The Massachusetts Business Roundtable welcomes John S. Capone as a guest contributor to highlight KPMG’s 2022 CEO Outlook. The findings reflect similar trends expressed by Roundtable members in doing business in Massachusetts, nationally, and globally.

John Capone, Managing Partner, Boston Hub (New England & Upstate New York)

On the heels of the pandemic, CEOs are facing another turbulent period. The 2022 KPMG CEO Outlook is being released amid a business environment marred by high inflation, geopolitical tensions and recession fears.

Broadly, our survey found that most U.S. CEOs are confident about growth over the next three years, but challenges lie ahead over the near term. CEOs are balancing foundational priorities and looking to turn risk into opportunity by focusing on technology, Environmental, Social, and Governance (ESG) and talent.

Confidence and growth are the overarching themes

CEOs are preparing for economic turbulence but remain confident in long-term business growth. They have weathered the challenges of the pandemic and many have emerged with new strategies to drive growth and transformation.

Just when it seemed there was a light at the end of the tunnel with pandemic-related disruptions subsiding, most U.S. CEOs (91%) are now convinced we are heading toward a recession in the next 12 months. Moreover, about a third of those believe this recession will be mild and short.

U.S. CEOs have expected and planned for a recession, and many have adjusted their strategies to build resilience. It’s worth noting that:

  • 83% are confident in the resilience of their companies and industries over the next six months.
  • 80% are confident about the domestic economy.
  • 72% are confident about the global economy.

The top steps companies are planning to take over the next six months to prepare for the anticipated recession are:

  • Pausing or reconsidering their ESG efforts (59%)
  • Downsizing their employee base (51%)

Despite these anticipated trends, growth is still on the horizon. First, with the potential recession testing CEOs’ commitment to their ESG strategies, reducing investment may lead to long-term financial risks. CEOs have made significant strides in tying ESG to profitability, with 70% of U.S. CEOs saying ESG improves financial performance, compared to just 37% last year.

Second, while more than half of CEOs are considering downsizing their workforces over the next six months, 92% of U.S. CEOs expect their companies’ headcounts to increase over the next three years.

Long term, U.S. CEOs remain positive about growth. Much of the future growth will be generated inorganically, with more than half (56%) of U.S. CEOs expressing a high appetite for M&A over the next three years that will have a significant impact on their overall organization.

Subthemes: Technology, ESG, talent

As noted above, three major subthemes were revealed by the 2022 KPMG U.S. CEO Outlook. At a high level, these subthemes include:

1. Technology

Neither the economy nor other risks can distract CEOs from their focus on digital transformation. While U.S. CEOs have had to make some short-term adjustments, they indicated advancing digitization and connectivity across the business is the top operational priority for achieving growth over the next three years. Improving operational  efficiencies, productivity, and customer experience are leading the digital transformation efforts.

2. ESG

Ability to deliver on ESG strategy and commitments will hinge on technology-driven solutions. Most CEOs believe that, as confidence and trust in governments decline, the public is looking to businesses to fill the void on societal challenges (79%) and major ESG challenges, such as income inequality and climate change, are a threat to their companies’ long-term growth and value (76%). But CEOs are also feeling pressure (59%) from stakeholders, demanding increased reporting and transparency on ESG issues.

3. Talent

The employee value proposition continues to evolve to align employees’ individual needs with companies’ growth strategies. The pandemic’s impact on employees continues to be top of mind for U.S. CEOs, who identified pandemic-related fatigue as being the most pressing concern for their organizations today. 75% percent of U.S. CEOs believe they need to address burnout from accelerated digital transformation over the past two years before continuing their transformation journey.

As executive leaders chart the course for their organizations, coming out of one period of turmoil into another, many are embracing the challenge by adopting new technology to invest internally, improving operational efficiency, the customer experience, and workforce connectivity to be ready for long-term growth.

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John S. Capone is the Boston-based managing partner of KPMG in New England and Upstate New York, representing over 1,800 professionals across six offices. John also serves on the Massachusetts Business Roundtable’s Board of Directors. Learn more about KPMG Boston at http://visit.kpmg.us/boston.