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Story URL: http://management.silicon.com/smedirector/0,39024679,39118614,00.htm

CEOs tired of cost-cutting, finds IBM
But plagued by skills shortages and compliance fears

By Jo Best

Published: Tuesday 24 February 2004

Cost-cutting is yesterday's news, according to CEOs, and growth is back on top of the agenda. However, there's one black cloud looming over the business world - there are not enough skills to go around but more than enough regulation.

Research from IBM Business Consulting Services unveiled yesterday reveals that 80 per cent of CEOs worldwide say their top priority is no longer cost-cutting - they're focusing on returning their businesses to revenue growth, in a change of view that shows the business world really does believe an economic recovery is on the way.

That doesn't mean CEOs are throwing caution to the wind, however, says one of the authors of the report, Abigail Tierney. "Cost-cutting is business as usual - it's still important for the CEOs to keep an eye on costs and it enables their agenda to return to growth." According to the report, many CEOs feel their cost-cutting measures have been successful enough to allow them to focus on driving their companies towards higher revenues.

How the bosses intend to get more cash pouring into their coffers is a matter of debate. Two-thirds want to see new products bringing in the moolah, with more than half aiming to expand into new markets - China and Asia being the hot favourites.

So what's holding them back from pushing the profit margins? Staff. It seems that the CEOs can't find the right skills in the marketplace to help them achieve their objectives - 60 per cent complained that their employees lacked the right expertise or leadership qualities to manage the change towards growth.

"There's an emphasis on people now - skills are a key enabler to growth. [The deficiency] runs right through leadership level and employee level. In order to transform, CEOs want to educate and re-educate their employees," Tierney told silicon.com.

Apart from biting their fingernails over what skills staff don't have, it seems governance is featuring in their business nightmares. IBM's 2004 Global CEO Survey discovered that governance is looming far larger in the mind of the CEO than expected, no matter what industry they work in. While CEOs reckoned they could plan or guard against market changes to some extent, some felt that regulatory changes posed a challenge because they were outside the bosses' control.

As one CEO interviewed for the survey put it: "We are well positioned to manage what is in our control, such as customer relationships and building sales relationships. The big issues are what are not in our control, such as tariff issues and external circumstances like China." Another added: "When there is competition in the market, it is possible to predict what will happen; whereas with regulatory problems, they can drop something on you without warning."

The overall impact of regulation according to the report is a reluctance on the part of CEOs to take risks, as well as hampering efforts to expand into new markets and run the gauntlet of regulation internationally.