The CEO Imperative: How has adversity become the springboard to growth for Australian and New Zealand CEOs?

12 minute read 15 Mar. 2021
Authors
Jenelle McMaster

EY Oceania Markets Leader

Transformation leader. Change ambassador. Passionate supporter of women in business. Lover of yoga and dance. Former army reservist. Mother of two. Metaphorical juggler.

Jennie McLaughlin

EY Oceania Purpose & Customer Leader

One of 17 customer experience professionals in Australia. Manages CX for a family with two soccer-mad children. Enjoys a good book, coffee and a piano jam.

Clare Payne

EY Fellow for Trust and Ethics

A leading voice on ethics in society.

Juliet Andrews

Partner, People Advisory Services, Ernst & Young LLP

Leader in solving complex workforce challenges. Inspired by the future of work. Mother to three teenagers. Greatest skill is managing time.

12 minute read 15 Mar. 2021

A renewed focus on purpose and people is driving CEOs to transform for prosperity in a changed world. 

As COVID-19 vaccination programs roll out, confidence is returning to C-suites across Australia and New Zealand. It’s clear though, that while CEOs are ready to rebuild, they recognise that returning to pre-pandemic ‘normal’ is not an option. The impact of COVID-19 pandemic accelerated the arrival of trends already on the C-suite agenda – from digital transformation to changes in consumer behavior to climate risk. Now CEOs have a rare – and brief – window of opportunity to leap ahead, and transform through purposeful, human-centered change, or risk being left behind. 

Digital transformation is the top trend impacting business

We know the pandemic’s impact on businesses was radical and prolonged but what’s also clear is that its effects were not uniform. Despite the tough conditions of FY20, 40% of the Australian and New Zealand companies we surveyed for our CEO Imperative study thrived, while 32% were survivors. Twenty-nine per cent of companies maintained flat revenues through the crisis. During this current fiscal year, 40% of Australian and New Zealand companies are experiencing revenue growth, a figure higher than the EY CEO Imperative Study global results. And, as reporting in the latest EY Capital Confidence Barometer Report, the majority of Australian and New Zealand Executives expect revenue and profitability levels to rebound to pre-pandemic levels this year or next.

Still, continuing to thrive in a changed business landscape will require renewed focus on finding better solutions to more complex problems. So how do you become a thriver or even stronger? The EY CEO Imperative Series is designed to provide critical answers and actions to reframe the future of your organization, with the Australia and New Zealand CEO Imperative Study, a survey of 35 chief executives – part of a broader global study of 305 chief executives – of Forbes Global 2000 and other large companies, focused on insights to achieve sustainable growth in the long term. We see a new DNA for successful enterprises emerging, built around human-centred transformations that break down silos, increase agility, improve innovation, and leverage data to become closer to the customer. That requires CEOs to embed four critical characteristics in their organisations:

  1. Committed to human-centred leadership. Leading with compassion, setting an example of experimentation and risk-taking and fostering stakeholder trust will drive core value.
  2. Organised for long-term value. The future enterprise will be organised and rewarded for generating long-term value and rewarded by the market.
  3. Embedded in ecosystems. The future enterprise will be embedded in external ecosystems and consist of internal ones, making ecosystem orchestration in a key leadership capability.
  4. Designed for agility. Both leadership and the organisation will be structured to act more nimbly.

Australian and New Zealand CEOs recognize that they will be critical to driving this change. Fifty-seven per cent of local CEOs – compared with 44% of their global peers – said the ability to drive a transformative mindset across the business will be a defining feature of the most successful CEOs over the next five years. And they’ll need to lead by doing – 49% say CEOs should set an example of risk-taking and experimentation.

CEOs will need to turn this transformative mindset to tackling the big challenges facing their organisations. Accelerating technology and digital innovation is the trend which 63% of Australia and New Zealand CEOs say has the biggest impact on their business. Changing customer experiences and expectations is the top trend for 46% of those surveyed with the emergence of new business models cited by 43%.  

