The turn of the year is a time of summaries and predictions. The CEOs of Polish companies, facing the forecasted economic slowdown for 2023, are already planning countermeasures. The strategies mainly include technological transformation, business digitization, and margin protection by reducing costs and increasing work efficiency.

EY Report: Polish CEOs and the New Recession Reality

In April 2023, the renowned consulting company EY published a report entitled “How CEOs in Poland react to the new recessionary reality?” The analysis was not a full-scale study but a review of experts – 30 presidents of the largest Polish companies with an international reach. Nevertheless, the results of the report and the conclusions drawn from it are precious and substantive. The following text is intended to explore these results and share my comments that may be helpful as you read the report.

Expectations and Strategies of Polish CEOs

Polish CEOs unanimously expect a slowdown despite expressing more optimism about its consequences than the global average. According to them, 60% believe the slowdown will be substantial, and 40% will be moderate. Moreover, 33% of those surveyed predict the slowdown will be moderate but permanent, and 27% believe it will be moderate and temporary. These results show that opinions on the nature of the slowdown diverge, but this is not surprising. The size and complexity of the economy make forecasting difficult, but it pays to respect experts and their views.

Actions in the Face of an economic slowdown

Reflecting on how CEOs plan to address the economic slowdown, a classic pattern emerges. It is easier to control costs than revenues, so cost reduction is standard. Nevertheless, CEOs show determination to use the slowdown to strengthen the company from the side of business efficiency.

Action priorities for the near future

The CEO’s priorities include: reducing costs, postponing investment projects, increasing the outsourcing of auxiliary processes, optimizing working capital and restructuring less efficient parts of the business. Interestingly, all respondents plan to intensify the business’s technological transformation and digitization to improve operational efficiency, sales and customer services. Such a strategy is an optimistic transformation of the threat of economic slowdown into a development opportunity.

Business transformation strategies

Despite the economic slowdown, as many as 50% of the surveyed CEOs stopped planned investments, 33% withdrew from some markets, 40% reconfigured their supply chains, and 40% moved assets from selected markets. A large scale of activity is noticeable here, which indicates well-thought-out and not ad hoc actions. CEOs are regrouping their companies’ priorities in response to new challenges.

However, this part of the research lacks the CEO’s opinion on retaining talent and high employee engagement in the company, which are crucial for the effectiveness of the planned tasks. Although only 30% of CEOs are considering reducing employment, in a situation where Poland and the Czech Republic have the lowest unemployment rate in the European Union, such decisions may result in a lack of staff in the future.

Changes in remuneration systems

Regarding salaries, 20% of CEOs plan to cut bonuses and 50% plan to freeze salaries. If there are no clear messages about the following steps to return to the path of wage growth, companies may lose valuable employees. The loss of talent is an apparent loss of competitive advantage. Moreover, 37% of respondents are considering introducing a more flexible remuneration system, e.g. hourly contracts, which is directly related to making working time more flexible and may be an acceptable proposition for many employees.

Seeing ESG as an opportunity or a threat

The CEOs were asked how they perceive activities for sustainable development, i.e. the so-called ESG (Environmental, Social, and Governance). As many as 47% of respondents believe that ESG is an opportunity to build a sustainable competitive advantage in the market, reflected in their corporate strategies.

The gap between declarations and actions

However, despite such a high percentage of CEOs declaring a commitment to ESG issues, the enthusiasm for actual action in this area seems much lower. Most companies see no role for sustainability policies in their corporate strategies.

Finding ways to increase sales

The economic slowdown does not discourage CEOs from looking for ways to strengthen sales or improve their market position. However, these strategies are characterized by great caution. As many as 57% of respondents plan to invest in the introduction of new products, but only those that were previously.

Looking for Ways to Boost Sales

The economic slowdown does not discourage CEOs from looking for ways to strengthen sales or improve their market position. However, these strategies are characterized by great caution. As many as 57% of respondents plan to invest in introducing new products, but only those that the market has previously tested.

Strategic Partnerships as Key to Survival

It is disturbing that 63% of respondents see the implementation of their strategies through the acquisition of strategic partners and the creation of joint ventures. This prudent strategy involves sharing risk with a partner and involving fewer resources.

Summary

To sum up, an economic slowdown is always an opportunity to organize and improve the effectiveness of internal processes. There’s just more time for that. It is also a time for strategic thinking and actions to improve our market position. Unfortunately, the results of EY research indicate a gap between declarations and actual actions in sustainable development. This is undoubtedly one of the foundations of building a competitive advantage. It’s time to wake up the CEOs.