Key findings for Romania from the 15th Annual Global CEO Survey 2012

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  • 1. Key findings for Romania from the 15th Annual Global CEO Survey 2012Balancingthe actTreading cautiouslyon changing grounds www.pwc.com/ro/ceosurvey
  • 2. ForewordStriking the right balance is rarely a fast-paced game. For most, it’s more a question of setting sail on a lifetime endeavour that implies withstandingchallenging times and making the best of what is. Yet all of us, individuals and companies alike, are ceaselessly coveting a form of it in our quest for a moresustainable livelihood. Paraphrasing a Romanian poet, one could say that last year was one when things were not as they seemed. From what appeared to be a rolling global economic recovery that raised hopes during the first half of the year, we ended the year 2011 with real concerns on the composure of the Euro-zone and with the menacing prospect of yet another global downturn. The prospect of achieved was indeed still playing hide-and-seek.Instead of making up for ground lost in the times of crisis, the financial sector was yet again at the core of global concern as the sovereign debt dramaunfolded, first in America, which lost for the first time in history its triple A rating, and then with higher resonance in Europe, where Greece, Portugal, Italy,Spain and later on Hungary were dragged one after the other into the whirlwind of the crisis. Closer to home, Romania finally re-emerged from economicrecession, closing the year with a fair 2.5% economic growth. Yet, the end of the recession in its “technical” sense did not coincide with that of the crisis, asmuch uncertainty still remains about future growth prospects, while the state of the economy remains shaky and vulnerable.In light of all this, Romanian CEOs display a lower level of optimism and have aligned to the cautious global approach to future strategies and development.Even though they are no longer as confident as last year when it comes to growth prospects, Romanian CEOs seem to have learned valuable lessons from thecrisis and are now leading their businesses to aim for sustainable rather than speculative growth. Many things have changed since the crisis hit some four yearsago, and many expectations have not been met. A very important one is related to the availability of the right people and talent to support business growth.The world as we know it may be fading away, but we will surely not succumb with it. We’ve just started to better come to grips with our own power. And weare using this to build on what we hope will be more sustainable grounds. This brings us now in front of two parallel facets of Romania. There is the countryof those who have bowed down to depression, are feeling left behind and are waiting for a helping hand from the State. While another Romania, the one thatrarely makes the evening news, has pragmatically adapted to the new economic circumstances. Belts have been tightened, sleeves have been rolled up. ThisRomania is making a comeback and appears ready to withstand any rough wind lying ahead.On this note, I would like to thank the business leaders who took time away from their demanding agendas to share their hopes and concerns with us. OurAnnual Global CEO Survey owes its success to their valuable input and we are proud to provide this country focus to the Romanian and international markets.Vasile IugaCountry Managing PartnerPwC Romania
  • 3. Contents1. What’s on the Romanian CEOs agenda? ........................................................................... 22. The future – to be handled with care ................................................................................ 33. Tight spots still abound .................................................................................................... 54. Yet opportunities are within reach ................................................................................... 75. Changing course while navigating the rough seas ahead .................................................. 96. The intangible assets: people and talent ......................................................................... 137. The role Government should play ................................................................................... 20
  • 4. Romanian CEOs would like to focus on developing leaders, meeting with customers and making their organisations more efficient1. What’s on the Q: Do you wish that you personally could spend more time on each of the following activities? Romanian CEO’s Global 69% agenda? Meet with the customers CEE 60% EU 73% Romania 70% The people, the customers and the Global 49% efficiency of their organisations are at Develop operations outside CEE 30% of the home market the top of the Romanian CEOs personal EU 44% Romania 39% agendas. As they see highly-skilled middle managers capable of good Global 54% CEE 48% execution as essential for the successful Set strategy and manage risks EU 45% implementation of their company’s Romania 50% business strategy, 73% of Romanian Global 68% CEOs state they would like to dedicate CEE 55% more time to developing their leadership Develop leadership and talent pipeline EU 62% and talent pipeline – a higher Romania 73% percentage than in any other region Global 62% analysed in this report. CEE 56% Improve organisational efficiency EU 60% At the same time, 70% of local CEOs Romania 52% want to spend more time meeting with Global 12% their customers, similarly to their CEE 14% global, EU and US peers, showing that Meet with the board and shareholders EU 9% they are getting more and more alert Romania 18% to the dynamics of customer demand and its impact on business. Improving organisational efficiency and setting Meet with lenders and providers of capital Global 16% CEE 19% 73% of the Romanian CEOs EU 16% strategy and managing risks also rank Romania 20% state they would like to dedicate more time to high on the agendas for 52% and 50% Global 28% developing their leadership of Romanian respondents, respectively. CEE 31% and talent pipeline Meet with regulators and policy makers On the other hand, 25% of the EU 27% Romanian CEOs would like to spend Romania 30% less time with regulators and policy Global 41% makers, if at all possible. Personal time or community service CEE 50% EU 39% Also worth noting is their interest in Romania 39% developing operations outside the home 0% 10% 20% 30% 40% 50% 60% 70% 80% market (39 %) and allotting more time for their personal pursuits and Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents community service activities (39%). 15th Annual Global CEO Survey 2012 – Romania 2
