10 minute read 30 Sep 2021

UK CEOs are pivoting from stabilisation to transformation, but recognise that the needs of multiple stakeholders must be front of mind. 

EY Speed train in a yellow frame attached to an old train in the background

When transformation is essential, how can strategy be differential?

By Benoit Laclau

UK&I Consulting Managing Partner, Ernst & Young LLP

Leader of EY UK&I Consulting services. Helping the world’s leading organizations to achieve business transformation. Husband. Father. Golfer. Wine enthusiast.

10 minute read 30 Sep 2021

UK CEOs are pivoting from stabilisation to transformation, but recognise that the needs of multiple stakeholders must be front of mind.

In brief:

  • Fully understanding and addressing the needs of employees, customers and wider society is key to tackling major global challenges.
  • Early action is required to ensure that digital transformation cements rather than erodes employee and consumer trust.
  • A human-centric approach gives businesses the best chance of meeting long-term value and digital transformation objectives. 

Eighteen months on from the onset of the pandemic, CEOs of the UK’s biggest businesses are refocusing on growth and transformation as economies restrenghten. This is a powerful finding that emerges from the UK responses to the CEO Imperative Forbes Survey of 305 CEOs from Forbes Global 2,000 companies, all of which generate more than £1bn in revenue and have more than 1,000 employees. 

Returning to the pre-pandemic ways of working is simply not an option. Instead, CEOs are laser focused on a multi-stakeholder approach to growth that delivers benefits to employees, customers, and society at large in addition to shareholders. This way of thinking drives digital business transformation plans, which have risen up the agenda as a result of COVID-19.

How can CEOs convert these bold ambitions for change into reality? These three steps provide a platform for success:

1. Make long-term value creation the north star

2. Act early to build trust in transformation

3. Put humans at the centre of decision-making

A lighthouse on a cliff at sunset
(Chapter breaker)
1

Chapter 1

Make long-term value creation the north star

CEOs in the UK are ahead of their global counterparts in understanding and creating long-term value.

UK CEOs drive the long-term value agenda. They are ahead of their global counterparts when it comes to understanding the importance of long-term value and taking direct action to create it.

More specifically:

  • 90% of UK CEOs believe large corporations will take the lead in combatting global societal challenges over the next five years, compared with 77% globally.
  • 96% of UK CEOs believe business models will increasingly incorporate circular economy dimensions, compared with 91% globally.
  • 59% of UK CEOs say they have a clear sense of shared purpose, compared with 50% globally.

As a reminder, long-term value involves maximising outcomes for four key stakeholder groups: shareholders, employees, customers, and wider society. It is a more holistic view of value that extends beyond financial performance. It has been recognised and embraced by some of the world’s largest investment managers.1

Pressure from all angles

Why are UK CEOs so focused on long-term value? COVID-19 is undoubtedly a major catalyst. Whether it be income inequality, poor working conditions, climate change awareness or mental health concerns, the impacts of the pandemic have exacerbated major societal issues and made them plain for everyone to see.

Many CEOs believe that their businesses can play a role in addressing these challenges. But they also know that employees, consumers, and wider society – especially younger generations – will judge them on their ability to do so. Illustrating the imperative to act, Edelman’s 2021 Trust Barometer2 found that 59% of UK citizens believe CEOs should step in when the government does not fix societal problems. In parallel, 63% believe that CEOs should hold themselves accountable to the public, not just directors or shareholders.

Many CEOs saw this play out in reality as the pandemic first unfolded. Businesses that looked after employees by delaying or avoiding redundancies at all costs, implementing safe working practices, or supporting employees with remote working have been rewarded with higher employee engagement and productivity, while there was higher employee turnover and less productivity in companies that did not look after their employees. Likewise, businesses that took positive steps to look after customers – whether it be banks supporting customers to use online banking or retailers implementing COVID-19-secure shopping – have been rewarded with increased customer loyalty. In short, CEOs that put long-term value as their north star when dealing with uncertainty have benefitted. And they see the future potential.

