2020 was a tough year that set up many obstacles for business leaders to overcome. Late last year, The Conference Board set out to learn about what might keep business leaders around the globe up at night in 2021. The top stressors, they discovered, are obviously COVID, but also recruiting and retaining top talent, concern of an impeding recession, vaccine availability and accelerating digital transformation. Worth talked to Chuck Mitchell, executive director of content quality at The Conference Board, about what their survey revealed and how business leaders can prepare for the year ahead.

The Conference Board recently did a survey that reveals what is keeping business leaders up at night. So, what is keeping business leaders up at night?

When it comes to external stressors—those issues that are out of management control—CEOs cite the COVID-19 virus, vaccine availability and changing consumer buying behaviors (likely as a result of the pandemic) as the key potential game-changers in 2021. Despite modest growth expectations for the global economy in the coming year (The Conference Board Economic Outlook forecast for 2021 puts global GDP growth at 4.4 percent, up from negative 4.2 percent in 2020), 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.

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However, there is light at the end of the tunnel. CEOs believe the distribution of a successful COVID-19 vaccine will have a significant impact on their businesses in the coming year, contributing to their more positive view of future growth prospects by taking the worst-case economic scenarios out of play. The spread of COVID vaccines will also provide greater clarity and predictability around short-term planning and operations, such as when physical workplaces can reopen and the dependability of supply chains. Again, CEOs in China are outliers. Only CEOs in China—where lockdowns have been severe and unproven experimental vaccines have been available to select populations since August 2020—see an effective vaccine release as having less of an impact on the local business environment in 2021. They rate its impact ninth overall as an issue outside of management control. Globally, it is third with U.S. CEOs giving it the highest ranking globally at number two.

Concern over the recruitment and retention of quality talent is a perennial concern for CEOs, according to our survey, which is now in its 20th year. Despite the pandemic-induced recession, 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.

Other issues that are clearly keeping CEOs up at night are the urgency to transform their organizations into digitally driven enterprises and transforming their business models.

How did The Conference Board come to these findings?

The anonymous survey was carried out from November into early December 2020 following the U.S. elections in November. To provide a representative view from respondents around the world, we weighted the 1,538 responses (909 CEOs, 629 C-suite executives) by the respondent’s country share in global output (GDP) divided by the respondent’s share in the total number of responses from his or her country. The project, coordinated by The Conference Board, involved collaboration with 14 partners around the world that invited their members and contacts to fill in the questionnaire, improving the coverage globally. The data was analyzed by a team of senior researchers and economists at The Conference Board worldwide who used their collective knowledge to determine the implications of the findings on regional business environments as well as industry sectors. The team then provided roadmaps on how firms can best meet the looming challenges and improve performance at the firm level.

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What are CEOs in the U.S. most concerned about compared to other global leaders?

There are several points of divergence between U.S. CEOs and their global peers, as well as a difference in responses year over year following the change in U.S. administrations. This year’s survey, completed after the U.S. elections in November, shows diminished levels of concerns both globally and in the U.S. around trade disruptions, global political instability and declining trust in government compared to a year earlier. However, U.S. CEOs also report elevated levels of concern about corporate tax policies and regulation. Supporting the lessening concern about global trade disruption: In our 2021 survey, 19 percent of U.S. CEOs see a decrease in globalization as a likely long-term outcome of the COVID-19 pandemic, down from 50 percent in our June mid-year survey. Globalization is multidimensional and includes financial flows, immigration, digital flows and exchange of ideas. Deglobalization, especially in trade, which is probably the most visible aspect of globalization, was a trend that was already underway prior to the pandemic outbreak, according to research by The Conference Board. The change in U.S. administrations may, at least partially, begin to restore confidence in globalization.

Overall, compared to their global peers U.S. CEOs are significantly more concerned about regulation, corporate tax policies and shareholder expectations about business’ role in dealing with social and environmental issues. U.S. CEOs are also more focused than their global peers on mergers and acquisitions, as well as improving speed to market of new products and services, as levers of growth. They are much less concerned about capital borrowing costs and access to capital than CEOs elsewhere. When it comes to the internal obstacles they say their organizations face, U.S. CEOs are considerably more focused on their own siloed internal structures and dealing with legacy technologies compared to the rest of the world. One of the more significant differences is that U.S. CEOs are far more eager to bring remote workers back to the physical workplace than CEOs elsewhere. U.S. CEOs rank this as their third most important human capital management strategy. It ranks ninth globally, 16th in China, 19th in Japan and 10th in Germany.

What challenges do business leaders expect to face in 2021?

CEOs say their organizations will focus on accelerating digital transformation, improving innovation while modifying existing business models, controlling costs, streamlining processes and improving cash flow to mitigate risk and seize opportunities in the coming year. The COVID-19 pandemic and resulting economic downturn have ended the luxury of taking years to adapt to the digital revolution. While CEOs see digital transformation as their top strategic priority for 2021 (it can be both a growth strategy by enhancing customer experience and cost efficiency by creating leaner processes and functions), many organizations are struggling to achieve it. It is important to remember that investment in digital technology is only a piece of the digital transformation puzzle. It is organizational culture, enlightened leadership and talent that will ultimately create a sustainable competitive advantage. The benefits of digital transformation can never be fully achieved without a concurrent investment in organizational structure and the human capital aspect of transformation and innovation. For many, it also requires a cultural change that allows organizations to openly question their most basic beliefs and assumptions. The responses to our survey show that CEOs are on the right path to driving digital transformation in their organizations. They are prioritizing such transformational fundamentals as integrating digital technology with business strategy by modifying their business models, building more agile teams, adopting more flexible work policies, embracing data analytics to drive decisions, engaging in external alliances and collaboration, and developing the next generation of leaders to thrive in a digitally transformed world.

Related to the urgency of digitally transforming their organizations, business model transformation is also a critical focus for 2021 and seen by CEOs as an important growth lever, yet it is one of the hardest things for organizations to do. The business model transformation journey is challenging and requires moving beyond incremental change in how you sell things to a disruptive questioning and redefining of what it is that you make, what it is that you sell (is it a product, a service or both?), and how it is sold. It requires asking hard questions about an organization’s basic operating assumptions, available talent and skills, and culture. Its impact on an organization goes well beyond the external relationship with customers and how a business goes to market. 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 culture, structure, leadership and a continuous evolution of talent and upskilling.

Perhaps most importantly, how can business leaders use these findings to get prepared for the year ahead?

While CEO and C-suite priorities certainly vary on a company-to-company basis, we believe this report can serve as a discussion starter and idea prompter within organizations to ensure that the enterprise understands the challenges it faces, the strategic goals it needs to set to meet those challenges, and the strategies and tactics required to be competitive in a global marketplace. Perhaps most importantly, it allows organizations to look at their internal alignment with issues and priorities and get everyone rowing in the same direction. This report surfaces some of the most vital questions firms ask themselves to be ready for a post-COVID pandemic recovery.

In time, the global economy will recover from COVID-19, but it may be forever changed. The pandemic is posing a unique set of risks and opportunities for companies regardless of size, location or industry sector. The long-term impacts on the basics of business—how and where work gets done and by whom, what customers want and how they buy it—require asking difficult questions as companies prepare for the recovery. How are organizations reinventing themselves for the digital age and how are they responding to the forced and rapid march toward digital transformation? How should they plan resource allocation and investment decisions, address skill shortages, manage key talent and innovative business models to best thrive in a post-pandemic world?