In the latest Fortune/Deloitte CEO Survey, CEOs share more modest growth expectations over the next 12 months, fine-tuning strategies around talent, workplace and technology models to adapt to new conditions.

Key Takeaways

• CEOs share more modest growth expectations over the next 12 months and remain optimistic about company performance despite uncertainty.

• Inflation and labor/skills shortage again topped the list of external issues that CEOs expect to influence or disrupt their business strategy within the next 12 months.

• The majority of CEOs (62 percent) anticipate increases in inflation-adjusted wages, and the majority (71 percent) believe the overall talent shortage will continue.

• To increase employee engagement, most organizations (87 percent) are allowing more flexibility and predictability in hours and location for work. However, half of CEOs (54 percent) believe hybrid workplace models lead to lower employee engagement and loyalty.

• Over the next 12 months, almost all CEOs (91 percent) anticipate investing in AI, indicating that it has the potential to differentiate their organization by accelerating insights, improving decision-making, and increasing speed to execution.

Why It Matters to CEOs?
The Fortune/Deloitte CEO Survey series tracks the perspectives and actions of CEOs from the world's largest and most influential companies. The survey gives key insights into CEOs' priorities, challenges, and expectations across more than 15 industries, including technology, finance and health care.

Overview
CEOs continue to adapt to a dynamic environment, including rising inflation, global conflicts, and geopolitical instability and polarization. The ongoing war for talent remains top of mind for CEOs working to identify new ways to engage and attract employees. Despite consistent headwinds, CEOs remain positive about their company’s growth and expect inflation to decrease by year-end.

CEOs’ Expectations for Growth Moderate
Over the next 12 months, the vast majority of CEOs (76 percent) shared a pessimistic outlook for the global economy as they continue to grapple with significant external disruptors, including inflation, labor and skills shortages, and increased geopolitical instability. Yet, CEOs maintain expectations for growth at more moderate levels. While 85 percent continue to expect modest, strong, or very strong growth, down only 6 percent from June 2022 (91 percent) and 13 percent from January 2022 (98 percent), expectations for very strong or strong growth continue to decline as expectations for modest growth increase. Only 34 percent of CEOs expect very strong or strong growth compared to 49 percent in June 2022.

Uncertainty, Inflation and the Economy are Top-of-mind
CEOs are managing to keep positive despite never-ending headwinds. Inflation continues to be named as one of the biggest challenges CEOs face today, despite the recognition that inflation will likely decrease by year end, to, on average, 7 percent. Three-quarters (74 percent) of CEOs ranked inflation as their top external concern, down 8 percent from June 2022 (82 percent), when asked what would disrupt their business strategy within the next 12 months.

Once again, labor/skills shortage ranked second behind inflation as external issues that CEOs expect to influence or disrupt their business strategy within the next 12 months. Compared to June 2022, when 59 percent of CEOs ranked labor/skills shortages as a top concern, 50 percent expressed the same concern in this survey. Geological instability came in third with 48 percent, down 1 percent from the last survey. Other sources of financial instability, while only mentioned by a third of CEOs (34 percent), is on the rise, up from 23 percent in June 2022. Overall, the top disruptors in this survey are consistent with June 2022 findings, yet CEOs are expressing decreasing concern around several top issues including supply chain disruption and the pandemic.

“CEOs’ outlook on the broader economy worsened significantly, but by and large they remain cautiously optimistic that their own organizations can continue to perform well in the midst of uncertainty and change. CEOs remain committed to prioritizing investments in key strategic areas including talent and digital transformation,” said Joe Ucuzoglu, Chief Executive Officer, Deloitte US.

“CEOs are preparing for a significant economic slowdown, yet their hunger for top talent remains unrelentingly strong. We’ve talked about ‘jobless recoveries’ for years. Now, the evidence suggests we are facing a ‘jobful recession.’ More CEOs cited ‘talent’ as their biggest challenge in our new survey than mentioned inflation or recession,” said Alan Murray, Chief Executive Officer, Fortune

Talent Shortages Remain a Top Concern
As CEOs rethink and reshape many of the key levers that define their organizations, they’re also focused on providing an element of safety and stability and a path forward for their people, balancing how to keep their people positive and engaged during uncertain times. While more than half (54 percent) of CEOs believe hybrid workplace models will lead to lower employee engagement and loyalty, 43 percent of CEOs don’t feel they can mandate employees return to the office, given the tight labor market. To attract in-demand talent, 96 percent state that their organizations will continue to focus on the employee experience, with 80 percent planning to develop new tools to drive engagement and loyalty that don’t depend on co-location.

CEOs Look to Invest In and Leverage AI
The majority (91 percent) of CEOs said they plan to invest to some degree in AI over the next 12 months. CEOs are looking to AI-enabled technologies to differentiate their organization and increase competitiveness in the marketplace, with (63 percent) looking to AI to accelerate intelligent insights. Additionally, half of CEOs (53 percent) indicated AI could differentiate them by improving decision-making, increasing speed to execution (50 percent), and reducing costs (48 percent). While the opportunities to leverage AI capabilities varied, a small number of respondents stated they didn’t think AI would help differentiate their organization (6 percent) or help increase market competitiveness (5 percent).