EY CEO Imperatives trends with the greatest impact

Digital transformation has long topped the CEO’s agenda but remains a challenge, with many attempts inadequate due to a narrow IT-focused scope and a ‘one-off’ approach – genuine digital transformation requires enterprise-wide change and a commitment to continual evolution. This enables organisations to keep pace with the rapid pace of changing customer needs, including through innovative business models enabled by technology.

Making the most of technology’s potential will also hinge off maximising the value of data, which may be a bigger challenge for CEOs in Australia and New Zealand. Just 31% of local CEOs say risk assessment is driven by data, compared with 49% of global CEOs. While only 34% (compared with 51% globally) say their company delivers timely data-driven insights that enable better internal and customer outcomes.  Australian and New Zealand CEOs report higher levels of customer trust in their use of data – 40% compared with 34% globally – but this still signals a worrying a trust gap that may hinder companies’ ability to drive data-driven transformation.

Embracing the human dimension of change

Australian and New Zealand CEOs are adopting a distinctly people-centred approach to transforming in response to the trends impacting their business. And while this growing focus on the human dimension of change is seen across our global survey, the trend is more marked here:

Key areas of change for Australia and New Zealand CEOs over the next three years will be:

  • Culture and purpose – 37% of local CEOs, compared with 17% of global CEOs
  • People and talent – 31%, largely aligned with global results
  • Leadership and team dynamics – 34%, compared with 22% of global
  • Organisational structure – 31%, compared with 20% of global 
EY CEO Imperatives key areas for transformation

The reasons behind the differences are complex – and we’ll explore them in future articles. But Australia and New Zealand’s response to the health crisis of COVID-19 may provide a clue. Both countries adopted ‘go hard, go early’ strategies to combatting the spread of the pandemic and keeping the virus’s death toll to less than 1,000 people combined. Trust in governments, that based responses on expert health advice, increased during the crisis, and a community sentiment of making personal sacrifices for the common good, meant people largely complied with lockdowns and COVID-safe practices.

Businesses moved fast to prioritise the safety and wellbeing of their workforce, a shift that has stuck. CEOs better understand how nurturing talent, including through upskilling/reskilling, collaboration, and empowering agility can directly catalyse transformation – and they acknowledge the implications for their own leadership. Forty-three per cent of Australian and New Zealand CEOs said leading with compassion will be a critical attribute of the most effective CEOs over the next five years.

We do, however, spot some gaps between intention and execution – businesses must close these to realise transformation ambitions.

  • Diversity deficit: Just 17% of Australia and New Zealand CEOs say increasing diversity is the most important change they could make to their C-suite. While the result is higher than that seen at a global level (8%) it still indicates a lack of recognition of the role diversity plays in creating an innovative, high performing culture.
  • Focus on technical skills: More than a third (34%) of Australian and New Zealand CEOs say a technical background will define the most effective CEOs. This may flag potential weaknesses in the future bench strength of boards, which will require a mix of skills and capabilities to understand the intricacies and interdependencies of more complex issues, such as climate risk.
  • Behavioural science: Thiry-four per cent of Australian and New Zealand CEOs say knowledge of the discipline will be important to drive growth over the next five years – far higher than seen at a global level (14%) but still perhaps lower than warranted, considering the huge impact of human behaviour on successful change.

Together these factors suggest that, despite Australia and New Zealand leaders better understanding that successful change is human-centered, they are still subject to some cultural blind spots. 

 

Successful transformation depends on organisations’ ability to harness or rapidly develop innovation that works – and quickly stop what doesn’t – which requires the right mix of skillsets, working and collaborating effectively. We see it as a mindset shift – from the notion of the “hero CEO” to a collective group who solve complex problems.

 

Linking purpose and performance

More Australian and New Zealand CEOs (57%) than global leaders (41%) say COVID-19 has slowed transformation. Now, as progress is expected to ramp up again, local businesses have a small, and fast closing, window of opportunity to view this pause as a way of reframing their transformation agenda. The pandemic has reset the economy, and our values as a community. It has accelerated the need for a new, better working world that put purpose at its core, to drive long-term value, rather than just meet short-term commercial imperatives.

