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PwC's 15th Annual Global CEO Survey


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In the 15th Annual Global CEO Survey, we set out to understand how businesses are preparing for growth in their priority markets. We surveyed 1,258 CEOs based in 60 different countries and talked to a …

In the 15th Annual Global CEO Survey, we set out to understand how businesses are preparing for growth in their priority markets. We surveyed 1,258 CEOs based in 60 different countries and talked to a further 38 CEOs face-to-face in the last quarter of 2011. To learn more, visit

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  • 1. 15th Annual Global CEO Survey 2012 o e ce srup e p5/ c o oc p9/ s res e ce p16/ e e c e e /p20 s e p27 / erv ews p30DeliveringresultsGrowth andvalue in avolatile world
  • 2. Most multinational companies have been adjusting, without fanfare, to the new global economic reality for some time. This year, CEOs have made clear that they are not backing away from global growth programmes but in fact are deepening their commitments to their most important markets. Among the CEOs we interviewed, whether based in Italy, Malaysia, the US or South Africa, the goal of delivering results by growing whole operations – not just sales – outside of their home base is the same. These are ambitious agendas, which is somewhat surprising given economicPreface uncertainties. How are CEOs going to make it happen? This year, we asked CEOs how they think their time is best spent, and two-thirds said they want to devote more attention to developing talent pipelines and meeting with customers (see Figure 1). Four years into the We all know these are uncertain times. Stories nancial crisis, we nd CEOs more grounded of strengthening economies, employment about the risks and changing conditions for improvements and breakthrough products growth. The focus on talent and customers from some parts of the world are offset by today is a natural ‘next step’ towards reports on natural disasters, government debt, establishing their organisations in the markets regulatory changes and political turmoil in where they operate and building the trust others. It’s hard to know for sure which way needed for the business of tomorrow. the wind is blowing. That’s why so many CEOs are changing talent While change presents opportunity for some, strategies to improve their ability to attract most business thrives on stability – and the and retain the right people. Skills shortages are fact that this is elusive makes forward plans very real – just 12 of CEOs say they’re nding increasingly hard to develop. No wonder that it easier to hire people in their industries – and con dence is down from what we saw last the constraints are having uanti able impacts year. Yet it’s still at a reasonably high level. on corporate growth. Just as our customers Why? Because despite the uncertainties, are changing rapidly, so are our workforces – the long-term trends that have encouraged and our talent needs are changing, too. corporations to invest in the emerging world, create innovation and develop talent remain I want to thank the more than 1,250 company rmly in place. leaders from 60 countries who shared their thinking with us. The success of the PwC Annual Global CEO Survey – now in its 15th year – is directly attributable to the candid participation of leaders around the world. The demands on their time are many and varied; we greatly appreciate their involvement. And I am particularly grateful to the 38 CEOs who sat down with us near the end of 2011 for more extensive conversations. Their thoughts added invaluable context to our uantitative ndings. Dennis M. Nally Chairman, PricewaterhouseCoopers International2 15th Annual Global CEO Survey 2012
  • 3. Figure 1: CEOs’ personal priorities include spending more time with customers and developing leadersQ: Do you wish that you personally could spend more time, less time or the same amount of time on each of the following activities? Develop leadership and talent pipeline 66 People Meet with customers 66 Improve organisational efficiency 57 Set strategy and manage risks 51 OperationsDevelop operations outside of my home market 40 Personal time or community service 34 Meet with regulators and policy makers 5 Meet with lenders and providers of capital -4 Governance Meet with the board and shareholders -5 % Net priority (% of respondents reporting ‘More time’ minus % of respondents reporting ‘Less time’)Base: All respondents (1,258)Source: PwC 15th Annual Global CEO Survey 2012 I want to thank the more than 1,250 company leaders from 60 countries who shared their thinking with us. The success of the PwC Global CEO Survey – now in its 15th year – is directly attributable to the candid participation of leaders around the world. 15th Annual Global CEO Survey 2012 3
  • 4. ContentsCon dence disrupted ........................................................ 5Balancing global capabilitiesand local opportunities ..................................................... 9Resilience to global disruptionsand regional risks ............................................................ 16The talent challenge ....................................................... 20What’s next ..................................................................... 27Final thoughts from our CEO interviews ......................... 30Research methodology and key contacts ......................... 36Acknowledgements ......................................................... 37Related reading ............................................................... 384 15th Annual Global CEO Survey 2012
  • 5. Confidence disruptedThe year 2012 unfolds with wide Yet businesses are not on the defensive. F William McNabb IIIdisparities in potential outcomes in CEOs are taking deliberate steps to Chairman, President and CEOmany economies, and little prospect of improve their businesses’ resilience The Vanguard Group Inc.a coordinated turnaround. Just 15% of against further disruptions and to The lack of a credible, long termCEOs believe that the global economy grow in the markets they believe arewill improve this year (see Figure 2). most important for their future. As aIncremental improvements in business result, 0% are ‘very con dent’ inoptimism seen in the PwC 15th Annual prospects for revenue growth in theirGlobal CEO Survey over the past own companies in the next 12 monthstwo years are reversing. In a sign of (see Figure 3).converging economic fortunes, Erdal Karamercancon dence declined in parallel among President and CEOCEOs across all regions, except for the Ec ac ba Group A SMiddle East and Africa. Figure 2: Half of CEOs expect the global economy to decline in 2012 Q: Do you believe the global economy will improve, stay the same, or decline over the next 12 months? in the region – in North Africa and 4% 15% Improve Stay the same 48% Decline 36% 34% Don’t know Base: All respondents (1,258) Source: PwC 15th Annual Global CEO Survey 2012 15th Annual Global CEO Survey 2012 5
  • 6. CEOs are manoeuvring to outpace the The tough choices and competition and the market, rather transformations made in business than relying on riding economic models since 2008. With stronger updrafts or just riding out volatility. balance sheets, improved cost They are nearly three times more structures and a greater awareness con dent in their own capacity to of global risks, CEOs are more generate growth in their business than prepared. They don’t think growthBrian Duperreault, they are in the global economy’s will be easy; but they do believePresident and CEO, growth prospects. they’re more ready for turbulenceMarsh & McLennan Companies Inc. than they were four years ago. At rst glance, this relative optimism seems unfounded. The unfolding The rise in investment and commerce Eurozone crisis alone is creating more to and from emerging economies room for disappointment. So what does – more pronounced than in any period this pattern mean? Should we worry over the past decade – creates vast that the chart suggests we might be market potential. Half of CEOs based facing 2008 all over again, perhaps in developed markets believe that with another crisis precipitating a emerging economies are more massive fall in business activity? important to their company’s future, After all, not everyone can outpace as do 68% of CEOs who are themselves the market. based in emerging markets. The world may be slowed for a time by nancial Possibly, but we don’t think so. In our problems, but this structural shift is view, CEO con dence in business potentially bigger than the institutional growth is holding up because of problems and depressed growth in three important and related trends: developed economies. Gradually rising incomes and economic opportunitiesFigure 3: Short-term confidence has declined – but remains well above the levels seen in 2009 and 2010Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Yearly comparison. 60% 52% 50% 50 48% 41% 40 40% 30 31% 31% 26% Very confident about company’s 20 prospects for revenue growth 21% over the next 12 months 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Base: All respondents (2012=1,258; 2011=1,201; 2010=1,198; 2009=1,124; 2008=1,150; 2007=1,084; 2006 (not asked); 2005=1,324; 2004=1,386; 2003=989)Note: Percentage of CEOs who are very confident about their companies’ prospects for revenue growthSource: PwC 15th Annual Global CEO Survey 20126 15th Annual Global CEO Survey 2012
  • 7. Francesco Starace for millions more people around the and human) towards new opportunitiesCEO, Enel Green Power SpA world have enormous implications for and the full potential of a far more infrastructure spending, sustainability closely integrated world comes technologies, demand for health care, together. CEOs believe that the forces education and personal nance of global integration will stay on track: products, and the list goes on. 45% believe the world will become more open to free international trade The strength of cross-border ties. (with fewer than a third expecting a In past economic downturns, the world pullback) and 56% are convinced thatYoshio Kono experienced rises in protectionism. cross-border capital ows will not comePresident and CEO And since the most recent downturn under new constraints.The Norinchukin Bank began, negotiations in the World Trade Organisation’s Doha Round have As a result of these factors, business foundered and a few governments have leaders’ commitment to doing more taken measures to protect domestic business globally is, if anything, industries they consider vital. But that accelerating despite economic, shouldn’t obscure real progress regulatory and other uncertainties.determine, we will have to be recently on bilateral and regional levels Risks are weighted towards economic in fostering cross-border commerce and in particular policy threats in and investment. Trade has rebounded 2012, but the fundamentals for future since the downturn began, according growth are still squarely in place. to data from the World Trade Businesses have adapted their Organisation.1 Add in the greater strategies to take advantage when they mobility of capital today (both nancial inevitably reassert themselves. Figure 4: Talent remains priority no. 1 for CEOs Q: To what extent do you anticipate changes at your company in any of the following areas over the next 12 months? 2012 2011 Strategies for managing talent 21 55 23 17 52 31 Organisational structure (including M&A) 26 50 22 25 47 27 Approach to managing risk 32 50 17 23 54 23 Captial investment decisions 38 42 19 23 48 28 Focus on corporate reputation and rebuilding trust 49 35 15 36 41 22 Capital structure 55 29 14 50 34 15 Engagement with your board of directors 63 27 8 52 34 12 % % No change Some change A major change Base: All respondents 2012 (1,258); 2011 (1,201) Source: PwC 15th Annual Global CEO Survey 20121 WTO data show global trade rebounded in 2010 to return to its 2008 levels ( 15th Annual Global CEO Survey 2012 7