  • 5. Most CEOs expect no improvements in the global economy2. The future – to be Q: Do you believe the Global economy will improve, stay the same, or decline over the next 12 months? handled with care Global 48% 34% 15% China 52% 11% 32% After three years of waiting for the Godot of a V-shaped recovery, Romanian CEOs USA 30% 47% 20% seem to have accustomed to the idea that, despite the technical end of the CEE 45% 41% 13% recession, the crisis is here to stay and the “new era” will be characterized by EU 52% 36% 10% high volatility and uncertainty. There is a feeling among the Romanian and Romania 32% 43% 18% global business community that this is % the new normal and that companies have no choice but to grow new life skills Decline Stay the same Improve for the current market environment. Base: All respondents Although CEOs are rather pessimistic Source: PwC 15th Annual Global CEO Survey, Romania respondents about the evolution of the global economy, they have become more confident in the capacity of their own companies to go beyond the difficult market conditions and thrive. Only 34% of the surveyed CEOs told us that they are very confident about their company’s prospects for ‘The financial crisis that started in 2007-2008 originated in the private sector. It lead to a sharp contraction of the growth, a drop from the 43% of last year. economy and forced the governments everywhere to try to intervene in order to protect the safety of the financial system However they appear to be cautious and maintain a socially acceptable level of employment. Now we are entering a new and more complex phase, especially rather than pessimistic, as 52 % are still in Europe, in which states have turned from saviours to patients. In the mean time, the private sector has managed to “somewhat confident” about what 2012 adapt quite fast to the new environment. Companies everywhere turned to deleveraging and cost control. Some have will bring (40% last year). managed to stockpile an impressive amount of liquidity in their coffers and to restore profits. It is clear that companies now feel better prepared to face come what may. Yet this might just as well be an illusion of safety, with very few top managers curious to discover what might happen in the case of a meltdown of the Eurozone.’ Vasile Iuga Country Managing Partner, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 3
  • 6. CEOs stick to the same trend regarding More confidence regarding revenue growth – but CEOs remain cautiousthe developments over the next three Q: How confident are you about your company’s prospects for revenue growth over the next 12 months?years, with 32% being “very confident” How confident are you about your company’s prospects for revenue growth over the next 3 years?and 59% “somewhat confident”, aconsiderable turn from last year when Very confident 40% Somewhat confident 44% 1 year70% were “very confident” and 23% Global“somewhat confident”. With Romanian Very confident 47% Somewhat confident 42% 3 yearsCEOs no longer showing the exuberanceof a developing economy, we can Very confident 54% Somewhat confident 36% 1 yearconclude that they are starting to take a Chinamore balanced approach to the market Very confident 47% Somewhat confident 43% 3 yearsconditions, opting for sustainable overspeculative growth. Very confident 41% Somewhat confident 48% 1 year USACompared to the rest of the world, Very confident 54% Somewhat confident 41% 3 yearsRomanian CEOs appear to be rathercautious, while American, Chinese Very confident 41% Somewhat confident 36% 1 yearand East-European top executives are CEEmarkedly more optimistic, with 54%, Very confident 49% Somewhat confident 42% 3 years47% and 49% respectively, having a highlevel of confidence in the perspective of Very confident 25% Somewhat confident 44% 1 yeartheir own companies for revenue growth EUin the medium term. Very confident 35% Somewhat confident 44% 3 yearsGoing into further detail, Romanianrespondents expect the world to be more Very confident 34% Somewhat confident 52% 1 yearopen to cross-border capital flows (57%) Romania Very confident 32% Somewhat confident 59% 3 yearsand free international trade (43%). 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents ‘Trust is the prerequisite of solid and healthy economic growth. The global financial crisis has shattered trust between companies and their shareholders, as well as between governments and their citizens. If we are to enter of a new period of growth, we must rebuild this trust. For companies, the best way to regain trust is full transparency in what concerns their business practices, clear and comprehensive financial reporting, as well as a complete overhaul of their corporate governance structures and practices.’ John Webster Partner, Assurance Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 4
