As UK CEOs continue to focus on recovering from the impact of the pandemic and building more resilient businesses, for many the priority remains how to manage capital and preserve cash. But they’re also looking to the future and how they’ll need to adapt to thrive in the new reality of a post-COVID-19 world.
Faced with ongoing uncertainty, UK CEOs are finding having a purpose more important than ever in how they steer their businesses. They’re using that purpose to frame a re-evaluation of their strategies and how they operate. They’re placing a large emphasis on how they can develop their talent and how to accelerate their digital capabilities to create more sustainable and agile businesses. They’re making these changes at a speed often unthinkable before the pandemic.
In July and August 2020, KPMG International conducted a pulse survey of 315 chief executives across the globe, to understand how their thinking has evolved during the crisis. Below we provide the UK view, based on responses from 50 UK CEOs.
UK CEOs have felt a stronger emotional connection to their organisation’s purpose since the pandemic began and have used it to help them navigate the many challenges the crisis has brought their way. Over four-fifths (84%) agree that purpose provides a clear framework for making quick and effective decisions in response to COVID-19. It’s helped them better understand and empathise with the needs of their customers, employees, partners and investors. And it’s helped them better understand the needs of the communities in which they operate too.
What’s evident is how many UK CEOs value having a strong sense of purpose compared to some of their global counterparts. Yet the pandemic has also given them cause to stop and reassess their organisation’s purpose. 82% agree that they had to re-evaluate their purpose as a result of COVID-19 to better address the needs of their stakeholders. Listening carefully to all of their different stakeholders and encouraging open dialogue, will be an important part of this re-evaluation.
of UK CEOs agree that purpose provides a clear framework for making quick and effective decisions in response to COVID-19
For leaders, there’s a greater obligation to be more visible, empathetic and engaged.
CEO, NatWest Group (formerly RBS)
As well as ensuring they have a more compelling purpose, UK CEOs are looking to digital transformation to help them respond to the changing market as they strive for growth.
As businesses have dealt with the impact of the pandemic, including how and where their people work and rethinking how they serve their customers, the importance of enterprise-wide digital transformation has become increasingly evident. Four-fifths (80%) of UK CEOs say the pandemic has accelerated the creation of a seamless digital customer experience.
There’s also been a strong focus on how digital transformation can deliver more resilient operating models, provide new revenue streams and enable the workforce of the future. And UK businesses have risen to the challenge, implementing new technologies at breakneck speed. 48% of UK CEOs say this sharp acceleration has put them years in advance of where they expected to be. 78% say that the pandemic has accelerated digitisation of operations and the creation of a next-generation operating model.
One of the challenges for CEOs is to identify where to invest and expend effort. Which investments will only provide short-term benefits as an immediate reaction to the pandemic and which will generate long-term value? UK CEOs say the greatest challenge they’ve faced in accelerating digital transformation is ‘lack of insight into future operational scenarios’. They recognise the need to keep up the pace of digital change in moving from pilots to scaled deployment.
Read more on digital acceleration and where to focus your efforts.
I think we’ve seen 3 to 4 years of progress in just 3 to 4 months, in terms of acceptance of what the new world needs to look like.
CEO, Thomson Reuters
Unsurprisingly, the pandemic has changed CEOs’ outlook on the biggest risks to their business. When we surveyed them at the beginning of 2020, UK CEOs didn’t rank supply chain risk as even a top-ten threat and now they consider it the biggest threat to growth over the next three years. Perhaps with Brexit in mind, it appears to be of particular concern for UK CEOs. 92% of them say they’ve had to rethink their global supply chain due to the disruptive impact of COVID-19, compared to 67% across our global sample.
COVID-19 has highlighted the importance of building resilient, flexible supply chains – ones that can withstand shocks and offer the agility to pivot to new opportunities. That’s going to be critical for UK businesses that face continued uncertainty in the shape of Brexit. It’s also going to be important to meet changing customer demands. UK CEOs appear to be feeling under greater pressure than those in other countries to bring production closer to home. They ranked it as their joint top reason for rethinking supply chains.
92% of UK CEOs say the disruptive impact of the pandemic has forced them to rethink their global supply chain.
