Insights for What’s Ahead

When asked which issues outside of management control will have the greatest impact on their business in the coming year, CEOs cite the COVID-19 virus, vaccine availability, and changing consumer buying behaviors as the key potential game changers in 2021. However, despite modest growth expectations for the global economy in both the short and long term, business leaders seem unable to shake lingering recession concerns. Recession risk is the second-ranked external stress point globally for 2021 and number one for CEOs in China.

The strategies CEOs say they will focus on in 2021 are a mix of prudent financial management and cultural changes to drive growth and improve performance. In the short term, preparing for growth and recovery will require finding the right balance between conserving cash and investing in the innovations and programs needed to succeed in a new commercial landscape.

2021—Light at the End of the Pandemic Tunnel: CEOs believe the distribution of a successful COVID-19 vaccine will have a significant impact on their businesses in the coming year and is likely contributing to their more positive view of future growth prospects by taking the worst-case economic scenarios out of play.

Lessons Learned: Adaptability, flexibility, clear communication, and the need for quick decisive action while maintaining calmness under fire are among the key lessons learned during the pandemic that CEOs say will help them manage the challenges ahead in 2021. Another lesson learned: the importance of external collaboration.

The Need for Speed: CEOs say their organizations will focus on accelerating digital transformation, modifying business models, and improving innovation, all while controlling costs and improving cash flow. The current crisis means the luxury of having years-long lead time to digitally transform and experiment with new business models is gone. Recovery will require finding the right balance between conserving cash and investing in innovation needed to succeed in a new commercial landscape.

The Business Model Challenge: Business model transformation is a critical focus for 2021 and seen by CEOs as an important growth lever, yet it is one of the hardest things for companies to do. Organizations must quickly pivot in response to new risks and opportunities requiring an extraordinary level of alignment across the enterprise as well as changes in organizational culture, structure, leadership, and a continuous evolution of talent and upskilling.

Levers of Growth: While CEOs and C-suite executives recognize that consumer buying behaviors are changing, they see new products and services and new customer segments, driven by data analytics and expanded strategic partnerships, as key levers of growth for their companies.

Human Capital Management: Despite the economic doldrums, CEOs remain focused on the recruitment and retention of top talent as well as the development of next-generation leaders. The focus on the core of talent management—recruitment, retention, and development—is an indication that human capital, once narrowly defined as the labor input in an organization’s business model and categorized as an expense, is being recognized as the engine of the enterprise. CEO responses show they recognize human capital as a valuable intangible asset with workers a critical stakeholder essential for future growth.¹

Remote Work Reaching Equilibrium: A year into the pandemic, remote work may have reached an equilibrium, with few responding CEOs planning to make significant changes to the current number of remote workers as part of their human capital management focus in the coming year. Companies may have found a comfort level when it comes to the number of remote workers they employ. Increasing the number of remote workers ranks 17th out of 21 human capital focus options for 2021, while decreasing the number of remote workers is dead last. In the United States, prepandemic, roughly 5 to 7 percent of full-time employees with office jobs worked primarily from home. That figure could settle at 20 to 40 percent in the postpandemic world.²

Policy Impact: The change in US administrations appears to be having an impact on CEOs, views of the global business environment.³ This year’s survey, completed after the US elections in November 2020, shows that, compared to our recent surveys, businesses have diminished levels of concerns both globally and in the US about trade disruptions, global political instability, and declining trust in government. However, US CEOs also express elevated levels of concerns about corporate tax policies and regulation.

Beyond the Pandemic: Long-Term Legacies of COVID-19

CEOs see a reduction in business travel, the automation of tasks (a clear outgrowth of their priority to digitally transform their organizations), large firms having better access to capital markets than smaller ones, more resilient supply chains, and an increased focus on climate change among the most likely long-term legacies of COVID-19.

Social Justice and Climate Risk: Compared to issues such as the pandemic and recession risk, CEOs do not see social justice concerns and climate change as having an immediate impact on their business environment in the year ahead. However, the majority do see a growing focus on both climate change mitigation and a need to address social issues in the public arena as likely long-term legacies of the COVID-19 pandemic. This view is likely driven by changing stakeholder expectations and increasing regulatory requirements.

Supply Chain Fixes: Even though concerns about global trade disruption have diminished, the pandemic has exposed vulnerabilities in supply chains, and CEOs believe the need to address global supply chain resilience will be one of the more important long-term legacies of COVID-19.

Access to Capital Markets: In the longer term, CEOs see large firms having greater access to capital markets relative to smaller firms. This signals challenges as well as opportunities for the business community. Since large companies often rely on small ones to do R&D and new product development, limited access to capital markets for small firms could have negative effects on innovation if merger and acquisition activity is used to squelch competition.

¹ Paul Washington, Rebecca L. Ray, PhD, Solange Charas, PhD, and Amy Lui Abel, PhD, Brave New World: Creating Long-term Value through Human Capital Management and Disclosure, The Conference Board, December, 2020.

² Gad Levanon, PhD, COVID-19’s Biggest Legacy: Remote Work and Its Implications in the US Postpandemic Labor Market, The Conference Board, forthcoming February 2021.

³ It should be noted that because the list of options in the survey changes, expands and contracts each year to reflect ongoing changes in the business environment, exact year-over-year rankings are not available. Rather the rankings comparisons are meant to show a broad trend in rising or declining sentiment about each option relative to other issues.