  • 7. Uncertain economic growth ranks high among concerns3. Tight spots Q: How concerned are you about the following potential economic and policy threats to your growth prospects? still abound Global 42% CEE 42% Inflation EU 34% While there is a feeling of sturdiness Romania 41% and resilience in the face of the crisis, Global 44% CEOs are keeping a close watch on CEE 39% external factors that may derail their Protectionist tendencies of national governments EU 33% growth prospects, with 64% of them Romania 41% considering uncertain or volatile Global 80% economic growth as a considerable CEE 78% Uncertain or volatile threat. At the same time, 59% of the economic growth EU 82% Romanian respondents are concerned Romania 64% with the lack of stability in the capital Global 56% markets, while the same percentage CEE 57% Over-regulation of respondents are worried about EU 47% exchange rate volatility. Although Romania 39% fears of governmental response to the Global 64% debt burden and harsher regulation Lack of stability CEE 64% in capital markets seem to have subsided somewhat EU 72% Romania 59% since the previous edition, they still rank high on the radar of potential Global 58% China 68% risks for local CEOs. Exchange rate volatility CEE 70% EU 46% A significant percentage of Romania 59% respondents (57%) see bribery Global 66% Government response and corruption as a threat for their to fiscal deficit CEE 61% EU 71% businesses, while 52% also see the and debt burden Romania 52% government response to fiscal deficit and debt burden as an area of Global 34% CEE 52% concern. Moreover, for 41% of Bribery and corruption EU 22% surveyed CEOs, inflation and the Romania 57% protectionist tendencies of national governments are also factored in 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% their risk management strategies. Note: Respondents who stated “extremely” or “somewhat concerned” Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 5
  • 8. The concern expressed last year regarding Shifting consumer behaviours, energy costs, the tax burden and inadequate infrastructure will impact growth prospectsthe increase of the tax burden continues to Q: How concerned are you about the following potential business threats to your growth prospects?be important (50% compared to 67% in2011), in addition to the shift in consumer Global 38%spending and behaviours, to which CEOs CEE 30% New market entrantsare also willing to pay more and more EU 28%attention (66% compared to 47% in 2011 Romania 30%– slightly higher than the Global and Global 53%European average). Furthermore, it’s Availability of key skills CEE 52%important to note that they are EU 40%significantly more preoccupied by energy Romania 36%costs than at the time of the last edition Global 46%(52%, similarly to their Global, EU and Energy costs CEE 47%CEE counterparts). As it will be shown in EU 42% Romania 52%more detail in the People & Talent section,the crisis does not seem to have eased the Global 34% CEE 27%wars of talent, as the availability of key Security of supply chain EU 25%skills is still seen as a potential threat Romania 32%(36% compared to 40% in 2011). Global 50%Even though there have been several Shift in consumer spending CEE 56% and behaviours EU 53%improvements regarding the number of Romania 66%infrastructure works, 45% of respondentsstill factor in the inadequacy of basic Global 40% CEE 43%infrastructure as a threat for their business Inability to finance growth EU 47%growth prospects (slightly more than Romania 36%in 2011 – 33%). Global 30%The ongoing sovereign debt crisis in Inadequacy of basic infrastructure CEE 40% EU 21%Europe appears to be the only important Romania 45%external factor that triggered strategy, riskmanagement and operational changes, as Global 55% CEE 61%stated by 52% of the respondents. All other Increasing tax burden EU 49%major environmental, political and social Romania 50%events and disruptions of the past year donot seem to have significantly influenced 0% 10% 20% 30% 40% 50% 60% 70%the business of Romanian CEOs. Note: Respondents who stated “extremely” or “somewhat concerned” Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 6
  • 9. Business is expected to grow through innovation and increased market share4. Yet opportunities Q: Which one of these potential opportunities for business growth do you see as the main opportunity to grow your business in the next 12 months? are within reach Global 18% CEE 6% New geographic markets EU 18% Faced with an uncertain economic Romania 14% environment and potential worsening Global 28% of the sovereign debt crisis in Europe CEE 30% (which already had a direct financial New product/service development EU 27% impact on over 41% of Romanian Romania 36% companies), added to its damaging Global 30% impact on the country’s exports and CEE 28% Increased share in existing markets financial system, local CEOs look for EU 26% opportunities closer to home and Romania 25% within reach. Global 12% CEE 14% Interest in increasing market share Mergers and acquisitions EU 15% is still relatively low (25% compared Romania 5% to 23% last year), with a considerable Global 10% gap when compared to their US New joint ventures CEE 22% counterparts (38%), while 36% see and/or strategic alliances EU 10% growth coming from new product/ Romania 11% service development, i.e. an important 0% 10% 20% 30% 40% drop from last year (50%). As a result of Base: All respondents this, innovation no longer ranks among Source: PwC 15th Annual Global CEO Survey, Romania respondents top priorities in terms of business development and CEOs are less willing to “bet” on new and possibly risky ventures. Along these lines, only 14% plan to expand on new graphic markets, while 11% plan for new joint ‘With the inflow of foreign direct investments quickly drying after 2008, the Romanian M&A market has seen a significant ventures and/or strategic alliances. drop in the number and value of transactions. Yet certain areas such as green energy and agriculture have remained Their appetite for M&A shows an resilient in spite of the crisis. We believe that, as the economy is slowly starting to return to its growth potential, M&A insignificant increase as compared to activity will pick up, as Romania is still a country with significant untapped potential. Yet, rather than being a herd that the previous edition (from 3% to 5%), flocks to feast, as before the crisis, investors will more and more resemble gem hunters, that ponder considerably before which confirms that local CEOs see making a move.’ deals more as an exit tool rather than one for consolidating their businesses. Radu Stoicoviciu Partner, Advisory Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 7
