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Now or neverIrish CEO Outlook2016

From the Managing Partner

Irish CEOs, in keeping with their global peers believe the companies they lead are likely to be significantly transformed in the medium term.

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The pace, scale and scope of change faced by Irish CEOs is ever increasing. In addition to strategic and leadership skills, the ability to anticipate change and to shape an organisation to be ready for that change has never been more important.

This report comprises CEO perspectives from Ireland and around the world based on interviews of over 1800 leaders from 28 countries. It shows that many Irish CEOs, in keeping with their global peers, believe the companies they lead are likely to be significantly transformed in the medium term. This shouldn’t be a surprise given the highly globalised nature of our economy.

We’re delighted to share insights from a range of Irish CEOs about the key strategic choices facing them and where they intend to focus their efforts.

I would like to thank all of the participants for sharing their insights with us. In many cases the themes are universal and the attitudes similar. In other instances, being based in Ireland has created a somewhat different perspective.

However, one constant has emerged and that’s a view that the decisions made in the very near future will have a lasting impact - hence the report title “Now or Never.”

These sentiments also reflect many of the conversations I have with Irish business leaders in every sector. In the midst of global uncertainty, including Brexit, many remain reasonably confident about the prospects for their industry and for their businesses.

I hope you find our 2016 Irish CEO Outlook insightful and I invite you to discuss your business challenges and opportunities with KPMG’s partners and professionals throughout Ireland and globally.

Shaun MurphyManaging Partner, KPMG Ireland

Contents

Key findings ......................................... 2

The next three years ............................ 4

Innovation and collaboration .............. 10

Transforming for the future ................ 14

Driving growth ................................... 18

Risk and cyber security ..................... 22

People and talent ............................... 26

Conclusions ....................................... 32

Methodology ..................................... 34

#CEOoutlook

Key findings

64 percent of Irish CEOs believe the next three years will be more critical for their industry than the previous 50.

More than a third expect their company to transform into an entirely different entity in the medium term.

Even the most experienced CEOs are concerned about having to make decisions on mission-critical issues they have not previously encountered in their career.

At a time when the lines separating industries, companies, technologies and customers are blurring, CEOs must also grapple with the uncertainties caused by global economic and geopolitical factors, not least Brexit.

However, business does not wait and for many CEOs, it’s a case of “now or never” as they seek to transform their companies over the next three years.

Most Irish CEOs are more confident about the future for their own business than they are about the wider economy and over half of them also expect to grow their headcount in the next three years.

The speed, depth and breadth of change is testing capabilities. Collaboration and innovation is the name of the game as companies seek to augment their talent in areas such as data and analytics.

80 percent of CEOs who participated in KPMG’s recent research will drive shareholder value utilising external partnerships and collaboration with other businesses.

Regulatory hurdles combined with rapid disruption and a low growth environment mean that alliances and joint ventures are becoming increasingly important.

3Now or never

The next three years

A Changing WorldIt’s “now or never” for Irish CEOs, 64 percent of whom expect their industry to change more in the next three years than in the previous 50. While the speed of change can often make it difficult to have a long term, or even a medium term view, CEOs understand that they cannot afford to wait for certainty.

More than a third (36 percent) predict that their company will transform into an entirely different entity in the medium term.

Their transformation journey will involve fostering innovation, entering into collaborative partnerships and alliances, spinning off legacy and/or innovative divisions, implementing disruptive technologies, and investing in talent as companies seek to buy in assets and capabilities from elsewhere.

CEO confidenceIn the short to medium term, global economic factors, Brexit and geopolitical events make for an uncertain business environment. This is reflected in somewhat cautious sentiment among Irish CEOs about the outlook for the Irish and global economies over the next three years.

Meanwhile, 44 percent of CEOs who participated in our research are confident about Ireland’s growth prospects over the next 12 months with 48 percent confident about prospects for the global economy.

