Home » Uncategorized » CEO Daily Brief – Dec. 15, 2010

CEO Daily Brief – Dec. 15, 2010

CEOs Predict Higher Employment, Sales and Capital Spending CEOs of leading U.S. companies say they expect to see higher employment, sales and capital expenditures over the next six months, says Business Roundtable’s CEO Economic Outlook Survey. But predicted overall growth in the economy is not that strong. “Our CEOs expect GDP to grow at rate …

CEOs Predict Higher Employment, Sales and Capital Spending

CEOs of leading U.S. companies say they expect to see higher employment, sales and capital expenditures over the next six months, says Business Roundtable’s CEO Economic Outlook Survey. But predicted overall growth in the economy is not that strong.

“Our CEOs expect GDP to grow at rate of only 2.5 percent in 2011,” Ivan G. Seidenberg, chairman of the Business Roundtable and chairman and CEO of Verizon Communications said. “There is still more work that needs to be done to get the economy back on the path toward strong, sustainable growth.”

Still, he is optimistic based on the reported level of demand.

“Demand is returning as evidenced by anticipated sales increases, and that is good news. When demand increases, capital expenditures and employment follow – which is what we expect to see in the next six months,” Seidenberg explained.

Among the greatest cost pressures reported by the CEOs are: materials, health care and labor costs. About one-third of CEOs said “materials costs” had the greatest impact. Copper prices and corn prices are close to near-record highs. Cotton prices and most metals prices are very high, too.

Not surprisingly, health care costs ranked second as a “significant cost pressure.”

Some other pressures include pension, litigation and energy expenditures.

As CEOs meet with President Barack Obama this week, it would be well-advised to discuss the health care insurance reforms and all the mandates that were placed on businesses. Since litigation is a concern, too, perhaps tort reform on medical malpractice suits could be a subject for discussion, too.

For more from the Business Roundtable survey, please click here.

Be an Optimist for 2011: Gumz of Olympus

Many companies are just starting to see signs that the economic recovery is having an impact. But a company needs to ready to grow and work towards that growth. F. Mark Gumz, CEO Olympus Corp. of the Americas, has some suggestions for fellow CEOs to accelerate business growth. These include:

  • Continue to communicate corporate goals. He eats in his company’s cafeteria and has “Coffee With the CEO” and “Question Hour With the CEO” sessions. The feedback is helpful, he says. It also makes the employees feel better about working at Olympus. With the economy improving, and more jobs likely to be available at other companies, CEOs want to retain their best talent. Show employees that the CEO listens to employees’ concerns and ideas.
  • Invest in “enterprise innovation.” He defines that as the “processes, practices, and organizational planning and models prerequisite to effective, profitable, and competitive operation (and later, product and service creation).” Many executives say the CEO should give tools that promote innovation. But lots of companies don’t have “a team, process, or system for vetting new ideas in order to decide which to invest in.” These are needed.
  • Hire future leaders of your company and spend money to invest in their training. Recent college graduates and midcareer employees who have been displaced are looking for work. Bring them on your team.

Gumz says that yielding to “short-term fears” could result in companies missing the benefits of the improved economy. Looking toward the future requires investing in the future. Though many companies continue to be taking a wait and see approach, while they keep money on the books, actions need to be taken to take advantage of the current and expected growth opportunities.

For more from Gumz in Businessweek, please click here.

Merger & Acquisitions Activity Slows, Is More Strategic

The projected outlook for mergers and acquisitions is less than stellar. In a recent Ernst & Young survey of a thousand senior-level executives, 29 percent of those responding “were actively seeking opportunities,” as compared to 38 percent six months ago and 31 percent during last year, according to Rich Jeanneret, Americas vice-chair for transaction advisory services at Ernst & Young.

A large part of M&As occurring during the recession was due to a company’s need to get rid of low-performing businesses. Now, with improvement in much of the economy, companies are looking instead at “strategic acquisitions, their goal being to drive growth in an otherwise flat market,” Jeanneret said.

In addition, of the executives surveyed, 46 percent said the major focus over the next six months will be “organic growth (improving their existing businesses, rather than going out and buying something new), up from 38 percent in April 2010 and 25 percent a year ago,” according to Jeanneret.

Over half (58 percent) of those surveyed say capital markets are better than six months prior. It is easier to get money, based on these results. But those numbers need to be broken down further. Just 33 percent and 47 percent, respectively, of executives in the United States and United Kingdom believe that. The percentage is much higher for executives in Brazil, Russia, India and China (BRIC), where a majority sees improvements.

So it appears there will be mergers and acquisitions in the year ahead but they will be deals that are essential for the overall strategic needs of a company. There also may be fewer bargains out there than were present during the recession, given there is less need to shed unwanted businesses.

For more about the outlook for M&A, please click here.

About Chief Executive

Chief Executive magazine provides global economy coverage, business and technology news, information on upcoming events, and executive life.