“Long-term value has become mainstream,” confirms Kate Bamford, Partner and People & Workforce Experience Leader at EY UK. “Many CEOs have realised that it’s just good business sense, especially when millennials have very different expectations around the organisations they purchase from and work for. This has always been important, but the pandemic certainly accelerated the shift to a purpose-led approach.”

It would be wrong to think that CEOs’ focus on long-term value is purely driven by young consumers and employees. Shareholders increasingly want their business to act on combatting societal challenges too. This is evidenced by the recent public interventions of shareholder groups to force global oil and gas companies to pursue more sustainable business models. In addition, EY research (pdf) shows that 60% of investors support businesses investing to address global challenges even if it diminishes short-term performance.3

Given the UK government’s focus on ‘building back better’, major government procurements will also be based on suppliers’ ability to demonstrate that they are committed to long-term value. Major businesses may also start to make procurement decisions on the basis of these metrics.

Enter listening mode: how to pivot to long-term value creation     

If they weren’t already convinced, COVID-19 alerted CEOs to the importance of long-term value creation. The next question is: how can CEOs pivot their business accordingly?

From adopting more sustainable business practices to rethinking corporate culture, there are many individual initiatives that businesses can pursue.4 But an often-overlooked starting point is to listen to what employees, consumers and wider society expect from a particular business. Essentially, what does value mean for them?

Businesses may think that they understand what’s important to employees and customers because they conduct annual surveys. But these can be complemented with more frequent pulse surveys to gauge opinions on particular topics. It’s imperative to do this frequently because stakeholder demands can change quickly. Indeed, UK CEOs identify changing customer expectations and experiences as the trend that is having the second greatest impact on their business, behind accelerating technology and digital innovation (see figure below).

Figure 1. Businesses feel the effects of tech innovation and shifting customer habits

Figure 1. Businesses feel the effects of tech innovation and shifting customer habits

Q: Which three of the trends above are having the greatest impact on your company?

It’s also possible to gauge what wider society expects through interacting with policy makers, community leaders and public officials. “We’re used to doing client-employee surveys but for the first time, we recently surveyed a much broader range of stakeholders including politicians, the media and business influencers, to understand what society expects from us as a business,” explains Hywel Ball, EY UK & Ireland Regional Managing Partner and UK Chair. “You may think you know who your stakeholders are and what they want, but unless you ask, you might jump to conclusions which may be wrong. That process crystalised our focus around facilitating UK trade post-Brexit, accelerating the rollout and use of digital, acting to build trust in business, and tackling climate change. It was a vital step in delivering on the EY organization’s purpose to build a better working world.”  

The power of reporting

It’s vital for businesses to outline their strategy for long-term value creation and to report on progress. Monitoring and reporting not only builds trust in stakeholders, but also ensures that those responsible for delivery are held accountable. 

In collaboration with the World Economic Forum’s International Business Council, EY worked with other major accounting firms to identify a universal set of metrics to help businesses demonstrate their contributions toward sustainable, long-term value creation.5

It includes 21 core metrics6 covering the four broad areas of governance, people, planet, and prosperity, and 24 expanded metrics. Businesses can take this as a starting point to help determine how best to report on progress. CEOs will need to work closely with their finance teams to understand how demand for nonfinancial information, including environmental, social and governance (ESG) reporting, will be met.7  

Interestingly, UK CEOs have greater confidence that common reporting standards will emerge: 92% believe there will be a global standard for measuring and reporting on long-term value creation over the next five years, compared with 80% globally.

UK CEO Imperative Forbes Study 2021

92%

of UK CEOs expect that a global standard for measuring and reporting on long-term value creation will emerge over the next five years.

A cyclist riding uphill in a beautiful landscape
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2

Chapter 2

UK CEOs double down on digital

Act early to build trust in transformation.

