In his 2018 letter which accompanied PricewaterhouseCoopers’ (PwC) 2018 CEO survey, Bob Moritz, the company’s international chairman recommended several thing’s CEO’s must do if they are to survive in this century.
For the last 20 years, PwC has conducted an annual survey of 1293 CEO’s in 85 countries.
• 40% of these companies had revenues of $1 billion or more.
• 35% of companies had revenues between $100 million and $1 billion.
• 20% of companies had revenues of up to $100 million.
• 56% of companies were privately owned...
PwC’s 21st CEO Survey reveals surprising faith and optimism among chief executives in the economic and business environment worldwide. They state that this year saw a jump to the highest-ever level of CEO optimism regarding global growth prospects over the next 12 months. For the first time since they began asking the question in 2012, the majority of CEOs surveyed believe global economic growth will “improve.” In fact, the percentage of CEOs predicting “improved” growth doubled from last year.
The survey quotes Glenn Hubbard, economist and dean of Columbia Business School, who observes: “We are in a cyclical recovery that has been going on for many years since the financial crisis. People have gotten more optimistic. I think in most parts of the world, CEOs believe that changes in policy are going to continue to improve growth.”
While Mr. Moritz addressed the present levels of optimism companies reported with the economy overall, he wrote that this 12 months’ findings expose a neighborhood of CEOs who’re seeing a troubling misalignment of financial enlargement and social growth, essentially fueled through source of revenue inequality. Workers everywhere are troubled by higher living costs, have less savings and are concerned for their future economic wellbeing.
CEOs are concluding that maximizing quarterly financial performance isn’t the trail to sustainable, long-term price. Treating staff as greater than an expenditure or incorporating a societal goal into your corporate goals is now not observed as feel-good advertising, but instead as a need for survival.
The PwC annual survey lays out several markers to follow of which Mr. Moritz focused on four essential elements a company must do if it is to survive:
First: Adopt new measures of prosperity that look beyond economic growth to social progress. Develop metrics beyond monetary targets. Financial performance is an essential element underpinning any market economy, but it cannot be the only measure of success in a globalized economy. Other, broader measures, reflecting target outcomes in societal terms, must also be considered. “As business executives, we can supplement measures such as GDP and shareholder value with indicators of quality of life.”
Asking more qualitative questions is critical: What are we doing on talent? What is our pipeline of innovation? How do our actions align with our mission statement? Are our customers satisfied? Are we contributing to our community and society as a whole? And, as we have seen in headline after headline, incentivizing monetary goals alone leads to the accounting control fraud we have seen with organizations like Wells Fargo.
Second: Foster a beneficial place for technology in our society. Artificial intelligence expands technology’s potential for both good and ill. There is the clear risk that it may displace more and more of the human workforce and contribute further to social isolation and the disruption of communities.
These technologies can also create a positive impact and jobs that may be more creative and fulfilling.
What is your organization doing right now to prepare for this eventuality?
Third: Educate for the future. Our educational systems need to equip and empower a global workforce with the right skills to succeed, and the support of private enterprise is vital to that effort. Companies need to invest in worker training to prepare their workforce for the wave of the future so they do not become obsolete. Employees need and want to be valued, with studies showing that those companies meeting those employee needs also reflect better stock performance.
Fourth: Commit to a purpose. These trends all highlight the heightened expectations of the societies and communities in which businesses operate. Every business needs a clear purpose – one that goes beyond financial goals to incorporate a broader set of shared values and behavioral expectations.
The above four premises should act as vital guideposts and benchmarks for every important decision a company makes. CEO’s and companies need to commit to a goal that includes all stakeholder involvement, employees, communities and, yes, shareholders as well; however shareholders are a part of the process, not the only measure, as so many CEO’s have focused on in the past.
Organizations need more leaders who are aware of and deeply connected to the purpose behind their work. Purpose defines ‘who’ a business is and why it exists; values and behaviors define an ethical culture.
For instance, Apple’s mission is about being a leading computer company, however their purpose from the very beginning was to create “beautifully designed, innovative tech products.” A mission is the what/how you’re trying to accomplish, and a purpose is the why.
What is your organization’s why?
Bill Damon, the director of the Stanford Center on Adolescence and author of Path to Purpose defines purpose as “a long-term, forward-looking intention to accomplish aims that are both meaningful to the self and of consequence to the world beyond the self.” Purposeful leaders act in ways that are personally meaningful and socially beneficial.
It is gratifying to see a direction like this being voiced, albeit PwC’s findings are not new news. What is interesting is that more CEO’s are agreeing on the necessity for it and are taking steps to govern themselves more ethically and responsibly. One of the forerunners of this business philosophy is John Mackey, co-founder and former CEO of Whole Foods and co-founder of the Conscious Capitalism movement. Their tenets: Higher purpose, Stakeholder integration, Conscious leadership and Conscious culture and management are at the core of the PwC findings.
Corporate social responsibility has been around for many years. PwC’s findings reflect how critical incorporating a societal goal is to the welfare of a company and all its stakeholders, not just its shareholders.
I hope we are seeing a trend to more ethical responsible standards for a company. Black Rock’s Chairman and CEO, Laurence (Larry) D. Fink, caused a furor in the business world as well with his January 2018 letter to Blackrock’s shareholders. He stated “The public expectations of your company have never been greater. Society is demanding that companies … serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society. Companies must benefit all their stakeholders… Without a sense of purpose, no company can achieve its full potential.”
In the PwC report Mr. Moritz stated, “From environmental footprints to social impacts to investor demands, businesses are scrutinized by an ever-wider array of stakeholders. If they fall short in any respect, they erode a vital commodity: trust. In an age of enhanced transparency and heightened accountability, a loss of trust has profound consequences.”
“Perhaps the most important job CEOs — and the broader business community — can do to contribute meaningfully to social progress, as well as business results, is to commit to a common purpose, a shared set of values and behaviors, and drive them through our organizations.”
With views like these coming from respected business leaders I believe we may have the opportunity to prevent another ethical and financial shipwreck.