  • 8. For our 15th Annual Global CEO There will be winners and losers as Making talent strategic: Not havingSurvey, we polled 1,258 CEOs based in businesses pivot to address markets the right talent in the right place is a60 different countries from September they are less familiar with. CEOs see leading threat to growth for manythrough to early December 2011. risks and customer segments through CEOs. One in four CEOs said they wereWe supplemented their comments different lenses than they’ve used unable to pursue a market opportunityon plans for business growth and in the past, and are focusing on the or have had to cancel or delay aassessments of constraints with insights talent they need to grow their strategic initiative because of talentfrom the global PwC network and businesses sustainably. constraints. There are short-termin-depth interviews with 38 CEOs from issues, such as an acute shortage ofall regions. The combined conclusions These are the priorities CEOs described trained managers and technicallyform the basis of this report. to us, and that we take a closer look at skilled workers. And there are long- in this report: term concerns with the capacity of educational systems everywhere to econ guring o erations to meet keep up with business needs. local market needs: CEOs are simultaneously building local These areas suggest a set of questions capabilities in important markets, that business leaders should consider extending operational footprints, in order to overcome executionAs businesses have faced volatile building strategic alliances and challenges in 2012 and position forglobal conditions since 2008, CEOs creating new networks for new markets longer term growth – questions whichhave crafted new approaches to risk that include research and development we comment on in the last section ofmanagement and new strategies in (R&D), manufacturing and services this report.response. But they’re not going back support. They’re adapting how theyon the defensive, as they did in 2008. go to market, recon guring processesRisk is not being ignored, but other and at times entire operating models. Andy Greenissues are higher on the agenda (seeFigure 4 on page 7). This year, CEOs CEO, Logica Plc Addressing risks that greaterare focusing on better execution in integration am li es: It may feelthose markets which are important to as if disruptions are multiplying asthe future of their business while also their impacts expand across widelyseeking stability and more certainty in dispersed and nely tuned supplytheir domestic markets. chains. During 2011, global businesses had to confront a portfolio ofThis was a message we consistently unrelated high-impact global risks –heard from CEOs, regardless of where from political upheaval and a nuclearthey are based. “We adopted a strategy disaster to massive oods and acalled ‘protect’ in most cases in the sovereign debt crisis. Through it all,mature markets. We pay more attention CEOs have learned that prudent riskto pro t making and how to transfer Tidjane Thiam management should focus less on thethe core business into cash cows,” said Group Chief Executive, Prudential Plc probabilities of particular events, andYang Yuanqing, Chairman and CEO of more on understanding the potentialLenovo. “In emerging markets, we consequences they have to prepare forhave primarily adopted an ‘attack’ from a range of risks. Many companiesstrategy. That means we have to pay weren’t directly affected by themore attention to market share at the improbable Fukushima crisis, forbeginning instead of pro t. We would example, or the oods in Thailand.say that it is dif cult to make money if However, supply chain disruption asmarket share is less than 10%.” severe as those two events causedSimilarly Keith McLoughlin, President should be on every company’s radar.and CEO of AB Electrolux pointedout: “Our goal is to maintain marketshare in the mature markets. Thosemarkets generate a lot of earningsso we have no plans to shrink ourpresence there. On the other hand,we are planning to invest substantiallyin the emerging markets.”8 15th Annual Global CEO Survey 2012
  • 9. Balancing global capabilitiesand local opportunitiesMaria Ramos A sensible strategy for globalisation including manufacturing, in each ofGroup Chief Executive, today means far more than building their priority markets, build deeperABSA Group Ltd cheaply in one location and selling relationships with their customers, in another. What has changed is the innovate anew, take advantage of local way operations are con gured. India’s talent and brands, reduce risk and Tata is now the largest manufacturer in strengthen supply chains. the UK. Taiwan’s HTC pioneered the use of Google’s Android software. New Over 60 different economies were operational strategies are required to named by CEOs as key overseas compete successfully in such markets. markets, some adjacent to their home market and others on the other side of “You have to innovate, design, the world. Solid growth and risingCheung Yan manufacture and source locally to be domestic spending power (see Figure 5)Chairlady, Nine Dragons Paper successful anywhere,” said David Cote, in more economies around the world,(Holding) Ltd, China Chairman and CEO of Honeywell. And such as Indonesia and Turkey, for that’s what CEOs are investing to do: example, are propelling CEOs past a build fully edged operations, mindset focused solely on the BRICs.Figure 5: CEOs eye the expanding buying power of emerging marketsPrivate consumption at current market exchange rates EU27 Canada Russia China & Hong Kong Korea US MENA Turkey Japan India ASEAN Sub-Saharan Africa Latin America Australia 5 Private consumption in 10 current prices and market exchange rates, US$ millions 20 2020 2010Source: Oxford Economics 15th Annual Global CEO Survey 2012 9
  • 10. Pailin Chuchottaworn The US and Germany were among objective for 2012; 31% plan to buildPresident and CEO, PTT Plc the economies identi ed by the most manufacturing capacity in Russia, and CEOs, and mentioned as economies 30% in China. A similar pattern holds where they are expanding capabilities. for product development; CEOs are Equal numbers of CEOs from seeking to source innovation from developed and emerging markets within their key markets. identi ed the two countries as important. China presents a different The recovery in foreign direct picture of diversi cation: it’s important investment (FDI) in 2010 corroborates to 37% of CEOs based in developed this trend.2 In ows into Brazil and economies versus 24% of CEOs Indonesia more than doubled from based in emerging economies. 2006 to 2010, above the 70% rise in FDI into China and Russia. FDI in ows Many of their objectives in the next into mature economies on the other 12 months are similar (see Figure 6). hand, are at – or down sharply in Building manufacturing capacity, for the case of the European Union. example, is important for many CEOs While FDI out ows from Organisation in each of their key markets. China for Economic Cooperation and faces increasing competition as CEOs Development (OECD) member reach further a eld. Of those CEOs economies have also eased over the who listed Brazil or India as important period, those from India increased to to their growth prospects, around a US$14.6 billion and those from China third cite manufacturing locally as an rose nearly threefold to US$60.1 billion. Figure 6: Growing customer bases is far from the only objective of CEOs in their key overseas markets Q: Which of the following objectives do you hope to achieve in the next 12 months? (The top 10 countries mentioned by CEOs in ‘Which countries, excluding the one in which you are based, do you consider most important for your overall growth prospects over the next 12 months?’) China USA Brazil India Germany 55 61 61 46 32 46 55 54 27 26 30 22 31 24 32 79 71 83 79 72 30 23 33 38 10 14 17 11 12 16 19 34 31 31 14 Russia UK France Japan Australia 53 47 49 42 44 19 49 36 15 29 34 36 22 38 19 87 78 76 81 85 31 9 21 12 12 11 10 10 16 17 26 5 6 21 19 Build R&D/innovation capacity or acquire intellectual property Build internal service delivery capacity Build manufacturing capacity Access local talent base Access raw materials or components Grow your customer base Access local source of capital Base: China (383); USA (275); Brazil (188); India (176); Germany (152); Russia (101); UK (81); France (66); Japan (62); Australia (53) Source: PwC 15th Annual Global CEO Survey 20122 OECD FDI in Figures (October 2011 revision).10 15th Annual Global CEO Survey 2012
  • 11. Hussein HachemCEO Middle East and Africa, Aramex Market opportunity, natural resources, talent ... all of these factors matter when companies decide where and how to locate operations. But tax may be the most signi cant: 44% of CEOs say tax policies are a ‘signi cant factor’ in their decision-making on cross-border locations. This has not gone unnoticed. Nations are increasingly competing on tax to foster in-bound investment. Businesses, innovation and skilled people will ow to countries where tax systems encourage and offer the prospect of economic growth. CEOs are paying close attention to changing tax conditions as a result of high debts and de cits in developed economies: 29% are anticipating they’ll change growth strategies as a result, with 19% globally ‘extremely concerned’ over an increasing tax burden in countries where they operate. Governments continue to reform their tax systems to help businesses grow and attract investment and employment. Over the past seven years moreRohana Rozhan than 60% of economies made paying taxes easier, with 244 reforms,CEO, ASTRO Malaysia Holdings according to Paying Taxes 2012, a study from PwC, the World Bank and IFC, which measures the ease of paying taxes across 183 economies worldwide. Globally, the total tax rate has fallen by 8.5% since 2006; the time required to comply with taxes declined by more than one day per year (54 hours); and the number of tax payments required dropped by ve.3FDI is commonly viewed as a measure Build or buy? Acquisitions always border deals continue to stem fromof operational commitment, with the have a role to play in growth plans. investors in either North America orpotential for both local job creation and This year, acquisitions are more likely Western Europe, Chinese rms haveknowledge transfers. So a rise in FDI to be a component of strategies for emerged as major internationalindicates deeper cross-border ties than CEOs based in developed markets, investors, as have Indian companies,trade alone would imply. perhaps re ecting classic consolidation and this trend is set to continue. in mature economies: 15% say M&A “Company valuations are now muchCEOs are being guided by domestic offers the main opportunity for growth more attractive than they were lastcustomer demand in choosing their for their companies versus 10% in year,” said Ajay G. Piramal, CEO ofpriority markets (see Figure 5). emerging economies. CEOs in Piramal Group Ltd. “Today, weMeasures to integrate product, developed economies were active would pay half or one-third of whatservice hubs, research facilities and deal-makers in 2011, with 26% we would have paid for theseoperations in each market stem from completing a cross-border transaction, companies last year.”that commitment. and were also more likely to have divested an operation. Responses this CEOs based in Africa and the year indicate the potential of a modest Middle East are the most bullish pull-back on international deal-making about continued deal-making in 2012: over the next 12 months: 28% of 40% expect to complete a cross-border CEOs globally plan to complete a transaction in the next 12 months. cross-border deal in 2012, a decline Foreign investment into Africa from a from the 34% who agreed last year number of sources has soared in recent (see Figure 7 overleaf). years, driven mainly by the mining and oil industries, but with increasing The pool of potential acquirers is interest in tourism, telecoms and becoming more diverse, as are the construction. target locations. While most cross-3 Paying Taxes 2012 ( 15th Annual Global CEO Survey 2012 11
  • 12. Acquisitions are always risky, even Acquirers will also need to learn new Martin Sennduring a time when assets can be post-merger integration competencies CEO, Zurich Financial Services Groupacquired at seemingly attractive to make these deals work. We believeprices. Yet our research suggests that that over 10% of deals that completeacquisitions in emerging markets – result in signi cant problems post-exactly the type of acquisition that completion. In an assessment of tenappears to be more popular today – public cases, we found that post-dealare particularly risky, with lower problems cost the buyer on averagechances of success even for proven 49% of the original In our experiencebetween 50-60% of deals that go into Modify or e ort? How businessesdue diligence in emerging markets fail achieve the right mix between local Yang Yuanqingto complete.4 Dif culty in justifying manufacturing and international Chairman and CEO, Lenovoemerging markets valuations is the supply chains to service local needs ismost common reason that deals fail. another de ning question for growingFor example, in China, high growth in new markets. Strategies naturallyand strong competition from other differ; ‘local’ will be home or intra-foreign bidders, an emerging private regional for some CEOs and a thousandequity industry and domestic rivals miles away for others. But in 2012, thehave driven up valuations. The most tilt is clearly towards decentralising,common issue to emerge in deals in creating more products whose designIndia concerned partnering. as well as production and distribution is more localised. Figure 7: A modest decline in cross-border M&A is expected in 2012 Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months? Responses of ‘Complete a cross-border merger or acquisition’. 40% 110 % of CEOs anticipating M&A Number of deals (100 = 2008) 30% 100 20% 90 10% 80 0 70 2008 2009 2010 2011 2012F % of CEOs anticipating M&A (left axis) Number of deals (right axis) Base: All respondents (2012=1,258; 2011=1,201; 2010=1,198; 2009=1,124; 2008=1,150) Note: Number of deals is all completed deals where final stake is greater or equal to 20%. Source: PwC 15th Annual Global CEO Survey 2012; Dealogic4 PwC, ‘Levelling the playing eld: avoiding the pitfalls of the past when doing deals in emerging markets’ (2012).12 15th Annual Global CEO Survey 2012
