03/16/2017

Turning confidence into performance: The private company findings from the 20th CEO Survey

Author: Stephanie Hyde, Global Entrepreneurial and Private Business Leader Stephanie Hyde

It’s the 20th time PwC has run its annual survey of the world’s leading CEOs, and as usual, there are some important and thought-provoking results. Taking a deep dive into the private company CEO views emerging from the Survey highlights a number of areas that private businesses need to focus on if they are to deliver on their ambitions for growth amidst a turbulent and uncertain market environment. The pace of technological change continues to quicken, it’s increasingly difficult to find people with the ‘right skills’, and the gaining and keeping of public trust for corporations is becoming a more important concern. Exploring the data in more detail, and seeing how different markets and sectors are thinking, provides a good baseline on which you can evaluate where you are in your business compared to where you want to be.

What are private company CEOs thinking, as we look ahead to 2017, and beyond? What stands out most is their self-confidence. CEOs in general are relatively gloomy about the immediate prospects for the global economy, but they’re all positive about their own prospects, and none more so than private companies. We see that 86% of these CEOs expect revenue growth over the next 12 months, up 5% from 2016 – a significant jump. In fact, it's the first time in five years that private company CEO confidence has been higher than that of public company CEOs. Likewise 92% of private CEOs expect growth in the next three years. So how well-founded is this optimism, and what challenges might they face in turning confidence into performance?

PwC_Rep_USA_SF_JFB_0171It’s not easy to find definite answers to the first of those questions. The data suggests that private businesses are more cautious than public ones when it comes to strategies for growth, or perhaps lack the skills or resources to fully exploit the possible options. Fewer private companies plan to accelerate growth through outsourcing, acquisitions or new collaborations with SMEs or entrepreneurs, though the number planning new M&A activity is on par. By contrast, when it comes to the challenges they face, the picture is much clearer. Finding and retaining people with the right skills remains a bigger issue for private companies, and especially for family firms and other companies that can’t offer shares or options to attract the best. But the real message for this sector is technology – both the risk it represents and the opportunities it opens up.

The survey results suggest that private company CEOs are markedly less concerned about cyber threats than their public company peers. This is a concern, given that there is growing evidence that hackers are now targeting smaller and private businesses, because they are likely to have less secure systems – and less money to spend on updating them. I think this particular finding really stands out for me as a red flag for the sector. Private companies have to take this issue more seriously, and do so with real urgency. And the flipside of the digital question is almost as worrying, though for different reasons. Nearly three-quarters of private companies expect their markets to be transformed by technology over the next five years, but it’s far less clear how many of those CEOs are acting on this expectation and actively seeking to transform their own business so it can to survive and thrive in that new environment. Our own experience of working with the sector suggests that private companies in general are lagging public ones in this area. With so many new pay-per-use and cloud-based apps now available, there really is nothing standing in the way of even very small companies taking full advantage of  the possibilities of digital. Indeed, they can often do so more nimbly and cost-effectively than many of their larger competitors, who are often encumbered with legacy IT infrastructure.

Taking a step back, I think that many of the findings in this year’s CEO Survey echo those we found in the 2016 Family Business Survey. That study looked at the issue of the ‘missing middle’ in family firms – in other words, the need to bridge the gap between running the businesses day to day, and thinking in generations. Private companies in general need to develop robust strategies for the medium term, covering issues like talent management, innovation, and the use of new technology. This is where a strong board can be invaluable. I’ve seen that many successful private companies have been able to take advantage of quicker decision-making to be more agile in the market. Experienced and objective non-execs can provide not only valuable know-how, but rigorous oversight, ensuring the necessary strategic plans are not only developed, but appropriately challenged, efficiently implemented, and regularly monitored. That, in the end, is what will help turn confidence today into performance tomorrow.

Stephanie sits on the PwC Global Leadership Team as Entrepreneurial and Private Business Leader and is also a member of the PwC UK Executive Board, as Head of Regions. The Global Entrepreneurial and Private Business segment works with over 100,000 businesses, and contributes over 20% of PwC’s global revenues. Starting with the firm in 1995, Stephanie became a partner in 2006 and joined the Executive Board in 2011. She has worked in a diverse range of industries from energy and defence to pharmaceuticals and manufacturing. Read more

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