Taxwise or Otherwise

Lessons from the 2024 PwC MAP Philippine CEO Survey

Insight
26 Sep 2024

Each year, our firm carries out a survey targeting Philippine CEOs to prepare for the Management Association of the Philippines’ (MAP) annual International CEO Conference. With this year’s theme being Business in Five Movements: Wisdom, Passion, and Inspiration Across Five Generations, we gathered insights from 168 CEOs worldwide on business threats, leadership transitions, and workforce composition.

This year showed a marked improvement in optimism, with 86% of CEOs expressing confidence in their industry’s outlook for the next 12 months and 85% anticipating revenue growth for their companies within the same period. This surge in optimism is largely fueled by our country’s economic growth. Globally, we experienced a sluggish start due to lingering effects from the Russia-Ukraine conflict and China’s real estate crisis. Additionally, economies like the US were bracing for a potential recession driven by high interest rates and volatile market conditions. In contrast, our economy expanded 6.3% in the second quarter. This puts us on track to meet the government’s target of 6-7% growth. Our expected annual growth rate outpaces global GDP, which is expected to remain flat at 3.2% in 2024 and 2025.

While CEOs are generally optimistic about their business prospects, our survey revealed several concerns that need attention. Geopolitical uncertainty is a significant worry for many of them. Only 25% have a succession plan for all senior executives, and nearly half have not communicated their succession plan to the next generation of senior leaders. Over 50% of CEOs also reported not maintaining a shareholders’ agreement or a dividend policy, and almost 50% lack emergency and contingency procedures. Last, most CEOs find managing a multigenerational workforce in today’s environment to be challenging.

LESSON 1: DIVERSIFIED PRODUCTS AND MARKETS

When asked about the main concern that keeps them up at night, CEOs identified geopolitical uncertainty as the leading threat. Although we were not directly affected by the ongoing conflicts between Russia and Ukraine and Israel and Hamas and Hezbollah, businesses experienced significant impact due to disruptions in supply chains, fluctuating fuel prices, and revenue losses. The continuous crises since the pandemic have demonstrated that global issues can also affect purely domestic businesses. Focusing solely on local markets is no longer viable. To mitigate potential threats, businesses should consider diversifying both their supplier and client bases to avoid dependency on specific markets.

LESSON 2: TRANSPARENT SUCCESSION PLANNING

Our survey also shows that nearly half of the respondents intend to make changes in their senior leadership within the next three to five years. However, only 25% have a comprehensive succession plan for all senior executives, and just 52% have communicated these plans to their future leaders. This is concerning because succession planning involves more than just choosing the next leader — it’s about developing a pipeline of talent throughout the organization. The lack of transparency can impede the growth of potential successors, causing them to miss out on crucial opportunities to prepare for future roles. Open communication fosters confidence, clarifies expectations, and ensures smooth transitions. By prioritizing transparency, organizations can cultivate a more prepared and engaged next generation of leaders, thereby strengthening their leadership pipeline.

LESSON 3: ROBUST GOVERNANCE STRUCTURES

While 61% of our respondents are from large corporations, over half reported lacking a shareholders’ agreement and dividend policy, and nearly 50% have no emergency and contingency procedures. In our country, many businesses start as family-run or entrepreneur-driven ventures and are not initially managed with professional structures. Over time, these businesses expand, but some outdated practices, such as the absence of formal documentation, persists. Today, businesses of all sizes should recognize the importance of maintaining proper structures and policies. A shareholders’ agreement is crucial as it outlines the management, operation, and control of the business. More importantly, it addresses the rights of both minority and majority shareholders. Likewise, having emergency and contingency procedures is essential given the increased vulnerability of businesses to various threats in recent years.

LESSON 4: VALUE EACH GENERATION

CEOs have identified the main challenges of managing a multigenerational workforce as stemming from the differences in management styles, communication approaches, and work-life balance expectations. Currently, many organizations employ professionals from Generation X, Millennials, and Generation Z. Each of these generations has distinct priorities: Gen X values control over their work and development opportunities; Millennials prioritize flexibility, appreciation, and teamwork; and Gen Z emphasizes mental health and work-life balance. To effectively manage today’s diverse teams, business leaders need to reassess their organizational strategies and adapt their practices to accommodate these varying dynamics. Despite these differences, it’s essential to recognize that each generation contributes uniquely to the organization. Senior members should appreciate the fresh ideas and energy from Millennials and Gen Z, while the younger generation should respect the wisdom and experience that Gen X leaders have accumulated over the years.

TRANSFORMATIONAL LEADERSHIP

Managing a business in today’s environment has never been more challenging. We are constantly confronted with rapid technological advancements, geopolitical issues, healthcare crisis, and climate change. Given these circumstances, organizations require transformational leaders who can understand the changes that need to be made and are able to guide their organizations through the implementation process. The era of transactional leaders, who concentrate solely on achieving limited goals through performance management, is behind us. Instead, we need transformational leaders who can reimagine their organizations and effectively lead their teams on this journey.

About the Author

Karen Patricia Rogacion, is a partner with the Deals and Corporate Finance group of Isla Lipana & Co., the Philippine member firm of the PwC global network.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.