Execs want growth, but maybe not more workers - CEO Confidence Index

Chief Executive, The, Nov, 2003

American CEOs are hungry for top line growth, but that doesn't necessarily mean they plan to dramatically increase their hiring.

That is the implication of our latest CEO Confidence polling. We asked CEOs by email what they believed was the No. 1 challenge they faced for 2004. Out of 283 replies, 48 percent said "growing the top line" was the largest hurdle (see chart, below left). That was followed by global competition (25 percent) and international instability (15 percent). Significantly, only 8 percent said they believe corporate governance is the top issue.

At the same time that CEOs want growth and remain relatively confident, with the overall CEO Index slipping only slightly to 133.8 (see chart, below center), their confidence about employment declined by 6.6 percent from the prior month to 115.9. Their confidence about investment is much higher, at 130.9 (see chart, below right), and is increasing. And when it comes to overall business conditions, their confidence has held steady, at 153.

The clear signal is that CEOs might invest, but they are less likely to hire. "I believe Peter Drucker said that you can't grow a business by cutting expenses," said Robert White, CEO of ARC Worldwide Group in Denver. "CEO attention needs to be on innovation, sales and marketing--that's where the growth is."

Global pressures remain brutal, particularly in sectors like textiles, and that's one reason U.S. hiring plans may be soft. "Far East pricing" continues to show no bottom in the apparel sector," said Mark Zerona, CEO of Shogren Industries in Concord, N.C. "We still produce 80 percent of our goods domestically, but global competition is becoming fiercer,"

CEOs are reluctant to rebuild their permanent labor forces, said Dave Wilson, CEO of Graduate Management Admission Counsel in McLean, Va. "In the past, we lost manufacturing jobs to Asia and Mexico where qualified labor was far less expensive," Wilson said. "Today we are losing information jobs to India and Malaysia for the same reason. Ten dollars per hour for a programmer in Hyderabad competes very favorably with a B.A. who wants $40,000, a parking space, a 401(k) plan and health and dental care."

Clearly there are opportunities to be had by engaging in international commerce, but it's clear that many smaller and medium-sized companies are finding it to be a challenge. "Globalization can open the doors to greater financial results for companies all over the world,"' said Doug Ward, partner and CEO at Industrial Forensics in Pleasanton, Calif. "But it requires a fundamental change on many fronts. I see few efforts being made to address these issues proactively."

The message to all the Beltway pundits is that CEOs are wrestling with many difficult challenges and, while they are focused on growth, they won't necessarily be expanding their work forces.

"In looking out toward 2004,
what do you think will be the
No. 1 challenge facing American
CEOs?"

Corporate Governance                8.13%
Growing the top line               47.70%
International Instability          14.84%
U.S. Elections                      3.89%
Global Competition                 25.44%

Note: Table made from pie chart.

Confidence in
Employment Declines

                                      Sept.              Oct.

BUSINESS CONDITION INDEX              153.3              153.3
INVEST CONFIDENCE INDEX               128.3              130.9
EMPLOYMENT CONFIDENCE INDEX           122.5              115.9

Note: Table made from bar graph.