CEOs tell us they are ready to lead the renewed focus on purpose. Thirty-seven per cent of Australian and New Zealand CEOs say long-term value creation and reporting will require greater attention from the C-suite over the next five years. While this figure is lower than the global result (47%), it’s worth noting that climate risk is seen as a bigger priority within Australia and New Zealand (37%) than at global level (26%). Perhaps recent direct impacts of a changing climate, including the devastating 2019/2020 Australian bushfires, are prompted organizations to do more to combat this existential threat.

CEOs that recognise the link between purpose and higher performance can better navigate their organisations through current and future uncertainty.

Investors are scrutinising environmental, social and governance (ESG) metrics before awarding capital and company boards are being sued for failing to disclose or mitigate against climate change risks.

The quest to win stakeholder trust is one that 66% of Australian and New Zealand CEOs strongly agree will be an increasing part of their role – just 30% of global CEOs say the same. Those that do so successfully, can take the opportunity of now to drive true change. In fact, the ability to foster trust and build stakeholder confidence, in addition to a focus on diversity and purpose, will be key to forging ecosystems and expanding ASEAN investment.

COVID-19 showed us that fundamental changes can be made, literally, overnight, that we are all connected and exposed to risks such as climate change, and that those companies that focus beyond compliance can create opportunities to truly transform.

Closing the gap between intention and execution

As Australian and New Zealand CEOs lead their organizations beyond the crisis of COVID-19, they have a new opportunity to create a future enterprise, led by purpose to both lift short-term performance and create the long-term value that will drive true prosperity for organizations, the working world and society. Digital transformation will be integral to successful change but, as our CEOs realise, successful change must be human centred, embracing radical customer centricity with nurturing and progressive cultures, to enable genuine innovation at scale and realise the full potential of technology at speed. Closing the gap between intention and execution is now the challenge. Creating a concrete action plan by considering some tough questions can help CEOs bridge this gap:

  • How do we capitalise on the realisation that we can collectively and rapidly drive change?
  • How do we align human-centred intention with execution?
  • How do we reframe today’s challenges on transparency and trust to become tomorrow’s opportunity for co-creation, innovation and collective growth?
  • How do we ground our decision-making in asking how it will impact our customers, employees and community?
  • How do we adopt a future-back approach to developing our strategy, using our corporate purpose to guide the necessary capabilities for long-term resilience?
  • How do we ask the uncomfortable questions across the organisation that challenge the status quo to seek continuous improvement?
  • How do I drive a transformative and human-centred mindset across every aspect of our organisation?

Further perspectives on how to close the gaps between intention and execution to progress transformation to the future enterprise will be shared in future articles.

2021 CEO Imperative study - Australia & New Zealand

  • This article is based on a survey of 35 chief executives of Forbes Global 2000  and other large companies with at least USD$1b in annual revenues across diverse industries in Australia and New Zealand. Of these, one-third have annual revenues of USD$10b or more. The fieldwork was conducted by Forbes Insights in December 2020 and January 2021. The study, which aimed to understand CEOs’ perspectives on the DNA of the future enterprise, is part of the EY CEO Imperative Series, which is designed to provide critical answers and actions to help business leaders reframe the future of their organisations. 

Summary

A renewed focus on purpose and people is driving CEOs to transform for prosperity in a changed world.

About this article

Authors
Jenelle McMaster

EY Oceania Markets Leader

Transformation leader. Change ambassador. Passionate supporter of women in business. Lover of yoga and dance. Former army reservist. Mother of two. Metaphorical juggler.

Jennie McLaughlin

EY Oceania Purpose & Customer Leader

One of 17 customer experience professionals in Australia. Manages CX for a family with two soccer-mad children. Enjoys a good book, coffee and a piano jam.

Clare Payne

EY Fellow for Trust and Ethics

A leading voice on ethics in society.

Juliet Andrews

Partner, People Advisory Services, Ernst & Young LLP

Leader in solving complex workforce challenges. Inspired by the future of work. Mother to three teenagers. Greatest skill is managing time.