96 per cent of Canadian CEOs and 88 per cent of SMBs confidently expect to grow over the next three years despite recessionary concerns
TORONTO, Oct. 4, 2022 /CNW/ - As companies shift to insulate earnings from a potential recession, many Canadian chief executive officers (CEOs) are freezing hiring plans and hitting pause on converting over to digital despite a recognition that customers are demanding better, faster service more than ever and that they risk missing out on scarce, specialized talent, finds new KPMG research.
"While it may be tempting for some leaders to 'slash and burn' to manage through a recession, they ultimately do so at their own peril," says Stephanie Terrill, Partner and Business Unit Leader, Management Consulting at KPMG in Canada. "They are counting on both their customers and talent to be waiting for them on the other side of a recession that may never happen."
Nine in ten Canadian CEOs surveyed in KPMG's latest Global CEO Outlook agree that there will be a recession in the next 12 months, but most expect it to be 'mild and short' lasting three to six months. In a separate survey of 503 small- and medium-sized businesses (SMBs) in Canada, two thirds of SMBs also expect a recession, of which the majority (52 per cent) believe it will also be 'mild and short.'
To prepare for a recession, four in ten (41 per cent) Canadian CEOs say that they have implemented a hiring freeze and nearly half (49 per cent) are considering downsizing their employee base in the next six months. Three in ten (30 per cent) SMB leaders say they've frozen all new hiring and four in ten (41 per cent) are mulling over whether to downsize in the next six months to mitigate short-term risks.
On the digital front, 37 per cent of Canadian CEOs have paused their business transformation strategies to mitigate short-term recession risks and another third plan to take similar action in the next six months. Fewer SMBs are hitting pause, with only a quarter having already scaled back and 35 per cent planning to do so within the next six months.
"Digital leaders know that by embedding agility, responsiveness, and flexibility into their operating models and corporate culture they build trust with their employees and customers, stabilize revenues, and minimize earnings erosion," says Ms. Terrill. "Canadian businesses have learnt these lessons over the past two years and need to keep that focus. There are ways to keep your competitive edge and improve productivity and operational efficiency without resorting to extremes."
Canadian CEOs |
SMB Leaders |
|
I believe there will be a recession in the next 12 months |
92 % |
66 % |
Implemented a hiring freeze to prepare for a potential recession |
41 % |
30 % |
Plan to implement a hiring freeze in the next six months |
43 % |
40 % |
Have downsized their employee base |
41 % |
29 % |
Consider downsizing their employee base in the next six months |
49 % |
41 % |
Paused their digital transformation journey to prepare for a potential recession |
37 % |
25 % |
Plan to pause digital transformation journey over the next six months |
33 % |
35 % |
Increase headcount over the next three years |
89 % |
77 % |
Lack the in-house people with the skills to manage the strategic and operational rollout of their digital business transformation |
60 % |
56 % |
Canadian companies are bullish about their long-term growth prospects.
Eight of ten (79 per cent) of Canadian CEOs are confident in their ability to ride out a potential recession.
Further, nearly all Canadian CEOs (91 per cent) surveyed confidently expect growth over the next three years. Similarly, 83 per cent of SMBs are either "very confident or confident" about their three-year growth prospects.
Their success rests largely with their people. And, Canadian CEOs have the third most-ambitious hiring plans in the world over the next three years, behind only the U.S. and Japan, according to the KPMG Global CEO Outlook. Nine in ten (89 per cent) Canadian CEOs expect to increase their headcount, with 38 per cent expecting to add 6 per cent or more over the next three years.
Eight in ten (77 per cent) SMB leaders also expect to increase their headcount over the next three years, of which 20 per cent expect an increase of at least 11 per cent in their workforce.
"While a potential recession throws a curveball, the vast majority of business leaders intend to increase their headcount to help drive their three-year growth plans," says Ms. Terrill. "Worryingly, part of why business leaders are temporarily holding back on their digital transformation investment is, ironically, a shortage of skilled talent and burnout among existing employees."
As many as seven in ten (68 per cent) of Canadian CEOs say they need to address the burnout caused by pushing hard on their digital transformation over the past two years before continuing on their transformation journey. Six in ten also say what's holding them back is the lack of people with skills to manage their strategic and operational rollout.
Similarly, over half (56 per cent) of SMBs say they lack the people with skills to manage the strategic and operational rollout to transform their business. Further, two thirds are having a difficult time hiring people with the skillsets they need to grow their business and as many as three quarters (74 per cent) feel Canada needs to welcome more foreign talent to meet business labour force needs and become an innovation leader.
"The pandemic forced companies to run hard and fast on their digital transformation plans, and they leaned heavily on their digital teams, many of whom are now suffering burnout," says Ms. Terrill. "Organizations need to use this pause, not to pull back, but to shift the focus from expanding their footprints to stabilizing them.
"That means investing in the teams that have taken them this far on the digital journey," she says. "These employees are going to be critical to their success when they are on the other side of the recession concerns and looking to rapidly boost headcount. Finding skilled talent will continue to be a challenge so it is critical they retain and nurture the talent they already have."
- Eight in ten (79 per cent) of Canadian CEOs are confident in their own resiliency to weather a potential recession
- 91 per cent of Canadian CEOs are either "very confident" or "confident" in their three-year growth prospects, compared to 83 per cent of SMBs
- 68 per cent of Canadian CEOs need to address burnout from accelerated digital transformation over the past two years before continuing on their transformation journey
- 66 per cent of SMBs are having a difficult time hiring people with the skills needed to grow their business
- 56 per cent of SMBs are finding it hard to recruit "talent of the future", like engineers, data scientists and developers
- 74 per cent of SMBs believe Canada needs to welcome more foreign talent to meet business labour force needs and become an innovation leader
- 65 per cent of Canadian CEOs say that hybrid / remote work has had a positive impact on productivity (20 per cent neutral and 15 per cent say it had a negative impact)
- Yet, 75 per cent of Canadian CEOs envision employees working in the office full time in three years and only 23 per cent envision hybrid work. The remaining 3 per cent responded fully remote.
- 74 per cent of SMB leaders believe a hybrid or flexible workplace improves employee morale, retention, and productivity, although 63 per cent have already shifted away from remote work and are asking employees to return to the workplace.
- Nearly seven in ten (68 per cent) of SMBs are also concerned about another COVID wave this autumn/winter that could result in employee absenteeism
KPMG in Canada surveyed business owners or executive level C-suite decision makers at 503 small- and medium-sized Canadian companies between August 16 and September 1, 2022, using Schlesinger Group's Methodify online research platform. Thirty-two (32) per cent of the companies reported annual gross revenue of over $500 million; 26 per cent between $300-$499 million; 18 per cent between $200-299 million; 16 per cent between $100-$199 million; and 8 per cent below $50 million.
The eighth edition of the KPMG Global CEO Outlook provides unique insight into the mindset, strategies and planning tactics of the CEOs of some of the world's largest and most-influential companies. KPMG International surveyed 1,325 international CEOs in 11 countries (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the U.K., and the U.S.) between July 12 and August 21, 2022. All respondents helm corporations with annual revenue of more than US$500 million. Thirty-nine per cent of the 75 CEOs surveyed in Canada lead organizations of more than US$10 billion in annual gross revenue, 31 per cent reported between US$1 billion to US$9.9 billion in revenue, and the remaining 31 per cent have revenue of between US$500 million to US$999 million. NOTE: some figures may not add up to 100 per cent due to rounding.
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SOURCE KPMG LLP
Caroline Van Hasselt, Media Relations, National Strategic Communications, KPMG in Canada, 416-777-3288, [email protected]
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