Senior Managers Doubt Leadership's Plan to Address Economic Crisis

January 20, 2009 (PLANSPONSOR.com) - A new survey conducted in December 2008 by Booz & Company of 828 senior managers across the globe finds that many are wavering in their confidence of leadership's ability to navigate the current economic crisis.

According to a press release, 40% of senior managers doubt that their leadership has a credible plan to address the economic crisis, and 46% are not sure that their leadership could carry out the plan, credible or not. Additionally, one-third of all CEO and CXO-level respondents do not have confidence in the plans that they presumably wrote themselves.

More than half (54%) of senior managers surveyed expect their companies to emerge from the crisis stronger, the press release said. This sense of optimism is higher (59%) among managers in emerging markets compared with 53% in North America and 52% in Western Europe. Three-quarters of managers express a rosy view of their companies’ financial strength today; only 13% said they worked for companies that are financially weak.

However, skepticism grows farther down the management chain. Among managers below the CEO and CXO levels, 51% think senior leadership lacks the capabilities to carry out their crisis plans.

Financial industry executives are alone in praising collaborative efforts to resolve crisis, Booz & Company found. Forty-three percent of financial industry respondents believe business, government and union leaders are working together effectively to stabilize their industry.

Skepticism about stakeholder collaboration was highest in health care and pharmaceuticals (56% are critical of efforts); telecommunications and media (42%); and transportation and commercial services (41%).

The Booz & Company survey of senior managers concludes that, in many cases, companies are not following the course that is best suited for them. Respondents' companies were categorized by Booz & Company as either strong (characterized by both financial and competitive strength), stable (strong financially but weak competitively), struggling (weak financially but strong competitively), or failing (weak in both areas).

According to the Booz press release, the survey found:

  • While struggling and failing companies would be expected to accelerate efforts to improve working capital positions, slash overhead, drive process improvements and renegotiate deals with suppliers, surprisingly, many are not. Between a quarter and a third of respondents say their companies are pursuing such strategies no more aggressively than they were before the crisis.
  • Stable and strong companies are more focused on cutting costs across the board and conserving cash than on opportunities to strengthen their competitive positions.
  • While stable companies would be expected to capitalize on the crisis by buying companies with compelling products or brands but weak finances, or pursuing other growth initiatives, 21% are pulling back on mergers and acquisitions, as are the same percentage of strong companies. One in five stable companies is also investing less in new products or slowing moves into emerging markets.

Booz said a remarkably high number of hard-hit companies (65%) are not doing enough to ensure their own survival, such as accelerating efforts to dispose of assets or secure external funding. Among companies that state they are financially strong, one-quarter are not taking advantage of opportunities to improve their position in the crisis.

«