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CEOs on offensive against slowing growth

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CEOs on offensive against slowing growth

Building innovative, people-driven organizations dominate thinking of CEOs in 2015.

According to a survey of business leaders released today by The Conference Board, despite weakness in the global economy, CEOs remain focused on seeking high-quality, sustainable business growth—and the strategies they selected to meet their top challenges reveal a longer-term focus on capacity building and the development of strong cultures of innovation, engagement, and accountability within their organizations.

According to the report, CEOs remain optimistic about profit expectations but must cope with fundamental changes in customer behavior, the emergence of new competitors globally, and a slowdown in emerging market growth to get there. They seek to counter such headwinds with investments in effective leadership and quality talent.

"Once again, we found the issue of attracting, retaining, engaging and growing talent at the top of CEOs' minds." 

"Once again, we found the issue of attracting, retaining, engaging and growing talent at the top of CEOs' minds," said Rebecca Ray, executive vice president and human capital practice lead at The Conference Board and a co-author of the report. "Not only was human capital the top-ranked concern on its own, talent- and leadership-based strategies also figure prominently in their responses to other pressing challenges."

Since 1999, the CEO Challenge survey has asked CEOs, presidents, and chairmen across the globe to identify their most critical challenges. In the 2015 edition, CEOs rank Human Capital, Innovation, Customer Relationships, Operational Excellence, and Sustainability as their top five long-term challenges to drive business growth. With the exception of Sustainability, the other four challenges make the top-five list in every region of the globe.

"CEOs have been putting customer relationships at the center of their growth strategies for the past three years in the survey," said Charles Mitchell, Executive Director, Knowledge Content and Quality and lead author of the report. "Whether in the business-to-business or business-to-consumer space, CEOs say they are keenly aware of the often disruptive impact that changes in customer behavior and motivation have on how and with what products and services they go to market."

This year's survey found cybersecurity to be one of the top-five hot-button issues, representing short-term issues that require CEOs immediate attention. Especially in the United States, which experienced several widely publicized data breaches, cybersecurity was the second most-critical hot-button issue following changes in customer behavior as the top hot-button issue.

"Surprisingly, CEOs put less emphasis on cost containment as a source of strengthening profitability." 

"While slowing global growth may lead to profitability becoming a source of concern in 2015, CEOs keep placing their focus on growing topline revenue supported by bringing new products and services to market and leveraging both innovation and technology to improve processes and operational performance," said Bart van Ark, chief economist at The Conference Board and report co-author. "Surprisingly, CEOs put less emphasis on cost containment as a source of strengthening profitability." 

Ten major trends clearly emerge in this year's results:

1.      On the offensive against slowing global growth

Cost-related defensive strategies are now trumped by more growth-oriented, aggressive monetary and time-investment strategies in intangibles such as business process redesign, improving workforce and leadership skills, and employee engagement and productivity.

2.      Focus on controlling the controllable

While global geopolitical and economic risks certainly impact the business environment, the focus of CEOs in this year's survey is on internal development of strong cultures of engagement, customer centricity, innovation, and accountability. They see organizational agility and flexibility as a critical competency and place relatively less emphasis on geopolitical risk. The one exception is Europe, where Global political/economic risk ranks first and regional volatility is high among its hot-button issues.

3.      Strengthening human capital through a grow-your-own strategy

CEOs see success in meeting their most urgent business growth challenges as being inextricably linked to the strength of their human capital. Effective use of human capital resources is their top challenge, and their strategies to improve productivity center on greater leadership effectiveness, building a performance culture, providing training to upskill their workforce, and raising engagement.

4.      Building a stronger and more dynamic relationship with customers

CEOs are now placing more emphasis on what their customers are trying to achieve than on what their companies are trying to sell. Judging by the importance they place on customer-centric strategies to meet an array of challenges, understanding changing customer needs is at the center of their growth strategies.

5.      Sustainability emerges as a top global challenge

For the first time, Sustainability ranks globally among the top-five challenges. However there are considerable ranking variations between regions, with China and India placing it higher than in the United States and Latin America. CEO priorities focus on meeting market demand for socially/environmentally conscious products and ensuring sustainability is part of their corporate brand identity. 

6.      A more integrated approach to innovation

While technology still plays a role, the notion that corporate culture and an engaged and empowered workforce are now the critical enablers of innovation —a dominant theme this year—argues for a more integrated approach  involving the human capital function and overall management of intangible assets, from process improvements to upskilling the workforce. CEOs see an inseparable link between customer centricity, human capital, and innovation, as well as the importance of diversity on innovation teams.

7.      CEOs seek to rebuild trust, sometimes below the radar

Even though Trust in Business is not seen as a top challenge by CEOs, the emphasis they place on fostering trust-building behavior through their high ranking of strategies related to ethical accountability and transparency to meet an array of challenges shows that trust building is viewed as fundamental to growing their businesses.

8.      A surprising lack of emphasis on cross-cultural competency

Mastering cross-cultural competence, even among the largest companies in our sample, is a relatively low strategic priority. This runs contrary to what we hear from human capital practitioners in our Councils across the globe, who say cultural sensitivity, or the lack of it, presents a major challenge to organizational alignment, performance management and measurement, and the development of effective global leaders.

9.      Increasing comfort with big data, but continued uncertainty about how best to use it

Last year's top hot-button issue has moved to the middle, indicating increased comfort with the concept of big data. However, its strategic value may not yet be fully recognized by CEOs. For many companies, it is still early in the learning cycle. Processes for gathering the right data and tying it to the bottom line are still in development.

10.  CEOs expect much of themselves

CEOs see themselves playing a very hands-on role by personally engaging with key customers and clients, as well as government regulators. They clearly embrace the concept that organizational culture is character in action, and that it starts with the boss, as ethical leadership ranked as a top-three strategy to meet the Trust in Business challenge.

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