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Countering the Global Slowdown: CEOs Seeking to "Control the Controllable" to Create Competitive Advantage in 2013

Countering the Global Slowdown: CEOs Seeking to "Control the Controllable" to Create Competitive Advantage in 2013

David Hoffman, Charles Mitchell 2013年04月18日

????Another indication that the definition of talent is being broadened is the drop in ranking for improve leadership development programs. It was the 10th ranked strategy in 2012 and 14th in 2013.

????The relatively high ranking of redesign financial rewards and incentives in China (6th) compared to the rest of the world (globally 13th) reflects the need to adjust wages that have skyrocketed in recent years. Slower economic growth in China may mean that talent job hops less and has less room to demand higher pay and benefits because of fewer employment choices.

Sustainability is a Priority for CEOs

????Talk about marching to a different drummer. Sustainability, which has never ranked particularly high globally or in the United States and Europe in previous surveys, dropped out of the top five challenges in Asia in 2013 but not so in China. With growth slowing in the region, CEOs in other parts of Asia appear to be turning to more immediate concerns that can affect growth, but sustainability remains the number three challenge in China, underscoring the commitment to the government’s aggressive sustainability program announced in the 12th FYP. Contributing positively and demonstratively to the sustainability agenda in China is also seen as an increasingly important component to the value proposition for multinational corporations operating in the country.

????With the public’s perception about quality of life and environmental issues changing, there is clear recognition of changes in consumer tastes as well. Develop portfolio of sustainable products and services, is the top strategy chosen by CEOs in China to meet the sustainability challenge. Balancing short-term operating goals with the need for long-term strategic investments is clearly a concern for CEOs in China, who see the need to balance the demands of short-term performance with a longer-term strategic view that may require changes in business models, processes, products, and markets. They rank engage with stakeholders to manage short-term performance pressures with long-term sustainability goals as their second most favored strategy to meet the sustainability challenge.

????Following high profile incidents involving sub-contracted manufacturers in China, CEOs there, along with their peers in other regions are sensitive to the potential damage such incidents can cause – commercially and reputationally. Encourage improvements in sustainability performance from suppliers and other business partners is the third rank sustainability strategy by CEOs in China, and a top five strategy in Europe and Asia as well. Strangely, in the United States, where the media has created a frenzy over such incidents involving Asian suppliers and US companies, it ranks at the bottom of the strategy list.

Is Tech Still a Magic Bullet?

????Compared to their peers across the globe, CEOs in China are more apt to look to technology for solutions to their challenges. They rank invest more in new technologies as their top strategy to meet the operational excellence challenge. It is 8th in Europe and 9th in the United States. CEOs in both those regions are more focused on reducing baseline costs as a way to improve operations. It is 3rd in Europe, 4th in the U.S. but 12th in China—a clear reflection of the business realities.

????(Interestingly, in India CEOs rank focus on reduction of baseline costs their top strategy, a reflection of a tight talent market that is creating pressure on wages especially in the technology and business process outsourcing sectors. Also structural rigidities in labor, product, and capital markets add a significant cost to businesses in India. With the predicted slow down in growth, senior business leaders in China suggest that controlling costs will become a much more important issue in the region in coming years, unless higher growth returns).

????The emphasis on technology can also be seen in strategies to meet various challenges. CEOs in China have technology as the number one enabler of innovation and are the only group to have foster research and development in sustainable technologies as a top five strategy to meet the Sustainability challenge.

????The emphasis on technology makes sense from a macroeconomic view. Throughout Asia, technological progress is critical to maintaining current high returns and speeding up the productivity “catch up” with mature economies. It also helps emerging economies climb the value chain. In the more mature economies, in contrast, there are signs that the contribution of technology to growth rates and productivity has peaked, and intangibles (e.g., human capital and training and development) are emerging as more important contributors to future growth. Investments in education, research and development, and other intangible assets are becoming more important as a share of total spending, but they also take longer to pay off in terms of growth.

