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CEOs make strategic decisions based on their company’s prospects and those of the overall economy. But in some cases, they may be conflating the two. In PwC’s 28th Annual Global CEO Survey, which drew responses from just over 4,700 chief executives, the overall sentiment regarding economic growth lagged the predictions of many economists. In our results, only 18% of CEOs worldwide predicted global growth of 2% or greater, even though official forecasts predict growth of 3.1%.
CEOs, as industry leaders, drive critical investment and recruitment decisions that guide their business through changing economic conditions. The collective impact of these choices creates a feedback loop: confidence fuels investment, which, in turn, sparks further confidence, giving rise to more investment—which contributes to economic outcomes. Understanding the calibration of the information that underpins these choices, and how economic confidence plays a role, is key to making more robust and informed decisions.
The findings from one group were particularly notable: CEOs at the most profitable firms were about 10 percentage points more likely to predict a net increase in growth in their territory—compared to leaders at the least profitable firms—and nearly 11 percentage points more likely to predict a net increase in global growth. (In North America, the effect was even greater, with a 17 percentage-point split between CEOs at the most profitable and least profitable firms.) These business leaders were also more likely to say they would increase capital investment and headcount over the next 12 months.
Such optimism may be understandable for a CEO at a highly profitable company, but it may not be an accurate reflection of the economic outlook in a given territory, or worldwide. Instead, it could reflect proximity bias, a tendency in which people rely on more accessible data and experiences when making decisions. This bias also could make CEOs overconfident about their own prospects, creating blind spots and causing them to bet on positive market conditions that may not develop.
How to overcome this tendency? CEOs should ensure that they are looking at the full picture regarding economic growth. Several steps are critical, particularly during annual planning processes.
- Gather economic data from a wide array of sources—not just those that are most readily available.
- Separate hunches from facts when making decisions.
- Rigorously stress-test assumptions. Push yourself—and everyone on the leadership team—to ask if personal views on a given decision would change if your company’s current situation were different.
- Scenario-plan for a broad set of potential future outcomes, including worst-case outlier conditions and extreme disruptions.
By following this kind of structured process, CEOs can ensure that their economic projections are grounded in objective truth and not clouded by the profit outlook at their own company.
Explore the full findings of PwC’s 28th Annual Global CEO Survey
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