This article first appeared in The Edge Malaysia Weekly on November 29, 2021 - December 5, 2021

CEOs are looking euphoric once again as economic activities resume, amid the progressive relaxation of the coronavirus containment measures in recent months. This is shown by the latest Vistage MIER CEO Confidence Index (CCI) which soared to more than a decade high of 118.3, reflecting CEOs’ confidence in the country’s current state of economic affairs and business outlook of their firms moving forward.

Economy

CEOs have rated the overall economic conditions in Malaysia higher in 4Q2021, as indicated by the current index of economic conditions which, at 108, had risen 90 points from 3Q2021. Some 37% of the 817 CEOs voted in favour of the economy this time, far exceeding the 3% who replied similarly a quarter ago. Those who believed that the economy had performed worse in 4Q2021 had also dwindled to 29% from 85% in 3Q2021. CEOs’ economic prognosis for the coming quarter is equally positive.

With the expected economic conditions index scoring 164 in 4Q2021, compared with 3Q2021’s 72, and almost three-quarters of CEOs responding favourably, it shows that economic confidence among CEOs has grown substantially lately.

Prospects

CEOs have also upgraded their projections for their firms in the near term. The expected index for revenue gained 45 points quarter on quarter to 170 in 4Q2021, an indication that higher revenues are expected in early 2022.

Another increase was recorded by the index for expected profitability, which climbed to 151 from 92 previously, implying that profits are expected to gain momentum in the coming months as well. Some 76% and 62% of CEOs are looking forward to higher revenues and profits soon, respectively, up from 37% and 30% in 3Q2021.

Expansion

New recruitment is expected to beef up in 1Q2022, as reflected by the index for expected employment which rose to 156 from 111 last quarter. Some 61% of CEOs are planning to increase their headcount soon, doubling last quarter’s 30%. Only 5% are contemplating downsizing their workforce, down from 19% in 3Q2021.

The index for expected capital expenditure (capex) gained 51 points quarter on quarter to 145 in 4Q2021, postulating that an additional injection of capex is likely in the months ahead. An increase in capex is being considered by 54% of the CEOs in 4Q2021, up from 25% in 3Q2021.

A pickup in new local and export orders is expected in 1Q2022. Some 68% of the CEOs are forecasting higher local orders soon, up significantly from the 33% in 3Q2021. More orders from abroad are also anticipated by 61% of those who export, up from 42% a quarter ago. Prices are also trending up, with 53% of the CEOs planning to increase their selling prices soon, while 41% will maintain theirs for now. Only 6% are slashing their prices this time, which is in sharp contrast to the 48% who planned likewise last quarter.

The latest cash flow situation of CEOs has improved from the previous quarter and a year ago, with more CEOs saying their cash flow can sustain their business operations by more than six months, and fewer CEOs estimating theirs at up to a month only.

In 4Q2021, some 44% of CEOs assessed the cash flow sustainability of their business operations at more than six months, up from 39% and 42% in 3Q2021 and 4Q2020, respectively. Some 33% evaluated their current sustainability at four to six months, little changed from the previous quarter’s 34%. Another 4% of CEOs projected a duration of up to one month, down from 7% last quarter.

Findings of the 3Q2021 survey show that freight costs, supply chain disruption and logistics inefficiencies have been of great concern to CEOs’ businesses. Of the measures undertaken by CEOs to address these issues, better planning and monitoring was the most popular, with three-quarters of CEOs having implemented them in 4Q2021. This was followed by digitalisation and warehouse management, as disclosed by 33% and 30% of the CEOs, respectively Enterprise Resource Planning systems was the choice of 18 CEOs, while 7% implemented Robotic Process Automation.

With the more relaxed standard operating procedures (SOPs) for work, almost 95% of CEOs are operating their businesses at 40% to more than 80% capacity presently. Among them, 68% are operating more than 80% of their businesses in 4Q2021. While 19% are operating at 60% to 80% levels, business operations of eight of the CEOs are at 40% to 60% currently.

