Since 2019, GLG has conducted a survey of global CEOs to help our clients and the broader public better understand how these trends impact business, and what business leaders expect for the future. 

In our fourth annual survey, we interviewed more than 450 executives. And the results tell a markedly different—and less optimistic—story than in previous years. 

Yet numbers don’t tell the whole story. Fortunately, our guest today, Sheri McCoy, the former CEO and Director of Avon Products, Inc. is here to help analyze the results, and add her own perspective to the conversation. 

Listen in as Sheri shares her thoughts on the biggest concerns executives face, including hot-button issues like how to navigate inflation, remote work policies and even Elon Musk’s handling of Twitter.

 

ABOUT SHERI MCCOY Sheri McCoy is the former CEO and Director of Avon Products, Inc. Previously, Sheri held a handful of roles, including Vice Chair, at Johnson & Johnson. She currently serves on the boards of several companies, including AstraZeneca and Kimberly-Clark. McCoy holds several patents and has appeared in both Fortune Magazine’s list of the 50 Most Powerful Women in Business, and Forbes’ annual list of the World’s Most Powerful Women. 

 

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Podcast Transcript

 

Eric Jaffe: We make decisions every day. While some of them are small, others can have a huge impact on our own lives and those around us, but how often do we stop to think about how we make decisions?
Welcome to Deciding Factors, a podcast from GLG. I’m your host, Eric Jaffe. In each episode, I’ll talk to world class experts and leaders in government, medicine, business, and beyond, who can share their firsthand experiences and explain how they make some of their biggest decisions. We’ll give you fresh insights to help you tackle the tough decisions in your professional life.

By most measures, 2022 was not a positive year for the global economy. In the face of so many crises, including rising inflation, faulty supply chains, COVID, and the war in Ukraine, we felt negative impacts on business performance, GDP, jobs, the stock market, and our wider society. Since 2019, GLG has conducted a survey of global CEOs to help our clients and the broader public better understand how these trends impact business, and what business leaders expect for the future.

In our fourth annual survey, we interviewed nearly 500 executives, and the results tell a markedly different and less optimistic story than in previous years. Exactly half of the CEOs we surveyed expect to see a decline in growth for the global economy in 2023, while just 17% expect to see an increase. Just under half of them said they feel, quote, “Confident or very confident,” that their revenue will grow in 2023. This is a huge difference from 2021, when with inflation only beginning to creep up, nearly 70% expressed confidence.

Yet numbers don’t tell the whole story, and I’m thrilled to be joined today by an executive who can help us analyze the results and add her own perspective to the conversation. Sheri McCoy is the former CEO and director of Avon Products. Previously, Sheri held a handful of roles, including Vice Chair at Johnson and Johnson. She currently serves on the boards of several companies, including AstraZeneca and Kimberly Clark. McCoy holds several patents and has appeared in both Fortune magazine’s List of the 50 Most Powerful Women in Business, as well as their annual list of the World’s Most Powerful Women. Listen along as Sheri shares her thoughts on the biggest concerns executives face, including hot button issues of the day, like how to navigate inflation, remote work policies, and even Elon Musk’s handling of Twitter.

Sheri McCoy, welcome to Deciding Factors. We’re so excited to have you on today.

Sheri McCoy:

Thanks, Eric. It’s a pleasure to be here.

Eric Jaffe:

Sheri, we’re here today to talk about GLG’s new CEO survey, and as a former CEO yourself many times over, couldn’t imagine someone better to help us contextualize the results. Let’s start on the global economy. The CEOs in the survey are not particularly bullish about the prospects for the global economy in 2023, and they cite supply chain and talent and hiring as the primary factors. In fact, 83% of CEOs expect the supply chain to have at least some impact on the global economy next year. Can you provide some additional context and what you think the story is behind that?

Sheri McCoy:

I think going into 2003, one of the things that people are very concerned about is the impact of inflation, whether it be wage inflation, commodity prices increasing. So I think what’s behind the supply chain aspect of it is really, it’s the cost of the supply chain doing business and the wage inflation, which I think is creating concerns around the impact on the overall economy and impacts consumer willingness to spend. We’ve been dealing with supply chain and talent through 2022, but I will say in all the boards that I work on and the CEOs I work with, what they’ll say is we thought we had it conquered in 2022. We have plans in place, as we’re going into 2023 with the impact of the Russia-Ukraine situation, the uncertainty relative to volatility, even with COVID, people are concerned about that, coupled with the inflationary aspect. So I think it’s really, behind that, is concern about inflation and recession.

Eric Jaffe:

And so while 25% of CEOs expect supply chain issues to have a severe impact on the economy, only 16% expect for it to have a similar level of impact on their business. So what do you think explains that gap?

Sheri McCoy:

I think there are possibly two things. One is there’s a mix issue. Certainly as you look at the geographic components to individual businesses and you look at the industries that people are in, they may be less inclined to have to deal with some of the supply chain issues than other industries.

At the same time, I think in 2022 people really dealt with the issues of the supply chain, looking at how do we make our supply chains more resilient and more transparent, so people have put in place different mechanisms, whether it be different contracting approaches, procurement looking at how to get backup supply, looking at how to take price in some areas. So people are addressing some of the supply chain issues because they’ve had time to work on that. So I think that’s perhaps why there’s a discrepancy between what businesses see in their own area as opposed to the broader supply chain issue.

Eric Jaffe:

16% of CEOs expect economic inequality to impact the global economy in 2023, nearly a 10% rise year over year. It would seem that on a related note, 87% of CEOs cite geopolitical uncertainty as a top concern. Do you see a connection between those two data points?

Sheri McCoy:

Well, certainly I think the issue of income inequality and certainly inequality at a broader level as it relates to social issues is continuing to increase. And given the inflationary pressures, I think that’s going to only accelerate. I think it starts with lack of trust and the social imbalance, whether it be within a country or across countries. And so I think governments then try to put policies in place or put barriers in place to actually address the inequality issue. But in fact, what that does is it impacts the global economy in terms of people’s willingness to buy and consume.
Eric Jaffe:

So let’s move from the global economy to business performance. Global recession and inflation are unsurprisingly the two top factors CEOs cite expecting to impact business performance next year. So I wonder, there’s some evidence now just recently that the impact of inflation is beginning to recede. Perhaps there’s some hope. Do you think that there’s a chance that 2023 may be actually better for business than many of our CEOs expect?

Sheri McCoy:

Well, I’d like to believe that, but I do believe that 2023 is still going to be a challenge. I do see that, and businesses are seeing, that inflation could recede in the second half of 2023, but we still have the inflationary costs in terms of wage increases. We are still investing heavily in IT and other systems to actually deal with stronger supply chains and the whole digitalization. So there’s a lot of other things that go into it. So whether or not the consumer will be ready to actually be able to get that benefit is a question mark. I think more likely, we may see some prices come down in durable goods, but as it relates to services and some of the other expenses, I think it may take time, and mortgages is another one, it will take time for us to see that benefit and get to a point where growth will rebound to the extent that we’d like to see. So I think it’s probably going to be through ’24, ’25.

Eric Jaffe:

Another big topic that perhaps has shown some surprising results of the survey, COVID, only 26% of executives said that revenue declined due to COVID, which constituted a 7% point drop year over year. I wonder if you have any thoughts about that, and then additional context about how you think CEOs are thinking about the impact of COVID in 2023.

Sheri McCoy:

I think in 2022, you saw the rebound of people getting back to work, traveling, restaurants opening. A lot of the spend came back into the market. So I think that’s why we did see growth. The areas that I do see still impacted by COVID are in the area of healthcare, where they’re still challenges in getting surgeries done and different things happening relative to that, and it tends to impact the growth of some of the healthcare companies. But in general, I do see people getting on with their life.

I think in 2023, we’re still going to see issues. We see issues in China today. The good news is that we have vaccines in place, we have treatments in place, and that really doesn’t necessarily stop COVID, but at least prevents death. And I think that people have learned how to deal with the disruption of COVID. Companies have put mechanisms in place in their workforce to be able to deal with that.

Now, certainly if the variant goes into a new strain and it becomes more challenging, I think that could be more problematic, but again, I’m not sure that we would see a wholesale shutdown of the economy or the businesses the way that we saw it in 2020.

Eric Jaffe:

Let’s talk about legislative restrictions a bit. So 70%, 7-0, are most concerned with legislative restrictions impacting their business. What change do you think is causing that to be such a big concern, and in what areas is that legislative change impacting businesses broadly? Is it climate change, hiring, et cetera?

Sheri McCoy:

Well, I think the geopolitical uncertainty, I think the inequality in income, all of the factors that we’ve talked about are impacting the regulators, and they’re looking at how to put policies in place. The area that I see most acutely is on climate change where people are very focused on how do we decarbonize our businesses, and doing that in a way that’s meaningful and in line with what the business is focused on.

The other area that people are spending a lot more time on today than four or five years ago is inequality, in looking at not just how the senior leaders and organizations are paid, but all throughout the broader organization, looking at both benefits as it relates to healthcare and 401k, and other flexibility type measures that are important to people from a benefit standpoint, but also looking at the pay gap between the top of a company as well as at the lower level, and looking at the gap relative to competitive environment and the marketplace dynamics. And so I think the whole area of employee satisfaction and employee equity is something that I see a lot more focus on.

The other thing I would say, just working in the healthcare space, is there’s been a lot more legislative focus on pharmaceutical companies and medical device companies as it relates to pricing and access. And that’s something that I believe will continue. And I see this globally. So in the US specifically, the Inflation Reduction Act is focused on ensuring that there’s lower price, particularly for Medicare patients, but also looking at how pharmaceutical companies should go to market differently relative to keep costs down.

So I do see a real, in terms of what’s happening in specific sectors, but I think that the biggest areas are around climate change across the board and employee treatment is pretty consistent.

Eric Jaffe:

Okay. Sheri, I got to ask. How do you think Elon Musk is handling his new role as Twitter CEO?

Sheri McCoy:

He can’t do all the work, and so you have to have an employee base that is engaged in what they’re doing and love what they’re doing.

Eric Jaffe:

The devil’s advocate would be, only those who have stuck around are true believers, and maybe Twitter only needs 30% of its original workforce in order to be effective.

Sheri McCoy:

I think on that point, I’m not actually opposed to him saying, “This is the new business model and this is how we’re going to do it.” The issue is that the people that were in the business model before he changed the business model, in some ways, have to be treated with respect and managed.

Eric Jaffe:

Absolutely.

Sheri McCoy:

His point has to be, “We have the wrong model. We made a mistake. We can do this with half the people. Thank you very much. Here’s what I’m going to do, and now let’s focus on this.” Actually, I think when people change business models, it’s the same thing we’re dealing with pharmaceutical sales reps now. And that’s why the sales and marketing thing, that question is, okay, well, we have to put more there, and we’re going to have to take people out. We don’t need people knocking on every single doctor’s door. The doctor doesn’t want to see them. We can do things with one person instead of 10 because we can do it virtually. We have to explain that that’s the new model, but we’ll take care of you and we’ll manage it.

So I think that’s a good thing to change models and to invest in that. I think how you treat people matters, though.

The issue in the end is it creates distrust. And the issue I think we have it, whether it be political, or corporate wide, or socially, is people don’t trust people. And when you try a scorched earth’s approach, that builds distrust. At the same time, CEOs who parrot and just say what they think you want to hear, and aren’t honest, also create distrust. I think it’s okay to make change. I think it’s okay to be bold and to be courageous, but I also think that we have to do it a way that people are trusted and respected, and you tell them honestly what’s happening and why it’s happening. And a lot of the people that are impacted and hurt, this goes back to this income inequality issue, those aren’t the people that made those decisions. They were following orders. And so that’s the biggest issue is you have a concentrated wealth system, Musk, who’s making all these decisions, and he doesn’t necessarily have the best interest at heart of the people underneath. And therefore, that creates this income inequality, social inequality, and transparency inequality. That creates this issue that we have today.

Eric Jaffe:

Totally. I could not agree more. Okay. Let’s move on to business priorities and spending. So in 2023, sales, marketing, and IT are the top areas businesses expect to invest in. Do those priorities surprise you, or what are your thoughts?

