Even as fears of a recession loom and a slowdown in global economic growth over the next 12 months is expected to prompt businesses to cut costs, more than half of chief executives around the world say they are not planning to reduce headcount or compensation amid a shortage of talent.
That’s a key finding from a survey released Monday by consultant PwC, which polled 4,410 CEOs across 105 countries during October and November 2022. While cybersecurity and health threats were the top challenges a year ago, PwC said 73% of the CEOs it surveyed cited expectations of a decline in global economic growth over the next 12 months as the main worry impacting the viability of their business operations.
“The bleak CEO outlook is the most pessimistic CEOs have been regarding global economic growth since we began asking this question 12 years ago and is a significant departure from the optimistic outlooks of 2021 and 2022, when more than two-thirds (76% and 77%, respectively) thought economic growth would improve,” PwC’s 26th annual CEO survey said.
Rising inflation amid a global economic downturn was ranked as the main concern on CEOs’ minds, followed by macroeconomic volatility and exposure to geopolitical risk led by the war in Ukraine. In 2021, chief executives cited the fear of cyberthreats and health risks as the top challenges.
“Strategic areas that took top priority last year, such as cyber, digital transformation, and more, did not disappear from the agenda but gave way to new-old challenges that are keeping company heads busy in the current period,” said Doron Sadan, managing Partner of PwC Israel.
Looking ahead, almost 40% of CEOs think their businesses will not be economically viable in a decade if they continue on their current path and don’t transform their operations. The need to transform and adapt to the new economic reality was found to be a necessity across a range of sectors, including telecommunications, manufacturing, healthcare, and technology.
“CEO confidence in their own company’s growth prospects also declined dramatically since last year (-26%), the biggest drop since the 2008-2009 financial crisis when a 58% decline was recorded,” according to the PwC survey.
Faced with a slowing global economy, 52% of the respondents in the CEO survey said they were planning to cut operating costs, 51% are seeking to lift prices and 48% are looking to diversify product and service offerings as part of efforts to spur revenue growth.
“For me, the bright spot of the survey once again lies in human capital. In one of the survey questions, the CEOs were asked how they operate or plan to operate in order to prepare for the expected economic challenges. This is because most of the CEOs stated that they are already operating and plan to implement operational efficiency, examine pricing strategy and enter new markets,” said Sadan. “In terms of activity and preparation, most CEOs stated that they do not act or intend to act in regards to harming workplaces or the employment conditions of employees.”
Specifically, 60% of the CEOs in the survey responded that they don’t plan to trim the size of their workforce over the next 12 months. Additionally, 80% of those surveyed said they will not reduce staff remuneration in an effort to retain human capital and mitigate workforce attrition rates.
Furthermore, chief executives believe that part of transforming their businesses to remain viable requires investment in human capital and technology to improve workforce capabilities. Almost two-thirds, or 76%, of the surveyed businesses said they were “investing in automating processes and systems, implementing systems to upskill workforces in priority areas, deploying technology such as the cloud, AI and other advanced technology.”