UK businesses intend to speed up their digital transformation programmes: the majority of surveyed UK CEOs say COVID-19 accelerated their transformation agenda while 61% expect to spend significantly more on transformation in the next three years compared with previous spend. 

The survey also finds evidence that UK businesses are accelerating at a faster rate than their global peers. For example, 80% of UK CEOs are planning a major investment in data and technology compared with 68% globally. In parallel, 71% are planning a major new transformation initiative compared with 61% globally.     

Digital transformation can deliver not only tremendous business benefits such as enhanced growth and profitability, but also better experiences for customers and employees. As such, it can help businesses achieve their long-term value creation ambitions while building trust with these stakeholders. A poorly thought through digital transformation can impede long-term value objectives. Here are two examples of steps businesses can take to ensure that their digital transformation projects support rather than undermine long-term value creation. 

Digital planning

80%

of UK CEOs plan a major investment in data and technology.

Tackle AI bias

Artificial intelligence (AI) is central to many businesses’ digital transformation plans. Implemented effectively, it can remove the mundane and process-orientated aspects of work, freeing up employees’ time for more value-adding and rewarding activities. The technology can also create more seamless and personalised experiences for consumers. It’s not hard to see how AI can help businesses achieve their long-term value ambitions. 

However, Gartner predicts that 85% of AI projects will deliver erroneous outcomes due to bias in data, algorithms or the teams responsible for managing them by 2022.8 Whether it be AI algorithms offering women lower credit limits than men despite having superior credit scores, AI-powered targeted advertising pushing higher-salary jobs to men, or AI-based virtual judges entrenching historical bias in the criminal justice system, there are many high-profile examples of AI enhancing pre-existing biases. If a business’ use of AI creates unintended bias, its long-term value ambitions could be materially impacted.

The positive news is that businesses can take steps to ensure this doesn’t happen. The starting point is to ensure that the teams that are developing or implementing AI are as diverse as possible. This is of course not easy given that 22% of AI professionals are female, according to the World Economic Forum9. That said, businesses can still bring in perspectives from a wide range of disciplines such as ethics, law and problem-solving when implementing AI10. They can also ensure that strict governance is put in place around AI implementation to ensure that ethical issues that may undermine long-term value creation are raised and mitigated effectively.

UK CEO Imperative Forbes Study 2021

22%

of all AI professionals in the UK are female.

Create consumer trust in data

Many digital transformations involve leveraging customer data to improve products and services and offer more personalised solutions. These benefit not only the business but also the customer.

But inappropriate use of data risks undermines customer relationships. 42% of customers said they would lose trust in a company that asked for more data than was necessary for their relationship. In parallel, 54% of consumers consider a company sharing information with third parties without their consent a breach of trust.11

How can businesses ensure that consumers trust how their data is being used? Businesses should ensure that data privacy policies are as easy to understand as possible and allow consumers to alter their privacy settings with ease.

“It’s not enough to simply express a desire to keep customer data secure and to use it within the permitted parameters,” says Kate Bamford. “Businesses actually need to build processes and use technology to ensure that data can only be used for its intended purpose.”

In both examples, action is required at the outset of the transformation to ensure success. “Your transformation programme has to consider how it will impact trust, and it needs to be there from day one,” explains Sayeh Ghanbari, EY UK&I Business Consulting Leader. “Whether it's the right kind of governance, whether it's the right tools or the right people, this has to be there by design from the outset. It's not a wrapper that comes after. You cannot implement new technology and then later think about what controls are in place to lessen AI bias or the misuse of data.” 

UK CEO Imperative Forbes Study 2021

42%

of customers would lose trust in a company that asked for more data than was necessary.

A family crossing the road on a zebra crossing
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3

Chapter 3

Put humans at the centre of decision-making

What does human-centricity mean in practice? And what capabilities do businesses and CEOs, in particular, need to put it in place?