  • 10. Aware that Romania is placed between Germany and Russia seen as main future business partners by Romanian CEOstwo economic heavyweights, Germany Q: Which countries, not including the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months?and Russia, local CEOs seem convincedthat these two countries will have the Global 30% USA 48%greatest impact on their future growth, China USA 24% CEE 26%with 18% of CEO indicating that Germany EU 17%is the most important foreign trade Romania 5%partner for business growth and 11% Global 12%mentioning Russia. China 20% USA 12% GermanyGeographical proximity weighs CEE 24% EU 21%therefore more than the size of the Romania 18%economy, with only a few of the Global 14%Romanian CEOs mentioning India, China 14%China, Brazil – the other BRICs apart USA 17% Indiafrom Russia – as important for their CEE 16%overall growth perspectives. EU 10% Romania 7% Global 8% China 9% USA 9% Russia CEE 11% EU 14% Romania 11% Global 5% China 7% USA 6% France CEE 8% EU 11% Romania 5% 0% 10% 20% 30% 40% 50% Note: Maximum of 3 responses were provided Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents ‘At a time in which the economy in general struggled, last year Romania had record exports. These didn’t come only from multinationals with factories in Romania. Local entrepreneurs played their important part in this success story. Romanian businesses have learned to adapt in the murky waters of our long transitions. Some prospered despite the administrative burdens, commercial risks and high costs of financing. This created a particular type of survivor entrepreneur, which is accustomed to hardships, doesn’t expect help from outside and performs wonders with little resources. This silent mass of entrepreneurs is Romania’s greatest hope for a sound and steady future economic growth.’ Mihai Aniţa Partner, Private Company Services Assurance Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 8
  • 11. Customer demand and competition drive strategy changes5. Changing course Q: Which of the following factors influence your anticipated need to change your strategy? while navigating the Global 66% rough seas ahead Economic growth forecasts or uncertainty Romania 42% Global 65% Caution is the name of the game when it Customer demand Romania 69% comes to strategies as well, with only 5% of the respondents saying that theirs will Global 39% change in fundamental ways over the Industry disruption Romania 23% next 12 months, 55% foreseeing some changes and a significant 36% Global 25% Capital structure/deleveraging foreseeing no change at all. Romania 12% As most of the major adjustments to Global 34% business strategies have been already Changes in risk tolerance Romania 38% made, CEOs are now more eager to keep the course steady and work on the Global 41% Changes in regulation fine-tuning, rather than experiment Romania 27% radical change. Even so, further adjustments to business strategies seem Global 33% Shareholder expectations to be driven mostly by the need to adapt Romania 27% to shifts in customer demand (69%) and competitive threats (54%), rather Competitive threats Global 56% than the downturns of the global Romania 54% economy (42%). Govt debt driving public spending cuts Global 29% and/or tax increases Romania 31% Global 34% Availability of talent Romania 23% 0% 10% 20% 30% 40% 50% 60% 70% Base: Respondents who stated “change in fundamental ways” or “somewhat change” to the question “To what extent do you anticipate your company’s strategy will change over the next 12 months?” (60% of Romanian respondents; 70% of Global respondents) Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 9
  • 12. The current “upbeat realism” of the Cost reduction measures still rank high on the strategic agendaRomanian CEOs stems out of the painful Q: Which, if any, of the following restructuring activities have you Q: Which, if any, of the following restructuring activities do youmeasures that were taken over the past few initiated in the past 12 months? plan to initiate in the coming 12 months?years in cutting costs and making theorganizations leaner and more efficient. Global 75% Global 66% CEE 81% CEE 80%73% of local CEOs state that during the Implement(ed) a cost-reduction initiative EU 83% EU 74%past 12 months they have taken a cost Romania 73% Romania 66%reduction initiative, while 45% said that Global 38% Global 49%they have either outsourced a business CEE 30% Enter(ed) into a new strategic CEE 38%process or function, or, on the contrary, EU 34% alliance or joint venture EU 45%in-sourced it, as a means to make savings Romania 27% Romania 32%for the organization. Global 20% Global 28% CEE 13% Complete(d) a cross-border CEE 9%For the future they display the same merger or acquisition EU 24% EU 31%cautious attitude regarding their overall Romania 14% Romania 9%growth prospects, with only 32% of Global 35% Global 33%respondents planning to enter into a new CEE 47% Outsource(d) a business CEE 47%strategic alliance or joint venture – a drop EU 36% process or function EU 34%by almost half compared to last year. Romania 27% Romania 27%Similarly to last year, outsourcing doesn’t Global 20% Global 16%seem to be seen as very effective, with only CEE 16% Insource(d) a previously outsourced CEE 13%27% of the respondents planning to go EU 23% business process or function EU 19%down this road, compared to 47% in CEE. Romania 18% Romania 16%In an unpredictable market environment, Global 18% Global 14%with future revenues difficult to forecast, CEE 13% Divest(ed) majority interest in a CEE 11%keeping costs in check remains crucial and EU 20% business or exited a significant market EU 17%local CEOs will continue to focus on Romania 5% Romania 11%implementing cost cutting measures, with Global 17% Global 12%66% of them anticipating such initiatives CEE 11% End(ed) an existing strategic alliance CEE 9% or joint ventureover the next 12 months. EU 15% EU 11% Romania 18% Romania 9% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents ‘We are now at the point where more accountability for results is needed in business. Companies need to be able to better measure the real return on investment at this time when capital is difficult to access and still expensive. Also, accountability has to reside in the right places and to be properly incentivized. This means going beyond cost-cutting and taking a new look at processes and business practices.’ Bogdan Belciu Partner, Advisory Services, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 10
