BEYOND THE BOTTOM LINE: WHAT CEOs ARE THINKING

New Mercer/Angus Reid Study Sees Broad Optimism -- Tempered By Concerns

New Survey Reveals Key CEO Strategies About About Hiring And Keeping The Right People

TORONTO Ontario (Feb. 26, 1999) -- A major new public opinion poll of Canadian chief executive officers released today shows that while increasing profitability is their greatest concern, attracting and retaining critical employees is the second most important worry.

In the study, Beyond The Bottom Line: What CEOs Are Thinking, Canada's corporate elite express optimism about corporate growth and their business' ability to compete globally. Yet it also reveals that CEO optimism is tempered by doubts about any meaningful reduction in what they see as a crushing federal and provincial tax burden.

"Beyond The Bottom Line shows an interesting split in the minds of many CEOs," states Bruce Martin, a principal in Mercer's Performance and Reward practice. "On the one hand, they are confident that the next 10 years will be good for their business, at home and abroad. On the other, they worry about finding and keeping the people needed to drive growth, and how much of the growth will be coughed up in taxes."

A summary of the poll is being mailed today by Mercer to roughly 1,500 chief executive officers of Canadian companies of all sizes. The blind survey was conducted by the Angus Reid Group.

According to Angus Reid senior vice president John Wright, "This is a unique study because it's the first time Canadian chief executives as a group talk publicly and in depth about the need to have the right horses for the right courses."

Business Priorities

CEOs responded to an open-ended question by listing their "most important" business priority today:

• Increasing profitability - 30% listed it as "most important"
• Attracting and retaining high calibre employees - 23%
• Expanding the number of markets in which they do business - 13%
• Growth through mergers and acquisitions - 13%
• Increasing productivity - 9%
• Launching new products and services - 8%
• Obtaining new capital or financing - 2%

When asked to compare the Canadian business environment over the next decade to what it is like today, seven-in-ten CEOs (70%) expect better opportunities for business growth. Some 75% expect to improve their organisation's international competitiveness. But while looking forward to being more aggressive in world markets, globalisation occupies a small corner of their attention with only 1% saying it is what they worry about most. Likewise, only 1% of CEOs say stock market uncertainties are uppermost in their mind.

Pessimism is rampant on taxes. Only 32% of respondents think the amount of business tax they pay will decline in the coming years.

In thinking about their own company and its workforce, a peculiar paradox surfaces. Just over one-quarter (26%) think job security for workers will improve yet 78% say it will be more difficult to attract and retain employees 10 years from now than it is today.

"Historically, chief executives didn't focus on recruiting and retention issues. They didn't need to," says Martin. "For attracting and retaining employees to pop up so prominently reflects how important a concern it is becoming for many companies."

Changing Mosaic

The study reveals a Canada continuing to evolve into an economy where growth is rooted in creativity and intellectual horsepower. Beyond The Bottom Line: What CEOs Are Thinking shows that even the nation's traditional business powerhouses of natural resources and agriculture are increasingly dependent on workers who "think" rather than those who "sweat."

"This is not just a high tech issue," Martin asserts.

Seven-in-ten (70%) chief executives surveyed declare retaining key employees to be a major priority. Those leading high growth companies are even more likely (80%) to place a top priority on the issue. At the same time, most CEOs (58%) list "attracting high calibre" employees as a high priority item.

Improving workforce skills will become more of a focus. Four-in-five (80%) CEOs say companies will offer more training opportunities to employees over the coming years. This view is expressed particularly strongly by CEOs of service companies, 90% of whom expect skills training to improve in the next 10 years.

CEOs are nearly unanimous in describing the most successful strategy for hiring and keeping key employees. Nearly nine-in-ten (88%) say that salaries exceeding industry standards is vital.

More Than Cash

Still, fat salaries alone are not enough. According to the survey, CEOs report that a "suite" of compensation-related components are needed to successfully attract and retain workers. These include offering training for new skills, allowing career development, providing stock purchase plans and offering flexible compensation and benefits packages.

Contrary to many people's perception, flexible work arrangements and above average vacation time are not seen by CEOs as useful tools in recruiting prospective employees or keeping workers from going to other jobs.

"It is becoming a seller's market for talent," Martin observes. "During the recession, it was a buyer's market. Companies downsized, retooled and reengineered. People were displaced, dumped or denigrated. Companies could cherry pick employees.

"Now, the labour pool is at its lowest level in decades," he continues. "The poll shows that CEOs recognise that to maintain profitability, they have to offer more and do more to find and keep key people."

The result is that a small but growing number of companies appear to be looking at "mass customising" compensation packages and plans for key or critical workers, much the same way businesses are trying to mass customise product or service offerings for customers. In the past, this has been done widely for senior executives but Beyond The Bottom Line findings indicate that a larger number of middle management and technicians may be getting this "perk."

"More than anything, the findings show a growing level of creativity, tailoring and accommodating employee desires is going into building a comp package," Martin notes.

Mass customisation is most likely in jobs where it is particularly difficult to find and keep employees. CEOs see a noticeable difference by job function in the degree of difficulty in attracting and retaining key people.

For example, marketing executives, along with sales people, are the hardest positions to fill, CEOs say. But information technology and computer jobs are the most difficult to keep filled, according to respondents. Other positions reported as being hard to fill and keep filled include general management, engineers, financial and accounting, and senior executives.

"This is the first topographical perspective by CEO's on their employee landscape released into the public domain," says Angus Reid's Wright. "It's an insightful benchmark for senior executives and human resource professionals and senior executives to guage their own thinking and strategies against the views of Canada's corporate elite."

Battle Plan

To continue the profit growth of the past few years, the poll indicates that CEOs are recognising that their companies need to do more to attract and retain key people. Doing so is harder today than five years ago, according to respondents, a majority of whom also say it will become even tougher in the next 10 years.

Staking out new territory for employees, and experimenting with new approaches to compensation, is just the starting point in what CEOs suggest will be a hard-fought campaign for workers into the early years of the 21st century. Martin says, "Key employees with needed talents are somewhere between scarce and endangered by those running Canadian business."

The poll was conducted among 307 chief executives drawn at random from published lists of Canada's largest 1,200 corporations and separate published lists of so-called "high growth companies." These are defined as having experienced substantial growth in revenue and number of employees over the past five years. The margin of error is +/-5% 19 times out of 20.

Founded in Vancouver, Mercer has grown to become the world's largest human resources management consulting firm. In addition to 11 Canadian offices, it has more than 100 offices around the world.

NOTE TO EDITORS: Charts illustrating key findings of the poll are included with this release along with a selection of verbatim quotes from respondents to open-ended questions.

For Additional Information Please Contact:

Dorenda McNeil, Manager-National Media Relations

(Direct) 416 868 2776
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(On-line) www.wmmercer.com/canada-news