Critical Examination of the PwC 9th Annual Global CEO Survey


Research Paper (undergraduate), 2007
40 Pages, Grade: 2

Excerpt

Table of Contents

1 Introduction
1.1 The 9th Annual Global CEO Survey
1.2 Key findings of the PwC survey
1.3 Structure of this paper

2 Part 1: Critical evaluation of the 9th PwC Global CEO Survey
2.1 Content-related shortcomings
2.2 Author-related shortcomings
2.3 Methodology-related shortcomings

3 Part 2: The PwC report’s implications for the role of corporate human resource Management in multinational enterprises
3.1 Changing forces in the global economy mentioned in the PwC survey
3.1.1 Globalization and its challenges
3.1.2 Emerging markets as new target markets
3.1.3 Changed business activities
3.1.4 Increased complexity

4 Part 3: The theoretical perspective
4.1 The effects of Globalization on Key trends identified in the IHRM literature and their future development
4.1.1 Standardization versus localization of the human resource management practices
4.1.2 Convergence versus divergence of (HR) management practices
4.1.3 knowledge transfer within MNCs
4.1.4 Industrial relations - the development of global unions and global bargaining
4.1.5 HR tasks in an increasing number of industrializing countries
4.1.6 managing cross border strategic alliances
4.1.7 forming and supporting transnational teams
4.2 Academic research on complexity in management
4.3 How does the PwC Report comply with current IHRM literature

5 Summary and conclusion

1 Introduction

1.1 The 9th Annual Global CEO Survey

In early 2006, PricewaterhouseCoopers ('PwC') published the latest edition of its Annual Global CEO Survey ('the PwC survey'). This year, more than 1,400 CEOs were interviewed to find out about what is at the top of their mind, focussing on the current topics globalization and complexity with a special emphasis on emerging markets like Brazil, Russia, India and China ('BRIC').

In addition to the data compiled by PwC, the PwC survey also presents in-depth interviews with five CEOs of multinational enterprises, offering insights into their personal way of dealing with globalization and managing complexity within their organizations.

1.2 Key findings of the PwC survey

In short, the key findings of the PwC survey are the following:

- Support for globalization is strong, and it is getting even stronger;
- The major challenges in going global are overregulation, trade barriers/protectionism, political instability and social issues;
- In respect to emerging markets, most resources are spent in China, India, Brazil and Russia;
- Globalization is primarily looked at as a way to find new and serve existing customers, rather than to cut costs only;
- Globalization adds additional layers of complexity;
- Complexity is constantly increasing in today's business world;
- Expansion into new territories, mergers and acquisitions, launching new products and services are creating the most complexity;
- Dealing with increased complexity is worth the efforts as long as it allows companies to add additional value, otherwise reducing unnecessary complexity has become a personal priority of CEOs;
- Surprising are the enormous gaps between capabilities that CEOs view as important and their organizational performance in these areas;
- Performing well in certain areas of managing complexity goes along with performing well in other areas (PricewaterhouseCoopers 2006, p.2).

1.3 Structure of this paper

The authors have structured this paper into the following three parts:

Part 1 critically examines the PwC survey in various aspects and presents three types of shortcomings that have been discovered (content-related, author-related, methodology-related).

Part 2 deals with the PwC survey's implications for the role of corporate human resource management ('HRM') in multinational enterprises, examining changing forces in the global economy and linking them to the HRM function.

Part 3 explores the impact of globalization and complexity on current international HRM literature and analyses its consistence with the findings presented in the PwC survey.

2 Part 1: Critical evaluation of the 9th PwC Global CEO Survey

With the 9th Annual Global CEO Survey, PricewaterhouseCoopers has again published a high-level survey among more than 1,400 global CEOs, examining current management challenges from a CEO's perspective, offering highly valuable insights and being of great value for the reader.

However, the PwC survey also seems to have some weaknesses on which the authors will concentrate in the following sections as the value of the survey is strongly dependent on an individual's information requirements respectively a company's current situation and can therefore not be discussed meaningfully on a generic level. The shortcomings mentioned above have been structured within three broad areas:

Exhibit 1: Weaknesses of the PwC survey

illustration not visible in this excerpt

Source 1: Compiled by author

2.1 Content-related shortcomings

In this section, the authors examine shortcomings related to the general content of the PwC survey, including a lack of depth of the results as well as critically evaluating the novelty of information presented.