Irish CEO Confidence

60

45

30

15

0Global economy Irish economyOur company

12 months 3 years

5Now or never

BrexitNot surprisingly, Irish CEOs are more negative about the impact Brexit will have on their business when compared with their global counterparts with over a third (36 percent) anticipating a negative impact on revenue growth versus 19 percent worldwide.

However, Brexit will affect different sectors in different ways – reflected in the finding that just over half (52 percent) of Irish CEOs anticipate no impact on revenue growth and one in eight (12 percent) predicting a positive impact on revenues.

Meanwhile, a majority of British CEOs surveyed by KPMG in the UK are assessing the possibility of relocating headquarters or operations outside the UK.

Irish CEOs are also divided in their view of the impact that Brexit will have on business confidence in the global economy. Just under a third (32 percent) predict a negative impact, 20 percent think the impact will be somewhat positive and the remainder (48 percent) say that Brexit will have no impact.

According to Shaun Murphy: “Most CEOs I speak to, whilst concerned, are fairly pragmatic about Brexit because the final outcome remains unclear. The preferred result for Ireland is obviously maximum access to the UK market and minimum disruption to trade and freedom of movement. Our role as business advisors is to work through the implications of various scenarios and see what mitigating actions may be put in place to manage issues or indeed take advantage of opportunities.”

Given the aforementioned potential challenges to trade and freedom of movement, it is also no surprise that 48 percent of Irish CEOs predict a negative impact on the complexity of doing business. Furthermore, over half (52 percent) of Irish CEOs expect the impact on access to capital markets to be negative and 44 percent anticipate a negative impact on raising capital.

However, sentiment about the impact of Brexit on supply chain and hiring plans is largely positive. Attitudes towards the impact on operating costs are also relatively benign with four in 10 Irish CEOs expecting no impact and 36 percent anticipating a “somewhat” or “significantly” positive impact.

of Irish CEOs predict Brexit will have a negative impact on the complexity of doing business48%

6 Irish CEO Outlook

Company performanceWhether the economy rises or falls over the next three years, more than half (52 percent) of the CEOs who participated in our latest research are confident in their ability to outperform the wider economy.

“By definition CEOs need to be resilient and their confidence is an important factor in business success” says Kieran Wallace, Head of Markets at KPMG. However, Wallace makes the point that the best CEOs also recognise that the factors that help build a successful businesses are not inevitably the same that maintain that success: “Because of the need for speed we see potential, for example, in more collaboration and more assessment of resourcing options that might include ‘rent’ or ‘collaborate’ the resources companies need rather than ‘build’ or ‘buy.’ If CEOs are to deliver on their relative optimism assessing these strategic choices quickly and effectively will be of increasing importance.”

Meanwhile, predicted top line growth levels range from negative growth for 12 percent of companies to more than 5 percent growth for 20 percent of companies.

Negative

Irish company growth - next three years

40

>5%

30

20

10

0

-10

-202--4% 0.01--1.99% 0%

20

36

24

8

-12

“ By definition CEOs need to be resilient and their confidence is an important factor in business success.” Kieran Wallace, Head of Markets, KPMG

7Now or never

LeadershipFour in ten Irish CEOs expressed concern about having to take a leadership position on mission-critical issues that they have not grown up with or experienced previously in their careers. Meanwhile almost half worry about the amount of time they have to personally focus on the forces of disruption and innovation shaping their company’s future.

Nevertheless, the majority are confident about their company’s prospects over the next 12 months and beyond. While it’s natural for experienced CEOs to remain calm in the midst of uncertainty, it is notable that 36 percent expect their company to transform into an entirely different entity in the medium term.

Cutting edge technologies, innovation, collaborative alliances and access to talent will be critical tools as forward thinking CEOs implement their transformation plans between now and 2019.

Top 3 sources of growth - Irish companies 2016 - 2019

Top 3 factors likely to impact on Irish company growth 2016 - 2019

24%New markets

48%New products

16%New customers

20%New competitors / disruptors

24%Global economic factors

16%Current competitors

8 Irish CEO Outlook

Innovation and collaboration

Only 44 percent of Irish CEOs believe that their organisation connects in a beneficial way with start-ups. Meanwhile 70 percent of their global peers see a beneficial connection.

