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Executive Confidence Slowly Rising Globally


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By Melissa J. Anderson

New McKinsey research suggests that executives around the world are looking to 2013 with optimism. The firm conducts regular quarterly surveys of executives around the world, measuring attitudes around economic opportunity, expectations on the economy, and workforce growth.
New McKinsey research suggests that executives around the world are looking to 2013 with optimism. The firm conducts regular quarterly surveys of executives around the world, measuring attitudes around economic opportunity, expectations on the economy, and workforce growth.

As reported in the McKinsey Quarterly, over 1,500 executives around the world participated in the survey at the beginning of December. By and large, respondents were cautiously optimistic about the year to come, although they were fairly negative about the here and now. While 30 percent of respondents said conditions in their country were better than they were three months ago, more (38 percent) said conditions were worse. But the largest percentage (40 percent) said conditions were the same.

On the other hand, McKinsey says, this is actually a positive sign. In the previous quarterly survey, the largest percentage of respondents said conditions were worse. And, the report continues, “Looking ahead, executives are more optimistic: 43 percent say they expect the global economy will be better six months from now, up 17 percentage points since last December.”

The study shows that executive optimism is higher than it was a year ago – which is welcome news for the global business environment.

Tempered Expectations

One key finding, according to McKinsey, is the divergent optimism in developed Asia. Executives in this region were more negative about the last six months, but the most positive about the next six months. While executives here are acknowledging a challenging environment for 2012, they anticipate a turnaround in the months to come. The report says:

“With 59 percent of executives there saying current conditions in their home countries are worse now than six months ago, domestic views in this region are more negative than they have been in the last few surveys. But the outlook in developed Asia is among the most optimistic: 53 percent of executives in the region say conditions in their countries will be better—more than three times the share who say current conditions have improved in the past six months.”

McKinsey adds, “Furthermore, their expectations for the global economy are more positive than they have been all year, with 45 percent expecting conditions to improve in the next six months.”

The report suggests regional disparities when it comes to optimism levels as well. “Executives in India continue to be the most positive about their country’s prospects, while those in the eurozone are still the likeliest to expect conditions will worsen—as has been the case for all of 2012.”

Consumer Demand and Workforce Outcomes

The survey revealed that one big executive concern moving forward is an anticipated drop in consumer demand. Respondents in developed Asia were the most likely to expect international demand for their country’s products to increase in the next few months (50 percent), while only 39 percent of executives in developing markets expected an uptick in consumer demand.

Nevertheless, the report continues, over half of the survey respondents expect to see profits increase in the next six months. For the first time since March of 2012, executives believe demand for their company’s products or services will grow.

But, that doesn’t mean executives expect to hire. The report says, “…the results indicate little change in workforce expectations, with the largest share of executives (44 percent) predicting the size of their workforces will stay the same.”

Given the state of uncertainty around the globe, it shouldn’t come as a surprise that hiring is not a priority for most companies. For example, executives sited both violence in the Middle East and North Africa and unpredictable US fiscal policy as reasons the global economy may suffer moving forward. Until the economy stabilizes, it will be difficult for companies to anticipate talent needs.

But talent should still be a top concern. Even though demand is difficult to predict, competitive companies should focus on developing effective leaders and cultivating high performing teams. Rather than serving as an excuse for short-termism when it comes to talent, the unpredictable economy should give companies cause to develop agile, robust workforces that can weather challenging business environments.