Executive Outlook: CEO Spotlight

Career transitions can be challenging for most executives, but there is an extra level of scrutiny, responsibility, and forward thinking that comes with considering a career as a Chief Executive Officer (CEO). These individuals are at the helm of the organisation and are tasked with driving the business forward. They are often credited for their company’s success, and on many occasions the first to be blamed when things go wrong.

But what does it take to be a CEO today? And what do current and aspiring CEOs need to build for future stages of their career? Here is the latest outlook and key considerations for current and aspiring CEOs.

CEO Snapshot

Our research has found that the average age for a CEO is 58 years old. Based on the current metric that only 5% of FTSE 100 and 2% of FTSE 250 CEOs are female, the CEO is more likely to be male. While this split is heavily unbalanced at present, we have seen the number of female chief executives rise in recent years as boards look to appoint more diverse leaders.

The average tenure for the role is 6 years. It is most likely that the CEO was appointed to the position through internal succession, as supported by recent research[1] which found that 72% of new CEOs are promoted internally, and 8.4% are former executives or current or former board members. That means that only 19.6% of CEOs are brought in externally for the role, but most of these ‘outsiders’ are not as disconnected as one might think. More than 90% of these candidates have pre-existing connections to the firm or its leadership. Most outsider hires are not CEOs poached from other firms (3.2%) but are instead in roles below the CEO or Board at other firms (55%) or those not currently in an executive position (31%).

For those considering a transition into a career as a CEO, it is worth examining the connections and networks you already have, and the need to invest in developing new ones within the companies and sectors you would like to work for.

Top Market Challenges impacting CEO’S

If you are a current or aspiring CEO, these three areas of concern will be most prevalent in coming months according to our research:

1. COVID-19 As we transition out of lockdown and face the economic repercussions of the pandemic, CEOs will be tasked with helping their company to thrive in the next normal. This may mean spearheading a change project, making tough decisions about the organisational structure, or creating a new strategy for the business and developing and launching innovations whist workforces get used to hybrid working.

2. Technology Adoption of new technology and artificial intelligence (AI) is accelerating in every industry across the world. Contributing to the creation of a new digital strategy will be a critical responsibility for the foreseeable future. Future-ready CEOs have a duty to understand the technology, its impacts on their industry and beyond, the potential benefits to the business, and any ethical risks or consequences for human staff.

3. Environmental Impact Sustainability and greener practices have become a top priority for both businesses and consumers in recent years. This issue is expected to remain prevalent, and responsible CEOs should understand their organisation’s impact and participate in any plans to help reduce it.

Top CEO Priorities

Current and aspiring CEOs should expect to focus their energy in the following four areas:

1. Data to Drive Execution Data has become a critical component of the digital-driven business landscape. This data can be harnessed and analysed by AI to make decisions based on insight rather than intuition. CEOs need to understand how their organisational and customers’ data can be safely collected and used, and how instrumental it can be in turning the generated insights into real, actionable strategy for the organisation.

2. Agility and Speed A crucial capability for today’s CEOs is the ability to pivot. They need to understand how to adapt their businesses and deliver sustained outcomes in a rapidly changing external environment. All of the challenges listed above will require CEOs to embrace a lot of change over the next several years, and the ability to be flexible without losing momentum is imperative for success.

3. Digital Evolution The future of business is digital, and the companies who are leading the pack in implementing digital technologies have radically improved their operational efficiency and their customers’ experiences. Understanding the capabilities available from harnessing digital technologies will help CEOs guide their organisation in reimagining its purpose and business models.

4. Linking the Company with the World at Large: The role of the CEO is that of the figurehead of their company, serving as the liaison between the organisation, the industry, and the world at large. Fulfilling this responsibility effectively is more important than ever for today’s CEOs as they navigate an era of digital technologies, social consciousness, and scrutiny across a vast range of media platforms. A CEO needs to be able to react quickly and effectively to a crisis should one arise.

People Priorities

A CEO is ultimately a leader and is responsible for guiding the organisation and its people into the future. CEOs should expect to focus on these people-centric priorities for the foreseeable future:

1. Hybrid Working The pandemic required teams to adjust to remote work models, and this way of working looks poised to stay in some form as we return to normalcy. CEOs will need to adopt a leadership style that is effective both in person and virtually, setting a precedent for leaders  around them to follow. There needs to be an understanding of how staff work best, and clear communication of responsibilities and expectations in order to maintain productivity and wellbeing.