Anna Scally, KPMG’s Head of Technology and Media believes that this highlights a missed opportunity for Irish businesses – regardless of scale. Anna also highlights the need for greater public recognition of the value of linkages between the two areas - a principle supported by both Enterprise Ireland and the IDA and she cites the KPMG supported American Chamber of Commerce Innovation Awards as an example of how to promote this approach: “This year a specific award was made for linkages between domestic business and the multinational sector and we’re very pleased that this will continue in 2017. Initiatives to showcase domestic talent to Irish multinational CEOs and their teams are invaluable – and we need more opportunities to prove the worth of such linkages.”

Areas such as FinTech are good examples of where significant potential exists. According to Anna Scally: “We have seen a big increase in the level of collaboration between financial institutions and FinTech players. That is driving huge behavioural changes and it’s extremely positive to see companies working together in this area.”

Innovation and collaboration also bring people and talent benefits. For Irish CEOs (32 percent) and global CEOs (36 percent) providing the opportunity to innovate and work in an entrepreneurial or collaborative environment is important for employee retention.

“ Ireland is uniquely placed to benefit from collaboration between the domestic and multinational sectors...” Anna Scally, Head of Technology and Media, KPMG

11Now or never

Over two thirds (68 percent) of Irish CEOs believe it is important to include innovation in business strategy with clear targets and objectives. However, less than half (48 percent) say it’s important to have a formal process to generate or source ideas when compared with their global peers (74 percent). “Driving successful innovation begins with culture and leadership,” says Niall Campbell, KPMG’s Head of Innovation. “Only when the organisation is focussed can innovation be successful. However, as our research tends to indicate - it is one thing to aspire to innovation, quite another to make it happen.”

Campbell highlights specific objectives such as embedding new innovation capability, supporting creativity and behavioural change and actively managing innovation initiatives as being vital if innovation is to make a commercial impact. “It takes time, effort and investment to deliver a high-quality output. Experimentation with different ingredients is also necessary if you want to produce something new.” Campbell also emphasises collaboration as one of the ways to stimulate innovation. However, he notes that only just over half (52 percent) of Irish CEOs rank collaboration with external parties as somewhat or very important when compared to 76 percent of CEOs internationally.

Our survey also checked CEO attitudes to collaborative efforts with third level institutions. Just under half (44 percent) of Irish CEOs consider it in some way important to connect with thrid level colleges in order to foster innovation - below the 74 percent global average. Niall Campbell says: “It’s really important to highlight the good work being done at third level in Ireland and to highlight role models and success stories.” He believes that collaboration between CEOs and third level institutions to develop innovative skills is essential when Irish universities are under pressure in terms of comparative global rankings. “If we want an improvement in this situation third level institutions need to engage even further with the business community and vice versa. This can help both in securing additional capital and in ensuring graduates emerge with the necessary skills for the market.”

Campbell acknowledges that CEOs have many competing objectives but he is optimistic that most Irish business also see the benefits of driving innovation through external relationships. “Overall, there is evidence of an emerging innovation ecosystem which facilitates collaboration between businesses, producers, consumers, academia, government, investors and service providers. Tapping into this ecosystem can be a fruitful exercise as the answers to the innovation challenge aren’t all found internally.”

“ Collaboration between CEOs, their companies and third level institutions to develop innovative skills is vital given the need for Irish universities to improve their global rankings.” Niall Campbell, Head of Innovation, KPMG

12 Irish CEO Outlook

Transforming for the future

CEOs worldwide and in Ireland believe that the time for change is now or never. Industry-specific transformations, along with new technologies, connected customers and convergence are driving a rapid pace of change.

Change is everywhere and no industry is immune whether in Ireland or overseas. According to Paul Toner, Head of Management Consulting with KPMG: “There was a time when business was in a relatively steady state and change was incremental - now it’s exponential and centre stage.” Toner highlights the point that identifying sources of competition is not always easy. “Over half of the Irish based CEOs we surveyed are worried about new entrants that are not currently perceived as competitors disrupting their business.”

