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Large company CEOs need a hug

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Large company CEOs need a hug

Confidence wanes at large companies, while the middle market bubbles with optimism.

The results of various surveys amongst middle market executives and their counterparts in larger companies are striking in their differences. Middle market executives are extremely upbeat, which large company CEOs seem to be down-in-the-dumps.

"middle market companies, because of their size, tend to be more agile, more nimble, they're driving innovation, they can move faster, and they've got cost-cutting capabilites with less decision-making"

The most recent example of this is the release today of The Conference Board and PwC Measure of CEO Confidence™ for the third quarter, which indicates a sharp decrease in sentiment from the second quarter. The index currently reads just 54, down from 62 in Q2 2013 (a reading of more than 50 points reflects more positive than negative responses).

"CEO confidence declined in the third quarter as increasing uncertainty about the short-term outlook prevailed," said Lynn Franco, Director of Economic Indicators at The Conference Board. "Expectations for growth in both India and Brazil deteriorated significantly, while the outlook for the U.S., Japan and China, despite less upbeat, on balance remained positive."

CEOs' assessment of current economic conditions declined considerably. Only 33 percent claim conditions are better compared to six months ago, down from 60 percent in the second quarter. Business leaders are also less positive about conditions in their own industries. Approximately 32 percent say conditions in their own industries have improved, down from 40 percent last quarter.

CEOs' short-term outlook also retreated from last quarter. Currently, 42 percent of business leaders expect economic conditions to improve over the next six months, down from 60 percent in the second quarter. Expectations for their own industries are also more tepid, with just 34 percent of CEOs anticipating an improvement in conditions in the months ahead, down from 53 percent last quarter.

Pretty dire, right?

Compare this to the results of similar middle market surveys.  Recent surveys of middle market executives conducted by Vistage, KPMG, PwC, Deloitte and others consistently reflect strong optimism in the middle market, albeit tempered somewhat by concerns about the fiscal, tax and regulatory environments. Large majorities of middle market executives expect robust growth in the coming 12 months, some topping 20% for the top line.  In fact, some 73% of CEOs surveyed in the Vistage Q3 report expected strong revenue growth.

When asked about this disparity, Brian Hughes, who runs the middle market practice at KPMG, commented that "middle market companies, because of their size, tend to be more agile, more nimble, they're driving innovation, they can move faster, and they've got cost-cutting capabilites with less decision-making.  I think it's all of those things that allow middle market companies to be more optimistic."

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