2. Productivity For many organisations, this past year has produced a lot of creativity and productivity. The CEO needs to be able to capitalise on this in order to ramp up innovation capabilities. Some organisations struggled to adapt to remote working formats, or to the overall challenges posed by the pandemic. Within these companies, the CEO should prioritise a review of what needs improving and iron out any issues before proceeding with new initiatives.

3. Board Make-up and Upskilling The CEO often plays an integral role in the hiring decisions for other top roles within the company. Who are you seating at the table alongside you? Are you willing to champion, digital savviness, experimentation, diversity, inclusion, and or sustainability within your organisation? How do you plan to reflect this dedication in the decisions you make? These are all essential questions for CEOs to have in mind. Not only that, but consideration needs to be given to how existing staff will be supported and invested in long-term. The pace of change and rise in digital technology is going to cause potential displacement of staff and a critical need for upskilling. The CEO should work with the rest of the board to devise a strategy for supporting people through the transition, whether that means investing in training and development opportunities or making touch decisions investing and providing outplacement and career transition services.

Personal Development

Personal development is a critical component of a successful professional career, and your efforts here can make or break your career transition. Based on our research, we advise focusing on these core areas:

1. Being Accessible, Inclusive and Transparent The priorities and needs of staff have shifted in recent years to become more purpose driven. Our research shows that it is not just millennials and Gen Z staff who feel this way, as older employees expressed similar views. Staff want to work at a company that stands for something, and follow leaders who they respect and admire. It falls on the CEO to set the tone for the culture of the organisation and to ensure that the purpose statement is lived out day-to-day. Learn to be respectful of diverse viewpoints, be transparent, and work on your communication skills.
2. Experimentation Strategic, contemporary CEOs do not look for a niche but instead study the changes in the marketplace, actively seeking out new opportunities, and seizing them. Radical change, pivots, and growth rarely happen overnight or at the first attempt. A successful CEO is one who understands that they need to take risks but knows when to switch gear or change direction to achieve the right results. Be open and ready to sprint in the short term and set realistic goals to focus on and achieve.
3. Building Knowledge and Networks As mentioned, a majority of CEO roles are obtained through connections. ‘Who you know’ has always been an important aspect of business life, but it is even more imperative for the CEO.  While your connections may open the door to your next role, they will also be valuable for your success once you are firmly rooted in your role. It is common and highly beneficial for CEOs to connect with other CEOs to share ideas and experiences, encourage and support one another, and create a dialogue surrounding the challenges or opportunities in the market. Factors such as the COVID-19 pandemic and the rise in digital technology have accelerated this dialogue and fostered greater learning across industries. This has provided CEOs with the opportunity to share their successes, failures and best practice. Do not simply view your network as a potential gateway to your next job, though this may be the case. Identify peers that you admire, can learn from, or can engage with in thought-provoking and insightful discussion about the role.

The role of Chief Executive can be one of the most demanding and most rewarding executive positions available. This individual is responsible for the future of the organisation and its people. Success takes innovative thinking, resilience, flexibility, transparency, and initiative.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3644496

With the COVID 19 vaccine rollout providing hope and early promising results, it seems that we are closer to a return to a new normal than we have been for over a year. This positive outlook means that it is safer for both individuals and businesses alike to start seriously considering and planning for what comes next, what this time has meant for businesses, and what needs to change in order to suit new ways of living and working. One major topic that needs to be covered as part of the discussion is purpose.

This past year has brought out the human side of business. It has led many of us to revaluate what is truly important and presented many organisations with challenges to their purpose statements. But what does purpose truly mean for businesses, leaders, and their people in 2021 and the near future? How do you transfer it from words into a real actionable leadership strategy?

Defining Purpose

Fundamentally, many businesses exist to make a profit, but profit should not be confused with purpose. Purpose is the starting point that led to the founding of the business. Think of it as the the ‘Why’ at the centre of Simon Sinek’s ‘Golden Circle’ model. Purpose looks beyond profits to the long-term impacts you would like to have on your customers, staff, market, community and the environment.

‘Purpose’ and ‘values’ are often misunderstood, due to being used interchangeably or variably in different contexts. Your purpose is why you are in business, and your values are the guiding principles and standards for behaviour. Think of purpose as the big picture roadmap for the direction in which you would like the organisation to progress.  Values are the compass for how to get there. In the Sinek model, values sit in the ‘How’ ring. How do you behave to ensure you are living out your organisation’s purpose? How does the organisation work towards this vision each day?

Why It Matters

Purpose and vision exist on an individual level as well. Just as you have your reasons for pursuing a particular career path and have a set of moral principles that matter to you, so will the people you do business with. Millennials and Generation Z are more socially conscious than previous generations, and as they begin to make up larger portions of the workforce and consumer market, these young people want to buy from and work for companies whose purpose they resonate with and whose values they share.

Think of Maslow’s Hierarchy of Needs. At the top of the triangle after all the basic and security needs are fulfilled, we start to look at topics such as belonging, esteem, and self-actualisation. Purpose provides unification, motivation, inspiration, and helps individuals tap into these higher level needs to get more out of their role.

Employees turn to purpose as a way of bringing meaning to their work and to understand the contribution they are making to the organisation and the world around them. Research has found that these employees who find meaning in their day-to-day work feel much more satisfied and engaged. Employees who feel connected to their organisation’s purpose have a deeper sense of belonging and are therefore more motivated in their roles and are easier to retain.

The intrinsic motivation which purpose can provide to staff has become incredibly valuable during the hardships of the past year. The changing business landscape has forced many businesses to rethink how they can incentivise their employees, especially in situations where financial rewards are not practical or possible. In some cases, the fulfilment of doing meaningful work and contributing to the bigger mission and vision may be enough to encourage staff to remain with the organisation.

Walking the Talk

For this to have any affect at all, businesses and their leaders need to ‘walk the talk.’ Your purpose is mere words on a page until there is action behind it. For example, a business can say that its purpose is to create a fairer world for all, but this means very little if its board comprises only one predominant demographic, and if its female staff are not paid the same as their male counterparts. Clearly, a lack of diversity at a senior level and unfair compensation practices are in direct conflict with the organisation’s mission of fairness.

This is a very serious and big picture example, but infractions against a company’s values and purpose can occur daily in smaller instances. Authenticity matters. If a leader is to serve as a champion for the organisation’s mission and purpose, they need to ensure that their words match their actions. If your company has outlined its values, you need to ensure that both you and your team are meeting those standards of behaviour. If you state that you value inclusion, you must ensure that you give every member of the team a voice. If you value respect, it’s important that you are respecting your team’s boundaries and opinions, and that they are showing the same respect to one another.

This sends a clear message to your team that the company is serious about what it stands for, and thereby helps to build their faith in the organisation. Staff will find it easier to buy into a purpose if they see it being lived out every day. Leading by example is critically important to build this type of trust and to reap the productivity, motivation, and retention benefits that ensue.

Putting this into practice post-COVID will be challenging for many leaders. Reinforcing purpose on an individual level and creating that sense of alignment and unity is more difficult whilst staff continue to work remotely.

While it is essential for staff to have a clear idea of where the organisation and its leadership stands in terms of values and purpose, it is equally important that each individual team member understands the role they play in that. This understanding of individual impact will help staff find their place within that bigger picture.

Operationally, this links back to the standards set by management. Leaders need to continue holding their team to those same behavioural principles even when outside of the office. Examples would include allowing everyone a chance to speak on video calls or monitoring team correspondence to ensure that teams maintain respectful for one another.

At Rialto, we work closely with teams to help staff gain an understanding of the impact they make on the organisation, and to understand where they can improve. Often, issues can be swiftly resolved through better communication from leadership. Managers need to have conversations with their staff about the purpose of the organisation, the contributions each team member makes towards furthering that purpose, and the values and standards of behaviour that every person in the organisation is held to.

One of the clearest indications of walking the talk is a company’s willingness to invest in its own people. Taking the time to ensure that everyone is aligned, on board, and motivated is the best way of ensuring that a company is living out its own purpose. Leaders should ensure that they are authentic in their words and actions and are leading by example. Hold staff to the right standards, but make sure they each understand what contributions they can be valued for, how to make those impacts, and how this all fits into the greater purpose of the organisation. That way, you build a team that truly believes in the work that they do, and who are willing to stand by the organisation, its customers, and its wider stakeholders.

Only a small number of organisations have been able to successfully scale their digital initiatives beyond the experimentation and piloting stages, a study finds, which identifies six barriers which must be navigated on when embarking on a digital transformation journey.

Business analyst Gartner contends that this is because digital transformation requires more than simply investing in the latest technology – it demands significant changes to culture and systems.

“To change an organisation designed for a structured, ordered, process-oriented world to one designed for ecosystems, adaptation, learning and experimentation is hard,” said Marcus Blosch, research vice president at Gartner.

“Some organisations will navigate that change, and others that can’t change will become outdated and be replaced.”

The six barriers and Gartner’s advice on overcoming them are outlined below:

1 A change-resisting culture

“Culture is organisational ‘dark matter’ – you can’t see it, but its effects are obvious,” said Blosch. “The challenge is that many organisations have developed a culture of hierarchy and clear boundaries between areas of responsibilities. Digital innovation requires the opposite: collaborative cross-functional and self-directed teams that are not afraid of uncertain outcomes.”