From highly regulated sectors like financial services looking to secure their future to consumer goods companies using digital to attract and retain more customers the constant is change. In retail banking, mobile technologies already allow consumers to conduct transactions online while services that use Touch ID and NFC technology allow consumers to avoid using PINs for in-store transactions. In the motor trade, how well a car integrates with a consumer’s mobile device is becoming part of the buying decision.

Meanwhile, in-store sensors connect to customers’ smart phones, collecting data and giving retailers a better understanding of the journey from entry to check-out. Streaming services like Netflix are disrupting entertainment, while robots are taking over elements of jobs in the services sector that were previously thought to be incapable of automation. What seems impossible today becomes mainstream tomorrow.

“ There was a time when business was in a relatively steady state and change was incremental - now it’s exponential and centre stage.” Paul Toner, Head of Management Consulting, KPMG

56%of Irish CEOs are concerned about the relevance of their products and services in the medium term

15Now or never

It’s in this context that Paul Toner believes that some of the biggest change drivers are technology, connected consumers and sector convergence; “These particular forces are upending business models and demanding a new way of thinking about business.”

As the lines between industries, companies, technologies and customers converge, CEOs see technology as both a trigger for - and an enabler of - their transformative strategies. Traditional industries understand that digital is integral to survival and that they must become software and digitally-enabled to sharpen their competitive edge.

Companies are utilising digital technologies like cloud, mobile, big data, and social as well as their own disruptive technologies to bring about transformational change. Organisations are also acquiring new skill sets and competencies and embarking on collaborative partnerships, alliances and joint ventures with suppliers, customers, investors, government, academia and even competitors. The ability to manage relationships in this new ecosystem is becoming a core competence for CEOs.

So what are the main worries for CEOs in terms of transformation? 60 percent of Irish CEOs are concerned that their organisation is not disrupting business models in their industry (53 percent globally). Meanwhile, new entrants or competitors disrupting their business model are a concern for 56 percent of Irish CEOs (65 percent globally) and almost half (48 percent) of the Irish CEOs who participated in our research are concerned about the amount of time they have personally to think about the forces of disruption and innovation shaping their company’s future. A significant number (40 percent) also expressed concern about integrating basic automated business processes with artificial intelligence and cognitive processes.

Top 3 uses of disruptive technology — Ireland (Global)

Ireland

1. To improve product / service offerings

72% 61%

72% 55%

64% 57%

2. To improve interaction with customers

3. To improve productivity / efficiency

Global

16 Irish CEO Outlook

The power of numbers – how does Ireland compare? The speed of transformation is, quite literally, inhuman as the advance of data and analytics (D&A), and cognitive and machine learning drive forward change more quickly than humans alone could ever achieve.

Whilst there isn’t a significant difference between Irish and global CEOs in terms of those who see themselves as leaders in the use of D&A (24 percent in Ireland v’s 30 percent worldwide) 44 percent of Irish CEOs state that they are still evaluating their use of D&A when compared with only 6 percent internationally – suggesting that there is still some way to go for many Irish based businesses in extracting the full value out of their data.

Data and Analytics – trusting the numbersAs the volume of information flowing into companies from internal and external sources increases, trust becomes very important. Of the Irish CEOs surveyed, only 20 percent have a high level of trust in the accuracy of the data they use in comparison with 41 percent of their global peers.

According to Paul Toner, addressing this trust gap will allow companies to have greater confidence in their decision making: “Many Irish CEOs have told us that they’ll be leading significantly transformed businesses and experience shows that they’ll need to trust their data before moving to unlock the value contained in the information at their disposal.”

How effectively is your organisation using data and analytics (D&A) to improve performance?

