 "Illustration: Binay Sinha")
Here’s a prediction for 2017: The job of chief executive will be as tough as ever.
Uncertainty has been a way of life for business leaders since the last financial crisis. But as U.S. President-elect Donald J. Trump moves into the White House powered by a largely unforeseen wave of global revolt against political elites, “2017 is going to be more volatile and more complex than previous years,’’ predicted Michael D. Watkins, a professor of leadership and organizational change at IMD Business School in Switzerland.
The unprecedented turbulence is seen in deep political divisions in the U.S. and abroad, uncertainty over the strengthened U.S. dollar, the faster pace of technological change and looming global problems such as mass immigration, terrorism and climate change.
In such a setting, chief executives often must decide how much they trust projections. AMN Healthcare Services Inc. CEO Susan Salka said she doesn’t pay attention to public-policy predictions coming out of Washington these days. Demand for health services, she said, will continue to grow regardless of whether the new Trump administration moves to repeal the Affordable Care Act.
Ms. Salka said she has stepped up the pace at which she and her team at the medical staffing and recruiting firm make major strategic decisions. In the past 18 months, for instance, AMN expanded into executive search and acquired three search companies—after hearing from clients whose high-level interim positions remained vacant for too long.
“This has quickly become an important service for us….We are making more swift decisions and being comfortable with the fact that we may not get everything exactly right,” she said.
John Crowley, CEO of Amicus Therapeutics Inc., is also trying to embrace the uncertainty, which he likens to drug discovery, where “almost everything we do doesn’t work,” he said. “Failure happens a lot.”
The biotech company, which specializes in treatments for rare diseases, had its first drug approved by European regulators in May. In anticipation of the approval, the company had spent the previous 17 months launching offices in France, the Netherlands, Italy, Germany and Spain. It established European headquarters in the U.K.—and then the Brexit vote took Amicus’s leaders by surprise.
After conferring with consultants, Mr. Crowley ultimately decided not to change plans for marketing the drug, which treats Fabry disease, across Europe. But the CEO said he worries about changes in regulatory policy—especially as it relates to the U.S. presidential campaign rhetoric around drug pricing. Like other corporate chiefs, he said he is apprehensive about an environment in which “a tweet can wipe out hundreds of millions in market cap.”
The global rise of local populism, evident in the Brexit vote, is a concern for KennametalInc. chief Ronald DeFeo. The company makes cutting and drilling tools used in oil-and-gas exploration and other industries.
Mr. DeFeo, hired in February, said he has revamped Kennametal’s management structure partly to create “much stronger regional leaders” to better serve local markets.
“The face of what we market…has to be less about our global capability and more about our local abilities to meet their needs,’’ he said. “We have to be more French in France, more German in Germany, more Chinese in China and more American in the United States.’’
E.V. “Rick” Goings, CEO of Tupperware Brands Corp. since 1997, said his employer tries to find opportunity in upheaval. For example, he wants Tupperware—a business long known for its colorful food-storage containers—to further sharpen its focus on making products that don’t come from petroleum or other commodities tied to the U.S. dollar. The company, which pays dividends in dollars, has been hurt by the rise of that currency.
Some chiefs are hitting “pause” on big projects. Bloom Energy Inc., a maker of commercial electric-power generators, had planned to create “at least a thousand jobs” in 2017, mostly in project construction and manufacturing, said its CEO, KR Sridhar.
Unknowns about a Trump presidency prompted Mr. Sridhar to put the Sunnyvale, Calif., firm’s job plans on hold until he learns more about the new administration’s interpretation of existing energy regulations and formation of new policies.
Deferring plans is “a classic way to react” to an ambiguous environment, said Martin Reeves, senior partner and managing director at Boston Consulting Group. “You’ll see a lot of postponed commitments,” in the coming year, he said. But he warns his executive clients that too much caution can lead to paralysis.
Other leaders are speeding up, making decisions on a shorter time frame and looking less deeply into the future.
ConnectOne Bancorp Inc., a community banking firm with 21 locations in New Jersey and New York City, raised $40 million in capital in mid-December. The stock offering came together much faster than usual, said CEO Frank Sorrentino, adding that strong economic projections for 2017 prompted the move. “We started thinking and talking about [the offering] 30 to 45 days ago.”
At Danone SA, CEO Emmanuel Faber recently created a “beyond budget” initiative that replaces annual spending plans with flexible quarterly budgets. The new system, informed by a five-quarter forecast, allows the food conglomerate to constantly adjust to a changing market environment.
Though management experts and leaders say the traditional five-year business plan isn’t dead in the era of uncertainty, Mr. Sorrentino joked that he doesn’t have the luxury of setting a multiyear plan and sticking to it. “The world is littered with failed companies that had great five-year plans.”