  • 13. “On business development, we would innovating locally need to reach scale Michael Whitetraditionally start with a standard in order to stay pro table. So global Chairman, President and CEO,product set and adapt it to the local and regional operations still have an The DIRECTV Group Inc.needs. That has worked well for us for important role in the mix.years,” said Lázaro Campos, CEO ofSWIFT. “But in India and China you Segmentation in focus. CEOs expectneed to forget the products that you’ve to either modify or create productsgot and start from scratch. Start from for speci c markets to suit localwhat it is they need and build customer preferences. Some fourfrom there.” billion of the world’s population live in countries where the per capita income model to be able to target a moreIn every major geographic market is between US$ 1,000-4,000 per year. affordable offering for thatidenti ed by CEOs, more companies This vast segment represents anare avoiding a simple export model. ‘Emerging Middle’ class in China,Substantial proportions, between 17% India and elsewhere that is promptingand 36%, say they are designing new business leaders to fundamentallyproducts speci cally for local markets rethink business strategies that have(see Figure 8). The balance is surely been successful elsewhere.changing as companies increasinglyoperate in dissimilar markets and learn Value propositions designed forto segment better. The advantages countries at the upper end of the(and expense) of managing a uniform global income distribution seldombrand across many markets are being work for the needs of this ‘Emergingweighed against the different needs, Middle’. It’s not only products thatcultures and price points of different must be adapted or built anew, but alsocustomer bases, and in many cases, production, distribution and marketingfound wanting. But businesses capabilities – in other words, entire business models. Figure 8: Pulling away from an export mindset to meet local demand Q: For each of the countries that you intend to grow your customer base, which of the following three statements best describes your approach to product and service development? (The top 10 countries mentioned by CEOs in ‘Which countries, excluding the one in which you are based, do you consider most important for your overall growth prospects over the next 12 months?’) % 100 30 25 20 34 31 32 33 29 37 37 75 30 46 50 46 34 42 43 50 42 49 39 25 36 27 30 24 24 26 20 22 19 17 0 Germany US France Brazil Japan Australia UK Russia China India Products and services are the same as in our headquarters’ market Products and services are modified to meet local market needs Products and services are developed specifically for local market requirements Base: China (302); USA (195); Brazil (156); India (139); Germany (110); Russia (88); UK (63); France (50); Japan (50); Australia (45) Source: PwC 15th Annual Global CEO Survey 2012 15th Annual Global CEO Survey 2012 13
  • 14. Jaime Augusto Zobel de Ayala Success involves understanding difference for your company or yourChairman and CEO customer segmentation and the professional pro le: customer serviceAyala Corporation dynamics driving it. Category – even and relations and innovation.” price – is not as important as solving a speci c set of consumer problems that CEOs in insurance and asset are not being met with existing management are among those more products. Bajaj, one of India’s leading likely to emphasise innovation in new motorcycle manufacturers, recently business models – often taking launched the Bajaj Boxer, targeted advantage of new technologies. towards the rural consumer. The Boxer Their customers are generating massive provides a functional bene t of higher amounts of information that they cartage and resilience to poorer rural can now capture, and analysis of this roads, features that are highly relevant data is propelling companies towards for the rural markets. The Boxer was models based on an entirely digital positioned as a sports utility vehicle of supply chain. A far more thorough motorcycles, directly targeting the understanding of customer behaviour,Michael Thaman male consumer with power, sporty based on data now available, canChairman of the Board and CEO, looks and functional bene ts, and has change how an underwriter createsOwens Corning been a success story for Bajaj Auto.5 policies for customers, for example. nnovating on multi le fronts CEOs in communications, and media Improving the effectiveness of and entertainment, two industries innovation continues to be a major facing swiftly changing dynamics, strategic priority. Three out of four are the most active on all fronts, CEOs plan to change R&D and whether refocusing innovation efforts innovation capacity in 2012, of for existing products and services which 24% expect ‘major change’. or for entirely new products in new models (see Figure 9). But competitive This is partly related to a widening intensity continues to rise in virtually de nition of innovation. CEOs in all industries, particularly as theRoger W. Ferguson, Jr industries in the throes of disruptive Internet transforms possibilities.President and CEO, TIAA-CREF change require radical innovation; Innovation and competition is if their business cannot quickly increasingly crossing industry create new products or services that boundaries, as Francisco González, customers will buy, they will not Chairman and CEO of Banco Bilbao survive. However, innovation does Vizcaya Argentaria (BBVA) SA, not just mean end product or service pointed out: “Our future competitors changes – it sometimes now includes will not be traditional banks but large taking costs out of processes or forming technology companies.” strategic alliances to collaborate. Each aspect of the business is fair game for Those in industries with a historical reinvention. Executives are targeting dependence on innovation are still changes to their revenue and margin among the most likely to change models – and the organisation as well approaches. A third of CEOs in – to nd better ways to innovate pharmaceutical and life sciences, across many dimensions.6 chemicals and technology industries expect ‘major change’ to R&D and Supporting the capacity to innovate is innovation capacities in their at the forefront of priorities for CEOs companies as patent expirations and this year and in recent PwC Global CEO low R&D productivity are leaving Surveys. This is surely a re ection of many large pharmaceuticals with the accelerating technology advances uncertain revenue streams. in many industries. Increasingly, being Pharmaceuticals businesses have been innovative is understood as a primary in the forefront in shifting some differentiator too. As Luiza Helena research resources to faster-growing Trajano Inácio Rodriguez, CEO of economies in Asia. Overall R&D retailer Magazine Luiza SA in spending in Asia has surpassed EU Brazil, told us: “Today, everything’s levels, and Goldman Sachs predicts a commodity. Service quality is a that it is likely to overtake US levels commodity, price is a commodity. But before 2020, due in large part to the there are two things that will make a rapid pace of growth in China.75 PwC, ‘Pro table growth for the next 4 billion’ (forthcoming 2012).6 PwC, ‘Caught in the cross re’, a 2009 survey of 65 executives on innovation strategies and expectations.7 Douglas Gilman, ‘The new geography of global innovation’, Goldman Sachs (September 2010).14 15th Annual Global CEO Survey 2012
  • 15. While primary R&D is still largely More innovations created in emerging Antonio Rios Amorimconducted in home markets, businesses economies are owing their way back Chairman and CEOare increasingly shifting some to other markets, according to CEOs. Corticeira Amorim SGPS SAcapabilities to their new priority “To me, one of the interesting thingsmarkets. Spending by foreign af liates that’s changed globally, particularly inof US multinationals on R&D in foreign our company, is where innovation takescountries, for example, rose to 15.6% place and where it migrates to,” saidof total multinational R&D spending Brian Duperreault, President and CEOin 2009 from 12.5% in 1999, according Marsh & McLennan Companies a recent report by the US Bureau “Classically, innovation resided inof Economic Analysis.8 The shift in the developed world. We took ideasresearch budgets is partly market- and moved them into the emergingdriven as multinationals seek footholds world. There’s now an equal chance,in fast-growing economies, but is also a and maybe a greater chance, thatresult of rising scienti c and technology innovative ideas will come out of thecapabilities in foreign countries. “It will developing world, where the action is,take us another ve to seven years to where the need to deliver more for lessbecome as innovative as companies in is even more heightened. Today we’rethe West,” said Baba Kalyani, Chairman getting as many ideas out of, say, Chinaand Managing Director, Bharat Forge and India as we were before out of theLtd. “But we will get there for sure.” US and Europe.” Figure 9: Many industries see significant pressure for both process innovations and radical innovation Q: To what degree are you changing the emphasis of your company’s overall innovation portfolio in the following areas? Responses of ‘significantly increase’. 50 Global average 19 40 Cost reductions to existing processes 6 4 30 1 7 5 12 2 13 8 9 11 20 3 14 10 18 15 17 20 16 10 0 0 10 20 30 40 New business models 1 Banking & Capital Markets 6 Metals 11 Chemicals 16 Pharma & Life 2 Business and Professional Services 7 Industrial manufacturing 12 Forestry, Paper & Packaging 17 Insurance 3 Healthcare 8 Retail 13 Global 18 Technology 4 Automotive 9 Consumer Goods 14 Construction/Engineering 19 Communications 5 Transportation & Logistics 10 Hospitality & Leisure 15 Asset Management 20 Entertainment & Media Base: All respondents (29-245) Source: PwC 15th Annual Global CEO Survey 20128 Kevin Barefoot and Raymond Mataloni, ‘Operations of US Multinational Companies in the United States and Abroad’, Bureau of Economic Analysis (November 2011). 15th Annual Global CEO Survey 2012 15
  • 16. Resilience to global disruptionsand regional risksLuiza Helena Trajano CEOs report that they are less likely There’s greater awareness of speci cInácio Rodriguez this year to focus on changing and evolving risks within differentCEO, Magazine Luiza SA approaches to risk management markets, and how local risks can be than on other areas of priority, ampli ed into global ones. Yet the from strategies for talent to speed with which risk events unfold organisational structure. Signi cant – and the extent to which their impacts defensive steps have already been on the business spread across different taken: balance sheets have improved risk categories – appear to be and cash reserves have been built. escalating. In the past 12 months alone,Nancy McKinstry Enterprise risk is now more frequently 56% of CEOs said their businesses wereCEO and Chair of the Executive discussed in boardrooms. nancially impacted by the sovereignBoard, Wolters Kluwer debt crisis in Europe, another 29% cited Dimitrios Papalexopoulos, CEO an impact from the earthquake and of TITAN Cement SA, Greece, tsunami in Japan, and 21% cited the summarised the changes taking place political upheaval in the Middle East. in risk approaches since 2008 within many businesses: “In the past, our risk Key operational moves have already management and scenario planning improved organisational resilience. was based on the assumptions After the earthquake and tsunami in that conditions would change Japan, for example, CEOs based inZsolt Hernádi incrementally. As events of the past Asia Paci c focused on improvingChairman and CEO, MOL Plc couple of years have shown, that has their company’s ability to react more not been the case. So we have now quickly to a supply chain shock.9 built into our risk management the They sought new locations for their possibility of more extreme conditions operations and reinforced buildings. occurring. And our board of directors Changes to supply logistics and has become much more engaged in the increasing contingency plans inchanging environment. enterprise-risk planning process.” supplier networks were also areas that business leaders in a PwC survey in July felt were critical to managingRichard O’Brien future disruptions.10President and CEONewmont Mining Corporation9 ‘APEC: The future rede ned’, PwC survey of business leaders in 21 Asia Paci c economies (November 2011).10 ‘Post 3.11 Japan: Global Community’s Perspective’, PwC Global CEO Pulse Survey (July 2011).16 15th Annual Global CEO Survey 2012