Struggling in this area

Considered a leader of D&A usage

Using D&A fairly effectively

Still evaluating our use of D&A

4%

24%

28%

44%

17Now or never

Driving Growth

Almost half of Irish CEOs surveyed (48 percent) believe their organisations will significantly change their focus in the medium term. CEOs are focusing on improving their existing operations as well as embarking on new ventures.

Deal making, divestments and transforming back office operations will be an important part of their strategy. Unlike, for example, their UK counterparts, most of whom favour inorganic growth, 80 percent of Irish CEOs plan to drive shareholder value through collaborative growth using external partnerships or collaboration with other firms. In this respect, Irish CEOs are more in line with their global counterparts.

Top 3 anticipated activities in Ireland 2016-2019

Changing the capital structure with debt/financing

56%

45%

Ireland

Global

Buying businesses, assets or capabilities

60%

41%

Ireland

Global

Merging with another firm52%

35%

Ireland

Global

80%Collaborative growth (external partnerships or collaboration with other firms)

60%Organic growth (new lines of business, geographic expansion)

Inorganic growth (M&A or joint ventures) 48%

Irish CEOs’ plans to drive growth over the next three years

19Now or never

“ The recent Brexit referendum has thrown up new risks but also new opportunities in the M&A landscape, the impact of which remains to be seen...” Michele Connolly, Head of Corporate Finance, KPMG

Strategic fit is the main consideration discussed in Irish boardrooms when identifying potential acquisitions says Mark Collins, Head of Transaction Services at KPMG. According to Collins: “CEOs continue to seek suitable targets in similar industries to maximise shareholder value and earnings growth through the addition of top line revenue and/or the achievement of cost synergies.

According to Mark Collins: “Previously a significant proportion of transactions involved the sale of assets or portfolios at discounted prices. CEOs increasingly believe that we are in a cycle where higher price multiples can be sustained. This is as a result of companies being able to point to a track record of underlying earnings, availability of funding and growth prospects fuelled by a more stable Irish economy. This enhanced confidence in available financial and commercial analysis allows for more informed valuations for both the vendor and acquirer.”

Michele Connolly, Head of Corporate Finance at KPMG says: “We noted earlier in the year that the health of the Irish economy continued to be a barometer for M&A activity. At that time we had seen increased confidence among Irish deal makers and continued healthy funding opportunities for existing and new sectors. However, confidence remains a fluid concept. The recent Brexit referendum has thrown up new risks but also new opportunities in the M&A landscape, the impact of which remains to be seen and will no doubt start to play out in the coming months.”

Irish companies are still very attracted to using debt finance to fund these expansion activities: “Our M&A survey showed that around 50 percent of businesses prefer debt funding ahead of cash reserves, private equity, IPO/equity markets and alternative investment sources. The preference towards debt funding is indicative of two key factors - debt is typically a lower cost form of finance when it is available and secondly, a common feature across a lot of Irish businesses is a preference not to have to dilute existing shareholders to fund expansion. Debt is available but we are increasingly seeing the rise of alternative debt capital providers (non-bank lenders) which will provide much needed additional capacity in this area.”

20 Irish CEO Outlook20

A focus on competencies

78 percent of Irish CEOs say they will be placing a stronger focus on core competencies in the next three years:

are acquiring new competencies to enter new customer, product

and market areas.

are divesting non-core competencies

plan to grow complementary competencies

“ The medium to longer term outlook for M&A remains positive, particularly in key sectors such as healthcare, pharmaceuticals, life sciences, technology, food and agribusiness.” Mark Collins , Head of Transaction Services, KPMG

80%

60%

60%

21Now or never

Risk and Cyber Security

“ Regulations in every sector continue to increase and are becoming ever more complex.” Declan Keane, Head of Regulatory, KPMG

The regulatory landscape is changing across geographies and regulation is increasing across every type of industry.

In some cases, practices stay the same but the level of reporting has increased; in other cases, businesses must staff large compliance departments and deal with an array of country-by-country regulations. For some smaller organisations, the costs of regulation may even be too high to enter into a foreign market.

