COVID is redefining corporate leadership. And the KPMG 2020 CEO Outlook seeks it out.
Editor’s note: Unless otherwise indicated, throughout this report, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.
At the beginning of the year, we found that most CEOs were seeing the primary objective of their organization shift from purely profit to also consider their purpose in society. Less than a quarter (23 percent) saw the organization’s overall objective in narrow ‘managing for shareholder value’ terms, with 54 percent taking a broader, purpose-driven approach focused on multiple stakeholders. Furthermore, one in five (22 percent) say that their primary objective is to improve society.
More recently, purpose has helped CEOs understand what needs to be done to meet the needs of stakeholders during the crisis, from employees to communities.
Purpose has become a central pillar for CEOs: 79 percent say they feel a stronger emotional connection to their corporate purpose since the crisis began. At the same time, however, the massive disruptive impact of the pandemic has caused many CEOs to question whether their current purpose really meets the needs of stakeholders. In fact, 79 percent say they have had to re-evaluate their purpose as a result of COVID-19. Carefully listening to different stakeholders and encouraging dialogue, will be an important element of this re-evaluation, particularly if it becomes clear that the current purpose needs to be adjusted to better meet the needs of a stakeholder group.
From empathy to action
This increasingly personal and emotional connection to purpose during the pandemic reflects the fact that CEOs face similar health and family challenges as their people and communities. In fact, well over a third of chief executives (39 percent) have had their health, or the health of one of their family, affected by COVID-19.
The pandemic will be remembered by many as a defining moment for this generation. CEOs are clearly determined to learn from the pandemic and their own personal experience to recalibrate and make not only the best-informed decisions, but also the most authentic ones. Out of those who were personally affected by the health implications of the crisis, only 4 percent made no change to their approach to the pandemic. In all, 55 percent changed their strategic response, either completely or to some degree. Another 40 percent, while not changing their strategy, did pay more attention to the human aspect of the pandemic.
Standing up for equality
At the beginning of the year, we found that CEOs were increasingly prepared to personally lead the way in tackling society’s major challenges. Around two-thirds (65 percent) said that the public is looking to businesses to fill the void on societal challenges. At the same time, 76 percent said they had a personal responsibility to be a ‘leader for change on societal issues’. During the pandemic, there are numerous examples of companies playing a significant role in their country’s response, from developing products and services for front-line workers to financial contributions.
Being able to draw on a diverse spectrum of talent is critical to addressing the unique challenges of the pandemic, and CEOs are looking to strengthen their anti-discrimination approaches. In the wake of widespread protests following the death of George Floyd on 25 May, 81 percent have either publicly announced new anti-black racism measures in 2020 or plan to do so in the near term.
For CEOs who had already introduced new diversity and anti-racism measures, the top three areas actioned were:
- Performance management
- External interventions, such as donations
- Supportive interventions, such as allyship training
Linking anti-racism measures to performance objectives can be used to set specific and measurable diversity targets and can ensure that supporting equity in the workplace is the responsibility of all leaders and managers.
Reflections for the new reality
While the pandemic has given companies the opportunity to demonstrate how they can make a real difference to society, scrutiny of corporate actions has also never been stronger. To maintain and build on the trust of employees, customers and communities, CEOs must demonstrate that their organization’s purpose is meaningful, relevant and makes a difference. For some, this will mean moving from generic purpose statements to more specific and measurable approaches. Carefully listening to different stakeholders, and encouraging dialogue, will be an important element of making adjustments and managing any trade-offs that need to be met between different stakeholders. The pandemic has shown the power of purpose. However, it must be integrated into the fabric of the organization in order to succeed and the CEO must lead from the front to ensure it actually delivers.
With digital acceleration shaping the future of industries, organizations will need a deep understanding of how customer behavior will shift and how to meet these emerging demands. Data-driven insight — and scenario modelling — will be critical to understand what major shifts are likely to emerge. Pre-pandemic, the major challenge to many organizations’ digital transformation was the burden and complexity of legacy IT and a continued struggle to manage their data effectively. These challenges have not gone away and organizations will need to focus on cybersecure IT transformation, across organizational silos drawing on cloud technologies and agile techniques. This is the time for organizations to reflect on their talent base and build a robust foundation of digital skills. Priorities Leaders need to ensure that we do not slip back from climate gains made as a result of the pandemic and instead build the foundations of a sustainable, green economy into the future. Companies can learn from how resilient (or not) their operating models proved to be during the crisis, to understand what areas would need strengthening to withstand environmental or climate challenges. With consumers increasingly focused on purpose-driven brands and sustainable products and services, companies are adapting their product and service portfolios in an effort to exceed those needs. At the same time, investors are increasingly focused on organizations’ ESG performance, with a particular emphasis on the ‘E’ of climate risk. The pandemic has been a major crisis with huge humanitarian implications, but it has also been a time where sustainable and socially responsible companies have come into their own. Organizations that are building robust ESG reporting programs — along with resilient and flexible supply chains and a talent strategy that focuses on the people and skills needed for a more agile and virtual future — will be well positioned.
Decision-making driven by purpose
With the real fears of an overturned marketplace, CEOs are acting decisively across their entire organization. Business leaders have told us they are accelerating their company’s digital transformation and working to ensure their talent pipelines can adapt to meet new demands. They are renewing or revamping their corporate purpose so their organizations can contribute solutions to the many problems the world faces, writes Bill Thomas, Global Chairman and CEO of KPMG International. As they answer those questions, and look to build a successful future, it is very clear from the research — as well as discussions with leading chief executives — that they are using purpose to guide their decisions.