A people business at the heart of issues that make business and society tick—that is how Dennis Nally, B.B.A.’74, chairman of PricewaterhouseCoopers International, describes the PwC network of firms and the work that it does in audit, tax, consulting and business services.
With a strong performance in the past year, PwC posted more than $35 billion in revenues and is managing a growing workforce of over 208,000 people. The PwC network operates in 157 countries. Nally believes it’s a fantastic time to be a part of the industry, but that’s not to say that it isn’t a challenging time as well.
Given the shifting market and the challenges inherent in global operations, there is a lot to consider as PwC looks ahead to what’s next. And ambitious plans for the network’s growth in a variety of areas are on the horizon. “We want to be the leading firm in our growth markets, a magnet for talented people and the best example in our market of a technology-enabled business—anticipating change and delivering high-quality services from strategy through execution,” says Nally. “Underpinning this is a clear focus on our purpose—to build trust in society and solve important problems. We can’t sustain growth and build in new markets doing just more of the same.”
Embracing change—and challenge—is something that Nally encourages at all levels of the organization.
“Our clients, like us, are expanding into new markets for growth, such as Africa, China and the Middle East,” he says. “Despite the recent concerns about turmoil in the global markets, China and developing economies represent real growth potential. We are investing both in our people and in our infrastructure—becoming a technology-enabled organization—to make sure we are anticipating and delivering what our clients need."
"We want to be the leading firm in our growth markets, a magnet for talented people and the best example in our market of a technology-enabled business—anticipating change and delivering high- quality services from strategy through execution."
- Dennis Nally
How do you evolve your business to its next and best iteration? PwC started anticipating these changes several years ago. “We know that our foundation in terms of our core business is strong, but we also know that we cannot just rely on the scale and expertise that got us here to make us stand out in the future,” says Nally.
Now, the firm is exploring different ways of doing business, looking at strategic alliances with firms like Google, Microsoft and Oracle that have technical expertise that can augment PwC’s services. Partnerships with these technology firms enable the firm to serve client needs and have a vast array of expertise available without having to provide all the resources in-house.
PwC has also made key investments in acquisitions in order to be able to provide not only advice but also solutions. And much of the future growth of the firm may be in those solutions. With the acquisition of Booz & Company, now known as PwC Strategy&, the firm has greatly enhanced its ability to provide these solutions across all its business areas, effectively narrowing or even closing the strategy-to-execution gap.
Yet PwC’s expansion of services works in concert with their traditional core business. “We are clear about our long-term vision and the steps we have to take over time to get there,” says Nally. “What is critical to that ambition—being the leading firm in our chosen markets—will be continuing to deliver the highest quality service in audit, tax and consulting. It’s what our reputation, in any market, is built on.”
"Business has always faced threats and had concerns; that's not new, but the way in which these threats now interact is new. China, oil prices, exchange rate volatility and geopolitical security concerns are among the issues that add to the list of regulatory, skills and competitiveness issues that CEOs are facing."
In a complex, global business world, progress is increasingly hard to define, and business faces many challenges. Each year, PwC conducts a global CEO Survey, and this year the firm gathered responses from more than 1,400 CEOs on the pressures, threats and opportunities that they face on a day-to-day basis, including responses from CEOs of almost 100 major companies in the U.S. The information gives PwC and the wider business community a unique insight into the collective outlook and concerns of those in charge of companies in all sectors of the economy.
“It’s fair to say the headline findings of the latest survey reflect a gloomy outlook for the global economy, with confidence in overall global growth and individual company growth lower than last year,” says Nally. “Business has always faced threats and had concerns; that’s not new, but the way in which these threats now interact is new. China, oil prices, exchange rate volatility and geopolitical security concerns are among the issues that add to the list of regulatory, skills and competitiveness issues that CEOs are facing. Popular thinking suggests digital breakthroughs will promote a more interconnected world, but our survey shows that CEOs fear the opposite—much greater divergence in terms of social, political and economic models.”
Examining the outlook of CEOs for the years ahead, PwC found that business leaders recognize that the world of business is changing, and they are thinking about the broader impact their businesses have on society and what that means in terms of a company’s purpose, communications, stakeholders, reporting, measurement and understanding of their customers. Nearly three quarters—71 percent—of CEOs believe that within five years successful companies will be guided by a purpose that is centered on creating value for a wider group of stakeholders than shareholders alone. “That’s a fundamental shift from 10 years ago,” says Nally “And certainly in some of our work, and client conversations, the impact is already being felt.”
As Nally notes, purpose is becoming a more and more important part of progress and performance for all companies, including PwC. With the firm’s stated purpose—to build trust in society and solve important problems—at the forefront of the business, there are many areas where PwC is having a significant impact and shaping important business conversations and actions.
Post-financial-crisis, PwC has taken its role in transparency and education very seriously. “The accountancy profession took a step back to consider lessons that could be learned,” says Nally. “For example, more could be done to communicate what an audit is and offer more transparency around a company’s disclosures. Certainly anything that demystifies the audit process, which is designed to give the markets reassurance that a company is managing risk effectively, is a positive thing.”