Irish CEOs cite regulatory risk as a significant risk concern (36 percent of those surveyed vs 28 percent globally). According to Declan Keane, Head of Regulatory at KPMG, this is to be expected: “Regulatory compliance and governance have been particularly high on the board agenda for many years. Regulations in every sector continue to increase and are becoming ever more complex. While at the same time the consequences of non-compliance are increasing. These trends are likely to continue for the foreseeable future.”

Cyber riskIn keeping with their global counterparts, over half (52 percent) of Irish CEOs see cyber risk in their top risk concerns. It is clear from the research that technological innovation is challenging firms. CEOs voiced concern about their company’s level of data and analytical sophistication, as well as their ability to connect with customers through digital channels.

According to the survey, one in five Irish CEOs lead organisations that “are not where we need to be” in terms of preparedness for a cyber event and only 24 percent consider their company “fully prepared” for a potential cyber issue. However, many Irish CEOs are also very open to sharing their vulnerabilities for the purpose of strengthening defences. 60 percent of Irish CEOs would personally be comfortable sharing experiences about a privacy breach with their peers in the interests of applying collective learnings to reduce risk.

23Now or never

“ Investors view data breaches as a material threat to a company’s value and are reluctant to invest in a business that has had its sensitive information compromised.”

Mike Daughton, Head of Cyber, KPMG

of investors would be discouraged from investing in a business that has been hacked79%

According to Mike Daughton, Head of Cyber at KPMG; “Most CEOs understand that while they may not be experts on cyber security, they will be held accountable if there is a major problem.” Such sentiment is reinforced by the finding that 68 percent of Irish CEOs agree with the statement: “I am personally comfortable with the degree to which mitigating cyber risk is now part of my leadership role”.

Alongside cyber risk, customer privacy is also an issue with 68 percent of Irish CEOs agreeing with the statement that: “our customers may be more concerned about their privacy than our organisation is.”

Meanwhile, a survey of global institutional investors conducted by KPMG last year found that 79 percent of investors would be discouraged from investing in a business that has been hacked.

Mike Daughton says: “Investors view data breaches as a material threat to a company’s value and are reluctant to invest in a business that has had its sensitive information compromised.”

“Following a number of high profile breaches internationally, we are seeing global investors waking up to the issue of cyber security. The ripple effect of this has seen investor appetite for cyber businesses increase, with the survey indicating that 86 percent of investors see it as a growth area.

“This research shows that investors believe that less than half of the boards of the companies that they currently invest in have adequate skills to manage cyber risk. There is an expectation from investors that businesses must increase their cyber capabilities from top to bottom, including at board level. In a world where breaches are common, it is reasonable to expect boards to have prepared themselves. The inability to demonstrate that a business is doing so could make it a less attractive investment proposition.”

24 Irish CEO Outlook

Some initial cyber risk considerations

“ The emergence of environmental risk as a significant agenda item shows that the issue is now mainstream for boards.” Caroline Pope, Climate Change and Sustainability Lead, KPMG

1. Cyber risk is not solely an IT problem. Board directors need to understand and approach cyber security as a business risk issue.

2. Directors need to understand the legal implications of cyber risks as they relate to their company’s specific circumstances.

3. Boards should have sufficient cyber security expertise, and discussions about cyber risk management should be on the boardroom agenda.

4. Directors should establish a firm wide cyber risk management framework that has adequate scope for staffing and budget.

Environmental risk

In recent years, there has also been a growing realisation and acceptance that good management of non-financial elements of business results in long-term value creation and sustainability. So perhaps it’s not surprising that environmental risk is cited as one of the risks that Irish CEOs are most concerned about (32 percent of those surveyed vs only 23 percent globally).

“The emergence of environmental risk as a significant agenda item shows that the issue is now mainstream for boards in every sector.” says Caroline Pope, Climate Change and Sustainability Lead at KPMG. “A significant, and growing number, of investors utilise ESG (environmental, social and governance) factors to better understand a company’s long-term risk profile and quality of management.”

