“It is hud to believe that an annual allotment of an incremental 1 or 2 percent of pretax income would make businesses lcss competitive to overseas competition, or would entail a sacrifice sufficient to harm shareholders,” he says.“Rcachmg- out giving by copnt ions would demonstrate leiuie&@.They need to become stroiget advocates of philanthropy; they need to im- prove their judgment of what to support; they need to show non- profits how to manage t h d v e s better. They could maw their employees ’ donations through matching-gift programs and en- couraged volunteerism.

“Giving is part of good corporate citizenship, and I would put that high on the list of a leader’s re- sponsibilities. Trying to improve things in the environment where you and your workers and cus- tomers exist is just good business,” he adds.

Contributing to the solution of local problems is also essential to p e r s o n a l l ~ p , s r y s Newtithtng Group’s executive vice president, Tim Stone. “Business leaders can kick off a significant new area in philanbpy and encourage others who are less d t h y but capable of giving. There are about 4 million millionaires, 250,000 &camillion- aires, and over 150 billionaires in the U.S. today,” says Stone.‘‘EVery-

one could benefit ftom the exam- ple of others who make charitable contributions based on their ktvcst- ment assets, not just their income.”

EXECUTIVE CHALLENGES

What to Worry About Next pen world markets, low in- 0 flation, and technological

innovation have all contributed to good times for business, especially in the United States. But these forces have also created a new set of leadership challenges. A recent survey by The Conference Board and executive search firm Heidrick & Struggles showed wide agree- ment on the issues that most con- cern cqorate leade-d a few surprises.

downward pressures on prices, changes in the level or type of competition, and industry consoli- dation (see table on p. 56). The top tm@efmtissues wexe maintaining customer loyalty and retention, managing mergers, acquisitions, or alliances, and-in a virtual tie- reducing costs and engaging em- ployees in the company’s vision and ValUeS.

Many of the issues selected are closely related, notes Melissa Ber- man, senior vice pmsident, research and progam development, for The Conference Board. “Today’s low inflation environment has many benefits, but it constrains compa- nies’ ability to raise prices. That presents a tough backdrop for a profitable growth strategy.’’

At the same time,“CEOs see more formidable competition tiom es- tablished companies and from un-

CEO$ ure sweating the SUB stat# S

The first annual “CEO Challenge” survey asked 656 CEOs from around the world and a c m all in- dustrial sectors to select the top three marketplace and management concerns fbr their companies in the next year. By wide margins, the top three marketplace issues were

expected quarters-counmes such as India or Ireland competing in idormation technology,” she says. “They also see a marketplace of mergers, not just in their own in- dustry but for their suppliers and customers. So the grueling work of reducing costs and integrating

Fall1999 55

WHAT MATTERS MOST

Percentage of CEOs placing each issue among the top three marketplace and management concerns

Marketplace Percentage

I hwnward pressurc on priccs . . . . . . . . . . . . . . . . .4X.O

Changes in level or type of conipetition . . . . . . . . . . . .43.4

Industry consolidation . . . . . . .40.9

Changing technology . . . . . . 2 5 . 3

Shortage of key skills . . . . . . . .22.0

Changes in supply or distribution systems . . . . . . . . .22.3

Access to or cost of capital . . . . . . . . . . . . . . . . . . .17.1

Kegulatory issues . . . . . . . . . .15.4

lnipact of the Internet . . . . . . .15.2

Instability in emerging markets . . . . . . . . . . . . . . . . . .14.9

Pressure from institutional investors . . . . . . . . . . . . . . . . . .7.5

Eiivironnicntal, health, and safety issues . . . . . . . . . . . . .7.3

Chrrency issues . . . . . . . . . . . . S.2

Inadequate educational systems . . . . . . . . . . . . . . . . . . 2.6

Efkcts of corruption . . . . . . . . .0.9

Management Percentage

Custonier loyalty and retention . . . . . . . . . . . . . .40.2.