PwC 2016 U.S. CEO Survey, Condensed Headline Findings, find the full report at: http://www.pwc.com/us/en/ceo-survey/top-findings.html
Confidence in global growth has weakened. Most U.S. CEOs (59%) predict more of ‘the same’ in 2016—meaning an uneven-to-slowing pace of economic growth in key markets in Europe and China. Dislocations are more than economic. Geopolitical uncertainty, violent attacks and financial market volatility can deeply affect customers, employees and business partners.
As for CEOs operating in the rest of the world: hopes are high for the U.S. market. For the second year in a row, more respondents globally rate the U.S. a top overseas market than any other.
Business leaders do not expect regulatory complexity to ease in 2016. Concern about further increases in regulation—and the impact regulation has on investment and innovation—is at its highest level
in seven years of PwC surveys of U.S. CEOs. Understanding why regulation is there in the first place, rather than focusing only on interpretation and compliance, can help ease the standoff.
U.S. CEOs report that a fundamental change is afoot in how they manage their relationships with customers. Currently, 85% of U.S. CEOs agree that customers make purchasing decisions based on a mix of cost, convenience and functionality. CEOs believe that over the next five years, a greater number of customers will seek out products and services from organizations that address wider stakeholder needs, such as health focus or environmental responsibility or societal consequences.
U.S. tax reform
Frustration with the U.S. corporate tax system has intensified interest on both sides of the aisle in the U.S. Congress to make significant changes. CEOs believe there is room for improvement: just 2% of U.S. respondents say the U.S. has achieved an effective tax system. For most (73%), creating a clearly understood and stable tax system is a top priority for government.
"Society’s expectations of business have changed, and businesses must respond."
- Dennis Nally
More than half of business leaders that PwC has interviewed as part of the U.S. CEO Survey note concern about the level of public trust in business. “Society’s expectations of business have changed, and businesses must respond—and that’s not an issue for the accountancy profession alone,” says Nally. “Trust breaks down when expectations, including the public’s, don’t meet reality in terms of what you do or how you work. What’s critical for businesses is understanding what those expectations are and why they are in place. For organizations, that means communicating much more about their purpose: who they are, how they do business, and how they are performing against standards or benchmarks.
Solving the important problems is a big part of the growing areas of PwC’s business as the firm works in the areas of cyber security, big data analysis, crisis response, food security and city development, among others.
“The range of our work, expertise and locations means we have a huge opportunity and responsibility to help address societal issues,” says Nally. “Our work is now so much broader than what might traditionally have been seen as audit and tax services. For example, last year we worked in Norway to help develop a new clinical pathway for patients with acute stroke, we led a program to promote girls’ education in 18 countries across Africa, and our analysis on carbon emissions helped inform policy makers attending the UN Climate Summit in Paris."
One of the areas Nally is most committed to as a part of PwC’s diversity and inclusion initiatives is gender equality. “There’s no doubt in my mind that bringing people together from different backgrounds improves the quality of how we work, come up with ideas and deliver outcomes,” says Nally.
And PwC is taking action when it comes to women in the workforce. “Women represent about 50 percent of graduate hires now, but over the coming years, we want to dramatically increase the representation of women in senior leadership,” says Nally. “We’re looking across our network at what the promotion rates are for women at all levels. Based on those results, we will be able to develop programs that target the specific barriers that are slowing our progress.”
The company has also signed up with the HeForShe initiative, a worldwide, UN-backed organization that aims to sign up one million men and boys in support of gender equality. PwC is one of only ten businesses to join this initiative. “This applies to our organization and its awareness of the roles that men can play in gender equality, but it is much larger than any one organization,” says Nally. “It’s a very different way of thinking about diversity because it gets men across our network and around the world to think about gender equality and diversity in a different way. This isn’t just a women’s issue. It affects all of us.”
Thinking deeply about all types of business challenges, and working towards solutions, is what PwC does best.
“We have always recognized that with the scale and strength of our network comes a responsibility not just to do the right thing in terms of playing our part as a responsible business but also to use our skills and voice to influence and work with others to help make a difference,” says Nally.
What actions does PwC see U.S. CEOs taking as they build their businesses for the future?
- Investing in technology
CEOs continue to invest in technology as the most direct path to meaningful innovation and operational efficiency.
- Doing domestic deals
46% of CEOs say they are planning to complete a domestic deal.
- Staying the course with China
CEOs continue to see opportunities in China despite recent volatility. Over half of CEOs surveyed ranked China as a top-three international market for their business growth.
- Anticipating needs
Most CEOs (74%) believe there are more threats to their business growth today than existed three years ago. At the same time, most also believe (69%) that there are more growth opportunities for their company today.
- Preparing Millennials for leadership roles
Not everyone thinks this generation is entirely different than others before it, yet there is agreement that top talent wants more from work than pay, seeking companies that reflect their values.