Climate related risk has had a particularly high profile – for example, last winter saw some of the worst flooding in Ireland in living memory. Meanwhile, in the United States there were 10 weather and climate disaster events in 2015 where losses exceeded US$1 billion. It’s in this context that the WEF Global Risks Report 2016 identified ‘failure of climate change mitigation and adaptation’ as the threat with the greatest potential impact. Caroline Pope says; “This is the first time climate change has topped the WEF risk list. Putting financial value on environmental and social impacts is making real some of the trade-offs between the sometimes conflicting values of people, planet and profit.”

However, Caroline also emphasises that the risk issues are not about climate change alone; “This conversation goes beyond carbon, it relates to physical risk, legal/compliance risk and transitional risk. It also relates to a world of opportunity for those with vision.”

25Now or never

People & Talent

Faced with significant transformation plans and rapidly advancing technology, many Irish CEOs report some level of emerging skills gaps across many areas of their operations.

For example, Irish CEOs report a likely skills gap in areas such as manufacturing and operations over the next three years. This speaks to the finding that over half (52 percent) of Irish CEOs are planning on increasing their headcount over the same period. Almost a third (32 percent) of Irish CEOs plan to hire talent from competitors while 28 percent plan on ensuring a greater focus on retaining experienced employees.

According to KPMG Managing Partner Shaun Murphy: “If you believe your organisation will change radically you need to skill up to execute your strategies and this requires both retaining and hiring the right talent and significant investment in training.”

of Irish CEOs expect their number of employees to grow in the next 3 years52%

“ If you believe your organisation will change radically you need to skill up to execute your strategies and this requires both retaining and hiring the right talent and significant investment in training.” Shaun Murphy, Managing Partner, KPMG

27Now or never

Developing talentFaced with significant transformation plans and ever advancing technology, most Irish CEOs surveyed report taking action to develop existing or future talent. Some of the options being taken to develop the talent base include:

32%

28%

Hire from competitors

24%Increase focus on agility

and problem solving

Engage/retain mature workers

Meanwhile, Irish CEOs (16 percent) are almost as likely as their global peers (17 percent) to look abroad to fill skills shortages.

Recruitment and retentionThe differing wants and needs of millennials and how these impact on companies are a major concern for almost half (44 percent) of Irish CEOs. For example, providing opportunities to learn, develop and work with leaders is one of the more effective initiatives to retain employees according to Irish CEOs. Meanwhile, global business leaders surveyed say that giving employees the chance to innovate and work in an entrepreneurial or collaborative environment is the most effective way to attract new employees.

According to Shaun Murphy, employer appeal is essential for all successful businesses - however, Ireland’s attractiveness as a location to live and work is also an underlying issue: “Irish CEOs are making strenuous efforts to recruit and retain the best people. Government policy needs to be in step with these efforts, especially in areas of personal taxation given that many employees not only have employer choices but also location choices.”

28 Irish CEO Outlook

of Irish CEOs are concerned with the differing wants and needs of millennials 44%

Top 5 most effective initiatives to retain employees — Irish CEOs

40%Opportunities to learn, develop and work with leaders

32%Chance to innovate and work in an entrepreneurial or collaborative environment

52%Financial incentives

Top 5 most effective initiatives to attract employees — Irish CEOs

40%Interesting career paths

36%Non-financial incentives

48%

36%

32%

Promotion possibilities

Flexible work arrangements

Chance to innovate and work in an entrepreneurial or collaborative environment

40%Opportunities to learn, develop and work with leaders

Purpose-driven organisation 40%

29Now or never

The diversity challengeDespite the increased visibility of diversity as a business issue, only 8 percent of Irish CEOs surveyed rank the topic as one of their top three strategic priorities over the next three years. The figure for their global counterparts isn’t significantly different at 12 percent.

Shaun Murphy believes that Irish business leaders should give gender equality greater priority. “Organisations with more women at senior level are proven to be more successful. They have greater success because they reflect their clients and customers and because they retain more talent - thereby growing their overall talent pool.”

