At RSR Partners, we see four important trends that will shape the leadership landscape in 2019 and present both challenges and opportunities for boards and CEOs.
1. Moral Quotient (MQ) is now as important as IQ and EQ. For decades, many reasoned that intelligence (IQ) was the most effective measure of potential. But as the information age exploded and the business ecosystem became more interconnected, a leader’s emotional quotient (EQ) became more of a business imperative; the ability to show empathy allowed them to better understand and engage customers, clients, stakeholders and employees. The concept of a commanding leader took a backseat. With greater transparency, today’s leaders now face a higher threshold—a moral quotient, or MQ—where character, morality and a sense of purpose are now a necessity and not just nice-to-have qualities.
We believe the innate talent you possess and the skills you develop are sufficient for success as long as character and integrity are present. Conversely, several prominent U.S. companies saw their stock prices and reputation capital plummet because of a lack of MQ in their leaders. Last year, RSR Partners worked with many clients who made MQ a priority in their leadership selections, including a search for a publicly traded global manufacturing CEO whose MQ characteristics overshadowed their technical industry experience but has resulted in the new CEO exceeding Wall Street and shareholder expectations in the first year; a financial services CFO who immediately restored shareholder confidence; and a consumer services CHRO who is remaking a corporate culture based upon engagement and inclusiveness.
2. Diversity and Inclusion is a competitive advantage. Gaining momentum in today’s business environment is the acknowledgement that companies need more diversity of thought, experience, expertise, background, mindset, belief, gender balance, and ethnicity to be competitive. Every major consulting firm has illustrated the positive impact of diversity on improving EPS, driving market share/growth, and improving strategic business differentiators.
Last year, we continued to complete diversity assignments for a wide variety of companies, from small private family companies to Fortune 500s. 76% of our board placements were either a woman and/or ethnically diverse. While these placements were diverse, they were also the most qualified candidates. This is a dramatic increase from 57% in the previous two years. We are proud to play a role in this important imperative, and excited for our clients who are making progress in diversity by adding female and ethnically diverse executives, board directors and trustees to their ranks. Some of RSR Partners’ diversity placements last year joined the boards of Fortune 500 life sciences, retail, financial services, and industrial companies; a Fortune 1000 technology services company; and leading mutual fund groups. We were also proud to help recruit a diverse CEO for a leading sport governing body and an investment executive for a leading endowment.
3. Disruption continues to impact talent. The rush for “star” talent continues to be frenetic. Across all industries, we continue to see the impact of disruption and a disconnect between the strategy of the company and the people responsible for leading and executing that strategy. Many savvy boards and CEOs are truncating timelines for succession and increasing the pressure and stakes to retain high-performing leadership teams. Leaders who can adapt and leverage technology to drive more efficient execution on a micro level are in high demand, and the ability to advance change and roll out innovation operationally across all levels cannot be undervalued. We are helping our clients pivot to confront these challenges with shifts in leadership priorities to better address their business objectives. As examples, we worked with the CEO of a leading consumer services company to hire a new CMO to re-imagine customer engagement for a new generation. We helped the CEO of a leading asset management company build a blockchain investment team to expand its capabilities and services. Similarly, we worked with the board of a leading consumer goods company to recruit a new CEO to transform its strategic priorities; and we also helped the CEO of a Fortune 500 industrial company recruit a new President to completely change its business fundamentals and create new customer value.
4. Short-term pressures drive more CEO succession planning. The authority that boards have traditionally enjoyed in selecting their CEOs and senior management teams is being challenged more frequently by the growing influence of institutional investors, hedge funds, and other investment managers. Short-term expectations are continuing to undermine long-term decisions by investors—who are subsequently being pressured to generate immediate alpha for their clients. Companies that delay making tough but necessary leadership decisions risk growing discontent or involvement from activist shareholders. As a result, the boards and CEOs are now turning to leadership advisory firms like ours to help them independently develop their own point of view on the company’s CEO succession plans. At RSR Partners, we partner with an independent firm to evaluate candidates in order to complement the competency assessment of our search professionals with the independence of a research-driven and legally defensible tool for a richer perspective. Recently, we helped the board of a Fortune 1000 technology company with an independent evaluation of three internal CEO successor candidates, ultimately exposing gaps in their succession optionality. We worked with the Chairman and CEO of a Fortune 1000 industrial company who needed to better understand their leadership team’s capabilities—and whether they had the collective and individual talent and skill to take the company in a new and necessary direction.