Case study: Resilience matters

Leading a business – whether public or private and in any sector – in recent years has been an unenviable task. Leaders have been faced with digital disruption, a global health crisis and geopolitical uncertainty. It is no surprise, then, that our 25th Annual CEO survey found business leaders more aware than ever of the range of potential threats they face from cyber security to climate change.

The pandemic was a sober lesson for many of the importance of resilience in all areas of a business. We can see its legacy everywhere. The continued desire to secure supply chains and for greater digital adoption are, for example, a major driver in M&A activity.

Despite the growing headwinds, business leaders across the UK and beyond remain optimistic about their company’s economic prospects; 66% of UK CEOs told us they are either very or extremely confident about their company’s revenue growth in the coming year.

“Businesses have to think about their resilience, not just against the kind of threats that they can anticipate and quantify, but things they haven’t thought about yet,” says CEO and Institute of Directors Ambassador Paul Stanley. “It’s not just financial, it’s operational and psychological resilience, such as having supply chains that work when challenged. Business leaders need a careful strategy for ensuring the business is resilient against these types of threats.”

This doesn’t mean that leaders are purely in defensive mode.

This comes from an understanding of how the world is changing – in terms of the visible, immediate threats such as rapidly rising inflation, geopolitical instability and complex supply chain challenges, but also in terms of longer-term trends such as consumer and investor behaviour, and changes in the way we all work and live.

Business leaders are not thinking in terms of growth at all costs but are focused on responsible growth and more purposeful business practices, while ensuring that the business is as resilient as possible in the face of considerable emerging risks. For Paul, three broad themes emerge:

ESG commitments on the rise

Over the long term, business leaders know that if they are to make the most of the opportunities before them, demonstrable environmental, social and governance (ESG) credentials will be essential. Businesses must meet the expectations of their customers not just in terms of product and price, but in terms of alignment with the customers’ values.

“Businesses don’t exist in isolation, they are part of a community,” says Paul Stanley. “And they have to play a part in engaging that community in a social way, a respectful way.” This means, for example, thinking carefully about their energy usage and the impact that has on the environment, but leaders must strike a balance between short and long-term influencing factors. The impact of sharply rising energy prices and geopolitical conflicts may push ESG temporarily down the agenda, but they also highlight the need to accelerate the shift to renewable energy and increase the likelihood that consumers will pay closer attention to the source of products and services.

This is where listed companies, pushed in the right direction by the public, their customers and increasing investor activism around environmental and social issues, are gaining the advantage. 34% of public company CEOs in the UK have made a public commitment to net zero, for example, compared with 24% of private business CEOs.

Accountability and transparency

There is increasing recognition that CEOs are accountable to a much wider set of stakeholders and for the wider impact of their organisation. Key to this is the inclusion of more non-financial drivers of value in their value creation plans. Evidence from our survey suggests that private businesses are lagging behind their listed counterparts.

Even so, private business leaders do show a strong understanding of the importance of leadership transparency; 60% say this is important to building trust with employees, compared with 55% of all CEOs.

Paul added, “It’s important to identify a small number of key messages that you communicate to the entire team. Then you’ve got to put in place some measures so, when you start to execute against that vision, you know what progress you are making and you can adjust your course as you go.”

Attracting and retaining talent

A recent global study found that 41% of workers were considering leaving their job or changing professions in 2021, as many workers reassessed their life and career priorities. The expansion plans of private businesses – leaders of private businesses are more likely than most to say that they will increase headcount by more than 10% in the coming year – suggest that they will have to fight hard to find and recruit the best talent.

The pandemic also caused a shift in the way we work. Many candidates will look for flexibility and the ability to work remotely at least some of the time, but there are also signs that many are looking for greater fulfilment and a connection to their employer that’s built on trust. Business leaders acknowledge that a clear commitment to purpose – showing care for their people, customers, the environment, and the communities within which they operate – will be essential as they compete for talent.

Paul said, “If you want to engage properly with a business to drive the best outcomes, you have to engage with the culture in a positive way to get the best out of people, out of teams and out of the whole organisation within that culture.”