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CEOs, Growth And The Future

The Light at the End of the Tunnel

CEOs, Growth And The Future

China has set a target of 6.5% growth for 2017, with hopes to continue the same increase of 6.5-7% from 2016. With this figure in mind, considering it is a 25-year low, are CEOs as confident as the Government to continue with such successful growth?

The target is asserted on the basis that it will help promote market stability, “the need to maintain steady growth is to ensure employment and improve people’s lives,” according to the Premier Li Keqiang’s report at the opening of the annual meeting of the National People’s Congress.

However, it should be noted that this target is 0.2% lower than 2016’s growth, marking another year of falling growth rate, steadily, from 10% in 2010. One aspect of the growth slowdown is the increasing connectedness and globalisation of trade, commerce and finance.

CEOs are Confident about Growth

On a global level, according to the 20th CEO Survey, of almost 1400 CEOs from 79 countries, including 182 from mainland China and Hong Kong, 38% are very confident about 2017 short-term business growth, with a total of 51% being very positive about the longer-term prospects for growth. Furthermore, according to the report, Beijing has become the most important city for developing their companies, with Shanghai and Hong Kong close behind. This confidence is interesting, considering that the greater convergence of global trade has also brought a divergence in values and systems, from differing regulations cross-border to skill shortages.

Despite the increasing sophistication in automation, AI and other technological systems, CEOs, according to the report, are recognising the need for talent acquisition. Interestingly, the number of industrial robots was 700,000 in 1997, growing to 1.8 million today, with PwC expecting 2.6 million by 2019. Yet, CEOs are diversifying their skill sets through tactical hires – employing more individuals, not fewer as 52% plan to increase their employee headcount, on the back of 77% fearing that a shortage of key skills could impair company growth.

Comparatively, whilst 79% of 5000 members of the public in 22 countries believe technology will cause job loss, only 16% of the CEOs surveyed plan to reduce their employee count. This demonstrable gap is caused by CEOs seeing the value in combining human talent with augmented technology – “marrying technology with uniquely human capabilities.”

Moreover, this can be seen considering the CEO priorities in the report, with 23% seeing innovation (a combination of human talent and technology) being the top priority in 2017. Lastly, technology also creates more jobs for designers and engineers, particularly those responsible for implementing, maintaining and monitoring.

Security and Trust

To this end, with companies becoming increasingly reliant on internal digital infrastructures and networks, there is an increasing risk of cyber security breaches. A data breach is a public relations disaster because it can lead to customers and clients severing their connection to the company out of fear that their interaction can impact the other areas of their lives. Due to this, users would rather close down their accounts for fear of ripple effects.

The brand reputation also has an impact on attracting the best talent, the best suppliers and creating better opportunities for developing relations with partners. Moreover, Semafone, a UK-based fraud prevention company, found that businesses are less likely to trade or conduct deals with businesses that have been breached, particularly if the breach included sensitive data. Thus the breach can translate directly into a financial loss for the enterprise.

According to the survey, CEOs understand this challenge, noting that trust is an opportunity, with 64% of CEOs surveyed believing that “the way their firm manages data will be a differentiating factor in future.” Whether or not the lessons learned from Yahoo last year will catapult security onto the meeting agenda has yet to be seen, but it is clear that CEOs are becoming aware of the increasing influence of systems on business.

Globalisation

Connecting more businesses (62%), increasing the free flow of money (60%) and creating a larger, more skilled workforce (37%), are all benefits of globalisation identified by the CEOs in the report, yet, 44% argue that it has done nothing for the gap between rich individuals and poorer ones. Moreover, some CEOs believe that globalisation has not mitigated climate change nor pushed for fairer regulations, with one CEO suggesting that businesses and governments need to adopt non-adversarial ways of working together.

On the one hand, one could argue that, as one has already seen in the Brexit vote alongside protectionism from the current President of the United States, there will be a rise in economic nationalism and national protectionism. If the current trend continues then one could see “a reversal of some of the globalisation that has occurred,” suggests John Patrick Hourican, the Bank of Cyprus CEO.

Yet, on the other hand, new company models are going to arise, that will take advantage of the ability to do business anywhere, calling for a greater diversity in skill sets, across borders, calling on talent from across the globe whilst simultaneously doing business there. This will require greater legal oversight, ensuring fairness and equitable regulation.

A Change in Stance?

Within this, the report also raises concerns from some CEOs about the continued validity of the ‘Shareholder primacy’ approach, that the company is to prioritise shareholder value. One can see the arguments for paying greater attention to stakeholder interests, as companies on a global scale are economic powerhouses that influence lives on a large scale. From changing the environment, both for raw materials and environmental policies like pollution reduction, to controlling the lifestyles of individuals, from online shopping to employment, companies play a very important role on the global stage.

As a result, several CEOs argued that it is important for companies to take the lead on making globalisation work for everyone. One such organisation taking this step is the RSA Inclusive Growth Commission, an independent and multi-stakeholder body in the UK, established to investigate meaningful and practical ways of producing more inclusive and prosperous results from local economies.

Further, on this point, is wealth distribution, especially the impact of technology entering the workplace. As one has already seen, several CEOs, including Elon Musk of Tesla, have shown support of a universal basic income, which will provide individuals with a monthly standard amount of money to expend on essentials.

This results from not only the reports that workplace automation will reduce jobs, alongside decreasing the demand for employees but also that automation will reduce the price of products and services, making them more affordable. Whether the move will come from governments or companies first is a key question, but what is certain is that the question is approaching. How can governments and companies work together to help those who are ‘ disenfranchised by globalisation?’

Conclusion

The role of CEOs at the helms of global companies is an important and critical one. Not only are they drivers for change but they also maintain the status quo.

Firstly, these CEOs will be responsible for striking the right balance between man and machine, from automating their work processes to utilising AI to benefit the business. Within this challenge comes the strategic decision of hiring the required talent whilst also reviewing the need for certain types of workers, who may be replaced by technology. Acquiring the necessary talent to remain competitive is a key challenge in 2017.

Secondly, CEOs also face a critical challenge in the way that they will handle security, connectivity and consumer trust. From implementing AI systems to policing their data usage, their interaction with consumers, and thus by extension, the trust relationship, are key components of business strategy this year. If a loss of trust leads to poor business value, then strong trust can lead to greater value generation.

Lastly, a key question for CEOs is the consideration of stakeholders in the age of globalisation. How can companies ensure a fairer distribution of the benefits of globalisation? As mentioned, global, multinational companies are economic powerhouses and thus carry weight in ensuring the fair regulation of activities from Governments. CEOs understand their power as drivers for change, from corporate social responsibility programmes to streamlining business practices by ethical means, and 2017 will no doubt test this relationship further.

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