  • 17. Rüdiger Grube Chairman and CEO, Deutsche Bahn AGCompanies are also learning that estern uro e:preparedness for uncertainty is about Outlook for taxes, nancial marketfocusing on the consequences of stability. Three-quarters of Westernbusiness disruption. This approach European CEOs are concerned aboutcan bring risk discussions to a more instability in capital markets and Jouko Karvinenstrategic level. In our experience, when three-quarters are concerned about the CEO, Stora Enso Oyjthe focus is on preparing to respond to government response to scal crises.consequences, discussions occur across It naturally follows, then, that 70%people involved in strategy, operations, believe that ensuring stability in therisk management, crisis management nancial sector should be a top priorityand business continuity management. of their governments. And stabilityBy contrast, a focus on assessing the includes calls for consistency in newlikelihood of particular risks tends to regulations for the nancial sector.remain theoretical and the domain ofrisk managers rather than the functions entral and astern uro e:that will have to respond to disruptions. Exchange rates, corruption. These are Tidjane Thiam two important threats for business Group Chief Executive, Prudential PlcRegional concerns reveal regional leaders in CEE economies, with CEOsrisks. The risk of global economic based there much more likely to reportvolatility is a common threat, as is the concerns than global average. As withcontinued uncertainty in markets as a CEOs in Asia Paci c, concerns relatedresult of depressed growth and rising to adjusting to rapidly changing scal debts and de cits in many consumer demands are more prevalent.developed nations: a concern cited byover half of CEOs regardless of where North America:they are based. “We are now into the Constrained state spending, skillsfourth year of the economic crisis and mismatches. Like CEOs in Europe,none of the European countries have many in North America believe risingemerged from the downturn – nor are public debts and de cits are a key Laércio José de Lucena Cosentinothey con dent that they soon will. threat, yet they are less concerned CEO, TOTVs SACompare that with the Asian economic about an increasing tax burden andcrisis that began in 1997. By 2001 or capital market instability. They’re also2002, most Asian countries had repaid among the least concerned abouttheir debts to the IMF and Japan,” in ation and protectionism.said Pailin Chuchottaworn, Presidentand CEO of PTT Plc, Thailand.Comparing how CEOs perceiveother threats to their business offers Dimitrios Papalexopoulossome insight into the risks that are CEO, TITAN Cement SAtop-of-mind in different regions(see Figure 10 overleaf). A businessoperating globally has to haveoperational strategies that encompassand respond to these very different risks. 15th Annual Global CEO Survey 2012 17
  • 18. Douglas R. Oberhelman Asia aci c: Middle East and Africa:Chairman and CEO, Caterpillar Inc. Currency volatility, energy costs. Skills shortages and corruption. Currency uctuations are among the The availability of key skills stands out top economic and policy threats for as an acute concern in the Middle East, CEOs in Asia, and CEOs there are while CEOs in Africa – the most more concerned about in ation than optimistic region in terms of their most others. Skills shortages, rising growth prospects in 2012 – have among tax burdens and higher energy costs the highest concern levels across a loom as potential constraints on range of potential threats, notably expansion plans. over-regulation and of cial corruption. Latin America: Underdeveloped infrastructures. Infrastructure looms larger for CEOs in Latin America as a growth threat and CEOs naturally call for governments to address it. Corruption and over-regulation stand out as potential barriers to business. Figure 10: Global economic uncertainty remains the top threat to growth prospects Q: How concerned are you about the following potential threats to your business growth prospects? North America Western Europe Asia Pacific Latin America CEE Middle East/Africa Uncertain or volatile Uncertain or volatile Uncertain or volatile Uncertain or volatile Uncertain or volatile Uncertain or volatile economic growth economic growth economic growth economic growth economic growth economic growth Public deficits Public deficits Exchange rate Increasing tax Exchange rate Exchange rate volatility burden volatility volatility Over-regulation Unstable capital Unstable capital Over-regulation Unstable capital Availability of markets markets markets key skills Unstable capital Shift in consumers Increasing tax Availability of Increasing tax Public deficits markets burden key skills burden Availability of Increasing tax Public deficits Exchange rate Public deficits Over-regulation key skills burden volatility Shift in consumers Over-regulation Availability of Public deficits Over-regulation Bribery and key skills corruption Increasing tax Exchange rate Over-regulation Bribery and Shift in consumers Unstable capital burden volatility corruption markets Exchange rate Inability to Energy costs Inadequacy of Availability of Inflation volatility finance growth basic infrastructure key skills Protectionism Availability of Shift in consumers Unstable capital Bribery and Increasing tax key skills markets corruption burden New market Energy costs Inflation Protectionism Energy costs Shift in consumers entrants Energy costs Business threats Economic and policy threats Denotes equal ranking Base: North America (236); Western Europe (291); Asia Pacific (440); Latin America (150); CEE (88); Middle East/Africa (53) Note: Rank of top threats, by % of somewhat or extremely concerned Source: PwC 15th Annual Global CEO Survey 201218 15th Annual Global CEO Survey 2012
  • 19. Tom AlbaneseChief Executive, Rio Tinto As CEOs seek growth outside familiar markets, they must adapt their rms’ risk practices. Economic, social and political conditions vary by country, and a more subtle understanding of how these factors will shape the business environment is critical to spotting new opportunities and managing unexpected risks. Many political, regulatory and tax risks are predictable. In developing countries, market-moving decisions are often made by government of cials with identi able political motivations or known limitations on their authority. One European rm operating in Latin America acted on an early warning of political deterioration and repatriated the rm’s equity, shifting to local nancing prior to currency devaluation. In a win/win outcome, the move allowed the company to avoid losses while maintaining operations in the country. Even unpredictable risks can be managed. We cannot know when a natural disaster or social upheaval will spring a surprise, but we can predict which markets are most vulnerable to such shocks – and how decision-makers areHussein Hachem likely to respond when they hit. Situational awareness and planning canCEO Middle East and Africa, Aramex ensure that their impact on balance sheets, supply chains and market demand is anticipated. As they seek growth in new markets, many executives focus on market- entry risks, but underestimate the risks that come with sustained marketenvironment where we can do presence – guring that they have good people on the ground and a good lay of the land. But just as with the political, economic and social environments, the business environment has changed rapidly in developed markets. Business leaders must constantly return to the fundamental question: “How must my business practices evolve to pro t from the torrent of change underway everywhere around the world?” The largest emerging markets – notably Brazil, Russia, India and China – illustrate this principle. Many large multinationals now regard a presence in these countries as a competitive imperative. Yet, as we have seen recently, threats to or changes in political leadership, revelations of corruption and of cial malfeasance, and perceived economic threats from abroad can have profound downside impacts on the local business environment. Early movers and those who understand the shifting terrain in these countries will have substantial advantages, and unpleasant surprises await those who enter late or without preparation for the torrent of change underway in these markets. For example, one rm watching the opening of a market for its services after the 2005 Chinese accession to the WTO bought out its joint-venture partner and quickly established itself in interior cities once closed to foreign rms. The investment greatly increased its corporate pro le among local and central government stakeholders and spread the brand name quickly in a lucrative market. In contrast, one bank’s late arrival in Latin America resulted in a failed attempt to establish a dominant presence in a market where rivals were already in the midst of consolidating the market. What’s true for risk is true for opportunity. As their commercial rivals focus on yesterday’s bonanza, business decision-makers can use a re ned understanding of political, social and economic trends to spot the growth opportunities of tomorrow. 15th Annual Global CEO Survey 2012 19
  • 20. This is the talent crunch. It’s a complex and frustrating challenge and it’s being felt worldwide. To give a measure of the scale of the problem: more CEOs are changing talent management strategies than, for example, adjusting approaches to risk (see Figure 4 on page 7): 23% expect ‘major change’The talent challenge to the way they manage their talent. And skills shortages are seen as a top threat to business expansion.Tom Albanese Theoretically, nding a good candidate Talent shortages and mismatches areChief Executive, Rio Tinto to ll a position should now be a very impacting pro tability now. One in four straightforward exercise. There have CEOs said they were unable to pursue never been as many educated people a market opportunity or have had to in the world, nor has it ever been as cancel or delay a strategic initiative simple for employers to tap this vast because of talent (see Figure 11). pool online. Highly skilled talent is One in three is concerned that skills also highly mobile; but just in case, shortages impacted their company’s networking advances also mean that ability to innovate effectively. many more tasks can be handled “Close to 15 percent of energy-related remotely or outsourced. investments around the world fail or are lost because a suitable workforce The reality is far different. A Chinese is not available,” said Zsolt Hernádi, automaker attends job fairs in Chairman and CEO of MOL Plc. Germany, even though China produces large numbers of graduate engineers There are challenges in hiring acrossMarijn Dekkers each year. High jobless rates persist in most industries, as well as in retentionChairman, Bayer AG the US and Europe, disproportionately in some markets and industries, among the young, even as businesses as businesses compete for highly fret that they cannot attract the talented people. CEOs are taking digitally adept ‘Millennial’ generation many approaches to address the to pursue careers in their industries. shortfalls, as Andrey Kostin, President Too many well-educated citizens of the and Chairman of the Management Middle East and elsewhere are not in Board of JSC VTB Bank, put it: the workforce at all. “Before, people “In some countries we have constant looked for jobs. Now, companies look shortages of risk managers or retail for talent,” said Erdal Karamercan, experts, for example, or local nance President and CEO of Eczac ba experts with relevant expertise. Group A S. Sometimes the solution is to relocate people from other of ces.” Figure 11: Talent constraints have impacted costs – but also factor in lost opportunities Q: Have talent constraints impacted your company’s growth and profitability over the past 12 months in the following ways? Our talent-related expenses rose more than expected 43 We weren’t able to innovate effectively 31 We were unable to pursue a market opportunity 29 We cancelled or delayed a key strategic initiative 24 We couldn’t achieve growth forecasts in overseas markets 24 We couldn’t achieve growth forecasts in the country where we are based 24 Our production and/or service delivery quality standards fell 21 % Base: All respondents (1,258) Source: PwC 15th Annual Global CEO Survey 201220 15th Annual Global CEO Survey 2012
