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It’s hard to think of the COVID-19 pandemic as “the good old days.”
But from a purely economic standpoint, once the lockdowns passed and vaccines kicked in, it was. Now, however, the accelerated disruption of the pandemic has led to compressed volatility in the economy. A hangover effect has hit CEOs.
Vistage’s Q2 2022 CEO Confidence Index fell to 69.0, a 15-point drop from Q1 2022 and a whopping 39.8-point drop below Q1 2021 (the index’s highest reading since 2005).
When asked to describe their biggest business challenges, hiring/retention, inflation and supply chain topped the lists of the more than 1,500 small and midsized business CEOs that Vistage surveyed from across the U.S.
Hiring/retention the biggest challenge
Despite gloomy economic data and widespread recession fears, hiring and retention remain the top business challenge. Of the 86 Wisconsin CEOs surveyed in the Q2 2022 Vistage CEO Confidence Index, 43% expect to hire more employees in the year ahead, and 48% noted they’ve already hired more workers in the first half of this year. 52% expect the number of employees to remain the same, as leaders work to keep their hard-earned talent on staff.
The talent wars are persisting, just a little less fiercely. 65% of Wisconsin CEOs say hiring challenges are impacting their ability to operate at full capacity. As a result, 79% have boosted wages, 80% are investing in employee development and 67% are allowing remote work options.
Regardless of how the economy swings, hiring and retention will remain a top concern. The “Great Resignation” has become the “Big Upgrade” as workers across the board seek an improved work experience. While the feverish pace of hiring will slow, the significance of employee retention will only grow because the workforce has options.
Inflation eats away at CEOs’ confidence
Inflation has steadily risen from zero in June of 2020 to today’s 9.1%. Once again, the accelerated disruption of the pandemic results in compressed volatility. Of Wisconsin CEOs surveyed, 93% cited increased wages and compensation as the top driver of rising costs. Close behind: higher prices from vendors (86%), higher energy prices (74%) and higher cost for goods and materials (81%). The result is the rising cost of everything, from an “added fuel surcharge” on bills to skyrocketing prices at the grocery store. 85% of Wisconsin CEOs surveyed will raise prices again in the year ahead.
The hangover from the massive stimulus of money pumped into the economy during the pandemic has not yet run its full course. But over time, demand will slow just as supply catches up. Increased costs to attract and retain talent and volatility of crude oil supply and price will continue to stoke inflation.
Supply chain issues persist
Availability of components/raw materials, slow deliveries and transportation issues are the key drivers behind supply chain business challenges, all of which contribute to inflation as costs rise across the supply chain. While far from the rhythm of a predictable pre-pandemic world, the supply chain is slowly healing, according to 51% of Wisconsin CEOs. But 28% still see it getting worse.
The improving supply chain still has a lot of work to re-establish consistency and confidence. Recent lockdowns in China and the disruption of manufacturing and transportation will send more ripples of volatility through the system. Slowing demand will relieve some of the pressure as global demand steadies and global economies slow. Continued improvement will reduce some of the inflationary pressure driven by the supply/demand continuum.
The disruption accelerated by the pandemic has taken us from the good old days to a rapidly shifting, unpredictable, post-pandemic environment. We’ve entered a new reality where the bar for expected economic activity must be reset.
The business classic “Who Moved My Cheese?” tells the story of two mice. One keeps looking for the cheese in its usual spot. The other realizes the cheese is gone and looks elsewhere.
In today’s business world, the cheese has moved. CEOs would do well to follow the core message of the book: Adapt quickly or be left behind.