And why the CEO can no longer go it alone.
The COVID crisis interrupted what was likely to be an unprecedented movement at the CEO level in 2020. January 2020 set a record in the US for the most CEO departures in one month (219 according to the Business Insider), setting pace to eclipse 2019 when a staggering 1,640 CEOs left their positions worldwide (according to Challenger, Gray, & Christmas). However, when the extent of the COVID crisis unfolded, many of our clients paused sweeping changes at the CEO level in order to exhibit stability and trust to their shareholders, customers, and to their employees.
It goes without saying that the remainder of 2020 put CEOs – new or experienced – under great pressure. CEOs were not only dealing with the COVID pandemic, but with social, economic, and political uncertainty. This type of unsettled environment tends to either accelerate transformation or exacerbate imperfections. Throughout 2020, while many of our clients evolved, innovated, and thrived, we also witnessed many recognize that their CEOs lacked some of the capabilities needed to survive, and, even more concerning, flaws in the wider C-suite leadership team supporting the CEO. In fairness, 2020 raised the bar in terms of what CEOs and their C-Suite teams need to be ready and capable of handling. Not every leader possessed the toolkit.
While much remains uncertain, organizations and boards are now acting on the lessons they learned from last year and are primed to enact transformation at the C-suite level. In particular, CEO succession planning – whether near or long-term – has rebounded. We are seeing an appetite to recruit CEOs who can lead transformation, and, for our clients who experienced growth in 2020, a strong desire to raise a CEO successor within an organization to ensure the successor will hold true to the values and strategic course that made the organization successful. This why, now, organizations and their boards are redefining the capabilities that are expected from a CEO and the C-Suite team, and these leaders certainly have their work cut out for them.
Expectations of Today’s CEO
What is expected of a CEO in today’s world? Broadly, CEOs are required to (1) set and articulate a vision; (2) engage with their employees and workforce; (3) collaborate intimately with the board on strategy and other stakeholder priorities; and (4) develop a consumer-driven marketing and sales plan that will achieve growth while maintaining an operational structure that yields profitability. These are very high level and palpable statements, but our clients have very specific ideas about which duties the CEO must actually perform and be personably accountable for.
Vision
There is a now clear requirement for CEOs to be able to articulate the organization’s purpose and mission with heightened clarity and to engender confidence and trust when conveying this vision, reassuring employees, customers, and shareholders. A vision is what helps keep organizations focused – during stressful and complex times as well as during periods of growth and success. Setting forth a vision sounds simple, but it is rarely as straightforward as it seems. No one has a crystal ball. However, in the wake of 2020, there is little patience for a CEO who struggles to set a path and is only focused on the short-term. In addition, an inability to communicate a vision in a way that galvanizes and motivates is an ineffectualness that organizations will be unable to overlook going forward.
Employee Engagement
CEOs and their C-Suite are now on the front lines of building employee loyalty and ensuring employee satisfaction teams. They can no longer be disengaged and allow managers to handle what is happening personally for employees at other levels of their organization. CEOs are expected to take deliberate measures to understand and address the emotional and motivational impact of the COVID conditions on the workforce at large and meet employees’ concerns and emotions with empathy and understanding. CEOs and their C-Suite team need to have some awareness of the familial challenges faced by their employees. There is now a greater emphasis on workforce oversight generally, including “work from home,” remote, or hybrid capabilities, and heightened environment, health, and safety standards from an operational perspective. CEOs need to be thinking ahead about how to cross-train for contingencies and emergencies and reassess labor and workforce policies and programs to be efficient, effective, and considerate of employees’ time and interests. Furthermore, employees and stakeholders (and consumers – see below) are looking to CEOs to at least demonstrate awareness, if not champion, a message of social change on issues of race, gender, justice, and equity. Studies have shown that employee satisfaction increases productivity and innovation, and helps organizations retain top talent – which, as discussed further below, is even more of a priority for the CEO than in the past.
Board Collaboration
Organizations increasingly expect their CEO to be intimately and regularly engaged with the bord of directors. Specifically, on CEO search assignments, clients ask for executives who want and have significant board exposure. CEOs now participate with the board on discussions and directions related to the more far-reaching issues of stakeholder capitalism and the related environment, social, and corporate governance issues – including rethinking and redefining the organization’s diversity, equity, and inclusion strategy. Consistent, regular communication with the board and external constituents, such as shareholders, and with financial services providers, is expected to be managed personally by the CEO. CEO candidates also need to be prepared to demonstrate capital allocation experience that increased returns, enhanced performance, and perpetuated the culture and values of their organizations. They also need a solid knowledge of board governance and board leadership. The interaction and relationship between boards and their CEOs is now deepened and significantly heightened.