Darina Barrett, KPMG’s Head of Financial Services Markets, cites examples of initiatives such as the 30% Club in Ireland. With over 100 corporate members spanning a range of household names from AIB, Primark and Ervia to GE, Mercer and NTR, the aim is to build a collaborative approach of men and women working together to effect change. Speaking about KPMG’s lead involvement in the 30% Club and other diversity driven initiatives, Barrett says; “There’s growing awareness of the need to take gender diversity beyond a narrow definition of the issue into mainstream talent management - that’s what gets not just the attention of business leaders but also helps turn increasingly positive attitudes into action.”

Darina Barrett believes that a focus on diversity should help companies recognise that it’s not a case of women instead of men – it’s about having a mix of different people with different perspectives: “More inclusion leads to a bigger pipeline of talent. Encouraging gender diversity also encourages better engagement by men as well as women.”

“ There’s growing awareness of the need to take gender diversity beyond a narrow definition of the issue into

mainstream talent management...” Darina Barrett, Head of Financial Services Markets, KPMG

30 Irish CEO Outlook

ConclusionsThe pace of change in Irish business continues to accelerate. In addition to broad macroeconomic factors such as Brexit and the health of the domestic and global economies, Irish CEOs increasingly need to focus on issues such as transformation and disruption and the potential challenges and opportunities they create.

The speed of change means that Irish CEOs need to act now. They must also act knowingly, taking into consideration issues including:

VulnerabilityIrish CEOs share many of the same issues and concerns as their global counterparts, facing the likelihood of many forms of disruption to their companies and finding ways to pre-empt them. It is human nature to be wary of the unknown and much of what we are living through today is on the scale of an industrial revolution.

EcosystemsTraditional boundaries and roles no longer apply. The lines separating industries, companies, technologies and customers are disappearing. Due to the need for speed, CEOs are realising that alliances or collaboration can be a better option to access the resources they need.

32 Irish CEO Outlook

Agility The speed of change is limiting visibility into the future, making short or medium term strategies a real challenge. The time of once-and-done transformation is over and Irish CEOs recognise that they often have little direct experience of the issues they are now having to confront. Today’s transformation is a continuous flow of incremental steps, allowing for quick adjustments and corrections, speed to market and measurement.

Customer-centricityWith the ability to communicate with the customer via digital channels, it is crucial to listen to customers and meet their expectations. But, it is equally important to discern what customers truly want. This has to be balanced with the value these customers generate.

Trust The idea of trust takes on an additional importance in the age of data. With so many strategic decisions potentially riding on the output of data and analytics or algorithms, there must be a heightened focus on the accuracy of data. Inevitably, data needs to be used without violating privacy and this trust needs to be upheld throughout the whole ecosystem, including the supply chain, partners and customers.

RiskMobile technology, machine learning, cognitive computing and artificial intelligence increases security and cyber risk exponentially. CEOs increasingly recognise that all parts of the organisation need to understand cyber issues and major decisions need to be looked at through a cyber security lens.

33Now or never

MethodologyThe survey data published in this report is based on a 2016 survey by Forbes of over 1800 CEOs in 28 countries, including Ireland. The findings represent the views of CEOs in a range of industry sectors including banking, insurance, investment management, infrastructure, life sciences, manufacturing, technology, telecoms, retail/consumer markets and energy/utilities.

About KPMGWe work with CEOs and their teams in every industry sector in Ireland and globally to help them realise their ambitions. With over 2,500 professionals based in offices in Dublin, Belfast, Cork and Galway we would be delighted to discuss any aspect of this report and the implications and opportunities it may have for your business.

We look forward to hearing from you.

34 Irish CEO Outlook

Notes

35Now or never

Notes

© 2016 KPMG, an Irish partnership

At the heart ofbusiness in Ireland

KPMG_A4_Farmers_Journal_Wave_3_FA.indd 1 09/05/2016 11:08

36 Irish CEO Outlook

© 2016 KPMG, an Irish partnership

At the heart ofbusiness in Ireland

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