Those aiming to establish a digital culture should start small: define a digital mindset, assemble a digital innovation team, and shield it from the rest of the organisation to let the new culture develop. Connections between the digital innovation and core teams can then be used to scale new ideas and spread the culture.

2 Limited sharing and collaboration

Digital innovation with its collaborative cross-functional teams is often very different from what employees are used to with regards to functions and hierarchies and resistance is inevitable.

“It’s not necessary to have everyone on board in the early stages. Try to find areas where interests overlap, and create a starting point,” said Blosch. “Build a first version, test the idea and use the success story to gain the momentum needed for the next step.”

3 The business isn’t ready

Many business leaders are caught up in the hype around digital business. But when the CIO or CDO wants to start the transformation process, it turns out that the business doesn’t have the skills or resources needed.

Gartner recommends focusing on the early adopters with the willingness and openness to change and leverage digital. But keep in mind that digital may just not be relevant to certain parts of the organisation.

4 The talent gap

Employees need new skills focused on innovation, change and creativity along with the new technologies themselves, such as artificial intelligence (AI) and the Internet of Things (IoT)

“In smaller or more innovative organisations, it is possible to redefine individuals’ roles to include more skills and competencies needed to support digital,” said Blosch. “In other organisations, using a bimodal approach makes sense by creating a separate group to handle innovation with the requisite skill set.”

5 Current practices don’t support the talent

“Some organisations may shift to a product management-based approach for digital innovations because it allows for multiple iterations,” said Blosch. “Operational innovations can follow the usual approaches until the digital team is skilled and experienced enough to extend its reach and share the learned practices with the organisation.”

 6 Change isn’t easy

Developing platforms, changing the organisational structure, and creating an ecosystem of partners is challenging.

According to Gartner, enterprises should build the organisational capabilities that make change simpler and faster. To do that, it said, they should develop a platform-based strategy that supports continuous change and design principles and then innovate on top of that platform.

In this white paper, Rialto examines four areas which we have identified as critical to organisational growth: enabling innovation; becoming customer-obsessed; forming strategic partnerships and alliances; and reskilling and upskilling the workforce with 21st Century skills.

The release of the 2018 UK Corporate Governance Code by the Financial Reporting Council further elevates the image and standing of corporate culture. After extensive consultation, the new code places emphasis on businesses building trust by forging strong relationships with key stakeholders. It calls for companies to establish “a corporate culture that is aligned with the company purpose, business strategy, promotes integrity and values diversity”.

The council also wishes to see clear and meaningful reporting and emphasises that investors and proxy advisors must assess explanations carefully and not take a tick-box approach. There is a new provision to enable greater board engagement with the workforce to understand their views with the code asking boards to describe how they have considered the interests of stakeholders when performing their duty under Section 172 of the 2006 Companies Act.

There is also a focus on succession and diversity. The FRC wants to ensure boards have the right mix of skills and experience, constructive challenge and to promote diversity, the new code emphasises the need to “refresh boards” and undertake succession planning. Other factors to consider are the length of term that chairs remain in post beyond nine years.

Organisations are also asked to address public concern over executive remuneration, with the new code underlining that remuneration committees should take into account workforce pay and related policies when setting director remuneration.

Sir Winfried Bischoff, chairman, FRC, reckons corporate governance in the UK is globally respected and is a framework trusted by investors when deciding where to allocate capital. “To make sure the UK moves with the times, the new code considers economic and social issues and will help to guide the long-term success of UK businesses,” he says. In its “shorter, sharper” form and, with its overarching theme of trust, he adds, the code is “paramount in promoting transparency and integrity in business for society as a whole”.

When it comes to culture, boards are asked to create one which aligns company values with strategy and to assess how they preserve value over the long-term.

Rialto has been banging the corporate culture drum for a long time. The FRC has undeniably helped it make the transition from something that was seen as a HR-nice-to-have to being directly linked to business success when it said in 2016 that corporate culture protects and generates value in the UK economy.

It is also spot on in its latest approach by telling businesses to align culture with its purpose and business strategy. This means not only having company values but ensuring they guide the actions and behaviours of every employee and leader. Culture can work like a magic elixir, running through a company not just correcting ills but enabling and helping to facilitate so many other things such as innovation and transformation.

“If you build it, they will come” is a much-quoted line from the sports film, Field of Dreams. Similarly, if you manage to build the right culture as a leader in your organisation, success will undoubtedly follow.