  • 13. Strategies for managing talent is the area Managing talents and dealing with risks are the main areas where change is anticipatedwhere 73% of the respondents anticipate Q: To what extent do you anticipate changes at your company in any of the following areas over the next 12 months?change, a percentage that remains almostas high as last year (77%). This goes to Global 78%show that previous expectations CEE 66% Strategies for managing talentregarding a possible pool of available EU 73%talent brought on by the economic Romania 73%downturn were not met. Global 61% CEE 60%At the same time 70% of Romanian CEOs Capital investment decisions EU 56%expect to make changes in their approach Romania 66%to risk management, an opinion they Global 67%share with their Global, EU and CEE CEE 67% Approach to managing riskcounterparts (67% on average). EU 66% Romania 70%Other areas where CEOs anticipate Global 43%change are capital investment decisions, CEE 43% Capital structuretechnology investments (both 66%) and EU 41%R&D and innovation capacity (64%). Only Romania 32%52% still intend to change their approach Global 35%when it comes to corporate reputation Engagement with your CEE 33%and trust (compared to 77% in 2011) board of directors EU 32%leading us to believe that many necessary Romania 25%adjustments were made in this area. Global 72% Organisational structure CEE 74% (including M&A) EU 72% Romania 57% Global 50% Focus on corporate reputation CEE 48% and rebuilding trust EU 52% Romania 52% Global 72% CEE 61% Technology investments EU 65% Romania 66% Global 72% CEE 64% R&D and innovation capacity EU 64% Romania 64% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Respondents who stated “some” or “a major change” Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 11
  • 14. Over the next three years, 68% of Workforce quality and wellfare are the main investment areasrespondents stated that they plan to Q: How much does your company plan to increase its investment over the next three years to achieve the following outcomes in the country in which you are based?increase investments by creating andfostering a skilled workforce and 64% by Global 71%maintaining the health of the workforce. CEE 60% Creating and fostering a skilled workforceThis reflects the fact that talent EU 67%management strategies are the main Romania 68%concern. Significant investments will also Global 41%go to ensuring financial sector stability and CEE 38% Ensuring financial sector stabilityaccess to affordable capital (43%) and to EU 44%securing natural resources that are critical Romania 43%to business (41%). It’s interesting to note Global 39%that, while infrastructure is still seen as the Securing natural resources that CEE 33% are critical to business EU 35%main government priority, 30% of Romania 41%respondents plan to increase theirinvestment in this area as well. Global 36% Addressing the risks of climate change CEE 32%The findings show that Corporate Social and promoting biodiversity EU 37% Romania 30%Responsibility (CSR) is also on the businessagenda, with 30% of CEOs planning to Global 37%increase investments in addressing the risks Improving the countrys infrastructure CEE 42% EU 30%of climate change and promoting Romania 30%biodiversity and reducing poverty andinequality, respectively. Global 61% CEE 50% Maintaining the health of the workforce EU 60% Romania 64% Global 37% CEE 28% Reducing poverty and inequality EU 30% Romania 30% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Respondents who stated “a significant” or “some increase in investment” Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 12
  • 15. Almost half of CEOs expect to raise their headcount6. The intangible Q: What happened to headcount in your company Globally over the past 12 months? What do you expect to happen to headcount in your organisation Globally over the next 12 months? assets: people and talent Global - past 12 months 6% 6% 11% 22% 19% 13% 21% CEE - past 12 months 6% 9% 15% 13% 16% 18% 20% Many may have hoped that the economic downturn would make the talent EU - past 12 months 10% 10% 12% 20% 19% 12% 14% challenge go away, or at least lessen. But increased market competition and Romania - past 12 months 7% 7% 11% 36% 9% 16% 9% fundamental incongruities between needs of companies and characteristics of the ‘Millenial’ generation seem to have made things even more complex. Global - next 12 months 3% 4% 11% 28% 23% 14% 14% In the previous edition, 60% of CEOs CEE - next 12 months 7% 6% 14% 27% 23% 9% 13% anticipated an increase in headcount, but these projections had been too optimistic. EU - next 12 months 6% 6% 14% 34% 18% 12% 7% Looking at 2011 in retrospect, 36% declared that their headcount stayed the Romania - next 12 months 9% 7% 36% 18% 23% 7% same, 16% that it increased by 5-8% and % only 9% that it increased by more than 8%. Taking into account that the Decrease(d) by more than 8% Stay(ed) the same Increase(d) by less than 5% Decrease(d) by 5-8% Increase(d) by 5-8% headcount decrease was not notable Decrease(d) by less than 5% Increase(d) by more than 8% either (11% saying that it decreased by Base: All respondents less than 5%, 7% by 5-8%, and 7% by Source: PwC 15th Annual Global CEO Survey, Romania respondents more than 8%), it looks more like stability is settling in. Despite the staff turnover, which results from various measures taken to handle the tough economic context, Romanian CEOs are still cautiously optimistic for the future. Almost half of the Romanian respondents expect to raise their headcount (18% to increase by less than 5%, 23% to increase by 5-8%, and 7% to increase by more than 8%) 36% are preparing for no change, while relatively few expect decreases in headcount (7% by less than 5%, and 9% by 5-8%). 15th Annual Global CEO Survey 2012 – Romania 13