Consumer-Focused Growth & Optimization
Growth and optimization could probably be two separate capabilities, but it is worth discussing them together since they are so intertwined and important to profitability. The COVID-19 pandemic and the upheaval of 2020 taught many organizations that they need to be extremely strategic about their spend and investments and ready for disruption at any time. CEOs are sharpening sales and operations planning capabilities and improving forecasting and planning processes and tools, as well as enhancing vendor relationships and related collaboration. At the same time, boards are now requesting a high-level review from the CEO regarding opportunities for the sustainable organic and inorganic growth of the business. For many organizations, this means CEOs are managing the unprecedented acceleration of digital transformation through the supply chain and into the customer markets and channels. This is complicated by the recent trend of consumer concern with the ecological impact of their purchases and with the corporate philosophy and social positions of those businesses and CEOs. This results in an intense rebuild and refinement of the operational excellence toolbox to advance the lean journey and requires a sapient brand and marketing strategy. Plus, all of these decisions should now be made under the assumption of ambiguous market conditions, an accelerated timeframe, and increased cybersecurity risk.
Why the CEO Can’t Go It Alone
If this seems like a tremendous amount of expectation and pressure for a CEO – it is. And everyone seems to recognize this. However, admitting that the CEO role has evolved in an extraordinary way in a short period of time does not necessarily change our clients’ point of view of what they need; especially now that we have all experienced disruption first-hand and have seen some leaders rise to the occasion in equally extraordinary ways. We instead often counsel our clients to take a very close look at the C-Suite team that is already in place, assess strengths and weaknesses, and addresses gaps – because ultimately the CEO will need to be able to profoundly trust their team’s capabilities, judgment, ability to execute, and ability to deliver results.
To that end, we often end up searching for CEO candidates who have the ability to harness the power of their C-Suite teams, which is a unique skill in and of itself. There seem to be two factors that contribute to a CEO who constructs a powerhouse executive leadership team: (1) an ability to regularly reassess the leadership competency model for the organization, and (2) a believer in systematic succession planning.
Reassessment of Leadership Competencies
Assuming that at a minimum the C-Suite supporting the CEO has the experience, skills, and characteristics necessary for each specific role, the CEO must also mobilize these leaders to tap their creative spirit and work together on innovation strategies and growth planning. This requires each and every executive to demonstrate grit, resilience, and agility in their respective roles. The CEO will need develop a culture that embraces technology, digitization, and calculated risk in every leadership vertical. The C-Suite team will likely look to the CEO to cultivate this environment and enable change management. Therefore, the CEOs we have seen spend considerable time thinking about the leadership competencies of the individuals that makeup their C-Suite and encouraging those competencies experiences more success because they have faith in their support system. Importantly, it is through this process CEOs can develop meaningful relationships with their teams since there needs to be frequent listening and feedback sessions. This is a great way to build loyalty and retain top talent. And this is not just a one-time exercise – CEOs will need to continually reassess and plan for how they address the leader competency-building agenda for the future as the capabilities and traits needed from their leadership team adjust to the latest market, social, and political trends.
Systematic Succession Planning
While the above exercise will contribute to the CEO’s talent retention strategy, organizations still need to develop extensive succession plans, particularly with the C-Suite bench. Boards have traditionally taken a significant interest in CEO succession planning, especially in light of the aforementioned statistics, but in today’s environment, CEOs must actively involve themselves in succession planning for every C-Suite role – whether it is a long-term plan or for emergent circumstances. Just leaving one of these positions vacant for an extended period of time can irrevocably harm the success of the CEO by drawing attention away from any of the CEO’s other responsibilities. It is also important for CEOs to have a thorough understanding the talent that is being developed and is ready to step into various roles, as well as the impact the inserted talent will have on the chemistry and skillsets already found in the existing C-Suite.
In short, building a high performing executive leadership team is the number one factor to the success of the CEO. Deprived of a C-Suite team with the relevant leadership competencies, CEOs will shoulder excessive expectations and be overburdened by the tactical elements of their job description. For organizations to sustain and thrive through times of disruption and for generations to come, succession planning must be a priority for the board and CEO. As CEO recruiting and succession planning heats up in 2021, we’ll be putting forth the CEO candidates that possess the integrity to trust and build their leadership teams.
About Our Board & CEO Services Practice
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:
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