EOs across the economy were optimistic in their 2022 outlook before the omicron variant of Covid emerged, reports CNBC.
About the recent survey
A recent survey from the Business Roundtable revealed confidence about the outlook into next year, but that was conducted before the first cases of omicron were reported.
On Wednesday, as the first omicron case in the U.S. was revealed in California — a second case from a Minnesota resident who recent travelled to New York City was revealed on Thursday — CNBC Contributor Suzy Welch led a CNBC Leadership Exchange virtual roundtable with CEOs across various sectors of the economy to gauge their confidence now as Covid dominates the market.
Why 2022 is a bullish year for business?
Shane Grant, Danone North America CEO, said he is “very bullish going into 2022 on the core business,” but does expect volatility to be a major theme.
“As we go into 2022, I think it’s this theme of just volatility, and it’s not one particular type of volatility. It’s enormous volatility in our supply chain. It’s everything from input availability, capacity, transportation, labor, it’s Covid adaptations by ways of working adaptation. It’s this accordion economy of sort of stop-and-go and the adaptations required,” Grant said.
“The theme going forward is just volatility in everything,” Welch said.
Covid will not end
But Covid is not going to end at any point in 2022, according to Dr. Marlow Hernandez, CEO of Cano Health, a health-care service provider for seniors. “No, sorry,” he said. “Because it’s so transmissible, because it continues to vary.”
He said that looking at the levels of vaccination across industrialized nations and increasingly, across the world, and still seeing “the staggering caseload” leads him to the downbeat conclusion.
That doesn’t mean new stay-at-home orders and lockdowns, but if there is a new normal it includes Covid. “We understand lots about the virus, but it’s a lot more like flu and hepatitis and measles and some others than it is like smallpox that we can simply eradicate from the earth,” Hernandez said.
Covid has been great for the logistics business, but for Mike Parra, CEO of global logistics company Deutsche Post DHL Group, the unknown of omicron is keeping him up at night.
Deutsche Post DHL has helped deliver 1.3 billion vaccines in 120 countries.
“And now we’re about to enter this new phase of the unknown,” Parra said. “And then we’re back into cycles in Europe of potential lockdowns, you have a very strict position in China where they want to eradicate Covid. … you’ve got restrictions from a flight perspective, you’ve got the impact on transportation.”
Supply chain
The fear of running out of inventory is now embedded in the supply chain, he said. “Companies going from ‘just in time,’ which is what it used to be before, to ‘just in case,’ which is what it is today.”
And an already stressed supply chain that has led to price spikes will remain subject to more volatility.
“Air freight is some way from returning to full capacity. Ocean freight, the ocean market is going to take longer, the piers are working 24/7, the ports are working 24/7, but there’s still a big backlog there,” Parra said.
Simplifying business models amid volatility
Some of the industries hardest hit by Covid do see opportunities to lean into the continued volatility as the closest thing to a norm.
“The volatility is likely to continue,” said Damola Adamolekun, CEO at restaurant company P.F. Chang’s.
Covid as an opportunity to reset a business also occurred for Judy Marks, CEO of Otis Worldwide, the elevator and escalator maker that was spun out of United Technologies during the middle of Covid.
“We explored every process and simplified everything from a 168-year-old history,” Marks said. “Everything we did was for a first time in a Covid environment. … Let’s view every day as precedents.”
Creating simplicity in the business also goes for work routines, Grant said. “What’s been important and will continue to be important is how we create more simplicity in our business and for our people, to deal with that volatility. … we can simplify all that’s within our control to allow people to deal with the volatility that’s just somehow baked into the macros at the moment.”
Volatility is placing greater demands on employees.
Fears about the Great Resignation
The Great Resignation and how to recruit and retain employees remains high on the list of fears among CEOs across the economy, and expected volatility will exacerbate this labor market challenge.
Labor has been the major concern in a lot of industries, and the restaurant industry is high on the list. The labor force is shrinking and employers need to be more competitive within that shrinking pool, and relative to competitors. “It is something that keeps us up at night in the restaurant business,” Adamolekun said.
“The war on talent in 2022 is going to only intensify,” Grant said. “It’s about game-changing people policies, like gender neutral parental leave, for not only corporate workers, but frontline workers. It’s about institutionalized flexibility. It’s about true commitment to diversity actions. And I think those things are going to become true differentiators in this war for talent in 2022,” he said.
Jane Park, CEO of women-led special purpose acquisition entity Athena Consumer, said she remains concerned about women in the workforce as part of the Great Resignation.
“The No. 1 thing keeping me up is the Great Resignation,” Parra said. “What we’re seeing is that people want to be in control of their future, more than ever before, because so much is changing around them.”
That is correlated to the level of fatigue he is seeing in employees.
CEOs worry about striking the right balance for workers who had the ability to be productive on a remote basis, especially at firms that have both large front line and professional staffs.
Staying ahead of crisis or falling behind
Even amid the Covid waves that have come, there have been surprise signs of resiliency and surprising ways in which companies have succeeded.
Cities are proving resilient, according to Marks.
“Urbanization has trumped infectious diseases over and over again. … Urbanization is continuing in the U.S., but especially globally,” she said.
Otis Worldwide has seen a rapid shift to digital sales in key urbanization markets which the CEO would not have expected to be possible.
But there is significant risk for any company that expects a return to a former state of normal, said Hassane El-Khoury, CEO of chip company Onsemi.
His company supplies to the auto industry and he thinks 2022 is going to be a defining moment for autos.
“It is exactly the same moment that the photography industry went through with the digital cameras and mobile with the iPhone, and now the auto industry with the shift to electric vehicles,” El-Khoury said.
He said the companies that will succeed are applying the disruption mindset as a way to approach problems and solve problems that “they don’t even know exist yet. But they know they will.”
Adamolekun sees a similar bifurcation in the restaurant business.
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Source: CNBC
