Majority of CEOs Do Not Plan a Cutback in the Workforce to Reduce Costs,
Strengthen Business
PricewaterhouseCoopers' Trendsetter Barometer Tracks the Business
Issues and Best Practices of Privately-held Companies Identified in
the Media as the Fastest-growing U.S. Businesses. It Incorporates the
Views of 226 CEOs: 109 From Companies in the Product Sector and 117
in the Service Sector, Ranging in Size From Approximately $5 Million
to $150 Million in Revenue/Sales.
NEW YORK, Sept. 15, 2008 (GLOBE NEWSWIRE) -- While optimism in the U.S. economy reached a new 16-year low among private company CEOs, according to PricewaterhouseCoopers' recent Trendsetter Barometer, approximately 84 percent of respondents believe new business opportunities will outweigh or offset the downside of the current economic environment. Forty-three percent believe new business opportunities outweigh the downside in the current economic slowdown, and another 41 percent believe that new business opportunities and any downside will offset each other. Only 15 percent believe that the business downside will outweigh the opportunities.
Regardless of their outlook, Trendsetter CEOs identified and plan to leverage several similar business opportunities over the next 12-18 months. The most cited opportunity was lowering costs and increasing operating efficiency (81 percent), followed closely by sharpening focus on products/services with the greatest potential (71 percent) and reviewing and resetting the company's near-future growth plans (67 percent).
"Despite the slow economy, private company CEOs realize now is the time to make adjustments to their business so they emerge from the slowdown in a better position to compete," says Ken Esch, partner with PricewaterhouseCoopers Private Company Services practice.
To improve efficiency, more than half of respondents will renegotiate terms with vendors/customers (58 percent), reformulate baseline products/services (53 percent) and look for more competitive pension and healthcare options (51 percent). Fifty-nine percent are looking for new hiring opportunities to have highly-qualified professionals/technicians or sales executives in this downside economy.
CEOs focused on growth, sustainability
Additional business opportunities focused on growth and sustainability are planned by at least one-third of Trendsetter private growth firms, including strategic alliances or joint ventures with strong-growth firms (45 percent), longer-term pricing plans for key customers (40 percent) and reviewing the supply chain for higher quality/lower costs (39 percent).
According to the report, approximately 36 percent of all CEOs plan on expanding operations within the U.S.; not surprisingly, that figure jumps significantly, up 12 points to 48 percent, among CEOs in the "opportunistic" segment.
Even with Slowdown, Few Companies Plan Significant Changes to Headcount, Initiatives
Despite the strong focus on efficiency, the majority of Trendsetter CEOs are not planning significant cutbacks of people, products and services, or costly initiatives. Approximately 29 percent of respondents plan to increase employees' co-pays or premiums to cover additional healthcare costs. And, only 19 percent plan to discontinue one-or-more of the company's costly initiatives. Of note, slightly less than one in four respondents (22 percent) will probably or definitely cut their workforce to only "essential people."
"While many private company CEOs are moving to reduce their current cost structure, it's important to keep in mind that of all business opportunities named by private company CEOs, among the ten least frequently cited strategies are reductions in workforce, benefits or other initiatives," adds Esch. "This shows that private companies are taking a hard look at their operations and are working to improve the fundamentals of their business, rather than simply reducing headcount and discontinuing programs to lower costs. It also reflects a long-term trend of increased productivity by automating processes through investments in technology and asking more of your workforce."
Trust in Suppliers is High, Yet Some Replacements Expected
While nearly 51 percent of Trendsetter companies have little or no concern over their key suppliers' financial stability over the next 12-18 months, nearly one-quarter (23 percent) of respondents have some concern; only 5 percent had a great deal of concern.
However, approximately 24 percent of respondents believe their company will replace any of their suppliers over the next 12-18 months as a result of the current business slowdown. "While private companies believe their suppliers are financially sound, they're looking to reduce costs in all channels and are counting on suppliers to be flexible as well," adds Esch. "That a majority of respondents do not plan on changing suppliers signals that so far private companies have been successful in renegotiating contracts and price points."
Notably more concern was shown by product firm CEOs than their service firm counterparts, with 39 percent and 17 percent, respectively, citing some or a great deal of concern in suppliers' financial stability. Product company CEOs are also more likely to replace suppliers (36 percent) than service firm heads (12 percent).
Total Product Service
Firms Firms
Concerns over Supplier
Financial Stability:
----------------------
A Great Deal of Concern 5% 9% 1%
Some Concern 23% 30% 16%
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28% 39% 17%
Little or No Concern 51% 49% 53%
Not Applicable/Reported 21% 12% 30%
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100% 100% 100%
Total Product Service
Firms Firms
Plans to Replace Suppliers:
---------------------------
Definitely 9% 12% 5%
Probably 15% 24% 7%
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24% 36% 12%
Probably Not 28% 33% 23%
Definitely Not 27% 19% 35%
Not Applicable/Reported 21% 12% 30%
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100% 100% 100%
PricewaterhouseCoopers' Private Company Services practice is an integrated team of audit, tax and advisory professionals who focus on the unique needs of private companies and their owners. Within the practice, our professionals concentrate on the needs of manufacturing, retail, wholesale and distribution, construction, and food and beverage companies, as well as on the needs of law firms and other professional service organizations. They are committed to delivering cost-effective, practical solutions and proactive services with the quality clients expect from PricewaterhouseCoopers. For more information about PricewaterhouseCoopers' Private Company Services, visit www.pwc.com/pcs.
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. "PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
For more information about Barometer surveys, including recent economic trend data and topical issues, please visit our web site: www.barometersurveys.com