PR pitches with "exciting survey results" are an inbox barrage. What is less common? A thoughtful survey of CEOs. That's how West Monroe's PR firm got my attention. Lines like this jumped out:
Interestingly, 21% of CEOs have already had to make tough decisions that conflict with their corporate values - which makes sense, knowing that layoffs and unemployment are at an all-time high since the Great Depression.
I can't remember the last time I've heard a CEO say, "We had to make a decision against our corporate values, but it had to be done." Soon I was on the phone with Greg Layok, Managing Director, Technology with West Monroe Partners.
This is more accurately portrayed as a CXO survey of U.S. executives. CIOs comprised 28 percent of the respondents, CFOs 25 percent, COOs 14 percent and CEOs 13 percent. The respondents spanned multiple industries, with only a handful of exceptions (public sector, A&D, professional services and media/entertainment were the only industries with two percent or lower respondents). Note: this article is based on the April 2020 survey; you can now review West Monroe's May 2020 CEO survey online.
CEOs increasingly concerned - the extent of the downturn
Bullet points from the April 2020 survey that caught my eye:
- Their respondents' top concerns are tied between their organizations' long-term survival and the unpredictable behavior of partners, employees, and clients in this environment (both at 21%).
This survey, published in April 2020, notched a pretty big jump in that long-term survival concern:
- In West Monroe’s March survey, only 5% of CEOs said long-term survival was a top concern.
Another progressing concern from the March survey? The extent of the downturn:
- 79% of CEOs believe the current market crisis will be longer/deeper than the Great Recession of 2008 – the least optimistic out of any other role (CIO, CFO, CMO, etc.)
- This is up 58% from the March survey.
The CEOs surveyed by West Monroe are also less optimistic than other executives:
- CEOs have longest prediction timeline for recovery - with 37% estimating that their operations won’t stabilize until 2021 or beyond.
That's pretty good fodder for a chat, eh? So I asked Layok: what about the rise in CEO concern from the March to April surveys? Layok responded:
Obviously people are learning new information as the crisis unfolds. I think the worry about long-term survival is: think about the challenges now. I think we've all realized that the economic impact is going to be deeper and longer, impacting lots of areas in the economy.
Layok thinks a "two-fold challenge" is keeping these CEOs in concern mode. In a typical recession, where demand is impacted, you're focused on understanding your customer - and the trends/data you need to respond to. But as Layok says, that's not enough today:
Many businesses are simultaneously having to worry about their employee experience, whether it's a more knowledge-based services industry, where they're thinking about working remotely, and all the concerns you have there. Or, you're a manufacturer, and you have to think about contract tracing and testing, and keeping your workforce safe. You've got two massive changes both with your customers and your employees.
Business resilience - "all of this centers around data"
How many companies had a comprehensive data strategy in place when the pandemic hit? How many were ready when their predictive models broke? Layok:
All of this centers around data. I think the first month of everything went down, even some of our Fortune 500 customers didn't understand what their customers were doing. They didn't understand the trends. They didn't have the data.
They were all undertaking different data programs. But they didn't have the dashboards to understand what was going on with their customers, or how to respond. How severe will this be? Which segments will this impact? There was a lot of confusion there.
Both sides of your business are in flux. And: you have limited investment dollars due to business impact. Huge decisions are made with limited, chaotic, or outdated data. Yep, that's a recipe for CEO concern:
You only have a few bullets to fire. And you've got to have the data and information to be able to understand which investment is going to give you the biggest bang for your buck. So I think that's the really hard part of this. We've probably never faced something like this before, with the impact on your employees, your customers, and your whole supply side as well.
Did early pursuits of digital transformation pay off?
I've been pushing back against a lazy idea I keep seeing: that the pandemic paid out some kind of digital transformation dividend (talk to Starbucks about that). As I wrote yesterday, the transformation reality is much more complicated - depending on the industries you serve. I put it to Layok: what has he seen amongst West Monroe's customers?
I think if you made the investments in data, and you had the right dashboarding in your business, you were able to take actions based on facts... When everything hit, every business unit had somebody create a report data dump into Excel. They didn't even know if they were looking at the right version of the truth. Different business units came from conclusions. Now they're scrambling - and they wish they had made the investments in data prior to all this happening.
Layok pointed to cybersecurity and digital commerce as two other areas where pre-pandemic investments have made a difference. But not just digital commerce - flexible commerce of the omni-variety, with effective/easy mobile apps, in-store pickup and delivery options in place.
Why were the surveyed CEOs less confident than their executive teams?
One thing that stuck with me: why are the CEOs less confident than other execs? Many CIOs and CMOs had their budgets slashed or frozen; CFOs have been under all kinds of cost-cutting duress. Why would CEOs be the least optimistic of the bunch? Layok's reaction:
I think it's uncertainty. The CEO has to think about all aspects of the business... A lot of times, I think that the CEOs are hearing things from their different functional leads that may be more based on gut instinct, not data. I think the savvy CEO will not want to have it based on gut instinct.
Better predictive models could help, but we're not there yet:
We're in unprecedented times; the situation changes from day to day. The best thing you can have is decisions based on data. And then seeing trend lines and, if anything, having models that are predicting future behavior with the new assumptions. That's the nirvana. I think that a lot of organizations aren't even close to that. Probably no organization is 100 percent there. And if I were a CEO, that would give me cause for trepidation.
I asked Layok if anything in the survey jumped out at him. He pointed to the contrast between March and April. Were executives prematurely sold on a so-called V-shaped recovery? Perhaps. But the unemployment numbers don't shake out overnight:
I just think with the numbers we were seeing in terms of job losses and everything else, I'm surprised that people didn't come to that conclusion sooner. You know, it wasn't going to just pass in four weeks... Maybe that was some wishful thinking by a lot of business leaders.
I told Layok I was a bit surprised to see that drop in confidence from March to April. If anything, my personal confidence increased a bit during that time - and I'm someone who anticipates a long road back. But in March, it seemed like the Coronavirus was a dangerous mystery. Now we know quite a bit more about how it spreads, and what it takes to contain those spreads. That implies a smarter approach to selective re-opening is now possible. Whether we have the collective will to restrain-and-contain is another matter.
That said, CEOs are right to be concerned. When you read headlines about United Airlines contemplating furloughs for almost half its workforce, I doubt we've hit the bottom yet.
Reflecting back on March/April data has limitations. In Coronatime, that's almost a lifetime from July. Also, this survey was not a huge sample size, with about 150 executives surveyed. So we should be careful not to draw sweeping conclusions.
However, these are sizable companies, so their impact does carry. There were no respondents from companies under $250 million; almost half surveyed came from companies with $1 billion in revenue and higher. The breadth of industries surveyed paints a broad picture of the impact, but it does prevent us from drilling into industry variations.
I'm not an optimistic person by nature; I view the pandemic as a long-haul scenario, not a "We're through the worst of it" return-to-work deal. That said, we are seeing something of a playbook emerge. Layok spoke to that point:
Instead of trying to boil the ocean, our customers are coming with very specific pain points. If it's analytics, we've got a rapid analytics offering to get something up and going in as short as four weeks... 80/20 rule - it doesn't have to be perfect. You refine it from there. What's great is the clarity of the business problems is very focused right now.
Ruthless focus is exactly what transformation projects needed:
You're stripping everything down. What do you need to know about your customers? What do you need to do to service your customers better? How do you share data better with your partners or employees? It's very clear what you need to do, because your business strategy right now has a lot of clarity.
How will that hold up? We're about to find out.