Effective Oct 1, almost 81% of CEOs confirmed that 40% to 100% of their employees are back to WFO in 4Q2021. Among them, 49% have 80% to 100% of their staff working from the office, while 17% required 40% to 60% of their employees to WFO. Some 50% to 80% of the staff of 21% of the CEOs are also required to WFO.

As at end-September, most CEOs (53%) estimated the proportion of their local workers vis-à-vis foreign workers at 90% to 100%. According to another 14% of the CEOs, their assessment on this is 50% to 60% while it is 60% to 80% and 80% to 90% for 14% and 7% of the CEOs, respectively.

When asked if they plan to, or have already, set a policy mandating that all their employees are fully vaccinated, a clear majority of 78% replied positively, while 8% are planning to, and 14% do not have such a policy.

One of the targets of the 12th Malaysia Plan (12MP) is to increase the contributions of micro, small and medium sized enterpris es (MSMEs) to 45% of gross domestic product  and 25% of total exports by 2025. The 2019 figures were 38% for GDP and 19% for exports. These targets, according to 48% of the CEOs, are achievable, but 22% believed that they are too ambitious and not achievable. Only 4% are optimistic that the targets are highly achievable.

For the financial year ending Dec 31, 2021 (FY2021), salary increments are expected to be better than the same period last year. While 50% to 60% of the CEOs did not plan to increase the salaries of all their employees in 4Q2020, the proportion of those who have similar plans this year have declined to 24% to 32%.

For managerial staff in 2021, the highest quantum of salary increment will be in the range of 1% to 5%, which 41% of the CEOs are considering, up from 28% in 4Q2020. Non-managers of 42% of the CEOs may also expect the same rate this year, up from 34% a year ago. Another 22% and 30% of the CEOs are currently contemplating increments of >5% to 10% for their managers and non-managers, respectively.

The same situation may be expected of bonus payouts for FY2021. Like salary increments, the highest bonus payout, if any, will also be up to one month only. Some 51% and 53% of CEOs are planning on this rate for their managers and non-managers, respectively, up from 23% and 24% in 4Q2020, respectively. Bonus payouts of >14 months are in the plans of 46% of CEOs for their managers, and 45% for their non-managers this year.

As health is wealth, a scorecard on CEOs personal health was included in the latest survey. For the second year in a row, mental stress topped the list, followed by overweight and high cholesterol issues. Hypertension was revealed by 19% of CEOs, while almost 17% have fatty liver.

Vistage has continued to accomplish its mission of increasing the effectiveness and enhancing the lives of CEOs and their key executives. As in 4Q2020, most CEOs considered themselves better strategic thinkers (91%) and more effective leaders (89%) since joining Vistage. There are also more CEOs (81% to 84%) than 4Q2020 (80% to 83%), who said they are now able to empower their people further, hold their people more accountable, and have become better listeners to their people and family members. Currently, 81% of CEOs are leading by example by living the culture they want to create for their companies, while 67% are better time managers and 66% have improved their work life balance as well.

Vistage Malaysia is a licensee of Vistage International, USA, the world’s most trusted resource for CEOs, business owners and key executives of small and medium sized businesses to help them become better leaders, make better decisions and deliver better results providing unparalleled access to issue resolution and better performance through monthly peer advisory group meetings, one on one business coaching, expert speaker presentations, and extensive online connectivity spread over 1,800 cities in 24 countries with more than 23,000 members worldwide.

Vistage Malaysia has more than 980 members with combined annual revenue of RM70 billion and employing over 120,000 employees. Vistage member companies grow, on average, 2.2 times faster than they did prior to joining Vistage.

In 4Q2005, Vistage Malaysia entered into a strategic alliance with the Malaysian Institute of Economic Research (MIER) to co-brand the CEO Confidence Index. MIER is an independent, private, non profit organisation, devoted to economic, financial, and business research that would serve as a think tank for the government and private sector by providing an objective and impartial understanding of socioeconomic issues of national, regional and global importance.

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