2022: One of the hardest times to run a company
2022 is shaping up to be one of the hardest years ever to run a company — even harder than 2020, when the pandemic first hit, corporate leaders and analysts tell us.
Why it matters: Uncertainty, CEOs' dreaded nemesis, abounds. Supply chain snarls, lingering COVID disruptions, labor shortages, inflation, rising pay and soaring demands for new benefits and work flexibility are driving up costs and complexity.
- Toss in a surge in individuals starting their own small businesses — and others simply quitting work altogether — and you see why c-suite anxiety is spreading fast.
What they're saying: "After two years of them sitting at home getting well-paid, seeing their stock appreciate — yeah, this year is going to be more challenging," says Lisa Shalett, CIO of Morgan Stanley Wealth Management.
- "They're struggling to find their way," particularly around workforce challenges, said Ted Bililies, managing director at AlixPartners, who works with CEOs and boards.
The Great Resignation is forcing companies to raise wages and beef up benefits to try to attract talent. America has some 11 million open jobs, but people aren't jumping to apply to them.
- The median tech salary in the U.S. increased 7% between 2020 and 2021, per Wired. And some companies are driving pay more aggressively: Amazon just hiked up its maximum base pay to $350,000, from $160,000.
- Less-sexy industries, like manufacturing and autos, are having an even harder time attracting talent, Bililies said.
Yes, but: Plenty of companies, especially the big ones, have been able to pass those higher costs, and a bit more, on to consumers who keep spending. Profit margins in 2021 were at historic highs.
- And even though doing business is harder now, many CEOs are paid millions of dollars to deal with this stress.
Smaller businesses, however, face different challenges. They don't always have the resources to raise wages — child care centers, already operating on razor thin margins, are struggling to find workers and aren't necessarily able to raise pay.
- And juggling the ever-changing landscape of vaccine and mask mandates can be difficult. "There's confusion," said Jeffrey Zuckerman, the CEO of Main St. Events, which organizes trade shows around the country.
Inflation and supply chain issues are driving up the cost of doing business, irrespective of the ways the workforce is changing.
- The year-over-year change in costs for companies on the S&P 500 is at 13.4%, the highest it's been in a decade, according to research Shalett released earlier this week.
- “In my 24 years in the business I’ve never seen anything like it, not even close,” Heineken CEO Dolf van den Brink told the FT yesterday, about inflation. “Across the board we are faced with crazy increases.”
Firms are also realizing they'll have to navigate remote and hybrid work even after the pandemic. That means figuring out new ways to manage teams and rally employees.
- 61% of remote workers say they're working from home because they're choosing not to go into the office, while just 38% say they're staying out of the workplace because it's closed or unavailable, per a new Pew Research report.
- So CEOs are scrambling to bring in talent experts who can answer questions about the future of work. Human resources job postings on Indeed are up 133% compared with February 2020.
- But "CHROs [chief human resources officers] are tired," says Lars Schmidt, founder of Amplify, an HR consulting firm. In the past two years, companies have faced a pandemic, a crisis of burnout, social justice demands, and remote work — and "all those things center on the people function," Schmidt says.
- As a result, many burned-out HR professionals are joining the Great Resignation themselves. Schmidt recently surveyed 280 U.S.-based CHROs, and 47% of them had left the jobs they had in January 2020, with many leaving HR entirely.
The bottom line: 72% of CEOs worry their jobs aren't going to survive the challenges ahead, according to a survey AlixPartners released at the end of 2021. That number is up from 52% the year before.
Editor's note: This story originally published on Feb. 17.