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Despite Economic Uncertainty, New Poll Finds C-Suites Investing In Labor, Tech

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Chief Executive Group recently asked hundreds of CEOs and CFOs to share their strategies for navigating the current environment. Here’s where they said they’re focusing energy and resources for the next few months of uncertainty.

CEO optimism rebounded for the first time in months in early August, as Chief Executive’s leading indicator of CEO confidence clawed back more than half of the one-quarter-plus loss it has experienced since the beginning of the year. But that’s not to say CEOs are expecting U.S. businesses to be out of the woods any time soon, and many are taking action to navigate the downturn—and seize opportunities.

According to our August polling, 77 percent of CEOs and 85 percent of CFOs believe the U.S. economy is now in a slowdown—or worse—and 59 and 61 percent respectively expect these conditions to persist for at least another six months. So, what are the strategies they’re implementing in the meantime? Turns out, cost-cutting isn’t one of them.

“In spite of concerns CEOs must find ways to keep on investing in growth initiatives,” said Thomas Doorley, co-founder, CEO and chair of professional consultancy Sage Partners LLC.

Overall, 59 percent say they’re upping their employees’ base pay this year in an effort to retain top talent, 54 percent are increasing access to upskilling programs, and 48 percent are enhancing their sales staff’s commission rates. CFOs shared a similar view, with 68 percent, 48 percent and 42 percent reporting the same actions, respectively.

In addition to compensation, CEOs say they are focusing on a variety of talent-related strategies, including building a positive work environment, as well as offering more flexible schedules and remote work opportunities.


Betting on Tech

Besides labor, another area getting a lot of attention these days is technology. A third of CEOs polled in July said speeding up automation and digital transformation initiatives was atop their strategy for not only surviving this down market but also positioning the company for growth well into the future.

In August, half of the CEOs and CFOs surveyed said they are, in fact, increasing their investments in their technological capabilities to continue growing in this market. Overall, 12 percent said they plan to increase their technology investments “significantly” during the second half of 2022—one of the largest increases in CFOs’ budget and the largest among CEOs polled.

“Looks scary now, but I believe we’re in a great decade of growth brought on by tech—AI, Blockchain, Web3, etc.,” said the CEO of a mid-sized marketing firm that is prioritizing the launch of new products to drive revenue in this environment.

Our research shows the acceleration of digitalization efforts is top of mind at all levels of the organization. Data from our sister publication Corporate Board Member’s polling of public company directors—conducted in late July with the Diligent Institute—also shows an accelerated pace of adoption of new technologies in this environment.

And it is clear from a survey of America’s technology chiefs (also conducted in July) by another Chief Executive Group publication, StrategicCIO360, that the current economic downturn isn’t affecting their part of the business, with 78 percent of CIOs saying they’re either staying the course with their original strategy—and spending—or doubling down to seize opportunities in these conditions.

“The unusual set of conditions is good cause for increased innovation and better strategic thinking with courageous decision-making,” said one CEO and respondent in our poll. “Willingness to make the hard calls has never been so valuable.”

The one area where CFOs are more bullish than CEOs, according to our data, is in the advertising budget: 41 percent of America’s finance chiefs say they’re planning to increase their marketing spend by the end of the year, vs. 31 percent of CEOs.

Despite the gap, those are significant proportions considering the cost-containment measures companies traditionally apply in challenging times. And it may also be a telling sign that the current environment is filled with opportunities.

Spending Cuts

So, where exactly are CEOs and CFOs planning to cut in the months ahead? Overall, the numbers are mixed across various strategies, but our survey finds the most common areas of focus for cost containment among both CEOs and CFOs include projects requiring large capital expenditures, travel & entertainment and hiring.

When polled in July, three-quarters of CEOs who said they had discussed their pricing strategy to cope with current economic conditions reported having increased or were considering increasing prices.

The value of the increase, however, is a balanced mix, with the largest proportion (24 percent) of CEOs planning increases of 7.5 to 14.9 percent.

While some have characterized the current wave of price increases as greed—“Inflation seems more to be equal parts greed and real increase in costs inputs,” said a PA-based manufacturing CEO—many of the polled CEOs said they are left with little choice in light of high energy and labor costs.

“We are walking a tightrope, increase pricing vs losing customers,” said the president of an insurance company who’s had to increase prices by 5 to 7.49 percent to cope with inflation.

But not everyone has that ability, and leaders are forced to take action elsewhere if they choose to (or are forced to) maintain prices. For instance, among those who are keeping prices intact for the time being, 38 percent are implementing a hiring freeze and 19 percent of eliminating positions altogether.

“We have a lot of longer-term contracts with not a lot of pricing flexibility,” said the CEO of a midsized professional services firm, who’s instead decided to extend the company’s line of credit, eliminate certain positions, reduce travel and training expenses, and cut bonus awards.

The current lack of consensus over the state of the economy doesn’t help with planning, but many argued companies need to keep an eye on the longer term and avoid being too reactive. So, instead of the usual cost-containment measures typically adopted by companies in this type of environment, 21 percent of CEOs said they are taking advantage of the down market to seize opportunities and prepare for the recovery.

“In three years, things will begin to get better,” said Brian Engel, owner and president of industrial manufacturer Strategic International. “We need to plan ahead.”


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