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February 28, 2023
The ever-shifting market, plus the Federal Reserve’s wavering expectations for the future of inflation, has chief executive officers on edge.
Daily headlines declare a recession is just around the corner, or already upon us. In January, inflation was expected to slow, but by February, the Fed was less confident inflationary pressures had passed.
Most CEOs remain cautiously optimistic about growth. But news of widespread layoffs, shaky stock prices and softening tech earnings also have many company leaders wary of the future.
At the end of 2022, PwC surveyed corporate executives from thousands of companies in over 100 countries to learn how CEOs feel about the new year, economic uncertainty and their chances of growth. And the results were disheartening.
Nearly 75% of surveyed leaders expect global economic growth to slow in 2023. That’s the lowest growth expectation reported since PwC began tracking the metric 12 years ago. And it reflects a drop from January’s slightly more hopeful expectation, when it looked like inflation was on its way out.
Why the big slowdown? CEOs point to the rising cost of goods and transportation, labor shortages and changing shopping habits.
The less certain the market becomes, the harder it is for these leaders to prepare for the next quarter, much less plan for long-term growth. As the global market changes course month after month, companies have to continually adapt to the shifts — and pay the steep cost.
As technology expands and global business develops, many leaders are realizing their companies may no longer be viable without significant changes. In fact, in PwC’s survey, nearly 40% of CEOs reported that to keep their business alive for the next decade, transformational change would be necessary.
What that business transformation looks like varies by industry and company. Some leaders are turning to better data systems and analysis tools to closely monitor costs, improve their organizational efficiency and pad their margins.
Others are offering more relaxed work structures that allow greater access to remote work, paid time off and adjustable schedules. But balancing forward-thinking change with the survival strategies needed to thrive through today’s economic turbulence is difficult, and companies around the world are feeling the growing pains.
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In a February survey by Chief Executive Group, 70% of polled CEOs expect their company’s revenue to increase over the next year, and 56% predict greater profits. But only 49% of CEOs surveyed expect to grow their workforce this year.
While less than half of the CEOs surveyed by Chief Executive Group plan to expand their workforce in 2023, in PwC’s survey, 60% don’t plan to shrink their workforce. Eighty percent of those same CEOs don’t plan to cut compensation either.
That’s good news for workers fearful of the next wave of layoffs, pay cuts and missed bonuses. Outside of the tech industry, workforces have largely stabilized, as companies have slowly returned to their pre-pandemic levels of staffing.
Just 38% of CEOs surveyed by Chief Executive Group say demand for their products or services is higher today than this time last year, and 37% say demand has declined. But overall, 53% of these CEOs believe demand will rise over the next year, reflecting their continuing hope in the months ahead.
Overall, these future-focused statistics represent a leadership group that’s cautiously optimistic about what’s to come, but only slightly.
In the coming months, we’re likely to see companies strengthen their commitment to diversity, equity and inclusion, while expanding their commitment to environmental, social and governance factors . These initiatives have been shown to improve company performance, longevity, talent retention and customer loyalty — all needed to safeguard the company’s future.
Today, these initiatives are no longer considered optional strategies or marketing pushes. They’re all but necessary to every business’ success.
Both DEI initiatives and sustainable manufacturing and operational practices can be cost-effective for the companies that embrace them. Better DEI programs improve workplace satisfaction and performance while helping companies bring in fresh ideas and valuable talent. And sustainability practices allow companies to improve their efficiency, reduce costs and expand their margins along the way.
CEOs and business leaders worldwide are facing a challenging and uncertain economic landscape while still recovering from the pandemic’s market upending. Rising costs, labor shortages and changing consumer spending habits aren’t going away anytime soon. But the CEOs weathering these issues are cautiously optimistic about what the future holds.
The CEOs who remain proactive, future-focused and committed to improving their company culture and climate impact are those most likely to emerge successfully from this turbulent time.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
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