First, what comes to one's attention in respect to the content when reading the PwC survey is a lack of depth of the presented results. Without doubt it is necessary to present all essential findings in an easily comprehensible manner, especially when targeting an audience like CEOs as this group of people generally suffers from a lack of time for detailed analysis of every paper they get into their hands and as they are much more interested in the big picture from a bird's eye view than they are interested in the details.

However, the PwC survey often seems to be very general and just scratching on the surface of the problems, therefore reducing the value for the reader. Various factors in respect to globalization and complexity are presented, but no framework is introduced about how to tackle those problems. For example, complexity is presented as one of the CEO's priorities, but there is no framework about what issues should be at the top of every CEO's agenda and how globalization, for example, is integrated into the main tasks for CEOs (for instance into self-management, corporate strategy, corporate culture, employees; according to the HIRT&FRIENDS leadership model [Hirt 2006, p.6]) in order to explain the origin of increased complexity and to give concrete starting points for managing it.

Second, the novelty of information given and results presented is questionable. Most findings of the PwC survey are more or less common knowledge and are stating the obvious for an up-to-date manager who is regularly reading qualitative newspapers and magazines. It also seems that well-known management issues are just labelled with a new term. For example, the PwC survey points out in the highlights section that reducing unnecessary complexity has become a personal priority of CEOs. Interestingly enough, this approach goes along with 'systematic refuse disposal' as Fredmund Malik, one of Europe's leading top-management trainers and consultants, already pointed out in 2001 in the 9th edition of his famous book "Führen – Leisten – Leben" (Malik 2001, p. 373), stating that it is essential to systematically reduce unnecessary complexity for anyone who wants to be an effective manager. What is more, Fredmund Malik also wrote that complexity is not necessarily something bad because a higher degree of complexity is the prerequisite for higher performance, i.e. complexity is favourable where it adds value and therefore has to be managed in these areas (Malik 2001, p. 73), what is also presented as a major finding in the PwC survey on page 31f.

On the other hand, however, this 'mere' consolidation and combination of the topics globalization, complexity and BRIC can have value for managers too because the high-level perspective at least enables the reader to become clear about the big interrelations. In addition, the data presented in the survey is obtained from more than 1,400 CEOs worldwide, ensuring a global, high-level perspective that is otherwise nearly impossible to obtain for an individual person or a company due to a missing link to such a high number of CEOs.

2.2 Author-related shortcomings

In this section, potential self-interests of a study's author as well as the orientation at mainstream topics are critically assessed.

Whenever reading a survey it makes sense to ask oneself about the background of the authors and their possible intentions why and how the survey has been conducted, as those factors usually have a significant influence on the outcome. A very practical and well-known example of this are polls from political parties before elections: it is quite likely that the one political party who has the poll conducted performs relatively better than at various polls conducted by other political parties. The same effect – the influence that the survey sponsor has on the outcome – can often be observed at any kind of studies, surveys and polls. Although it is not said that this influence always has to be distorting, one has to be aware of it at least when interpreting the results.

In this specific survey, the survey sponsor is the biggest professional service firm, offering auditing, tax- and legal as well as management consulting services to the most reputable companies worldwide. However, the quality of professional services in general, on this high level specifically, is usually only very difficult to assess by the client, if not impossible at all due to multidimensional cause-effect relations. Due to this fact, professional service firms have their own set of marketing tools to market their services, including among others magazines, reports and surveys on specific topics, aiming at widely demonstrating their superior knowledge as well as the quality of their work performed.

Exhibit 2: Overview of professional service firms' publication activities

illustration not visible in this excerpt

Source 2: Compiled by author

When bearing all this in mind it becomes clear that the survey is probably designed to address those issues that correlate with the consulting expertise of PwC. Specifically, it seems that globalization and its impact on companies are presented in a very favourable light, thus raising awareness about future opportunities and encouraging companies to expand into other countries. As a consequence of globalization efforts, the need for professional international human resource management increases, in particular the number of international assignments will go up. Interestingly, PwC offers a range of international assignments services (PricewaterhouseCoopers (a)) that want to be marketed and sold within the target group high-level managers responsible for handling the issue globalization and having the authority to sign consulting services contracts. In this light it becomes clear that certain aspects in the survey might be – consciously or unconsciously – influenced by the interests of the author.