UK CEOs ranked talent risk as the second biggest threat to growth over the next three years. When we surveyed them at the beginning of 2020, before the pandemic, this was the risk they were least concerned about. It also ranks as the second biggest threat for US CEOs and is top of the list across our global sample.
CEOs are acutely aware that talent will be key to driving long-term growth and building an organisation that is fit for the future. The increase of remote working accelerated by the pandemic opens up the market much more and makes talent retention a hotter issue. It’s already evident that some of the jobs people are doing today won’t still exist in the not-too-distant future. And accelerated digital transformation will require a more digitally savvy workforce. As automation of operating models accelerates, upskilling and reskilling will be critical for people’s employability and effectiveness.
It’s apparent that UK CEOs recognise the importance of developing their employees’ skills and capabilities to survive and thrive. Asked what investments they would prioritise to meet their strategic objectives, UK CEOs were split almost 50:50 between buying new technology and developing workforce skills. That’s in stark contrast to the US, where almost three-quarters of CEOs are prioritising digital investments.
For many organisations, lockdown saw remote working kick in literally overnight. That has forced businesses to make significant changes to the way they work and communicate with their employees. UK CEOs acted quickly, and many say they will continue to build on the use of digital collaboration and communication tools as we migrate to a more digital workplace.
Almost three-quarters (72%) of UK CEOs say they’re planning to downsize office space. That could see remote working become the new normal for many employees. CEOs are embracing the positives this could bring, including access to that wider talent pool. Of course, this may not benefit all locations or industries – with some seeing local talent disappear. And for many businesses, the very nature of their work makes remote working unrealistic.
of UK CEOs are planning to downsize their office space
‘Talent risk’ was the threat that UK CEOs were least concerned about in January 2020. It is now ranked the second biggest risk - up 10 places.
The pandemic has created what will be a career-defining economic challenge for most CEOs. Given the scale of that challenge, many were worried that the environmental, social and governance (ESG) agenda would fall down the corporate agenda. The responses of the UK CEOs suggest that’s not the case – with ESG remaining firmly part of their purpose. 78% say that managing climate-related risks will play a part in whether they keep their jobs or not over the next five years. That’s ahead of the global average of 65%. And 60% of UK CEOs say they want to lock in climate change gains made as a result of the pandemic.
The pandemic has also brought greater emphasis to the ‘S’ of ESG – social – with almost three-quarters (74%) of CEOs saying their response to the pandemic has caused their focus to shift to the social component of their ESG programme.
To move forward, measuring and communicating the impact of environmental improvements, as well as social and governance performance, will be critical for businesses. Earlier this year at the World Economic Forum (WEF) in Davos, the WEF’s International Business Council published a paper with a proposed set of ESG metrics and reporting disclosures. Led by the WEF and developed by a task force composed of subject matter experts from Bank of America, KPMG and the other Big 4 accounting organisations, the paper identifies a set of ESG metrics. Adoption of these metrics can bring consistency, comparability and transparency to reporting of non-financial information and ESG aspects of business performance, critical to demonstrating long-term value creation.
say managing climate-related risks will play a part in whether CEOs keep their jobs or not over the next five years
74% of CEOs say their response to the pandemic has caused their focus to shift to the social component of their ESG programme.
The KPMG 2020 CEO Outlook provides an in-depth 3-year outlook from thousands of global executives on enterprise and economic growth. The survey offers a unique perspective on the mindset shift of global CEOs since the lockdown.
KPMG initially surveyed 1,300 CEOs in January and February, before many key markets were beginning to feel the full impact of the pandemic. In July and August (between 6 July to 5 August 2020), KPMG conducted a follow-up survey of 315 chief executives across the globe, including 50 CEOs from the UK, to understand how CEO thinking has evolved during the crisis.
In the UK, all respondents have annual revenue over US$500m and two-fifths of the companies surveyed have more than US$10B in annual revenue, with no responses from companies under US$500m.
Globally, the pulse survey included CEOs across 11 industries (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology and telecommunications) and from eight key markets (Australia, Canada, China, France, Italy, Japan, UK and US).
KPMG would like to thank the following for their contributions: