Navigating inflation: A new playbook for CEOs
Few chief executives have faced the challenge of leading a company through an inflationary spike like today’s. Lessons from strong leaders and bold action can help CEOs make the decisions that only they can make.
ast year, policy makers, economists, and financial-market participants fiercely debated the higher inflation then under way. Was it a transitory problem, caused by dislocations from the COVID-19 pandemic that would inevitably fade, or was it a more fundamental and potentially permanent shift? CEOs told us that they viewed this debate as detached from the business environment in which they operated. For them, higher inflation was already “permanent enough” to start asking whether a fundamental shift in the way they led and managed their organizations was required. We agreed.
In the first months of 2022, it became increasingly apparent that this year and next—and possibly longer—inflation rates well above the approximately 2.0 percent that planners have come to expect (and central banks have targeted) will prevail. The consumer price index rose by 8.5 percent from March 2021 to March 2022 in the United States, a 40-year high, 7.5 percent in the eurozone, and 7 percent in the United Kingdom. Some 60 percent of advanced economies grapple with year-on-year inflation above 5 percent. Russia’s invasion of Ukraine, and the resulting disruptions to the energy, agriculture, and minerals markets, have made it likely that inflation will be higher and more persistent than even revised expectations suggest…