Managing iiiergers arid acquisitions . . . . . . . . . . . . . . 30.3

Reducing costs . . . . . . . . . . . 29.7

Engaging eniployees in conipany’s values . . . . . . . . . . 2 0 . 3

Incrcasing flexibility and speed . . . . . . . . . . . . . . . 25.6

1 )eveloping and retaining potential leaders . . . . . . . . . . . 24.2

Increasing innovation . . . . . . . 23.5

Competing for talclit . . . . . . . 22.7

Iniproving the stock price multiple . . . . . . . . . . . . . . . . . .19.4

Invcstment or capital allocation decisions . . . . . . . . .17.1

Top management and board succession . . . . . . . . . . . .9.1

Transferring knowledge, ideas, practices . . . . . . . . . . . . . .H.8

Coiiuiiunicati~ig across cultures . . . . . . . . . . . . . . . . . . .5. H

Leveraging diversity . . . . . . . . . .1.8

Corninunity relations across regions . . . . . . . . . . . . . . .1.4

Helping employees achieve work-life balance . . . . . .1.4

mergers and acquisitions will con- tinue. And amid all this turmoil, CEOs are especially concerned about retaining customers-that is the number one management challenge in the U.S.”

The Promise of Employee Engagement

Given these business nuts and bolts, one finding stood out. “What’s truly surprising,” says Berman, “is how many CEOs-across all re- gions and virtually all indusmes- say that engaging employees in the company’s vision and values is one of the top three challenges. Only customer loyalty is a significantly bigger concern. We’re seeing that even in a demandmg climate CEOs are sweating the sofi S ~ E ”

However, other findings suggest that CEOs will have to work hard to deliver on the potential of em- ployee engagement. “Social issues” like diversity, work-life .balance, and community relations ranked at the bottom of the list-despite their relevance to employee en- gagement and corporate values. “For many CEOs,” says Berman, “diversity, work-life balance, and community programs are compo- nents, or inputs, for an important result-employee engagement, which improves customer reten- tion. One lesson of the past decade may be that CEOs should focus

56 Leader to Leader

on results, not inputs. So employee engagement and customer loyalty score much hrgher than the build- ing blocks that create them.”

Strategie3 for Alrrna

Other research by The Confer- ence Board has explored various approaches to community and employee relations. A study of companies applying for the Ron Brown Award for Corporate

for corporate citizenship, identified Leadership, the presidential award

“ThCCEOChdhgCdSOyieldCd

place side of the survey: elecaonic

Internet rrgwmd with only about

than xegulatory issues. only in the

at last one surprise on the market-

commerce and the impact of the

15 percent of CEOs-no more

technology sector was this the top issue (picked by 51.2 percent of CEOs); in just one other industry (financial services) did it receive more than 25 percent of choices. “ManyCEOsviewtechnologyasa tool, not a strategy,” Berman notes. "Except in the technology in*,

8

Perhaps the times a1t not asgood as they appear.

employee relations as a key to

that pmvide well-managed goals, challenging work, coaching, re- wards, and recognition tend to outperform those kcking in those areas, says Berman. Furthermore, research shows that “good com-

in how connected people feel to their job,” she says. “Company-run volunteer programs, for example, build commitment. So do a com- pany’s donation and community-

company pertbrmurce. Compvlies

munity relations arc ah0 important

support plognms.”

some express genuine skepticism about how soon ocommerce redly will change their Wdds.”

CEW focus on economic issues rather than organhtional strategy

achieving their ad!? than about the

a d te~h010gy ~uese~ts h t busi- ness leaders worry more about

m a n s t o o d r o J e t h a t t h e i r orpizuions’nar-term viability is s t i l l ? conccrn.pem;lps the timcsuc notasgoodasthcyappeu.

lssues

Stephen Jay Gould con ~ o n i z a l i o n s Adopt?

Dee Hock 7he Futun t ! j

Se$.\Ltragmtetrt

Douglas K. Smith 771~ Pr~~bletn uirh C i d s

Dave Ulrich H o u ~ Laden t i t Ht*sit/ts

. . . and morc

Fall1999 57