  • 21. A minority of CEOs expect to Even industries such as banking that Andy Greenundertake deep restructuring have retrenched workers in large CEO, Logica Plcmeasures speci cally to ll the talent numbers are still struggling to get thegap. As they consider how to build the right people. Developed market banksfuture of their workforce, a third or are in competition with one another butless expect to make dramatic changes, also with increasingly ambitious andsuch as making an acquisition to well-capitalised local competitors insecure needed talent, seeking faster-growing economies.12 There arepartnerships to get access to skills, or also shortages of speci c nancialmoving operations to more talent-rich services skills in these economies,areas. Slightly more CEOs (38%) for example, private wealth bankersexpect to make signi cant investments or actuaries. Almost twice as manyin technology to circumvent shortages. banking CEOs (48%) plan to expand Mariano Bosch workforces than to cut (26%) in 2012Hiring talent. CEOs across all CEO, Adecoagro SA (see Figure 13 overleaf).industries say it’s become moredif cult to hire, but the challenges are Making talent strategic. CEOs areacute in knowledge industries such as determined to be more strategic in thepharmaceuticals and life sciences, and way they manage their workforcetechnology, and in heavy industries today and plan for future needs. Up tosuch as industrial manufacturing and now, an assumption has held that the Richard O’Brienautomotive (see Figure 12). The need market analysis element of a strategic President and CEOfor technically skilled people to plan is paramount, and how a business Newmont Mining Corporationmanage the increasing sophistication ‘resources up’ to meet the plan isin production is strong, and the growth something that’s worked out demand for professionals in Now, leading businesses are lookingmanufacturing is projected to be over beyond the next budget round to plan4% a year across all economies and to talent needs. A longer-term strategicpeak at over 10% in developing view is needed, if they want to close demand for them.economies in 2020.11 the gap today and map how talent needs will change. Figure 12: Different industries, different requirements – but skills gaps remain Q: In general, has it become more difficult or less difficult to hire workers in your industry, or is it unchanged? Global 12 43 Consumer goods 11 44 Automotive 8 46 Healthcare 9 47 Sectors above the global Industrial manufacturing 14 47 average in % of CEOs responding Technology 12 48 ‘More difficult’ Insurance 10 49 Pharamceuticals & Life sciences 6 51 % -16 37 Less difficult More difficult -21 34 Base: All respondents (29-245) Note: Responses of ‘unchanged’ not depicted. Source: PwC 15th Annual Global CEO Survey 201211 World Economic Forum, ‘Global Talent Risk’ (2011).12 PwC, ‘Securing the talent to succeed: Making the most of international mobility in nancial services’ (November 2011). 15th Annual Global CEO Survey 2012 21
  • 22. Francisco González As part of this effort, more CEOs are They are very good at telling a CEOChairman and CEO, Banco Bilbao now integrating HR with business how the business is performingVizcaya Argentaria (BBVA) SA planning at the highest levels of the today relative to its peers, but not at company: 79% of CEOs say that the indicating whether the organisation chief human resources of cer, or is investing enough in employees to equivalent, is one of their direct reports generate future growth. (most have ten or fewer direct reports). Such measurements cannot isolate They are also seeking a better skills gaps and struggle to identify understanding of the scale and the pivotal jobs that drive exponential effectiveness of their investments in value; they do not measure employee talent. Productivity and labour cost engagement or team performance,Baba Kalyani remain important measurements; both of which are so critical forChairman and Managing Director, these are the tools investors, lenders investments to foster innovation toBharat Forge Ltd and businesses use to benchmark bear fruit. These measurements are progress (or lack of it). They are largely much harder to make, which is one standardised in many industries, and reason why they’ve been neglected thus easy to implement. Yet for many and why today, so many CEOs are CEOs, those tools aren’t enough frustrated with the issue of talent. (see Figure 14 opposite).Figure 13: Half of CEOs expect to raise their headcount in 2012Q: What do you expect to happen to headcount in your organisation globally over the next 12 months? Healthcare 6 6 38 31 9 Business services 5 6 23 17 18 Technology 4 2 11 20 18 19 Communications 7 14 24 12 19 Chemicals 1 11 34 11 10 Automotive 3 4 7 26 16 10 22 15 Global 3 4 11 23 14 14 Insurance 3 3 10 25 13 12 Entertainment & Media 5 4 10 24 6 20 Industrial manufacturing 3 3 6 19 18 12 Banking and Capital markets 7 7 11 25 8 15 Asset management 6 5 6 21 13 13 Consumer goods 4 4 15 20 18 9 Construction/Engineering 4 4 13 17 10 19 Retail 4 3 17 22 13 11 Pharmaceuticals & Life sciences 1 5 12 20 12 11 Transportation/Logistics 5 1 12 17 10 12 Metals 3 5 15 13 18 5 Hospitality & Leisure 3 17 7 17 3 14 Forestry, Paper & Packaging 8 10 18 10 14 8 % Decrease by more than 8% Decrease by 5-8% Decrease by less than 5% Increase by less than 5% Increase by 5-8% Increase by more than 8%Base: All respondents (29-245)Note: Responses of ‘stay the same’ not depicted.Source: PwC 15th Annual Global CEO Survey 201222 15th Annual Global CEO Survey 2012
  • 23. Laércio José de Lucena Cosentino,CEO, TOTVs SA Employee engagement analysis can give business leaders a clear link between engagement and improved performance measures such as retention and discretionary effort. The point is to align strategy and engagement – and to thus understand the organisation’s capacity to generate the bene ts derived from engagement in ways that directly impact delivery of the business plan.Michael White,Chairman, President and CEO, A study conducted by the Corporate Executive Board found that theThe DIRECTV Group Inc. employees who were most committed to their organisations gave 57% more effort and were 87% less likely to resign than employees who consider themselves disengaged.13 Yet during the recent downturn, engagement levels among top performers fell more sharply than for workers overall, PwC has found.14 That’s why forward-looking businesses are going further. They’re coupling a clear view of the pivotal roles within their business – the roles that create (or destroy) disproportionate business value – and applying data mining and predictive modelling to gain insight into retention, recruitment or productivity. For example:Roger W. Ferguson, Jr a retention score for each employee, which measures the probability thatPresident and CEO, TIAA-CREF an employee will leave in the next year; use of engagement studies to identify barriers to high performance within speci c groups of employees, as well as the tangible improvements that can drive both engagement and business performance; or a focus on the direct market-facing impact employee engagement has on measures of business performance such as customer satisfaction or product quality. Figure 14: A minority of CEOs get comprehensive reports on their workforce Q: When making decisions, how important is it to have information on each of the following talent-related areas? For those areas that are important to you, how adequate is the information that you currently receive? 100 % of CEOs who believe the relevant information is important or very important 80 Information Gap: Percentage of CEOs CEOs believe information is 60 important but don’t receive comprehensive reports 40 20 0 Costs of Return on Assessments Labour Employees’ Staff employee investment on of internal costs views and productivity turnover human capital advancement needs Do not receive information Not adequate Adequate but would like more Information received is comprehensive Base: All respondents (1,258) Source: PwC 15th Annual Global CEO Survey 201213 Corporate Executive Board, ‘The Role of Employee Engagement in the Return to Growth’, Bloomberg Businessweek (August 2010).14 PwC Saratoga Global Survey (2011). 15th Annual Global CEO Survey 2012 23
  • 24. Jaime Augusto Zobel de Ayala evelo ing talent. Frequent job- Wolters Kluwer. “It’s very dif cult oftenChairman and CEO hopping is endemic to many markets, to take people from outside to comeAyala Corporation at all levels of the organisation. A 2010 into the company and have them be survey of over 2,200 mid- to senior- productive in a short period of time.” level managers in mainland China found that two-thirds had received at To develop talent better, however, least one competing job offer in the last companies will need to understand 18 months, and that nearly half (46%) that what works in one market might had moved to a new role with a more not work in another. Mentoring than 30% increase in compensation.15 programmes, for example, are popularRüdiger Grube, Chairman and CEO, in some countries but fail in others, Employee loyalty to their employerDeutsche Bahn AG because of the way coaching is is changing everywhere. Only 18% of Millennials in a global survey of received in different cultures. Even new graduates said they intended companies that are well respected for to stay with their current employer, their development practices are for example.16 rethinking global talent strategies and adapting them for different markets.Yoshio Kono, President and CEO This is a trend many CEOs would like to counter. Two-thirds say it’s more Holding the organisation together.The Norinchukin Bank likely that talent will come from High-potential middle managers are promotions within their companies the employees more CEOs across all over the next three years. While industries and regions fear losing the outsiders bring many bene ts, the loss most (see Figure 15). These in productivity and time when a operational managers are often the valuable employee leaves, as well as closest to changing customer demands the expense related to retraining, are and the ones charged with executing beginning to be better appreciated: the strategic direction. This is one 21% say the information they receive reason why formal succession planningRohana Rozhan on the cost of employee turnover to in some companies is starting to goCEO, ASTRO Malaysia Holdings their organisations is not adequate and deeper into the organisation. Efforts to 47% receive some information but identify the talented managers earlier want more. “We need to grow our own in their careers, and to speci cally talent,” said Nancy McKinstry, Chair of devote development resources to them, the Executive Board and CEO of are taking place in more organisations. Figure 15: Recruiting and retaining high-potential middle managers is the biggest concern for CEOs Q: With which of the following groups do you currently face the greatest challenges with regard to recruitment and retention? Respondents were able to choose all that applied. 55 High-potential middle managers 50 35 Skilled production workers 31 32 Younger workers 30 35 Senior management team 21 13 Overseas unit heads 21 % Emerging Markets Developed Markets Base: All respondents (621; 637) Source: PwC 15th Annual Global CEO Survey 201215 MRI China Group Talent Environment Index.16 ‘Millennials at Work: Shaping the workplace’, PwC survey of over 4,300 graduates aged 31 or under (December 2011).24 15th Annual Global CEO Survey 2012
