How CEOs are managing the tension in the face of recession

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When PwC surveyed over 4,400 CEOS from more than 100 countries and territories, it discovered that nearly 75% of the world’s top executives are expecting a drop in growth in 2023. But in the surveys conducted by PwC in the two years prior, there was a complete flip in perception. Three out of every four CEOs had expressed optimism. 

Today, CEOs are managing the tension that exists between short-term economic pain and the long-term mandate to transform to remain competitive. Nearly 40% of CEOs think their company won’t be economically viable in a decade if they continue with business as usual, according to PwC’s annual global CEO survey

“My advice: get your company fit for growth,” says Mohamed Kande, vice chair for U.S. consulting solutions and co-leader and global advisory leader at PwC, during Fortune’s CEO Leadership Series on Wednesday. “Do all the cost structuring that needs to be done and reinvest in growth. And that growth needs to be powered by technology. That will be the future.”

For more than a year, Federal Reserve officials have been fighting inflation and have consistently hiked interest rates in a bid to slow the economy to ease price increases. But policymakers are aiming to do so in a manner that would ideally result in a gentle or short term recession, or perhaps avoid an economic downturn completely. The strategy has thus far been fairly successful, with the U.S. seeing inflation lessen but economic growth still projected in 2023 by observers like the International Monetary Fund.

Glenn Fogel, CEO and president of online travel agency Booking Holdings, says his company must balance the macroeconomic environment with the future needs of his business. For Booking.com, that’s largely focused on the acceleration of tech innovations, with Fogel pointing to the recent buzz surrounding A.I. and chatbot ChatGPT.

“You have to have the courage not to just look at the next quarter,” says Fogel. “Travel will pretty much grow a little bit faster than GDP. So I have to always say, ‘Let’s not worry too much about the short term. Let’s be sure we are going for the long term.’”

Michael Sonnenshein, CEO at crypto asset manager Grayscale Investments, also likes to think long term. He’s been in the crypto business for nine years and says the industry has seen a lot of noise and even mistrust in the wake of the high-profile bankruptcy of crypto exchange FTX. But he says that’s a failure of the people involved, not an indictment of the entire crypto market. 

“Don’t get distracted by the headlines,” says Sonnenshein. He says he reminds his team to focus on what Grayscale is trying to build as an organization and that the “day-to-day debates about crypto shouldn’t take away from the long term conviction we have around the asset class.”

At tire maker Michelin, longer-term thinking also led the manufacturing giant to outlive three key levers that are the focus of a five-year plan. Alexis Garcin, president and CEO of Michelin North America, says all three—a focus on customers, accelerating the digitization of factories, and investing in their workforce—are also bringing down costs overall.

Brad Jackson, CEO of consulting firm Slalom, says that he thinks many executives want a short-term recession, as it would allow them to reset expectations with investors and their employees. He thinks companies that will do well in the future need to have a broader cultural reset, with a keen focus on customers and their employees.

“I’d like to see more consciousness of long-term investments and how they impact the multiple and valuations for companies,” says Jackson. “That’s not getting talked about much today.”

Even if the U.S. experiences a short-term recession, Tata Consultancy Services North America Chairman Suresh Muthuswami says that while companies may cut costs to be recession ready, it shouldn’t affect employee engagement. He says that hurting morale could even be counterproductive.

“Technology is the last thing they are cutting,” says Muthuswami, when referencing conversations he has had with clients.

Janeen Gelbart, CEO at A.I.-driven software leadership platform Indiggo, says leaders know that society is always in a period of change and that uncertainty will always exist. And she rhetorically asked, whose shoulders does this land on. Her view: much of the responsibility lies on the shoulders of burnt out middle managers and executive leadership.

“We need a balance of having some quick wins, and at the same time, building our organizations for the future,” says Gelbart. “That mix of transformation, innovation, and change is very hard.”

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