Some Oddities

????Other interesting observations and data points from The Conference Board CEO Challenge Survey 2013:

????? Similar to last year’s survey, few CEOs anywhere in the world have serious concerns about cyber security, though there are some indications that recent high profile incidents involving attacks on U.S. banks in September may be capturing the attention of some. As a risk mitigation factor, increase funding for cyber security moves to eighth in risk mitigation strategies for U.S. CEOs—up from twelfth a year ago. It also gains some traction in Asia, where it is sixteenth (after being unranked in 2012). In China it is ranked 15th out of 18 strategies after being unranked in 2012.

????? Roughly two-thirds of the executives surveyed by The Conference Board for a 2012 report on IP protection, Protecting Intellectual Property and Preventing Corrupt Activities in the Global Supply Chain, felt theft of trade secrets presents an extensive risk in emerging markets. It appears that respondents to the 2013 CEO Challenge survey are not overly concerned about this potential threat to innovation. Strengthen intellectual property and patent protection ranks no higher than eleventh in any of the regions as an innovation strategy. It is 12th in China.

????? Interestingly, raise capital reserves, last year’s second-ranked strategy to deal with Political;/economic risk globally and in Europe and a top-ranked strategy in Asia, has given way to concerns over how to manage currency risk, which is in the top five strategies for Europe (first rank), Asia (fourth rank), and the United States (fifth rank). Raising capital reserves remains a critical strategy for CEOs in China. It is ranked 2nd, while managing currency risk is 7th.

Comparing China with its neighbors

????Human Capital, Innovation, and Operational Excellence are challenges shared by CEOs across Asia. But a look at the top five challenges cited across seven countries in the A/P region and India shows a jumble of priorities that reflect the specific business environment in each country.

????Interestingly at number seven, China CEOs give Government Regulation the lowest ranking of any country in the region even though the conventional wisdom is that dealing with the bureaucracy in China can be a hindrance. (It seems not to be the case for local firms.) Meanwhile Hong Kong gives it one of the highest at number four.

Comparing China to 9 other
countries/region in the?area

Importance listed from left to right

China
Innovation Human Capital Sustainability Global political/
economic risk
Operational excellence
Singapore Human Capital Operational excellence Innovation Global political/
economic risk
Customer relationships
Hong Kong Human Capital Customer relationships Global political/
economic risk
Government Regulation Operational excellence
Malaysia Innovation Human Capital Sustainability Government Regulation Operational excellence
Phlipines Human Capital Operational excellence Customer relationships Government Regulation Innovation
Thailaind Human Capital Operational excellence Innovation Customer relationships Corporate brand
and reputation
India Human Capital Global political/
economic risk
Innovation Operational excellence Government Regulation
Australia Customer relationships Human Capital Operational excellence Innovation Corporate brand and reputation
Indonesia Innovation Human Capital Operational excellence Customer relationships Government Regulation
New Zealand Global political/
economic risk
Customer relationships Sustainability Operational excellence Human Capital

?

Is the Party Winding Down?

????Within the HR profession in China, there is increasing concern about the potential gap between employee expectations and business reality in a slowing economy: The region has developed at breakneck speed for decades and now with predictions of slower growth there will be less opportunity and less room for promotion—creating a gap between reality and expectations for a whole generation of young employees who have experienced nothing but unbridled boom times. While the party hasn’t ended it may be winding down. For this generation salaries went only one way—up, often out of proportion to overall business performance. So there is talk that salary inflation should slow down is the economy does indeed grow more slowly. But with the war for talent still in full force, it is difficult to envision a company that will be willing to be the first to tie business performance directly to salaries for a generation that has come to expect quite the opposite.

?

????David Hoffman is vice president and managing director of The Conference Board China Center, based in Beijing, Prior to joining The Conference Board, Hoffman led the Technology-InfoComms-Entertainment Advisory practice of PricewaterhouseCoopers in China for 20 years.

????Charles Mitchell is the global director for knowledge content & research quality at The Conference Board. Based in Hong Kong, Mitchell spent more than two decades as a journalist for UPI and the Detroit Free Press based in Johannesburg, Nairobi, Moscow and Washington.

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