  • 25. Those future leaders will also need to compensation packages. In 2007, 41% Daniel S. Glaserre ect the world in which they operate. of highly skilled Chinese professionals Group President and COO,“The evolution of senior leadership preferred working for a Western Marsh & McLennan Companies Inc.teams is going to continue. I think multinational, while 9% preferred apeople will have to be more global in job with a domestic rm. By the secondtheir perspective. They will have to quarter of 2010, the preference forunderstand the interconnectedness employment by a multinational hadaround the world. That’s going to be a risen to 44%, but the preference forvery important element,” said F William Chinese employers had jumped to Jouko KarvinenMcNabb III, Chairman, President and 28%, according to the Corporate CEO, Stora Enso OyjCEO of The Vanguard Group Inc. Executive Board.17Moving talent. Across all industries, While 53% of CEOs expect to movemore CEOs would rather have local experienced people from the homeleadership run local business units. market to newer markets to ll skillsToday, 29% of senior managers are gaps (see Figure 16), reverse transfers,transferred from their headquarters involving moving top performers incountry to newer markets; in an ideal emerging markets into developedworld, only 18% of CEOs said they markets for a short period of time towould continue to move their senior become ‘credentialised’, can also beleaders from headquarters. This is effective retention and development Marijn Dekkersbecoming increasingly hard to achieve measures. And businesses are making Chairman, Bayer AGin fast-growing economies. Foreign greater use of short-term assignmentsmultinationals remain desirable to address skills shortages in high-employers, but the best people in India priority markets, and costs related toand China, among other economies, long-term assignments. These can behave many more options with domestic extended business travel or exiblemultinationals today. These are groups commuter arrangements, oftenwhich offer opportunities to run intra-regional, which addressgrowing, global businesses and which situations where an employee orcan increasingly match Western candidate is reluctant to move. Figure 16: CEOs are more focused on recruiting local talent and developing and promoting from within Q: With regards to plans for your global workforce over the next three years which of the following statements do you feel is more likely to occur? Don’t know We plan to move experienced employees from our home 53 16 We plan to move experienced employees from newer 31% market to newer markets to circumvent skills shortages markets to home markets to circumvent skills shortages We plan to develop and promote most of 67 24 We plan to recruit more experienced talent our talent from within the company from outside the company 8% We plan to primarily recruit local talent 70 19 We plan to move more talent across borders 11% wherever we have market needs to fill market needs % Agree with statement Agree with statement Base: All respondents (1,258) Source: PwC 15th Annual Global CEO Survey 201217 ‘The Battle for China’s Talent’, analysis from the Corporate Leadership Council, Harvard Business Review (March 2011). 15th Annual Global CEO Survey 2012 25
  • 26. Douglas R. Oberhelman Chairman and CEO, Caterpillar Inc. Skills constraints are not likely to go away soon. As economies evolve, workforces need to evolve as well. It’s an issue for CEOs, who recognise that talent is vital to competitiveness at a time when business success relies increasingly on knowledge capital and innovation capacity. One-third of CEOs saw reduced innovation as a consequence of talent constraints. It’s also an issue for governments, which increasingly see the need to compete on talent. India and China have invested heavily to upgrade skills and widen access to education, and are more actively cultivating their substantial diaspora of students and entrepreneurs to encourage their return. Singapore and Malaysia are taking comprehensive, long-term approaches to attract highly skilled foreigners to enhance their economies; the UK is reforming its R&D tax credit to incentivise innovative businesses Francesco Starace to stay. In short, policy makers are seeing the effects of talent mobility on CEO, Enel Green Power SpA economic competitiveness and, as a result, more countries are acting to attract and retain talent.18 This is likely to encourage even more global talent mobility, which will, in turn, impact business talent management strategies. Yet while immigration and tax reform will bridge the skills gap to some extent, over the long term, multinationals will need to move from ad hoc solutions and create hubs to seed and develop the skills and managerial talent they need. That’s why leading companies take the long view and are partnering with their governments and foundations to invest in workforce development. Most CEOs believe business has a role in upgrading and fostering skills outside their own companies and 78% say they are making direct Martin Senn investments in workforce development. Just over half say they are investing CEO, Zurich Financial Services Group in formal education systems and adult or vocational training programmes.This is part of a wider trend we have Not all countries are keen on thisobserved of businesses reaching back trend, with some arguing that directfurther into the talent pool and seeking involvement of business in educationto ‘grow their own’ with a proliferation results in short-termism rather thanof employer-led universities. Regions establishing a broader education basewhere the needs are greatest today have to equip people better in the longerseen more employers taking the lead term. However, there are increasing David Coteon solutions to skills gaps. Many more examples of public-private Chairman and CEO, Honeywellcompanies, such as Infosys in India, are partnerships involving a more active,putting employees through intensive strategic role being played by businesstraining on their own campuses. in education. Take P-Tech, a six-year high school in large part created by the IBM International Foundation, where students can earn a diploma and an associate’s degree in a computer Andrey Kostin science-related eld and have a rst President and Chairman of the crack at a job with IBM.19 Management Board, JSC VTB Bank18 The number of countries looking to ‘systematically encourage talent mobility’ rose from just a few in 2001–01 to nearly two dozen in 2008, according to Papademtriou et al., ‘Talent in the 21st Century Economy’ Migration Policy Institute (November 2008).19 For more on government and business partnerships in education and elsewhere, see ‘Taking responsibility: Government and the Global CEO’, PwC (forthcoming 2012).26 15th Annual Global CEO Survey 2012
  • 27. What’s nextIn the past, recovering from a downturn That is why we’re seeing greaterwas a relatively straightforward con dence from CEOs in their ownprocess; businesses could look forward company’s ability to grow than theirto studying the trends and the expectations for global economiccompetition, and planning how to growth, and why they believe therespond. Those days are long gone. main challenge today lies in howThree years into the nancial crisis, well organisations are able to becomeuncertainty and volatility have become more local in their global strategies.the baseline expectation. Global fundamentals for future growth are still squarely in place – andYet changing conditions also present businesses are positioning to takeopportunities. The rise of emerging advantage when we do emerge fromeconomies, ever greater mobility of this period of economic volatility.goods, capital and, increasingly, ofpeople, along with accelerating We believe the ndings have broadtechnological advances in many implications for business in 2012 andindustries, are supporting far more beyond as companies position foroptimism for business prospects than long-term growth in their prioritythe headlines today would suggest is markets. The following eight questionsmerited. CEOs have built on the are distilled from CEOs’ insights andexperience of the past few years and can help business leaders achieve theare better prepared to tackle emerging balance they’ll need to grow theirrisks head-on. businesses in these volatile times. The rise of emerging economies, ever greater mobility of goods, capital and, increasingly, of people, along with accelerating technological advances in many industries, are supporting far more optimism for business prospects than the headlines today would suggest is merited. 15th Annual Global CEO Survey 2012 27
  • 28. The traditional wayCEOs are shifting away from an export Cost-focused measurements around of setting a grandmindset to respond more attentively tolocal markets. Over 70% of CEOs are talent strategy need to give way to measurements around returns on global strategy andplanning to grow domestic customer investment, as leaders increasingly pushing it out tobases in their important markets.Competition will be tough, particularly implement new approaches to solve their talent shortage problems. operations maywhen operating in markets that are Two-thirds of CEOs are seeking need to give way to adissimilar and far a eld. Thetraditional way of setting a grand relevant data and analysis from talent managers to make and inform more agile strategyglobal strategy and pushing it out to investment decisions around people. that can adapt atoperations may need to give way to amore agile strategy that can adapt at Implementing strategic workforce planning will help leaders look beyond the local level.the local level. the talent shortages today to align the talent needed to ful l business plans. Around a fth of CEOs expect they will have to make acquisitions or partnerships to ll the gaps. This may be conservative, considering theCEOs are developing new capabilities degree of challenges businesses facein their important markets, and with talent.tailoring approaches to ensure that thebest of their global expertise supportsrather than imposes operationalstructures on the local business. One in ve plan to innovate locally in theirimportant markets; and over a third When it comes to innovating in and forexpect to expand internal service local markets, delivering on the valuedelivery. They’ll need to nd the right that customers in those markets expectscale to bring the bene ts of their is paramount. Between a fth and aglobal organisation to the local level third of all CEOs say they are creatingand maintain pro tability. products speci cally for their important markets. It will be increasingly important to get segmentation right – at the regional, country, city or even neighbourhood level – and to design operating models around serving those segments. That means looking beyond product design to include factors such as production, distribution and marketing.28 15th Annual Global CEO Survey 2012
  • 29. governance model to changing and government to The organisation of the future willThe range of CEO concerns re ects Compliance with a growing body likely be accountable to a differenthow diverse sources of risks are: of regulations, particularly when mix of stakeholders from a different25% are ‘extremely concerned’ that operating in disparate markets, is a mix of markets. Governance modelsinstability in capital markets will complex task for most businesses, need to adapt, beginning with buildingimpact business, for example. The which is why CEOs consistently report a leadership pipeline that re ectsnumber of potential risks and their over-regulation as a threat to their potential future demands. It’s a keyinter-relationships make it very growth. However, the successes of area of focus globally, with 53% ofdif cult to predict what will occur the private and public sectors are CEOs concerned about recruitingwhere and when, but companies can increasingly intertwined. Roughly half and retaining high-potential middlebetter deal with uncertainty – and take of CEOs believe that workforce skills managers and a desire to build morea more strategic approach to risk – and infrastructure developments are diverse leadership focusing on likely consequences, top priorities for their governments,no matter what the cause. and eight in ten CEOs say their business has a role in workforce development, other than their own employees. Areas such as infrastructure development, education, intellectual property protection, healthcare and regulatory convergenceCEOs recognise that sustainable standards are ripe for increasedbusiness growth requires working collaboration between the public andclosely with local populations, private sectors. Effective partnershipgovernments and business partners, models – better communication.and investing in local communities.This can mean creating job trainingprograms, helping to manage resourceconstraints or contributing to healthsolutions. Over 60% plan to increaseinvestments in the next three years to Roughly half of CEOs believe thathelp maintain the health of theworkforce, for example. workforce skills and infrastructure developments are top priorities for their governments, and eight in ten CEOs say their business has a role in workforce development, other than their own employees. 15th Annual Global CEO Survey 2012 29