However, it also has to be said that it is absolutely legitimate for everyone to highlight those aspects that one sees as the most important and interesting ones. The survey certainly invites the reader to think more consciously about the aspects that are highlighted. Even though the selection and presentation of those aspects might be influenced by the author as indicated above, they nevertheless allow the reader to see in which management issues other companies have difficulties, and they also have certain benchmarks to evaluate their own performance in comparison to other global companies. This is especially valuable when thinking about how difficult it would be for an individual company to obtain reliable performance data from other companies or even competitors to evaluate their own performance against, once again highlighting the importance of such global surveys as conducted by PwC.

Another issue that is related to the author of the survey is that authors often focus on mainstream topics, i.e. topics the target group is already aware of and that are already widely discussed. In particular, this might be the case especially with the focus on the so-called BRIC countries when talking about current globalization efforts. The survey states that the primary driver of globalization is not cost-cutting anymore, but expanding into emerging markets like BRIC to increase the customer base and to provide services to existing customers. Again, it might be asked whether expansion in order to increase a company's customer base is presented as the primary driver because of the fact it really is right now or because of the fact that one particular service offer of PwC is "Expanding internationally" (PricewaterhouseCoopers (b)), what may have a much higher earning power for PwC in the next couple of years than cost-cutting, as most successful international companies have already cut their costs in the last couple of years to remain competitive on an international level.

On the other hand it can also be argued that raising awareness about globalization, especially in respect to BRIC, is an important input of PwC, what also is an explicit goal of the survey as stated by Samuel A. DiPiazza Jr., CEO of PricewaterhouseCoopers International Limited: "However, if the results of this survey raise the level of awareness about this important issue, foster debate and stimulate additional research, we will have accomplished our objective" (PricewaterhouseCoopers 2006, p. 1). From a business point of view, companies can really benefit from such external inputs when taking into consideration the experience curve framework, originally developed by the Boston Consulting Group, one of the leading strategy consulting firms. Particularly, companies in industries like production of aircraft turbines heavily depend on developing experience and economies of scale before their competitors do in a certain country or industry (von Oetinger 2003, p. 543-547). Not surprisingly, competitors that come second or third, often lag behind the market leader in terms of experience and scale and often never manage to become profitable at all. As a consequence, being aware of new opportunities in countries like BRIC can be of great value for a range of companies to become the market leader before one of its competitors does, thus ensuring making higher profits.

2.3 Methodology-related shortcomings

In this section, the authors critically examine those aspects of the survey related to the survey participants and methods as outlined in the survey, focussing on the origin of the companies surveyed and on the influence of the group of people interviewed.

To begin with, the origin of the companies surveyed is distributed as follows: 463 are from Europe, 331 from Asia-Pacific region, 301 from South America, 187 from the United States, 58 from Canada, 14 from Mexico and 56 from the Middle East and Africa.

Exhibit 3: Origin of companies surveyed

illustration not visible in this excerpt

Source 3: Pricewaterhouse Coopers 2006, p. 3; own illustration

What is interesting here is that the relative majority of companies surveyed is located in Europe. On a very general level, markets in Europe are already saturated and growth is increasingly difficult to achieve. In other words, European companies that are under pressure to fulfil shareholders' growth and earnings expectations are forced to expand to emerging high-growth markets. Consequently, it is quite likely that globalization is on a more prominent place of European CEOs' agenda than of CEOs that have their home base located in emerging markets. Moreover, the optimism of 58% of CEOs interviewed that globalization is expected to have a positive impact on their company over the next year, and of 63% that there will be a positive impact over the next three years, may be lower when CEOs of European companies would not be overly represented.

[...]

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Details

Title
Critical Examination of the PwC 9th Annual Global CEO Survey
College
Vienna University of Economics and Business  (Department of Human Resource Management)
Course
International Human Resource Management
Grade
2
Author
Year
2007
Pages
40
Catalog Number
V130539
ISBN (eBook)
9783640392353
ISBN (Book)
9783640392322
File size
736 KB
Language
English
Tags
Critical, Examination, Annual, Global, Survey
Quote paper
MMag. Robert Steiner (Author), 2007, Critical Examination of the PwC 9th Annual Global CEO Survey, Munich, GRIN Verlag, https://www.grin.com/document/130539

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