How C-suite leaders are preparing for the biggest economic and workplace challenges in 2021
Companies are revamping their 2021 budgets because of the pandemic.
The novel coronavirus has forced executives to reimagine how they work, what areas employers should invest in, and where they see themselves in the next year. Google, for example, is already reconfiguring physical offices to fit a hybrid remote work model. Professional services firms like PricewaterhouseCoopers (PwC) and KPMG shared that they're cutting business travel budgets and adjusting to a new practice in collaborating with clients online.
Some companies are getting rid of their offices all together. Business Insider's Shana Lebowitz previously interviewed CEOs at companies with fewer than 200 employees. They shared that pulling the plug on office space gives employees more flexibility and reduces spending.
West Monroe Partners, a management consulting firm, conducts quarterly surveys of 150 C-level executives who work at companies with at least $250 million in annual revenue. Its most recent data is based on responses collected between September 4-7, 2020. Business Insider compiled a list of the primary investments that business leaders are making in response to COVID-19.
"Everyone is pushing out their timelines for when they think business operations will return to normal," said Greg Layok, managing director and technology lead at West Monroe Partners. "And the whole impetus of this project is to understand how priorities and concerns have shifted among C-suite leaders during the pandemic."
Here are the four biggest trends executives paying attention to heading into the new year.
More than 40% of executives shared they are cutting real estate budgets and physical office space.
Nearly 70% of executives said they are cutting travel, and about 42% are putting a pause on real estate budgets used to rent office spaces. And these cost-cuts are being redirected toward tech and digital innovation, the survey noted.
This makes sense, as some major corporations have already extended their work-from-home policies indefinitely.
Companies have stabilized the abrupt transition to a fully virtual workforce, Layok said. But employers are still struggling to leverage collaboration tools to replicate positive company cultures online, which is one of the reasons why people will still want to return to physical offices, he added.
"We're going to end up in a hybrid work environment," Layok said. "We won't see a 100% remote workforce because there are times when people will still need that face-to-face collaboration for the best business outcomes."
The managing director said a hybrid office model may mean that companies will invest in co-working spaces. These physical locations can help employees create a sense of community and bring people together on an intermittent basis, he said.
In the next six to 18 months, about 43% of C-suite leaders are strongly considering acquisitions.
West Monroe's study found 43% of executives are acquiring new businesses. Companies believe that mergers and acquisitions (M&A) will be the way out of the pandemic crisis. And this trend is visible worldwide. According to Refinitiv data, M&A activity from July to September leapt 80% from the previous quarter amid global lockdowns, Reuters reported.
"Companies are realizing that acquiring digital capabilities can help them do business better," Layok said. "Literally every business right now is looking for digital tools to improve their outcomes, interact with customers, and allow more flexibility."
An economic downturn can also be a great time to bargain for acquisitions, as evaluations and expectations may be a bit lower, he added.
Executives are optimistic about the long-term economic impacts of the coronavirus pandemic.
C-level leaders believe that the coronavirus pandemic will create a lasting impact on the US economy in areas like education systems, travel, supply chains and more, the survey noted.
For instance, a staggering 75% of executives shared that companies will work faster and with more agility than they did before (an increase from 65% in April). A full 47% executives said the way families and companies approach learning will change, and some of the revamps are well underway.
Marcy Daniel, chief product officer of PowerSchool, a company that provides education technology solutions for grades K-12, predicted three major changes as a result of COVID-19. There will be a greater emphasis on personalized education, project-based learning in place of standardized tests, and mastery learning in which students will have specializations earlier on, she said.
Remote work, employee training, and rebuilding a positive company culture are still some of the biggest hurdles impacting productivity.
"When you think about knowledge workers and the economy that we're in today, the best high-bandwidth communication and the best collaboration for really hard problems tend to be face-to-face," Layok said. "I really don't think anything is better than a group of people in a room."
The 150 executives surveyed shared that upskilling, remote work, and navigating through company politics virtually remain the top three hurdles that keep them from working at a faster pace. When you add social isolation, social distancing guidelines, and a fully remote workforce into the mix, it's bound to create some friction to employee productivity, Layok added.
The managing director predicted that companies' continual investments in tech will help employers find digital collaboration tools that work.
"Everyone has a laptop at home now, and we've gotten the basics of remote work down," he said. "But I don't think we've figured out the next level of collaboration tech."
There are going to be growing concerns over employee retention and employee care as remote work prolongs, Layok said. As the US prepares for another wave of coronavirus cases, preserving employee well-being and mental health will become the biggest hurdles for employers in the new year, he said.