  • 30. Final thoughts from ourCEO interviews e re y o ee o s up oc us esses w peop e rom ose cou r es. oes m e se se o ve r e um ers o e p s wor rou e wor s s us very e pe s ve so we ve o r we ve o eve op we ve o r c er oc e . or e mos p r ese oc o s re pre y w p ces. ow mos pro ess o s w o e ur oc o s p r cu r y ey ve m es. o s cre s c e e o uce peop e o wor ose cu oc o s. Chief Executive, Rio Tinto, UK e re oo more more e ce s ee . e re oo muc more wor c p ee s. s c e r eco omy s o o e e evere s o o ve cre res r c o s e m r e so your ves me po cy your c u s o po cy s o e o more pru e ever e ore. u s so c e r e m r e s re o o o e row . o you re y ee o ves . Chairman and CEO, Corticeira Amorim SGPS SA, Portugal e ore e cr s s urope e were e mos mpor m r e s. ow we re o o o u muc s ro er re o s ps w cou r es. e re se r ce su r e o o more e p e ce wor . CEO, Adecoagro SA, Argentina s emer m r e s cce er e or m y e e res o e wor ece er es ere s s c se se o ur e cy. ere s e se se m y re y e oo e o p ce your e s. seco c or o co s er s muc more cu o e o ose m r e s ec use o e r u ec e. ey ee pos 200 ey ve ess o e r rom e es . CEO, SWIFT, Belgium e c se o e seems s mem ers were ous o e e rom e u o u some w o up o e r respo s es. e mem ers o mus o o e s me r p. President and CEO, PTT Plc, Thailand em co cer or s or r comp es e er s c o s e our. s s m or m c or or r o y. or row you ee c ves me r s ruc ure you ee peop e u e peop e w o re e oc rry ou e p s o e comp es w o re se up ere. o y ere s e c o s e our sec ors rom ec c pos s o ess s e our rom e u r e o e r spor sec or. CEO, TOTVs SA, Brazil30 15th Annual Global CEO Survey 2012
  • 31. e ve cer y see muc more ov o com rom ou s e e . e ye rs o ess 0 perce o our s es were ou s e e . o y s ppro m e y55 perce . e ve row rom 22 o comp y o 37 o comp y. ou o o y s mp y pro uc s se em somew ere e se. ou ve o ov e es m u c ure source oc y o e success u yw ere. or s ce we ou e ee o eve op pro uc s or s es o ose cou r es o er m r e s c u e . Chairman and CEO, Honeywell, US e us ess c se or ov o s cre s u s o e s y e e sy s u s ee o e. or ov o s o e me u y e er re u res more s o e u me s o sc e ce. e e e mp e o oo . e ve y e r y opro uc s e sp r were use s oo ru . u or er o ve re ysop s c e oo re me w o e ew eve o c em s ry s re u re . o mov rom re ve y s r orw r c em s ry o very comp e c em s ry s cu r s o . Chairman, Bayer AG, Germany eco s e wor s somew sp ow em e e wee s ow row r p row you e er e e o oper e o e s me me. ou veom e cu s ow row e comp e e y sw c e rs o o row . ou ve o w ys o mov your resources or us s erom w ere s o e u se o w ere c e u se . President and CEO, Marsh & McLennan Companies Inc., US e o er us esses ve mp e c p . e see us esses vese u pme so w re. co sumer spe o e s p c e up. o ere resome e w s ere re some s re suppor ve over s o o m e or p c ure o re ve y s ow row u w very ow o . President and CEO, TIAA-CREF, US our m eme s ow u we we re o o some e u ure we m y o o er e c e . ow ys some comp es prov e orm o o ers cre u e e o e y e or ers w ecome urre o us w e compe or cus omers. o e c e r s orm orm o o ow e e s w ere e ew e ou . Chairman and CEO, Banco Bilbao Vizcaya Argentaria(BBVA) SA, Spain e sor o mmer re s we see re s ou we eve op ourse ves more ou mer c or or rc s some w ere we ve e op o ec s o s r er s r e cc es. e o er ey suppose s we re e eve op ew us ess mo e s rou e c ou . o e ep oyme o us ess process serv cesw ere we cre e p orms w c m y us ry p yers use co or e o ec use ey re ppy o o so suc p orms or p orms or e ue c r s ruc ers use rou urope or sm r me er p orms w c c e use y m yu es o ese s re e om e ere ce. CEO, Logica Plc, UK 15th Annual Global CEO Survey 2012 31
  • 32. e emo r p c c es we see occurr m y o e re o s w ere we oper e s r popu o s e wor orce vers y emo r p cs compou s e c e es we ce e s es e w r or e . Chairman and CEO, Deutsche Bahn AG, Germany e ve s we re o o ves 100 m o r c w ere e re ur o ves me m r s re muc e er or us e m r s o er m r e s suc s urope e . rom perspec ve we ves me s emer m r es m e o o se se. s w y we re mov s. CEO Middle East and Africa, Aramex, UAE ur rece ye rs e ssue o s e o er m eme s ecome s ou y mpor . e w y w c comp y c pos o se w e r er soc e y ow c c eve ccep ce w ve commu y s ecome source o v ue. Chairman and CEO, MOL Plc, Hungary e eve or s o s ve o e r ow so u o s. e ru e c ory o 700 o 00 peop e ere we re wor o cre o e poo o ou 100 peop e 60 o em rom 0 rom o er cou r es so we c se em yw ere cross our oper o s. e ope o ve s e poo re y w e e ree ye rs. Chairman and Managing Director, Bharat Forge Ltd, India e s our ye rs our ov o e or s ve ee ocuse o sus y. every pro uc serv ce every ec o o y we eve op we pr or se sus e eve opme . me s y we pro uce s ou u se ess resources. y we ve o our co sumers s ou e p e co sumer o u se ewer resources. e v ue c s w o e we s ou u se ewer resources wor w comp es w o u se ewer resources. President and CEO, Eczac ba Group A S, Turkey ov o mos us r es s oo r ve y ec c perspec ves r er co sumer perspec ves. e re very o o ou sor s o ec c poss es. u m y c ses we o c u y u ers m yo em r e s we re ry o se o. ppe o e eve s w ere you s ou s r . ou ee o r e co sumer o e e u o rs e ore pus ou ec c so u o s. CEO, Stora Enso Oyj, Finland ur s r c o ce m ers e y u us m w e re ec ures w c were y e s s er. o ese oc e s w o were e o e spo comm ers o o p c u o s ssue e p c rec o s s we wro s e pres e wou ssume u respo s y. President and CEO, The Norinchukin Bank, Japan32 15th Annual Global CEO Survey 2012
  • 33. rom o er erm perspec ve po e sse u y m e s emm rom e uro o e cr s s mus e co s ere . owever o m or uss s ys c rec e posure o e per p er urope sovere s eo commo espr ces seem o e very res e s ey re suppor e y e ese em e ere pec e eco om c e co u po c u res e e s. President and Chairman of the Management Board,JSC VTB Bank, Russia e ve o ee e o eo es r e y w wor w wor w wor r . o you ve o p e s r e y very muc o e oc m r e . our ocus s ee o r e y or c row ec use we re ore e y. ec c u y ow co e sse s so we ve o ve o o es s e p r ers ps p r ers ps re re y cr c or us. o er p ces e ey repro y r ess cr c ere s ou ow o e s r u o cross e cou ry. oe c m r e s ere e ocus or us s ow o or our s r e y o mee e oc ee s o e us ess. CEO and Chair of the Executive Board, Wolters Kluwer,The Netherlands e m r e es wor epe e y o o e o er we o ve somesuccesses. u we o e e s me sor o mp y e ec e we o w e ey wor o e er e ov o r e. President and CEO, AB Electrolux, Sweden es re re ve y op m s c we ve w u o o oppor u es o omes c y e s we s rou e wor o row y r ym r e s re. Chairman, President and CEO, The Vanguard Group Inc., US e eep y e eve we ve o e o ow m r e ose compe orsor er o e em o e r ow me. e e r e e e r y 1960s w e ourpre ecessors we o p success u y oo o om su very s ro emercompe or. se c yw we re o o o w ere we ve re yes s e 15 p s w 9 000 emp oyees. ur e ers ere re s ro . e re u e s me erp r us ess mo e s we ve everyw ere e se e wor e eve ese cus omers w respo o over me. Chairman and CEO, Caterpillar Inc., US e es c or c e o eco omy o o y s ow o we re ec row ocou r es we e r e ere s wor o poss es or e eco omy. we o s o o e e up o ose row eco om es o pu e res o e wor o . President and CEO, Newmont Mining Corporation, US 15th Annual Global CEO Survey 2012 33
  • 34. e were ree comp y or 90 ye rs u e s 15 ye rs we ve ecome mu o comp y. e se or m eme e m owever rem s o r e e e ree m e. ow oes comp y e ours eve op mu cu ur e poo rom w c u ure m eme e m c e r w CEO, TITAN Cement SA, Greece s ye r m y comp es were ere . ey o o ve e c p c y o ves e u ure ec p m r e s ve ecome sur . ere ve ee o pu c o er s s w e pr v e e u y s so scep c . u o s ve come ow . r e pro ec s ve come o s s ec use o re u ory re so s or c s co s r s. o ere re sever oppor u es ou ere or c s r c roup e ours. CEO, Piramal Group Ltd, India r ew rc s cre se s c y mpor y r rc r e s so cre se . e re see e p er s o e por s c e more more o e emer m r e eco om es. oo our ow c e se o ou rc e o er r c eco om es we oper e oo e o c e s we er c w e rc ys roup e ues o we e s e e me s you e p us o us ess rc Group Chief Executive, ABSA Group Ltd, South Africa ow we re 50 pe e r o o ys ouse o s. o e ues o ecomes ow o we co ue o c eve ou e row every ye r e swer s we ve o s mu eous y move up e v ue c e w cus omer re s em s e o curre wou e compe o so s o e r our r s re o e cus omer es y e w e . o co ue row our cus omer um ers o ouse o s v u s. ur co e re c ve e curre ec o o y c so r ve eyo ys or ers. o we ve o o w ys o mo e se u o s. CEO, ASTRO Malaysia Holdings, Malaysia u ers e ou cry u ere s r s e re u ors respo popu s w y e recovery cou e re e e . e pu c e pr v e sec ors we o e cr s s o e er ow ey ee o come ou o o e er. o or us o s very mpor some we pursue. CEO, Zurich Financial Services Group, Switzerland erms o ec c re rou s e re ew e e er y us ry e er es or e mou o ov o . o we ve s oppe ry o e e comp y e er es e e s s e we ocus o e es e s re r ess o w ere ey or e. s e o w ys ry o e e ve or e ow w s o ecome e comp y s es commerc s ov o s r em o sc e w e er ose ov o s re er or e er o our comp y. CEO, Enel Green Power SpA, Italy e we oo pro uc s we prov e o emer m e c ss we o e eve ey w u ys r e ow w mer c s or urope s ve come o e pec . we ve see ou s we ve o w ys o u c p c y emer m r es ower c p cos s. Michael Thaman Chairman of the Board and CEO, Owens Corning, US34 15th Annual Global CEO Survey 2012
  • 35. m o o os o o ry o se e pro uc s r e y o es . s oome o . e us ess mo e e o peop e you e e cu ure s veryvery m ey e . e eve e c we re ece r se e er mo e owsus o ve e er u y peop e u m e y o o e er e m r e p ce. e o y r you w s s w e you c com e e e er mo e w c ru s w ys s s ory w c sc p e w c s ee more e s ory over e s reeor our ye rs e com o s very power u . e co sume 12 ess c p ourye rs o e er e 90 more pro . s e s me us ess u w ce rm eme o c p . ose wo spec s s mpor . Group Chief Executive, Prudential Plc, UK s wor remem er 0 m o peop e ve rece y o e e co sumer m r e r s o see cr s s em . e co r ry 5 o peop e o o ye ve 5 o o ye ve w s m c e 95 o e ew m e c ss o ow e r ow ome mos o em e or e s . s ese peop e e oy er v s r s ey w w e r ow omes coo ers r e ree ers s e c. CEO, Magazine Luiza SA, Brazil o o e r s s you e o oo o r s m ps re ess o e r o cr s s e co ro r s s e s ro y e eve er u ou o co ue o ocus o ose. u ere s muc more r s rou c es compe o or yourco sumers ow you re ry o ccommo e ose your us ess s r e y.Michael White President and CEO, The DIRECTV Group Inc., US e ve m y m em eme pos o s e up y s you e er o ey s re e s me v s o s corpor e cu ure s e r co e ues. ey re socomm e o e p per us ess. ee very co e ey w m e s cco r u o o e e erpr se u prom s c reers or emse ves. Chairlady, Nine Dragons Paper (Holding) Ltd, China or er o er o se e e v u s rom e c u re comp y ve ec r e o some mpor pos o s. mpor y we ocus o eve op e eo our o erm emp oyees y prov em w ew oppor u es. sw y ecomp y c re ec e c eveme s m e erms o e cu v o o s ew c us o s e or o our ow e s. uccess epe s o e ce e wee ese wo spec s. Chairman and CEO, Lenovo, China our comp es we ve oc e r c y e w y we o us ess. s eee c me ec use e y o o y s ow my op o r more re ev o ev s m or y o our cou ryme w s 10 o 20 ye rs o. Chairman and CEO, Ayala Corporation,The Philippines 15th Annual Global CEO Survey 2012 35
  • 36. Research methodology and key contacts Note: Not all gures add up to 100% This is the 15th Annual due to rounding of percentages and to the exclusion of ‘neither/nor’ and Global CEO Survey ‘don’t know’ responses. e ve o owe e s me me o o o y s use prev ous ye rs o e sure we re r y represe e emer eco om es o e wor . e ve Sophie Lambin co uc e erv ews w s 60 cou r es Director of Global Thought Leadership wor w e v re e um er o erv ews +44 20 7213 3160 ew . Suzanne Snowden Global Thought Leadership +44 20 7212 5481In total, we conducted 1,258 interviews 42% of the companies had revenues CEOs in 60 countries between of US$1 billion and over, and a further22 September and 12 December 2011. 34% had revenues of over US$100By region, 440 interviews were million up to US$1 billion. Theconducted in Asia Paci c, 291 in remaining 20% had revenues of up toWestern Europe, 236 in North America, US$100 million. Company ownership is Mike Davies150 in Latin America, 88 in Central recorded as private for 47% of the Director of Global Communications& Eastern Europe and 53 in the Middle companies, with the remaining 48% +44 20 7804 2378East & Africa. The interviews were listed on at least one stock exchange. across a range of industries.Further details, by region and industry, To better appreciate what isare available on request. underpinning the CEOs’ outlook for growth we also conducted in-depthThe majority of the interviews were interviews with 37 CEOs from veconducted by telephone, with some continents over the fourth quarter Heather Harrison, Market Insightscountry exceptions. Interviews were of 2011. With global recovery still +44 20 7212 8334conducted face-to-face in Africa and the appearing fragile their insights look, postal surveys were used in at how multinational businesses areJapan and Korea and online surveys adapting their approaches in thesewere completed in most central conditions, including understandingAmerican countries. In addition, how the global economy is changing,members of our global CEO panel were how strategies are changing ininvited to take part online, with 167 response, and how talent strategiesCEOs across the globe providing their in particular are changing.views through this online panel. All the Their interviews are quoted in thisinterviews were conducted in con dence report, and more extensive extractsand on an unattributable basis. can be found on our website at whereThe lower threshold for inclusion in you can explore responses by sectorthe top 30 countries was companies and location.with more than 100 employees orrevenues of more than US$10 million. PwC’s extensive network of expertsThis is raised to 500 employees or and specialists has provided itsrevenues of more than US$50 million input into the analysis of the the top 10 countries. Our experts span many countries and industries.36 15th Annual Global CEO Survey 2012
