Covid-19 has made people & talent the top risk, say CEOs

31 August 2020 Consultancy.eu

The confidence of CEOs in growth has plummeted globally as a result of the Covid-19 pandemic. And while the war for talent has considerably cooled the labour market, CEOs now see talent risk as their top concern for the period to come.

The CEO Outlook of KPMG surveyed over 1,800 CEOs globally, asking them to provide their views on a range of topics including the macro-economic environment, company outlook, talent management, innovation, risks and diversity & inclusion.

Not surprisingly, the study found that confidence in the global economy has fallen sharply since the start of the year. As it stands, one third of CEOs are less confident now about prospects for global growth in the coming three years. This is true for all three growth dimensions studied: country, sector and company growth.

CEO confidence in the global, country, sector and company growth

The crisis is seeing the majority of organisations launching cost cutting programmes, including slashing discretionary spending, reducing capital investments and minimising supply chain costs. Most organisations are also cutting back in their personnel expenditures, including downsizing headcounts and asking their staff to accept a voluntary reduction in their salary.

To remain in line with the new realities faced, many leaders have cut their own compensation as well. Close to two-thirds of CEOs (63%) have made changes to their compensation as a result of the crisis. Nearly half (46%) of the leaders took a reduction in their future bonus and just under a third (31%) opted to make a charitable donation as a part of their salary. 

Greatest risk: People

When asked what poses the biggest risk facing their organisation over the next 3 years, CEOs identified talent risk as the main threat, a category which encompasses recruitment & retention, overall wellbeing and health of staff members. Over a fifth (21%) of the executives identified talent as their main organisational threat in the next three years, ahead of supply chain risk (18%) and environmental/climate change risk (12%). 

Biggest risk to organization over a 3-year period

Talent’s pole position is notable, because in a similar survey held at the beginning of this year, the same group of CEOs said that talent risk was not even a top 10 risk. The key drivers behind the surge are twofold. First, with the majority of employees working from home and having to adapt to a new, digital working environment, leaders are concerned about the mental and physical wellbeing of their staff, said Gary Reader, Global Head of Clients & Markets at KPMG. 

Second, CEOs recognise the current pandemic is putting a strain on the capability-fit of employees. Covid-19 has forced three-quarters of companies to completely revise or stop recruiting. With no fresh talent coming on board, CEOs are worried that in-demand roles can’t be fulfilled. 

Meanwhile, they are also fearful of losing key employees. The labour market may have suddenly made it easier to hire talent, however, “it takes time to find the right talent. And in these times of working from home, it is not easy to onboard someone efficiently,” said Stephanie Hottenhuis, Head of KPMG in the Netherlands.

Pandemic as an purpose

Ultimately, “business leaders recognise that unless they manage this talent equation properly, growth will likely be stunted,” remarked Reader. 

When it comes to supply chain risks, nearly 20% of the surveyed leaders said that they struggle with volatility and bottlenecks in the supply chain, disruptions that are the consequence of Covid-19 and growing protectionist trade policies. Nearly 70% said that they have revised their supply chain strategy to build a more fit-for-purpose approach in light of the emerging ‘new normal’.

Purpose

Several studies internationally have shown that Covid-19 is sparking a permanent change among organisations, the workforce and consumers. One of these changes is growing awareness for purpose. KPMG’s CEO Outlook study re-iterates this conclusion, finding that the corona crisis has clearly shed new light on the purpose of companies: their right to exist, their sense of social responsibility and how they deal with diversity and equality. 

Pandemic as an opporttuniy

79% of CEOs feel there is now a stronger emotional connection to the company’s corporate purpose since the crisis began. And six in ten (63%) of CEOs admit that the pandemic has grown their focus on the social component of ESG. Looking at the environment pillar, nearly three quarters (71%) of CEOs want to accelerate their contribution towards climate change. 

Jane Lawrie, Global Head of Corporate Affairs at KPMG, said: “CEOs have responded to the Covid-19 crisis by putting even more focus on purpose, helping to signpost to employees and stakeholders why their company exists and how it aims to contribute to the world at large.”