  • 16. Some CEOs might have thought that the Difficulties in finding skilled candidates raise concerns for CEOschanges which resulted from the economic Q: Which of the following statements are the primary reasons why it is more difficult to hire workers in your industry?downturn would make it less difficult tohire. However, only 30% of respondents Global 15% 47% 9% 8% 14% 5%have experienced this, whereas for 25% ofthem it has become even more difficult to China 18% 31% 6% 6% 26% 12%find the people they need. USA 7% 53% 13% 10% 13%The underlying reasons for this aremultiple, but there is one in particular CEE 15% 47% 15% 9% 9% 3%that leads by a landslide: the availabilityof skilled candidates, mentioned by 91% of EU 14% 52% 14% 11% 6% 1%the respondents, a percentage almosttwice as high as the EU average of 52% Romania 91% 9%and that of the US (53%). The high 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%percentage of CEOs pointing to thisindicates a lack of proper educational and Growth rate of the industry Candidates view of industry reputation has changedtraining frameworks in place to support Surplus or deficit in supply of skilled candidates Compensation expectationsthe required pool of Romanian talent.The second most important reason to Skills requirements in our industry have changed Working conditionsthe difficulty to hire workers, in the viewof Romanian CEOs, is the level of Base: Respondents who stated “more difficult” to the question “In general, has it become more difficult or less difficult to hire workers in your industry, or is it unchanged?”compensation expectations (9%). (43% of Global respondents, 64% China, 37% USA, 39% CEE, 27% EU and 25% from Romania) Source: PwC 15th Annual Global CEO Survey, Romania respondentsAt the EU level, CEOs who are faced withsimilar issues cited other reasons as well,including the growth rate of the industryand the changes in industry skillsrequirements (both with 14%), as wellas the candidates’ view of the industryreputation (11%). ‘Market developments have sharpened the change of focus from filling jobs to finding talent. If there was any expectation that the downturn will release capital, including human capital, making talents more easily available for successful companies, this expectation has proven wrong. The challenge is more complex now when high employment rates persist while businesses face talent shortages. This mismatch is impacting profitability and has gone up on the executives’ agendas, driving a more strategic approach and more investment in the area.’ Peter de Ruiter Partner, Tax and Legal Services Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 14
  • 17. “Finders keepers” seems to be quite a Recruiting and retaining high-potential middle managers is the biggest concern for CEOschallenging notion to implement in Q: With which of the following groups do you currently face the greatest challenges with regard to recruitment and retention?relation to staff retention. High-potentialmiddle managers are the most likely to be Global 31%lured by the tempting benefits packages of CEE 31% Younger workerscompetitors. 50% of CEOs voiced their EU 27%concern about this issue, a percentage Romania 36%almost equal to the EU and global levels of51% and 53%, respectively. At the same Senior management team Global 28% CEE 28% 50% of the Romanian CEOstime, there is a high turnover of younger EU 25% face challenges in recruitingentry-level staff (36%), which is not Romania 27% and retaining high-potential middle managersunusual for organizations undergoing Global 33%difficult periods while adjusting their Skilled production workers CEE 32%growth strategies. EU 28% Romania 30%It is interesting to note the importance of Global 17%the management function of Chief Human Overseas unit heads CEE 7%Resources Officers within the leadership EU 17%team. According to the survey, 75% of Romania 2%respondents have them as direct Global 53%subordinates, the percentage equalling High-potential middle managers CEE 56% EU 51%the one in the CEE and being slightly lower Romania 50%than the global and EU average (79% and77% respectively). 0% 10% 20% 30% 40% 50% 60% Base: All respondents 70% nu şi-au evaluat companiile de peste mai mult Source: PwC 15th Annual Global CEO Survey, Romania respondents de un an - slide-ul 10 ‘Another Global survey we carried out in the Financial Services sector with what we call the millennials – the generation born between 1980 and 2000 and who are now starting to join the workforce in considerable numbers – has shown that loyalty has been seriously eroded during the financial crisis. The traditional talent management model where companies rewarded loyal and high performing employees with a clear career path and comfortable retirement no longer exists in the new economic reality. An option for companies is to focus on results delivered, allowing employees to choose how they work, including when and from where they work.’ Dan Iancu Partner, Financial Services Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 15
  • 18. Despite the fact that the Romanian Costs incurred by companies due to talent shortages rose more than expectedworkforce is among the most affordable Q: Have talent constraints impacted your company’s growth and profitability over the past 12 months in the following ways?in Europe, the changing financialand labour legislations bring about Global 24%fluctuations affecting company talent We cancelled or delayed or delay CEE 22%management. As such, the most serious a key strategic initiative EU 18%talent constraint impacting the level of Romania 20%growth and profitability is related to the Global 29%higher than estimated increase of We were be unable to pursue CEE 30%workforce costs (mentioned by 27% of a market opportunity EU 23% Romania 25%the respondents). Interestingly, thispercentage is the lowest among all Global 31%regions and countries analysed. The We werent able to innovate effectively CEE 27% EU 24%relatively low percentage of CEOs Romania 20%mentioning this constraint comes hardlyas a surprise, given that the previous Global 24% CEE 17%year was characterized by cost-cutting We couldnt achieve growth forecasts in overseas markets EU 19%measures across all industries in this Romania 18%area. Global 24%Other areas of impact include the limited We couldnt achieve growth forecasts CEE 24% in the country where we are based EU 23%capacity to pursue market opportunities Romania 20%(25%), along with the postponement ofstrategic initiatives and the lack of Global 21% CEE 16%efficient innovation (20% each). Our production and/or service delivery quality standards fell EU 12% Romania 14% Global 43% Our talent-related expenses CEE 31% rose more than expected EU 31% Romania 27% 0% 10% 20% 30% 40% 50% Note: Respondents who stated “yes” Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 16
  • 19. With the level of productivity of Romanian Information on staff productivity is paramount when making decisionsworkers consistently below the EU average, Q: When making decisions, how important is it to have information on each of the Q: For those areas that are important to you, how adequate is theit comes as no surprise that this ranks first following talent-related areas? information that you currently receive?in any talent-related decision-making Note: Respondents who stated “important” or “very important” Note: Respondents who stated “comprehensive”process. 93% of Romanian CEOs indicated Base: All Romania respondents Base: All Romania respondents who stated “important” or “very important” Source: PwC 15th Annual Global CEO Survey, Romania respondents to the first questionthis aspect, in line with their global and EU Source: PwC 15th Annual Global CEO Survey, Romania respondentscounterparts (94% and 92%, respectively).Factors of almost equal importance are the % of CEOs who believe that to have information is “important” or “very important”assessment of internal advancements, inaddition to employees’ needs, labour costs,the return on capital investment and the Return on investment on human capital 80%costs of employee turnovers, scoringresponses of over 80%.Appropriate and relevant information is Staff productivity 93%crucial for any educated decision regardingorganizations’ talent strategy. Respondents Assessments of internal advancement 89%indicated that the information at hand isnot sufficiently adequate to ensure clear-cut decisions are made. Only 32% of CEOs Employees views and needs 86%are satisfied with the information receivedon productivity matters (indicated aboveas an essential decision-making factor). Labour costs 86%At the same time, it seems that ‘moneystill talks’, given that responding CEOshave the most detailed and appropriate Costs of employee turnover 80%information in the areas of human capitalROI (40%) and labour costs (37%). 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%At the other end, the least amount ofinformation is reported in relation to % of CEOs who believe Information Gap: the information received CEOs believe informationthe assessment of internal advancement is “comprehensive” is important but don’t receive(28%), similarly to the answers provided comprehensive reportsby CEOs across the EU (28%). ‘In spite of last year’s economic growth, local business leaders are still concerned about the perspective of a tax increase as a response to the economic crisis. With workforce related expenses rising much faster than expected, CEOs are hoping for a possible reduction and capping of social contributions that would reduce the labour related fiscal burden and stimulate job creation.’ Mihaela Mitroi Partner, Tax Services, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 17
  • 20. In correlation to the scarcity of skilled CEOs invest in workforce development and want to see the returnsworkers mentioned previously, it is Q: Do you believe that business in general has a role in workforce development – by this Q: Is your company making direct investments in workforceencouraging to see that Romanian CEOs we mean the education and training of youths or adults other than your employees? development in any of the markets where you do business?place a high emphasis on the existence ofan adequate development framework for 84% Global 78%future potential employees (80%). As 88% CEE 78%such, CEOs seem to be more and more EUinterested in creating the adequate 82% 82%environment of growth for prospective 80% Romania 75%professionalized staff. Note: Respondents who stated “yes”Along the same lines, there is an Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondentsencouraging trend regarding companieswilling to invest in workforce Q: To what extent do you agree with the following statements about your company’s investments in workforce development?development. 75% of responding CEOsmake direct investments on their Global 44%company’s markets, only 3% less than the We require quantifiable returns to our business for any investments CEE 52%global and CEE percentage of 78%, we make in workforce development EU 48% Romania 61%indicating a growing concern relating tothe quality of the available workforce. Global 30% CEE 30% We invest primarily to enhance our reputationDeciding on whether to invest or not in EU 28%workforce development relies on a series Romania 27%of specific factors. Most Romanian CEOs Global 69%(61%) consider that quantifiable returns We invest primarily to ensure a future CEE 59% supply of potential employeeson their business are the decisive factor. EU 64% Romania 52%For their EU counterparts (64%) it is moreimportant to make sure there is a solid Global 55% CEE 58%workforce pool to draw their future staff We invest primarily to improve overall living and working conditions where we operate EU 41%from, an aspect that is also important for Romania 55%52% of Romanian respondents. The second Global 54%most significant aspect in the investment CEE 42%decision-making process, from the point of We are investing in formal education systems EU 46%view of human capital, is the improvement Romania 27%of the working conditions provided (55%), Global 58%a percentage similar to the global average. CEE 57% We are investing in adult/vocational training programmes EU 57% Romania 48% 0% 10% 20% 30% 40% 50% 60% 70% Note: Respondents who stated “agree” or “agree strongly” Base: Respondents who stated “yes” to the question ”Is your company making direct investments in workforce development in any of the markets where you do business?” Source: PwC 15th Annual Global CEO Survey, Romania respondents 15th Annual Global CEO Survey 2012 – Romania 18
