Identifying the right CEO for the right time

Written by
Heidrick & Struggles

03 Feb 2020

03 Feb 2020 • by Heidrick & Struggles

The role of the CEO is changing and so are the skills and competencies being sought, according to research by Heidrick & Struggles across 16 countries.

The job of the global CEO is continually expanding and, as it does, traditionally valued skills and experience are merely augmented. This is clearly shown in an analysis of data from theCEOs of 906 companies listed on 16 country indexes, including the UK FTSE 100 and US Fortune 100.

Combining this with interviews, Heidrick & Struggles has assembled a profile of what it takes to become a global chief executive today, the skills and experience required, and how that picture is changing (link to the key trends piece) in the broader context of transformative economic and business shifts. 

Range of demands 

Its 2019 Route to the Top report, based on data from September 2019, shows that demands are made on today’s CEOs from every corner of the corporate universe: shareholders, employees, communities and various interest groups. Potential CEOs are expected to have led top-line growth and cut costs as well as having a proven ability to think and plan digitally about the business and to lead transformative change.

They are also expected to inspire, motivate, act as communicator in chief and to have the leadership competencies to build cultures – including attracting necessary talent – that will future proof their organisations.

“In addition to day-to-day management of the company, CEOs also have to focus on the wellbeing of employees, environmental issues and maintaining a good relationship with the community,” attests Andrew Harding, managing director and CEO of Australian rail freight company Aurizon.

“Empathy is critical,” adds Liv Garfield, CEO of UK-based water services company Severn Trent. “In a politically uncertain world – with increasing divergence between the ‘haves’ and ‘have nots’ – you have to think carefully about how you show up as a leader and ensure you’re in touch with your customers, employees, and wider stakeholders.” 

Thirty years ago, the CEO may have been something of a mythical figure tucked away in the corner office. Today, they are expected to be more approachable, to be confident enough to show vulnerability, but also resilient, engaging with the organisation at all levels, and managing, at least partly, by walking around. 

In other words, today’s CEOs still have to accomplish everything their predecessors did – but in a more complex and public-facing environment.

A relatively new addition to the list comprising desirable CEO experience is experience with environmental, social, and governance (ESG) investing, including the impact on consumers’ purchasing decisions and direct impact on the bottom line.

Companies’ ability to adapt to the lower-emission economy has already started to affect their credit ratings, building on the pressure from regulators, investors, and consumers. Depending on the company and industry, familiarity with specific third-party corporate social responsibility standards, certifications, and awards may be important background.

In essence, the CEO is now not only the head of the business but also the standard bearer for corporate reputation and the myriad nonfinancial factors that can have a direct impact on the health of an organisation.

Matching CEOs to specific challenges

Success as a CEO also depends on their organisation’s ability to match their expertise, leadership style and personal characteristics with the specific challenges he or she will have to tackle while in the role: a great CEO for one stage of a company’s growth, in one region, and operating within a relatively stable external environment, may not be the right fit as circumstances change.

All in all, the job can be too big for one person to be expected to do everything. This means that boards must set priorities among the criteria they are seeking in a CEO, based on the company’s current circumstance. Chief executives of large multinational companies must also be excellent team builders and delegators. As Aurizon’s Harding explains: “CEOs have to let the board know what they cannot do well so that it can compensate for any imbalance.”

The role of today’s CEO might be compared to that of an orchestra leader who brings in the right instrument at the right time in service to the larger goal.

The continuing challenge of diversity at the top

Vocal demands from many quarters for increasing diversity in the ranks of public company CEOs – who still are overwhelmingly male and Caucasian – are difficult to ignore.

Our data indicate that gender diversity remains stuck in single digits: 5% globally compared with 4% last year. There has been significant progress on other measures that indicate diversity, notably CEOs with cross-border experience, who comprise 40% of CEOs globally, up from 30% last year.

While CEOs themselves are not yet as diverse as their workforces or customer bases, given future demands on organisations (where diversity will grow as a key differentiator that contributes directly to the bottom line) boards and CEOs have established diversity – of gender, ethnicity, nationalism, and industry background, among others – as a significant criterion for developing next-generation leaders.

“People strategy is at the heart of all the other challenges CEOs will face in the next three to five years,” argues Samuel Wu, president of Whirlpool, Asia Pacific. “Whether anticipating changes in the marketplace, technology, or economic cycles, a focus on people and diversity and inclusion is the foundation, especially for a consumer-facing company.” 

Since the CEO is still an organisation’s chief decision maker, the selection criteria for a CEO must leave as little as possible to chance to avoid potentially increasing risk. The pool of diverse candidates remains very small and attracting them is highly competitive. Regardless of a board’s desire to appoint a diverse candidate to the top spot, members often feel compelled to stick with ‘the safest bet’.

But the other risk is playing it too safe. Boards have to strike the right balance. A lack of relevant diversity is itself a risk from both an experience and a reputational perspective, at the CEO level and throughout the organisation.

So, while we may not yet see the surge forward of diversity in the CEO ranks, we are hopeful about future generations of CEOs being ever more representative of our global society.

Looking ahead

As the CEO’s role grows and considerations beyond quarterly profit become ever more crucial to long-term performance, personal leadership traits, alongside business acumen, have become key criteria for selecting a CEO.

One key trait of today’s CEO is simply the resilience to manage such a role, alongside the ability to gain and build trust – with the board, the senior team, employees, investors, customers, and other stakeholders.

Severn Trent’s Garfield says: “I have learned through difficult periods as a CEO that resilience is everything. I believe that the ability to quickly recover from setbacks, rally for longer, and remain positive is a key differentiator for many top CEOs.” 

Insights from CEOs we work with every day, confirmed by our research, are heartening.

We see leading CEOs and boards focused on meeting the critical need for capable, innovative leadership by expanding traditional CEO selection criteria, resulting in a greatly increased pool of candidates with the broader experience required to contribute as part of a collaborative C-suite.