Survey: Companies Finding Ways to Increase Profits Under the 'New Normal'

After a year of cutting costs, reducing capital investments and headcounts, respondents to a McKinsey Global Economic Conditions Survey say they expect their companies’ profits to rise than fall in the near term, with product development and long-term planning high priorities for many among them, and most are optimistic about their prospects in the longer term.

 

However, McKinsey says that the overall survey response indicates a “new normal” is settling in for many companies—an environment less comfortable than the one they knew in the pre-crisis world. “Most are still cutting costs, and a third of all respondents say that their companies are in crisis,” says McKinsey.

 

According to the survey, 19% of respondents around the world—and 28% of those in Asia’s developed economies—say that an economic upturn has already begun. Each economic conditions survey since March has shown an increase in the hopes of executives for their national economies, reveals McKinsey.

 

But a majority of the executives don’t expect GDP to rise soon, and the responses also suggest other indicators of economic anxiety: 54%, for example, say that governments should scale back—but not stop—their support for economies.

 

McKinsey says that the anxiety of the executives is also highlighted by the fact that 42% of them describe the economy as “battered but resilient.”

 

Many executives are nonetheless hopeful about their companies on several fronts. “Expectations for profits are significantly brighter than they were six weeks ago, and expectations for customer demand are notably brighter. The share expecting that their companies will increase the size of the workforce over the next six months has risen to 26%, equaling—for the first time in a year—the share that expect it to decline,” explains McKinsey.

According to McKinsey, the top current priorities of companies are a mix of short- and long-term moves, including cutting costs, developing new products, and working to ensure that organizations are flexible enough to respond to changing economic conditions. Although three-quarters of the respondents’ companies are cutting costs and most will continue to do so, fewer than half identify cost cutting as a top priority, notes McKinsey. Equal shares report that their companies are restructuring to position themselves for growth and to reduce costs.

 

“Innovation is more important than ever; the companies that have the highest hopes for their own futures are likeliest to be focusing on it.,” says McKinsey.
 

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