  • 21. What does the future hold for human Investments in technology and partnerships seen as potential solutions for skills shortagesresources? Optimism has yet to move into Q: To what extent do you agree or disagree with the following statements about the future of your Global workforce?top gear when it comes to predictions onavailability of talent: 43% of Romanian Global 13%CEOs are somewhat confident in terms of CEE 1% In 3 years we will have moved operationsfuture access to the talent pool required because of talent availability EU 12%for their organisations while only 36% arevery confident. Global 38% In 3 years we will have made significant technology investments CEE 25%In terms of how they plan to mitigate specifically to circumvent skills shortages EU 24%the effects of a possible workforce deficit,30% of Romanian CEOs surveyed rely Romania 30% Global 33% Only 36% of the Romanian CEOson technology investment plans. At In 3 years we will have partnered with other organisations CEE 26% are very confident that they will have access to the talentthe same time, 27% of respondents specifically to circumvent skills shortages EU 24% needed to executeproject an increase in the number of Romania 27% the company’s strategypartnerships with other organizations, Global 22%for the same reason. In 3 years we will have acquired other companies CEE 11% specifically to circumvent skills shortages EU 17%With regards to the future dynamic of Romania 11%their global workforce, existing employees 0% 10% 20% 30% 40%have an advance over new recruits. 52%of Romanian respondents plan to develop Note: Respondents who stated “agree” or “agree strongly” Base: All respondentsand promote most of their talent from Source: PwC 15th Annual Global CEO Survey, Romania respondentswithin the company over the next threeyears. It is also important to note thatlocal talent is preferred in organisations’mid-term recruitment strategy to meetlocal market needs (68%). ‘When it comes to people, technology is a double-edged sword: while it opens countless opportunities through social media or even more sophisticated tools like Sonru, the system used by CERN, the European laboratory for particle physics in Switzerland to automate part of the interview stage of recruitment by using video, it also brings about challenges in terms of privacy, security and governance. In terms of solutions and efficiencies, the open data movement, which creates new possibilities through data exchange technology, could take matters to a new level.’ Ionuţ Simion Partner, Tax Techology, Information, Communication and Entertainment Leader, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 19
  • 22. Infrastructure improvement is seen as the main area of Government intervention7. The role Government Q: Which 3 areas should be the Government’s priority today? should play Global 47% CEE 43% Creating and fostering a skilled workforce EU 52% The Romanian business community Romania 27% has clear views regarding the priorities Global 57% that should be included on the CEE 66% Ensuring financial sector stability government’s agenda. While there is EU 67% Romania 41% no surprise regarding the main area in need of immediate attention, i.e. Global 21% infrastructure (70%, the same as their Securing natural resources that are CEE 10% critical to business EU 15% CEE counterparts and much higher Romania 11% than any other regions), the list of top three priorities is completed, albeit at a Global 17% CEE 5% considerable distance, by measures to Addressing the risks of climate change EU 17% ensure the stability of the financial Romania 2% sector (41%) – signalling CEO’s caution Global 53% in relation to the occurrence of other CEE 70% financial crises – and, last but not least, Improving the countrys infrastructure EU 47% by the creation of a skilled workforce Romania 70% (27%). Global 21% CEE 25% For these last two aspects, a Maintaining the health of the workforce EU 19% percentage of local CEOs significantly Romania 23% lower than respondents from all Global 37% other regions, except for China, CEE 33% believe that involvement is needed Reducing poverty and inequality EU 28% from the Government. Romania 20% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Maximum of 3 responses were provided Base: All respondents Source: PwC 15th Annual Global CEO Survey, Romania respondents ‘What we need to see is that the cost of the infrastructure bill is bound to increase every year. Whether we are talking about transport or energy, the existing one becomes obsolete and needs major overhauls, while the pace of the new developments is still very slow. One solution to speed up investments would be to conclude Public Private Partnerships, where risks are shared and the financing burden remains mostly with the private investor.’ Daniel Anghel Partner, Tax Services, PwC Romania 15th Annual Global CEO Survey 2012 – Romania 20
  • 23. Research methodologyand key contacts For PwC’s 15th Annual Global CEO Survey, 1,258 interviews were conducted with CEOs in 60 countries during Q4 2011. By region, 440 interviews were conducted in Asia Pacific, 291 in Western Europe, 236 in North America, 150 in Latin America, 88 in Central and Eastern Europe and 53 in the Middle East & Africa. 44 interviews were conducted in Romania. Note: Not all figures add up to 100% due to rounding of percentages and to the exclusion of “neither/nor” and “don’t know / refused” responses. For further information, please contact: Ruxandra Băndilă Director, Marketing and Business Development +40 21 225 3544 ruxandra.bandila@ro.pwc.com
  • 24. www.pwc.com/ro/ceosurveyPwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 168,000 people in 158 countries in firms across the PwC network share their thinking, experience and solutions to developfresh perspectives and practical advice. See www.pwc.com for more information.This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professionaladvice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC 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 any decision 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 PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual memberfirms of the PwC network. Each member firm is a separate legal entity and does not act as agent 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 ofany of its member 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 of any other member firm nor can it control the exercise of anothermember firm’s professional judgment or bind another member firm or PwCIL in any way.