Surge in Economic Optimism Among CEOs Means More Hiring and Investments on the Way
Friday, March 26th, 2021
Confidence among CEOs in the first quarter of 2021 is the highest it has been since 2018, according to the Q1 CEO Confidence Index from Vistage. The quarterly CEO Confidence Index measures CEOs' opinions around categories including current and expected economic conditions, expected change in employment, planned fixed investment and expected revenue and profit growth. The gains in confidence and optimism about the economy in this quarter's survey point toward a time of transition before the anticipated release of pent up demand.
The Vistage CEO Confidence Index rose to 102.4 in the first quarter of the year, up from the pandemic low of 65.5 in last year's second quarter and posting the largest year-over-year gain in the past decade. CEOs of small and midsize businesses report that substantial gains in the economy have recently occurred and anticipate those gains will continue in the year ahead. The surge in economic optimism among small and midsize businesses is due to a growing rate of COVID-19 vaccinations and the passage of the latest stimulus package, which will release pent up demand as restrictions lessen and consumer confidence grows.
In stark contrast from last quarter, recent improvements in the national economy were reported by 40 percent of all CEOs, up from just 8 percent in Q4 2020, and fears of a worsening economy fell to just 34 percent from last quarter's 76 percent. When asked about prospects for the economy during the year ahead, 68 percent of CEOs expected the economy to continue to improve; a year ago only 18 percent expected improvement.
To understand priorities in talent management strategies, the Q1 2021 Vistage CEO Confidence Index found that attracting and retaining talent and creating a strong culture were the most important priorities for small and midsize businesses. When asked about employee development, an overwhelming majority of respondents, 91 percent, agree it is a vital part of company culture. What's more, the same amount said it is a key strategy to improve retention and engagement.
"Two thirds of CEOs report plans to increase their headcount in the year ahead. This has ignited the next wave of the talent wars, and the demand for talent is extreme," said Joe Galvin, Chief Research Officer at Vistage. "Employees have options that become more appealing as the economic and job uncertainty wanes. Retention is critical as losing a key employee can have a devastating effect when businesses are trying to scale to rise to growth potential."
When looking ahead to work arrangements for the rest of the year, a third of respondents plan to utilize a fully onsite workforce, and nearly 60 percent intend to maintain a hybrid workforce. "While compensation matters, working for a company with a strong purpose, opportunity for development and advancement, and now work flexibility have risen to the top of employees' requirements," Galvin continued. "The work from home experience has changed the rules for both employers and employees. Given a taste of the work from home lifestyle, many existing and potential employees will look at remote working opportunities as a key consideration for staying with or joining a new company. This puts the pending return to work and new hybrid workforce policy decisions front and center for CEOs."
Survey highlights include:
Economic Turnaround in Progress
- 40 percent of CEOs report recent improvements in the national economy, up from just 8 percent in the last quarter
- Fears of a worsening economy fell to 34 percent, down from 76 percent in Q4 2020
- 68 percent of CEOs expect the economy to continue to improve; a year ago, only 18 percent felt that way
- 76 percent of respondents anticipate revenues will improve in the year ahead, up from 67 percent in Q4 2020 and well above last year's second quarter low of 45 percent
- Just 6 percent of CEOs expect falling revenues, compared to a pandemic peak of 31 percent in last year's second quarter
Investment & Hiring Gains
- Increases in fixed investment spending were planned by 44 percent of respondents during the first quarter of 2021, up from last quarter's 40 percent and last year's 38 percent
- Planned increases in hiring were reported by 66 percent of CEOs, just above last quarter's 64 percent and substantially above last year's 55 percent
Full results for the Q1 2021 Vistage CEO Confidence Index can be found here.