03/04/2014

Looking to the long term – what’s the view like for CEOs of state backed enterprises?

Nick Jones_6559Author: Nick C Jones, Director of PwC’s Public Sector Research Centre

CEOs running organisations with state backing are typically taking a longer term view of their businesses and also a wider view of their impacts, according to the results of PwC’s 17th Annual Global CEO Survey. As noted by one of this year’s interviewees, Emilio Lozoya, CEO, Petroleos Mexicanos (Pemex), Mexico: “The fact that we have one single shareholder – and that it is the state – gives us a very long-term planning horizon.”

In recent years, particularly with the onset of the financial crisis, the extent of state involvement in the private sector has become more noticeable. And this is reflected in this year’s Survey again, with nearly one in six of the CEOs surveyed in an organisation with some form of government ownership or backing. So how do the views of these CEOs differ from those with no state backing?

There’s one clear difference - state backed CEOs are relatively less confident in their prospects for revenue growth in both the shorter and longer term. This is perhaps reflected in the finding that relatively more CEOs in state backed organisations are expecting to reduce headcount, with over a quarter expecting to cut staffing by up to 8%, compared to one in six of the non-state backed CEOs surveyed. And there’s less focus looking ahead to the next 12 months on M&A and more on outsourcing and also insourcing – clearly it’s not all one way traffic for operations in state backed entities!

But there are also many similarities with non-state backed CEOs: for instance on perceptions of their key threats, where over-regulation comes out top of the list for both. There are also similarities in the ways that CEOs are getting fit for the future. Cost reduction initiatives are the most prevalent restructuring activity for state backed CEOs – in line with companies with no state backing.

And even more so than their counterparts fully in the private sector, CEOs running organisations with state backing see technological advances as having the potential to transform their businesses over the next five years, well ahead of the next trend – demographic shifts.

In response to these opportunities and threats, relatively more state backed CEOs seem to recognise the need to change, or are changing, across a range of areas: their organisation structure and design, corporate governance, R&D/innovation capacity, investments in technology and production capacity.

But in making these changes, relatively more state backed CEOs also see the need to satisfy societal needs and protect future generations as well as seeing it as important to measure and report on total (non-financial) impacts of their activities, such as on the environment. All of these elements are seen to contribute to long term success of their organisations.

This may perhaps also reflect their longer planning horizons, with about a third of state backed CEOs having a planning horizon of more than five years, compared to only about a fifth of their non-state backed counterparts. Even if there are downsides, perhaps having one shareholder – government – can indeed help state backed CEOs to focus on the long term!

Find out more in our report Government and the Global CEO: Fit for their Futures.

Nick Jones is the Global Director of PwC’s Public Sector Research Centre and has authored, and contributed to, reports on a wide range of public services issues. Nick is also a member of the Editorial Team for PwC's Annual Global CEO Survey, commenting on the relationship between business and government.


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Comments

It's interesting that there are many parallels with CEOs of family businesses; the long-term planning horizon and community/societal values etc. Perhaps this tells us something we already knew about the impact investors can have on business leaders' decisions.

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