Company purpose, employee engagement, top of CEOs’ COVID-era focus
While COVID-19 has been a traumatic experience for everyone and has damaged economic activity, it has nonetheless been a catalyst for some positive and long-lasting impacts on businesses.
This is clear from KPMG’s annual survey of global and Australian CEOs. The original survey of 1300 CEOs across the globe was conducted in January and February, before COVID-19 hit, but was supplemented by a second study of 315 leaders in July and August (including 50 from Australia) to understand how CEO thinking has evolved during the crisis.
Normally we would focus on the business confidence levels and growth projections but for me, in this very different year, there are other findings of interest.
The first is that a large majority of business leaders said they felt a greater emotional connection to their company’s purpose since the shutdown, and that it was helping to drive action to meet the changing needs of their stakeholders.
Australian CEOs came top (90 percent) of the eight countries re-surveyed in July in terms of using purpose to provide a framework for making quick/effective decisions during the COVID-19 era. Almost as many said they felt a stronger emotional connection to their purpose since the pandemic started; and a similar number said they had had to re-evaluate that purpose, given COVID-19, to better address the needs of their stakeholders.
For many CEOs the impacts of the pandemic have been felt close to home – both in Australia and overseas 40 percent said a member of their extended family had had their health affected by COVID-19 and over 70 percent said their personal experience of the impact of the virus had reshaped their strategy for addressing the business challenges posed by the crisis. This may help explain why the purpose of their business has grown in importance to so many.
A second notable finding is just how much employees are at the heart of this greater focus on purpose for CEOs, with staff engagement and retention rising in priority. Business has adapted quickly to the new environment, and of the Australian CEOs, 70 percent said widespread flexible/home working had widened their potential talent pool; 72 percent said staff communications had improved; and 78 percent said they would build on use of digital collaboration and communications tools.
The biggest indicator of the enhanced focus on employees in 2020 is that talent risk has moved from 11th place in the list of leaders’ top risks in January, to first both here and overseas. This was mirrored by a similar surge in the risk list of supply chain risk, which was barely mentioned in the January polls, but was second in July, reflecting the huge changes to the business environment.
The third issue that stood out for me was how much digital transformation has accelerated during the crisis. More than three-quarters of CEOs here and internationally said the crisis had brought forward the provision of digital customer experience by either years or months and that it had sped up digitisation of internal operations, and the creation of digital models and revenue streams. Separate KPMG Australia research recently found that most consumers now want either wholly or mostly online service in areas like financial services, so this development will have positive and permanent effects.
There is general agreement that the societal impact of business – the ‘S’ in ESG (Environmental, Social and Governance) – has risen in importance during the pandemic. While climate change has had to take a temporary backseat in terms of immediate priorities, 84 percent of Australian leaders said dealing with climate risks effectively would be crucial in their roles over next five years. This was higher than the 65 percent of overseas CEOs who said this. There was a widespread desire to ‘lock in’ the climate change gains made during the pandemic and to focus on a green recovery.
So, what of the business outlook? Compared with January, there has, unsurprisingly been a slip in confidence among both Australian and global CEOs in terms of the 3-year growth outlook for their businesses – but not hugely so. Almost three-quarters of Australian leaders were still confident about their earnings outlook, compared with 86 percent earlier this year. There were larger falls in confidence in terms of their industry sector and the national and global economies, although it is not unusual for leaders to be more confident about their own company than the broader economy. An innate belief in one’s own business is important, especially in challenging times. The COVID-19 crisis has also hit their pockets – half of Australian CEOs and 63 percent globally said they had taken a remuneration cut.
The findings of our annual survey reflect a unique and tumultuous year. And for all the difficulties, much has been learned which will benefit how we work in the future.