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CEO Strategy Focuses on Resilience and Risk

By Melissa J. Anderson

According to PwC’s latest annual CEO survey, US CEOs are increasingly focused on resilience. This should come as no surprise, since global economic uncertainty seems to be here to stay. In the short term, they are concerned about growth prospects. But, PwC’s US Chairman and Senior Partner Bob Moritz writes, “They are far more confident in their company’s ability to navigate through the anticipated volatility expected over the next three years.”

Nevertheless, while 47 percent of the CEOs said they were very confident about prospects for revenue growth over the next three years, that’s down from 54 percent who said the same just last year.

Moritz added that many of the CEOs were relatively new to the job. “Half of the 167 US CEOs participating in our survey have been heading their company for less than five years. The operating environment over the past few years has been unlike anything seen before, so this group has admittedly learned a lot—and gained a lot, too.”

Becoming a corporate leader during a time of high volatility has certainly shaped the style of many of these CEOs. According to the study, “On average, CEOs expect more than one major risk event to occur” in 2013. Some of the most likely potential risk events, the CEOs believe, include China’s GDP growth falling below 7.5 percent (50 percent), recession in the US (about 35 percent), or a cyberattack or major disruption (about 31 percent).

In fact, the study says, “Growth strategies should factor in how government policies could shock the economy—90% of US CEOs worry about uncertain or volatile economic growth, a greater share than their global peers.”

The expectation of risk is shaping every part of CEO strategy – including talent. Here’s how.

CEO Talent Strategy for 2013

PwC says talent is a key concern for CEOs. “In an age in which companies are increasingly differentiated by the talent they can deploy, this shouldn’t come as a surprise,” the report explains.

As L. Kevin Kelly, CEO, Heidrick & Struggles says in the report:

“There is clearly a supply-demand issue when it comes to top-level talent globally. Given the demographics, the technology changes that we’re seeing today, and the economic environment in which we’re operating, the supply-demand issue is not going to go away overnight.”

Over half of US CEOs in the study believe inadequate skill sets on behalf of their workforces could threaten growth this year – and, PwC says, they are doing something about it. “In fact, nearly three-quarters of US CEOs expect to change their talent management strategies, with 18% prepared to make major changes in the coming year.”

Two thirds of US CEOs (65 percent) said they plan to “invest in creating and fostering a skilled workforce in their home country.” At the same time, 68 percent say they believe education and skills development should be a government priority. What’s more, they believe that responsibility isn’t being met. Only three percent said the government is doing a good job creating the workforce of tomorrow.

Respondents are also dedicating resources to developing their companies’ own leaders. Almost all said they support active succession planning (89 percent) and two thirds (64 percent) said their companies are developing programs to build leadership diversity.

The most effective leadership development programs, according to CEOs are “involving managers below board level in strategic decision making” (84 percent) and “active succession planing including identifying multiple successors” (74 percent). About half (51 percent) suggested developing well-rounded leaders through “rotations to different functions/challenges” and 47 percent mentioned “dedicated executive development programs.” Next, 46 percent named leadership diversity programs, and finally, only 20 percent mentioned shadowing a senior executive as an effective leadership development program.

By focusing on developing talented leaders with the skills to handle a wide range of challenges, companies can better meet the needs of tomorrow. As Moritz writes in his opening letter to the report:

“The experiences they will be able to pass on to the next generation will shape a new perspective on the importance of resilient leadership through uncertainty. ‘Persistent,’ ‘ethical’ and ‘pragmatic’ were the words many CEOs used to describe traits of historical leaders they most admire.

After a decade of near-constant volatility, CEOs have learned that a high-performing, well-equipped, and versatile workforce is critical for success.

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