Sheri McCoy:

One of the things that’s very top of all of board’s mind and CEO’s mind is how do we make sure we continue to actually keep the customer engaged and make sure we’re delighting the customer, particularly in the consumer and retail area, as we’ve had supply chain shortages and other things. We’ve been investing in supply chain, but what we’re seeing now is we need to look at how we improve our go-to-market strategies, and sales, and marketing, and e-commerce, and new systems, and tools for our customers is becoming inherently more important. I see a lot more investment in that piece because people also are wanting to ensure that we are ready for growth as we get through this inflationary period, that we’re out in front as it relates to delighting customers. So I see a lot more investment there.
On IT, IT is across every single business I’m in. It doesn’t matter what type of business it is. It’s probably the number one area for investment. I think we’ve realized through the pandemic that we don’t have robust supply chains. We don’t have transparent supply chains. We don’t have end-to-end mechanisms as it relates to even understanding what raw materials we use all the way to pricing with our customers. And so there’s been a lot of investment at looking at new tools on the IT front and then looking at the resources and skills that can help us understand the data and use artificial intelligence, et cetera. So that’s looking at it not just from a supply chain standpoint, but from a procurement standpoint, from an R&D perspective. And so IT is really the glue that’s holding things together, and it’s been such an evolution since the pandemic. It’s become apparent that there’s a lot more we can do and there’s a tremendous amount of opportunity. So as boards are cutting back in certain areas and trying to conserve cash, one area I see them continuing to invest in is IT.

And I should add, the other part of it is the cybersecurity aspect, and surrounding these new tools with the right protection to protect data and to protect the company as it relates to cybersecurity.

Eric Jaffe:

So is one way to think about IT in this context, like investing in business intelligence, understanding operations, as you said, providing transparency around supply chains, so that executives can get more operating leverage from existing operations? Is that how you and the boardroom would think about it?

Sheri McCoy:

I think it’s both efficiency from operations that are in place today, because a lot of times you’ll have seven or eight SAP systems, and we’re trying to integrate them into one as an example. So it’s that efficiency that looking for, but there’s also an element of sales and opportunity to actually increase e-commerce or other ways of going to market that we need IT systems to be able to do so that we can put it in the hands of our sales force.

Eric Jaffe:

To circle back to that topic of income inequality that we talked about before, it seems that globally, most business leaders feel that the private sector bears the greatest responsibility to contribute towards fixing income inequality, even more so than the prior year when we did the survey. What do you think accounts for that increase in that line?

Sheri McCoy:

I think part of it is, and I’ve been talking with shareholders as it relates to some of the boards that I’m on, and one of the things that I have been getting a lot more questions about is, how are you feeling about making sure that you’re supporting your employee base, particularly the lower income employee base that are running your plants or working in your plants? And I think part of that is because people are concerned about the inflationary costs and what’s happening to the workplace today. And so I think that has been more acute, and so there’s more focus on that than there has been in the past. And the best way for private sector to be able to do this is to ensure that there is pay equity as it relates to the workforce, to make sure we’re training and upskilling workforce, particularly as we’re moving into the technological changes that we’re doing, making sure we’re bringing some of our associates and employees along with us.

And so there’s a huge role that the private sector has to play in this, and I think it’s become more apparent as we see the gap between the top of the house, and the people with wealth and people that are lower in middle incomes.

Eric Jaffe:

In a previous episode of Deciding Factors, I interviewed John Katzman, the founder of Princeton Review and the current CEO of Noodle. He’s actually a big believer in remote training and a thought leader in the space, and he believes that mentorship absolutely can happen in a remote learning environment, and cites a lot of the advantages for people who live outside of the normal radius for an office or they may have family issues that require them to be at home taking care of loved ones. And the flexibility of that remote model as being really attractive, and the innovative teaching methods that are being employed to provide mentorship. Do you think that in five, 10 years, the way mentorship works in the workplace will be radically different from, perhaps, how you and I were mentored early in our careers? Or do you think that that’s something that’s going to take a really long time to change?

Sheri McCoy:

I’d like to think it would happen more quickly, but my sense is it will take longer. I do think that if that works, I think it would help with unconscious bias and some other things that happen today in the workforce. Whether that happens as rapidly as predicted, five years, I’m not so sure. I think it will take time and I think there will be a different type of CEO at that point in time to kind of embrace that, because today it’s not embraced by most of the CEOs that I know. I mean, not that they don’t think it’s important or it can work at some level, but I think it’s not in the fabric of how people think about how things are going to happen in the very short term.

