, ESG considerations such as climate risk and diversity are now more deeply integrated into risk and strategy discussions, with a strong focus on monitoring regulatory developments.

 

 

Chances & Potential for 2023

 

INITIATIVES TO ADDRESS INFLATION

Redesigning operating models and streamlining organizational structures are common strategies for managing periods of high inflation.

 

In addition, CEOs are placing significant emphasis on reducing costs and improving operational efficiency in their efforts to combat inflation. According to a survey conducted by Deloitte, a staggering 79% of CEOs believe that Generative AI will improve efficiency, while 52% believe it will create new growth opportunities.

 

This significant potential for efficiency gains puts technology investment at the top of the priority list. The PwC survey highlights that around three-quarters of companies are currently focusing on automation, skills development, and the use of advanced technologies such as AI.

However, many companies are taking their efforts a step further. According to a Gartner survey, boards are likely to refine their digital acceleration initiatives by prioritizing business transformation over mere optimization. As a result, 60% of companies are successfully achieving their digital business optimization goals, while 19% are making progress toward full digital transformation.

 

The CEO plays a critical role as the primary leader driving digital business initiatives. As such, CEOs must prioritize technology and ensure a direct link between technology transformation and value creation. In addition, fostering a software-like culture and product management capabilities will prove critical to digital success.

 

INITIATIVES TO ADDRESS ECONOMIC UNCERTAINTY

CEOs' concern about economic uncertainty is not surprising, but it is concerning that this uncertainty is leading to decision paralysis, with executives waiting to see what happens before acting.

 

Most CEOs are aware of how an economic downturn could affect their businesses and should be making decisions based on the information they have now.

 

Proactive decision-making, even in uncertain times, is essential to effectively managing economic challenges. Boards can play a critical role in addressing uncertainty by embracing diverse perspectives and seeking independent advice.

The Role of the Board of Directors in Uncertain Times

 

PwC's Corporate Governance Center has identified several approaches to addressing boardroom bias. These include seeking views through independent consultations or questionnaires, structuring discussions to explore overlooked opportunities, and appointing a "devil's advocate" for critical discussions.

 

In addition, holding special meetings to evaluate critical decisions, replaying them as if they had been made a year earlier, and reflecting on potential disasters can provide valuable insights.

 

Finally, resilience-building measures such as fostering agile work cultures and implementing effective talent management strategies can optimize employee talent and drive collective results.

 

INITIATIVES TO ADDRESS WORKFORCE SHORTAGES

According to a PwC survey, CEOs are focused on reducing costs and driving revenue growth in the current business environment, but most are not planning to reduce their workforce. Survey respondents largely believe that the elevated employee turnover rates they are experiencing will continue, with more CEOs expecting them to increase rather than decrease.

 

With the expectation of a fierce war for talent, even in challenging economic conditions, it is critical for companies to prioritize keeping their employees happy and engaged.

 

To do so, organizations must adapt their talent strategies to meet employee expectations. The degree of flexibility, fair compensation, meaningful work, and the ability to be true to oneself at work have a significant impact on an employee's decision to stay with a company or seek opportunities elsewhere.

 

By creating an environment conducive to employee development and growth, CEOs can positively influence future churn rates. Prioritizing employee well-being and fostering an engaging work environment will be critical to attracting and retaining talent, even in times of economic downturn.

CLIMATE CHANGE INITIATIVES

 

PwC's statistical analysis shows that CEOs who perceive a higher risk of climate change are more likely to take action to address it. While this reactive approach is understandable, it comes with its own set of risks, and relying solely on companies facing immediate financial impacts will not be enough to adequately address this global challenge.

 

Moreover, the effectiveness of the most common measures, such as decarbonization initiatives and the development of climate-friendly products and services, remains uncertain, especially in the short term. Given existing atmospheric emissions, these measures may not be sufficient to prevent continued warming under various scenarios.

 

Data shows that many companies are simultaneously pursuing decarbonization, innovation, and developing climate strategies. At the same time, less than half of CEOs plan to implement an internal carbon price to inform decision-making. Despite the potential benefits of taking into account factors such as taxes, incentives and strategic trade-offs, this approach is not yet a priority for most CEOs.

 

It is critical to understand the potential impact of climate change on cost profiles and supply chains, and to consider the use of internal carbon pricing mechanisms to account for taxes, incentives, and strategic trade-offs.

 

In addition, the challenging issue of climate change should be broken down into manageable components for effective leadership. For example, rather than looking at climate risk in a broad sense, you might assess the impact of high heat stress days on your operations, evaluate flood risks at a coastal airport, and examine wildfire risk in the regions where you operate.

 

Similarly, executives seeking to reduce Scope 3 emissions (those generated in a company's upstream and downstream value chain) should prioritize the 20% of suppliers responsible for 80% of those emissions. This requires highly detailed data and modeling, looking beyond industry averages, and implementing accurate processes to estimate, quantify, and extrapolate Scope 3 data across the enterprise.

 

 

TRANSITION

TO CLEAN ENERGY

On the one hand, we must tackle the net-zero equation and address the urgent climate crisis that is the defining challenge of our time. On the other hand, it is imperative to prioritize resilience by embracing clean and affordable energy solutions.

CEOs should view the energy crisis

as an opportunity, not a cost.

By investing in different value pools such as electrification, sustainable aviation, and nature-based solutions, companies can unlock a $12 trillion opportunity by 2030. Reframing the issue as an opportunity aligns business interests with climate action and promotes positive ROI investment opportunities.

 

Conclusion

In conclusion, as we navigate the dynamic landscape of uncertainty, several key takeaways emerge:

 

Navigating inflation:

CEOs are focused on improving efficiencies, reducing costs, and leveraging generative AI to combat the negative effects of inflation. Investing in technology-driven solutions and digital transformation emerges as a key initiative to address this challenge head-on.

 

Economic uncertainty:

The role of the board in fostering diverse perspectives, soliciting independent opinions, and encouraging structured discussions becomes critical. Equipping boards with tools to evaluate critical decisions from multiple perspectives and promoting resilience-building practices, such as agile work cultures, contribute to successful uncertainty management.

 

Address workforce shortages:

Companies must adapt talent strategies to meet employees' expectations for flexibility, meaningful work, and personal growth. By creating an environment conducive to employee well-being, companies can mitigate workforce challenges, even in difficult economic times.

 

Address climate change:

Breaking down climate challenges into manageable components and understanding their impact on costs and supply chains are critical steps forward. Pursuing net-zero goals and prioritizing resilience through clean energy deployment can shape a sustainable and prosperous future.

 

In light of these findings, it is clear that collaboration between CEOs and boards is critical to shaping a resilient and adaptable company. Embracing technology, fostering diverse perspectives, investing in talent, and addressing climate concerns are fundamental pillars of success. By strategizing around these key areas, companies can strengthen their position in an ever-evolving business landscape and ensure a future-proof path to growth and sustainability.

 

W-INSIGHTS 2023 August - Summary EN - 3.1 (1)

 
#Executive Search #C-Level #CEO #2023 #Board
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