40% question credibility of their company’s plans to navigate crisis
A third of CEO/board level respondents are sceptical about their own plans
Many hard-hit companies are not sufficiently focused on survival and strong companies may be missing opportunities
London, 20 January 2009 — a new survey conducted by Booz & Company of more than 800 senior managers across the world has revealed that many companies—whether financially weak or strong—are struggling to make the right moves in the current economic environment, with many wavering in their confidence of their leadership’s ability to navigate the crisis. The survey revealed that:
- 40% of senior managers doubt that their company’s leadership has a credible plan to address the economic crisis, while 46% are not sure about their leadership’s abilities to carry out the plan, credible or not. Even among CEO/board level respondents, a third are sceptical of their own plans;
- 65% of hard-hit companies are not doing enough to ensure their survival, such as accelerating efforts to dispose of assets or secure external funding; in total a third of all companies appear to be performing inappropriate actions and one-quarter of financially strong companies are not taking advantage of opportunities to improve their position in the crisis. However,
- 54% of global respondents still expect the economic crisis to ultimately have a positive impact on their company’s competitiveness.
Jake Leslie Melville, a partner at Booz & Company in London, commented: “It appears that the speed with which the crisis hit and the subsequent volatility has left many senior leaders uncertain of how to move forward and whether they should be in survival or opportunity mode.”
The Booz & Company survey, conducted in December 2008, explored how well corporate executives are handling the global economic crisis and the actions they are taking. Respondents represented all major industries and were spread across 65 countries. Thirty-seven percent of respondents were CEOs or reported directly to CEOs and a further 24% were two layers below the CEO.
The results show that in many respects, the reason that the recession has hit harder in the UK than in other countries may be because more companies have been caught off-guard and are not sure what action to take. In the UK, according to respondents, a total of 40% of companies—financially weak or strong—appear to be performing inappropriate actions, compared with a third globally.
The survey concludes that, in many cases, companies are not following the course that is best suited for them. Respondents’ companies were categorised by Booz & Company as either strong (characterised by both financial and competitive strength), stable (strong financially but weak competitively), struggling (weak financially but strong competitively), or failing (weak in both areas). Based on an analysis of responses, Booz & Company found:
- While struggling and failing companies would be expected to accelerate efforts to improve working capital positions, slash overhead, drive process improvements and renegotiate deals with suppliers, surprisingly many are not. Between a quarter and a third of respondents say their companies are pursuing such strategies no more aggressively than they were before the crisis.
- Stable and strong companies are more focused on cutting costs across the board and conserving cash than on opportunities to strengthen their competitive positions.
- While stable companies would be expected to capitalise on the crisis by buying companies with compelling products or brands but weak finances, or pursuing other growth initiatives, 21% are pulling back on mergers and acquisitions, as are the same percentage of strong companies. One in five stable companies is also investing less in new products or slowing moves into emerging markets.
Other key findings are:
- “Green” efforts will be significantly delayed due to the recession: 49% of UK respondents (compared with 40% globally) expect “green” and other corporate social responsibility initiatives to be slowed down significantly due to the downturn. The pullback will be especially pronounced in transportation and energy, with 51% and 47% respectively of global respondents in those industries saying CSR agendas will be delayed.
- Optimism overly rosy? Despite the depth of the challenges they face, 54% of all respondents believe that the crisis will ultimately have a positive impact on their companies’ competitive position. Further to this, 75% of managers express a rosy view of their companies’ financial strength; only 13% said they worked for companies that are financially weak. In the UK, 72% believed that their company is financially strong, whilst 15% thought that they needed urgent financial support.
Jake Leslie Melville commented: “This level of optimism was quite surprising and was universal across regions and industries. Indeed, emerging markets respondents were even more optimistic about the future than developed economies - 59% of respondents were positive in emerging markets, compared with 53% in North America and 52% in Western Europe.”
- Scepticism grows further down the management chain. Among managers who don’t report directly to the CEO, 51% think senior leadership lacks the capabilities to carry out their crisis plans, a point that seems at odds with the optimism expressed by many respondents. “Either top executives have not done enough to communicate the elements of their plans, or the plans simply don’t resonate with the people who must make them happen,” said Jake Leslie Melville.
- Financial industry executives are alone in praising collaborative efforts to resolve crisis. Forty-three percent of financial industry respondents believe business, government and union leaders are working together effectively to stabilise their industry. Scepticism about stakeholder collaboration was highest in healthcare and pharmaceuticals (56% are critical of efforts); telecommunications and media (42%); and transportation and commercial services (41%).
Booz & Company's survey about the economic crisis was fielded in December 2008 and generated 828 responses. The respondents represented many major industries, from financial services to healthcare to energy to consumer goods. Thirty-seven percent of the respondents were CEOs or people who reported directly to CEOs; another 24 percent were two layers below the CEO. Geographically, the survey captured responses from managers in 65 countries. Western Europe was the most highly represented, accounting for 38% of the sample, followed by North America, with 30%, and emerging markets with 28%.