Executives want to cut costs but not workforce size or salaries

According to the results of a global CEO survey released by PwC Cyprus on Tuesday, the majority of chief executive officers predict that global economic growth would slow down over the upcoming year, with 73% of respondents contributing to the most negative forecast in more than a decade.

Despite the bleak picture for the coming year, a sizable percentage of participants responded that while they are looking to reduce costs, they are neither looking to lower pay nor their workforce size.

In its most recent round, conducted in October and November 2022, the annual Global CEO Survey by multinational consulting firm PwC surveyed 4,410 CEOs across 105 countries and territories.

The company noted in its report that the depressing CEO outlook marked a significant change from the optimistic predictions of 2021 and 2022, when more than three-quarters (76 percent and 77 percent, respectively) believed that economic growth would improve. "The bleak CEO outlook is the most pessimistic CEOs have been regarding global economic growth since we began asking this question 12 years ago," the company said.

The business continued, "In addition to a challenging environment, nearly 40 per cent of CEOs think their organisations will not be economically viable in a decade if they continue on their current path," it said.

Additionally, the study found that chief executive officers' confidence in the growth prospects of their own companies has decreased significantly since last year, falling by 26%, the largest dip since the 2008–2009 financial crisis, when a 58% decline was noted.

The poll found that, globally, corporate optimism towards economic growth differs significantly, even within G7 economies.

The research also stated that rising inflation, macroeconomic volatility, and geopolitical tensions rank among the chief executives' most serious concerns.

"While cyber and health risks were the top concerns a year ago, the impact of the economic downturn is top-of-mind for CEOs this year, with inflation (40 per cent) and macroeconomic volatility (31 per cent) leading the risks weighing on CEOs in the short-term – the next 12 months – and over the next five years," the report said, noting that 25% of CEOs also feel financially exposed to geopolitical conflict risks, whereas cyber risks and climate change have been the top concerns in the past year

Nearly half of respondents who are exposed to geopolitical conflict have integrated a wider range of disruptions into scenario planning and corporate operating models by either increasing investments in cybersecurity or data privacy (48%) or both, according to the report. "The war in Ukraine and growing concern about geopolitical flashpoints in other parts of the world have caused CEOs to rethink aspects of their business models," the report continued.

A further finding from the poll was that chief executives are reducing expenses but not personnel or salary.

The findings showed that 52% of CEOs said they are cutting operating expenses, 51% said they are raising pricing, and 48% said they are diversifying the product and service offerings of their businesses.

To keep talent and lower employee turnover rates, however, 60% of CEOs stated that they do not expect to cut the size of their personnel in the upcoming year, and 80% stated that they do not aim to reduce staff compensation.

If CEOs want to create long-term societal value, they must work with a variety of stakeholders to develop trust and deliver lasting results. According to the poll, organizations that work with non-profit organizations tend to focus on issues related to education (49%), diversity, equity, and inclusion, (49%) and sustainable development (54%). 

In terms of technology, 76% of organizations said they were investing in automating systems and processes, 72% said they were putting in place systems to upskill employees in priority areas, and 69% said they were deploying technology like the cloud, artificial intelligence, and other cutting-edge technology.

To address the increasingly complex risks that organizations confront, the research claimed that "many CEOs question whether critical preconditions for organisational empowerment and entrepreneurship are present in their companies to tackle the increasingly complex risks organisations face."

For instance, just 23% of CEOs reported that their company's leaders frequently or regularly make strategic choices for their role without involving the CEO.

In addition to the foregoing, just 46% of CEOs reported that their company's executives tolerate small failures frequently or usually.

More upbeatly, though, 85% of respondents stated that employee actions frequently or regularly correspond with the goals and values of their organizations.

"The risks facing organisations and society today cannot be addressed alone and in isolation. CEOs must therefore continue to collaborate with a wide range of public and private sector stakeholders to effectively mitigate those risks, build trust and generate long-term value – for their businesses, society and the planet," Bob Moritz, the global chairman of PwC remarked.

Last but not least, PwC Cyprus said that as part of its worldwide survey, it will present its 12th local survey at a special event in March 2023.

The company claims that 159 CEOs from Cyprus took part in the poll, demonstrating the increased interest of the business community in the survey.

By fLEXI tEAM