Businesses will not successfully transform digitally nor pivot to long-term value creation if they do not consider the human impact of these initiatives. This includes the impact on employees, customers, and other stakeholders. UK CEOs clearly agree: 86% believe that putting humans at the centre of decision- making will be a core value driver.  

Ensure new tech is both customer and employee-centric

When it comes to digital transformation, human centricity in part means ensuring that employees have the necessary skills to work with new technology. CEOs should ensure that leaders of teams in which new technology is being introduced collaborate with human resource leaders to implement an effective talent and change management strategy.

As important as skills are, putting humans at the centre of digital transformation requires businesses to forge a deeper emotional connection between humans and technology. For example, implementing and using new technologies requires behavioural changes and a culture of experimentation and innovation. It also requires technology to be designed and implemented in such a way that it is accessible and useful to employees.

Input from HR leadership can help here. They can help pinpoint aspects of technology that hinder employees’ work experience and highlight areas of inefficiency and frustration that could be alleviated with technology.

This applies to consumers too. Whether it be online banking apps or AI-powered customer service chatbots, businesses must ensure that technology genuinely enhances customers’ overall experience.

New styles of leadership

CEOs are clearly engaged with the need to put humans at the centre of decision- making. But doing so requires new styles of leadership, starting from the very top of the organisation. CEOs and other senior management will need to hone their empathetic qualities to ensure, for example, that they consider the impact of new technology on the workforce.

They will also need to set a positive example of experimenting with new technology. UK CEOs fully realise that this is a new vital part of their role: 61% believe that setting an example of experimentation and risk-taking will be a characteristic of the most effective CEOs over the next five years and beyond, compared with 46% of CEOs globally.

In addition, progress on pivoting to long-term value creation will in part be judged on the actions of the CEO. It’s therefore vital that CEOs’ leadership style, methods of communicating internally and externally, and their actions reflect their business’ long-term value priorities. Indeed, 79% of UK CEOs believe that the CEOs of the world’s largest companies must take the lead in addressing global societal challenges.

UK CEO Imperative Forbes Study 2021

61%

of UK CEOs believe that setting an example of experimentation and risk-taking will be a vital characteristic.

CEOs need to assume that everything they do and say will be seen. They need to ensure that their words, actions and principles are consistent with the purpose of the organisation they lead.
Sayeh Ghanbari
EY UK&I Business Consulting Leader

Despite its importance, the survey data reveals that these initiatives are not currently front of mind for UK CEOs. When asked which areas of the enterprise they expect to implement most change in over the next three years, their lowest two priorities were leadership and leadership team dynamics, and culture and purpose (see figure below). 

Figure 2. Human-centric initiatives are not a top priority

Q: In which areas of your enterprise do you expect to implement the most change in response to these trends over the next three years? Pick three most important.

It could be that CEOs do not appreciate that link between human-centricity and successful transformation, or that they simply have other priorities. Either way, CEOs ought to think again about the importance of addressing talent, culture, and leadership issues.

The consequences of not prioritising these areas may be more profound than derailing transformation initiatives. In a period where the war for talent has intensified­, with huge shortages of a wide range of roles – from AI specialists to lorry drivers – anything less than exceptional employee experiences will undermine businesses’ efforts to attract, nurture and retain talent, and support broader transformation initiatives.

Summary

UK CEO Imperative Forbes Survey reveals that UK CEOs want to get back to growth and digital transformation. The added dimension today is the unrelenting internal and external pressure to adopt a multi-stakeholder approach that benefits employees, consumers and wider society. Achieving this is not an easy task, but those that do, will be rewarded with loyal customers, engaged employees, a compelling social license to operate and ultimately support healthier long-term financial performance. That is genuine transformation.

About this article

By Benoit Laclau

UK&I Consulting Managing Partner, Ernst & Young LLP

Leader of EY UK&I Consulting services. Helping the world’s leading organizations to achieve business transformation. Husband. Father. Golfer. Wine enthusiast.