Eric Jaffe:

Yeah, it’s not in the muscle memory. There’s the meeting after the meeting, and that meeting after the meeting where a lot of learning takes place. It doesn’t typically happen when you’re having all your meetings on Zoom.

Sheri McCoy:

Exactly.

Eric Jaffe:

So another set here, over half of business leaders expect employee headcount to increase in the next year, which one might think is a positive sign about their faith in growth in the economy and their own business performance. CEOs expect talent acquisition and retention to be their top workforce challenge next year. So do you see these responses actually reflecting increased confidence and growth that may not be showing up elsewhere or am I misreading it?

Sheri McCoy:

I was surprised by that because a lot of what I see is people worried about talent retention and worried about getting, particularly in competitive spaces, getting the talent they need to fill particular roles. But I don’t see people going off wholesale and saying, “We’re going to increase our total talent base.”

What I do see is a shift in the type of talent. People are moving from looking for people that have specific skills, biostats, data analytics, et cetera, versus perhaps people that are doing more day-to-day work. So I think that there’s a shift in the type of talent that people are looking for, with some skills very, very competitive in certain areas. But I don’t see a wholesale saying, “We’re going to increase our base,” unless there’s a strategic change relative to a major acquisition, et cetera. And I think there are companies that would like to do that, but are certainly cautious given the market today. But perhaps toward the end of the year, there’ll be more focus there in terms of growth and opportunity because that’s something that we need to continue to look at. But it’s not obvious to me how… I see people trying to hold talent versus going out and say, “We’re going to dramatically increase,” but there will be a shift in the type of talent.

Eric Jaffe:

Conventional wisdom holds that during COVID in the last couple of years, an executive, in order to be successful, must be able to lead remote teams, which is a different thing than leading an in-person team. I wonder, are there other attributes that you see being really critical for executives in order to be successful, that perhaps maybe didn’t exist in the period prior to COVID?

Sheri McCoy:

The area that is very apparent, and really I think attracts talent and keeps talent, is the executive himself or herself is willing to be vulnerable, to be authentic, to engage in key social issues, or key issues within the company, in a more personal way than a top-down approach. And so having that personal connection and that personal engagement is something that is very different in the last two to three years than I’ve seen in the past. And that puts a lot of burden both on the CEO and management to be able to do that. But I do see that connectivity and that authenticity, and that focus on purpose, and sharing that in a real way and a meaningful way is something that’s really, really important.

It manifests itself in terms of people going all out and saying that they’re engaged and they’ll put in the extra time because they believe in the vision and the value that the CEO and management is bringing to the company. And you can see that in terms of, likely to recommend that other people should join us, likely that you’re going to be here in three years, likely that you’re going to continue to see value coming out of this company, and a belief that your company is doing what’s right, not only for shareholders, but for the communities in which they live and work.

I think it’s most important that the CEO is active on the issues that are relevant to the purpose of the company that he or she is leading. And I think it’s most meaningful that the purpose and the activism is aligned with the values and the vision for the company.

Eric Jaffe:

Sheri McCoy, so valuable to hear your viewpoint as a former CEO and active in the boardroom. Really appreciate you coming on the show today and sharing your thoughts.

Sheri McCoy:

Thank you, Eric. A pleasure.

Eric Jaffe:

That was Sheri McCoy, the former CEO of Avon Products. It was so helpful to hear the firsthand perspective of a leader deeply embedded, both in companies and markets, to contextualize the results of our CEO survey. Our conversation only solidified my conviction that inflation has played a critical role in influencing the trajectory of our global economy. It seems that if we contain inflation, there’s an opportunity for a rebound in the second half of 2023, but if not, it seems possible that our woes could continue into 2024 and beyond.

We hope you’ll join us next time for a brand-new episode of Deciding Factors, featuring another one of GLG’s network members. Every day, GLG facilitates conversations with experts across nearly every industry in geography, helping our clients with insight that leads to true clarity. Feel free to leave us a review on Apple Podcasts. We’d love to hear from you. Or email us at decidingfactors@glgroup.com if you have feedback or ideas for future show topics.

For Deciding Factors and GLG, I’m Eric Jaffe. Thanks for listening.