♦ Executive Management Research

Get the information to navigate complex business decisions. From Performance Management to Executive Compensation and Outsourcing, InfoEdge has the management research and best practices guides you need to compete in today’s global business environment. And learn more about strategic global management decisions with Outsourcing Research and Outsourcing Data from InfoEdge.

Enterprise Risk Management

Many companies fail to recognize the fundamental link between ERM and performance management because their applied performance metrics, such as return on assets or return on equity, do not reflect the level of risk involved. Only 34 percent of the executives surveyed said that their companies use risk-adjusted return on capital at the corporate level, and even fewer - 21 percent - do so at the business unit level. When asked about challenges to the use of risk assessment data in planning, 73 percent of the executives noted that their risk measures were not compatible with their planning metrics. In many organizations, ERM programs are based on relatively simple risk assessment processes - facilitated risk workshops or "risk mapping." As a result, the ERM program provides information to help better manage the risk, but not the organization.

Current performance measures are often based on pro forma assumptions about internal performance and external events. As such, the measures do not factor the impact of risks on performance. Current risk assessments are also typically limited since they may illustrate the risk impact in terms of overall dollar impact to the organization, but do not illuminate how the risks will affect the critical success factors of specific strategic goals (e.g., expansion into a new market or divestiture of a business unit).

Learn more about enterprise risk management in Building Risk Awareness into Performance: Integrating ERM and Performance Management.

Corporate Reputation Risk

Media monitoring has become more sophisticated
Basic media monitoring has traditionally focused on tabulating the number of mentions of a company, sometimes with little analysis of the nature or impact of the coverage. Today, some companies are using software to automate the process and gain deeper insight into the impact of media on their reputation, although only 44 percent of executives reported using software applications in this area. The most sophisticated applications assess whether coverage is positive, neutral, or negative; the credibility of publications; the prominence of coverage; the persistence of an issue; and even the emotions that the story is likely to evoke.

Quantifying the value of reputation
While CEOs recognize the importance of a favorable reputation to success, many are frustrated by their inability to place a financial value on having a strong or a weak reputation. For this reason, it is difficult to evaluate possible investments in reputation and compare them with competing investments. A select group of companies is making progress by working with specialist consulting firms to quantify the impact of reputation on share price - both overall and for specific aspects of their reputation - and identify areas where investment can have the greatest impact.

Social media are rapidly gaining influence, but most companies are ignoring them
Although consumers and investors are increasingly gathering information from blogs, online forums, and social networking sites, only 34 percent of our respondents said they extensively monitor such sites, and just 10 percent actively participate in them.

Learn more about Reputational Risk in Managing Reputation Risk and Reward

CEO Salary

Median Total Cash Compensation for CEOs by Industry (US Dollars)

Food and Tobacco: $6,343,390
Utilities: $4,328,490
Insurance: $3,934,670
Industrial Transportation Equipment: $3,482,240
Chemicals: $3,078,880
Energy: $2,830,650
Construction: $2,753,630
Textile and Apparel: $2,637,530
Holding Companies: $2,482,720
Commercial Banks: $1,101,170

Learn more about CEO Salaries in Top Executive Compensation in 2008

CEOs React to the Economic Crisis

The heightened anxiety felt by consumers is mirrored among CEOs around the world.2 As they endeavor to steer their organizations through global events that are nearly impossible to predict and are beyond their control, more CEOs are rating individual challenges as being one of "my greatest concern(s)" - the most intense challenge rating.3 Between July/August and October, the percentage of CEOs assigning the most intense rating rose on 55 out of the 94 challenges.

In tandem with this rising level of concern, a reordering of priorities is taking place. As the financial crisis leads even more CEOs to rate excellence in execution as their number-one challenge, crisis-driven concerns outside their control - global economic performance; financial risk, including liquidity, volatility, and credit risk; and business confidence - push into the global Top 10, displacing July/August’s focus on sustained and steady top line growth and profit growth.4

Amid all the turmoil of recent events, CEOs increasingly (55 percent now compared to 46 percent in July/August) see their most important job as execution of strategy - one tool well within their control - in the context of a challenging global marketplace. To do this, they see speed, flexibility, adaptability to change as more important than ever; it ascends to 3rd place from 7th. The number who rate speed, flexibility, adaptability to change as being one of their greatest concerns almost doubles. Both profit growth and top line growth give way to the challenges of global economic performance, which rose to 4th place from 16th, and financial risk, including liquidity, volatility, and credit risk, which rose to 5th place from 11th.

Learn more about strategies for the recession here in the CEO Challenge: Top Ten Challenges - Financial Crisis Edition

The Global Business Agenda

No doubt, the effects of the economic downturn during 2001-2002, combined with the headwinds of globalization (and an uncertain geopolitical environment) has made many C-Team executives reluctant to put their large balance sheet positions to work. However, that reluctance to spend appears to be waning, with the productivity miracle of the past 10 or more years beginning to running out of gas - on top of the need to drive top-line revenue in an increasingly competitive global economy. In this sense, the data suggests that we may be seeing a shift to spending money rather than saving money, as CEOs and their C-Team colleagues - cautiously - begin to commit cash that had previously either sat idly on the sidelines, or had been redistributed to shareholders (in the form of corporate stock buy-back programs).

We anticipate that this spending will likely come in the form of both continuing M&A activity (to help buy market share) as well as a potential up-tick in capital investment spending, although top line capital spending forecasts for 2007 thus far do not yet fully support this scenario. With information technology representing nearly 50 percent of non-farm capital spending in the US, any acceleration in this area would have a profound impact on the technology sector - especially as it concerns key infrastructure and integration investments.

Learn more about business innovation here in C-Team Research: Growth and Innovation Driving the Global Business Agenda