  • 37. AcknowledgementsThe following individuals and groups inPwC rms and elsewhere contributed to Ian Bremmer Poh-Khim Cheahthe production of this report. Miles E. Everson e e o so our e wor e ers p Himani Guptae m e s . y o er or owe or er e o s or e r v u e s s suppor . Natasha Cambell Angela Lang Roxana Opris Core editorial team Heather Harrison Emily Church Suzanne Snowden Sophie Lambin Larry Yu Elaine Aitken Editorial board Ashley Hislop Cristina Ampil Nick Masters Justine Brown Blake Neiman Áine Bryn Julie Szydlowski Mike Davies Jonathan Grant Nick Jones Christopher Michaelson Design & Media – The Studio Elizabeth Montgomery Oriana Pound Leyla Yildirim The research was coordinated by the PwC International Survey Unit, located in Belfast, Northern Ireland. Fouad Alaeddin Donald Almeida Jon Andrews Tom Craren Moira Elms Simon Friend Leo Johnson Paula Loop Sridharan Nair Tony Poulter Juan Pujadas Bharti Gupta Ramola Alastair Rimmer Yael Sel n Jan Sturesson David Wu 15th Annual Global CEO Survey 2012 37
  • 38. Capital markets in 2025: The future of equity capital markets (December 2011) Is the focus of capital markets Capital markets in 2025 The future of equity capital markets nance moving A PwC IPO Centre publication, assessing the choices ahead for global companies. eastward?Related reading Will emerging market exchanges have the sophistication and infrastructure to challenge incumbent exchanges in the West? What are the drivers behind the 10Minutes on the CEO agenda. change in capital market dynamics? Delivering results: growth and value These are some of the questions we in a volatile world (January 2012) asked in our survey of senior 10Minutes On the CEO agenda Continued managers from companies across Delivering results: growth and value uncertainty has Continued volatility and uncertainty has taken a toll on CEO con dence in the prospects for their con dence for the upcoming year has been disrupted, particularly by the outlook in Europe, January 2012 the globe. Their responses highlight the challenges facing incumbent business growth in 2012. But despite the many but growth plans are still moving forward. taken a toll on unknowns, companies aren’t on the defensive. in a volatile world. Our 15th Annual Global CEO Survey of 1,258 2) Talent and innovation are key to results. Eight questions for business leaders in 60 countries shows that CEOs The challenges of getting the right people in the right places and continuously renewing are taking deliberate steps to grow in priority every CEO. markets – those they believe are most important innovations were identi ed as key constraints by for their future.1 They’re mindful of risks and costs, CEOs. One in four CEOs say talent constraints have Highlights but aware of the greater risk of standing still. affected their ability to chase market opportunities, thereby limiting growth potential. And the speed Companies are getting more local about their We’ve drawn on the ndings from the survey, and intensity of competition has made it crucial markets in the coming two decades. global growth strategies. and from our related research, to create eight for companies to be continuous innovators. As a CEO con dence questions that we think help to frame the result, talent strategies and innovation capacity are Many are expanding capabilities in their priority challenges and opportunities facing CEOs. markets and innovating locally to better serve two of the biggest areas where CEOs are planning new customers in new segments. Survey responses make clear that over the next changes in the coming year. three years, strategies centre on getting the right Seeking growth outside familiar markets calls global business model for a world where risks 3) re aring for the conse uences of risk. for careful monitoring of ongoing risks, both at and opportunities are often very much local. Reliance on priority markets away from home the local level and by considering their potential will challenge companies to better prepare for the impacts on global businesses. hat s in uencing the CE agenda? consequences of business disruption. Embedding CEOs are also challenged to address talent Long-term business plans are likely to remain the constraints and needs of local communities consistent in spite of expected volatility in 2012. in strategic plans, and working with stakeholders in their prospects issues more systematically and strategically in all their markets. to address them, will become a bigger element of 1) Con dence has been disru ted. risk resilience. Only 15% of CEOs expect the global economy to improve in 2012. Yet 40% are ‘very con dent’ of 1 All survey ndings are from PwC’s 15th Annual CEO Survey, their revenue growth prospects, down modestly January 2012. Find full survey results and interviews with 37 CEOs at from the 48% who agreed last year. So business for business growth in 2012. But What next for the Eurozone? Possible companies aren’t on the defensive. scenarios for 2012 (December 2011) Drawing on ndings from our 15th The potential Annual Global CEO Survey, political and 10Minutes on the CEO agenda economic outcomes explores eight critical questions for emerging from the business leaders as they position their Eurozone crisis in companies for long-term growth in 2012 are disparate, their priority markets. although all share a similar theme. Millennials at work: Reshaping A harsh adjustment to a new the workplace (December 2011) scal reality will be unavoidable, The millennial Millennials at work regardless of the path politicians generation, now decide to follow. This report analyses Reshaping the workplace The millennial generation, now a number of scenarios and outlines entering into ooding into employment, will reshape the world o wor . re you ready employment, will the outcomes of each in terms of the shape the world potential Eurozone in ation and of work for years to come. Attracting GDP impact over the medium term. the best of these millennial workers is critical to the future of your business. In late 2011, PwC surveyed over 4,000 university graduates. This report explores their career aspirations, attitudes about work, and knowledge of new technologies.38 15th Annual Global CEO Survey 2012
  • 39. Securing the talent to succeed: Making Cybercrime: protecting against the Post 3.11 Japan: Global Community’sthe most of international mobility in growing threat. Global Economic Perspective (July 2011) nancial services (November 2011) Crime Survey (November 2011) In July 2011, we There’s a huge PwC’s sixth global surveyed 201 global Post .11 apan: Global Community’s Perspective gap between Securing the talent to succeed: Making the most of international economic crime Cybercrime: protecting against the growing threat business leaders from nancial services survey examines the our international CEO mobility in financial services Global Economic PwC lobal CEO Crime Survey Pulse urvey uly 2011 How financial services 3,877 respondents from organisations’ causes and effects of panel who participate organisations can make organisations in 78 sure they have the right countries provide a global people with the right skills picture of economic crime in the right places to realise their goals. November 2011 November 2011 growth aspirations fraud worldwide, in PwC’s Annual and the availability of focusing on the Global CEO survey. talent in key growth growing threat of The aim was to gain locations to make this cybercrime. A decade insight into how the tragic events ofpossible. Drawing on interviews with on from our rst survey and the fraud the Great East Japan earthquake andsenior HR executives from leading risk continues to rise. Our survey shows Tsunami, and the ensuing crisis at theinternational nancial services groups that economic crime is persistent and Fukushima nuclear plant, have affectedfrom around the world, this report that organisations need to be vigilant international business leaders’explores the workforce management and proactive when ghting fraud. con dence in Japan. The report looksissues of matching talent with growth at the strategic and operational lessonsobjectives and how companies can Eye of the storm. Key ndings from learned, and what Japan needs to focusaddress these issues as part of their the 2012 Global State of Information on for its future competitiveness.overall business planning. Security Survey® (September 2011) Growth re-imagined: Prospects in According to theThe future rede ned: Asia Paci c at an emerging markets drive CEO results of this study,in ection point (November 2011) con dence (January 2011) the majority of As the Knowledge executives across In the last quarter Partner for the 2011 industries and of 2010, we set out Growth reimagined Prospects in emerging markets drive CEO confidence APEC CEO Summit, markets worldwide to uncover how CEOs PwC conducted a are con dent in the 14th Annual Global CEO Survey Main report were approaching survey of over 300 effectiveness of their growth, during a business executives organisation’s information security time when on the most pressing practices. This report explores the sustainable economic business issues and basis for this con dence, and examines growth appeared fartrends. This survey explores topics where organisations have made from assured. We surveyed 1,201such as barriers to trade, the growth progress in addressing information business leaders in 69 countriesof bi-lateral trade among countries security over the past year. around the globe. The results showedwithin the region, the rising that two years removed from thecompetition for talent, and the Resilient growth: Making the most depths of recession, CEOs’ con denceimpact of innovations in the eld of opportunities away from home in future growth had returned toof technology. (August 2011) nearly pre-crisis levels.Paying Taxes 2012: The global picture CEOs aspiring to 2011) reignite company Resilient growth Making the most of opportunities away growth are looking from home Based on a study at fast-growing CEOs today are focusing on fast-growing emerging markets as major engines of growth. But success of tax regimes in in unfamiliar markets requires more deliberate emerging markets alignment of risk monitoring with strategic planning and operational execution. How prepared is your organisation to grow away from home? Paying Taxes 2012 183 economies The global picture and seeking the A fair, sustainable tax system – how can governments create an worldwide, this joint opportunities that annual report from environment that fosters business investment and economic growth? developed markets PwC and the World continue to yield. In this report, Bank enables the PwC outlines the risks to look out comparison of tax for at each stage of the marketsystems from the point of view of lifecycle and how they could impactbusiness. This year’s study shows that potential reform is continuing around theworld, with an increasing focus onimproving the administrative aspectsof tax systems. 15th Annual Global CEO Survey 2012 39
  • 40. firms help organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with close to 169,000 people who arecommitted to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon theinformation contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for anydecision based on it.© 2012 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopersInternational Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act asagent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of itsmember firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions ofany other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.Printed on FSC 50% recycled material, supporting responsible use of forest resources. Produced at a mill that is certified to the ISO14001 environmental management.