Many FTSE 100 firms are still failing to share important workforce data in their annual reports despite an increase in the quantity of workforce reporting, according to new research from the CIPD. The study found reporting on skills shortages to be, notably, woefully lacking.

In response, the professional body for HR and people development, is calling for improved reporting and transparency from Britain’s biggest businesses. The body warns that failure to capture and disclose key workforce data is keeping investors, employees and other parties in the dark on key business indicators.

The CIPD’s research examines how workforce reporting has changed over the last five years and how transparent organisations are being about risks and opportunities relating to the workforce.

The report, Hidden Figures: How workforce data is missing from corporate reports, found:

• Workforce reporting in FTSE 100 organisations’ annual reports increased by 9 per cent between 2015 and 2017, a much smaller increase compared to the 19 per cent increase seen between 2013 and 2016 when the CIPD first analysed FTSE 100 workforce reporting
• Regularly reported: The most commonly reported workforce issues were talent management, succession planning and employee turnover
• Skills reporting in short supply: Only 12 per cent of FTSE 100 firms reported their perspectives on skills shortages and only 21 per cent reported on skills gaps, despite many businesses expressing concern about access to skills after the UK leaves the European Union in 2019
• Going up…Apprenticeships (64 per cent more reporting), employee well-being (76 per cent), entrepreneurship (28 per cent), talent management (26 per cent) all saw increased levels of reporting between 2015 and 2017
• Going down… Internships (32 per cent less reporting), commitment (31 per cent less), flexibility (30 per cent less) and employee engagement (21 per cent less) all saw decreased levels of reporting between 2015 and 2017.

“It’s positive to see that the quantity of workforce reporting is increasing, but there’s still a considerable challenge regarding the quality, consistency and transparency of data being reported. Organisations seem to focus their efforts on complying with legislation and governance codes and report on very little else voluntarily,” said Edward Houghton, senior research adviser for human capital and governance at the CIPD.

“Reporting is also often subject to trends or pressure from government rather than ongoing strategic imperatives. We need to see much more consistency in what is being reported, the language used to report it and the measurements being applied so all stakeholders get a complete picture of workforce opportunities and risks.”

According to the CIPD, without full transparency there’s a “real danger” that businesses are painting an overly positive picture of how they manage their people and people risk. Gender pay gap reporting regulations have shown that a framework and a common language can improve disclosure and prompt healthy debate on important issues among key stakeholders. It’s also awakened an appetite among investors for even more workforce data, said the CIPD, and businesses need to be ready to respond to this demand.

“We need senior leaders to get comfortable with being more transparent about their workforce practices and we need investors and government to be demanding far more of these insights,” added Houghton.

Research finds that four-fifths of workplaces don’t have a culture of experimentation

Innovation is the lifeblood of business and in the era of digital disruption it is also critical to survival for some organisations. Many leaders may vaunt it as one of their values and genuinely believe they promote it but new research suggests otherwise.

According to a study carried out by RADA in Business, four-fifths (81 per cent) of workplaces don’t have a culture of experimentation. Moreover, while one quarter (24 per cent) reckon their workplaces are desperately in need of new ideas and fresh thinking to overcome current problems, only one fifth (21 per cent) of employees believed anyone was interested in listening to their ideas.

Worse still, 16 per cent of workers said that any new idea would actually be treated with suspicion and criticism, while 15 per cent believed their business leaders actively discouraged innovation. It is far removed from the vision espoused by many leaders of their workplaces enjoying a collaborative and open communication culture where innovation is championed.

In response to this so-called “innovation gap”, RADA in Business, the commercial subsidiary of the Royal Academy of Dramatic Art which provides communication skills training for corporate individuals, has been working with leading UK companies to transfer dramatic techniques, such as play and improvisation, from a theatrical setting to a business environment.

Kevin Chapman, director of RADA in Business, is concerned to see how many employees feel that creativity and innovation aren’t encouraged in their role “especially when there are simple techniques available to help companies to support and tap into the power of imagination for solving problems or developing new ways of working as a team,” he says.

Chapman recommends that businesses need to create space for people to play with new ideas “without being overly critical”. “Adopting an attitude of enthusiastic curiosity towards every idea that you come up with defies your critical voice and may lead the way to new innovations,’’ he continues.

The research found that government and local government workplaces are the settings where people find it hardest to think creatively (21 per cent). It also reveals that those working in IT (29 per cent) and financial services (26 per cent) find it hardest to make their voices heard, with companies often dominated by a few “loud voices”.

Interestingly, the workers who feel most able to think creatively are those working in teaching and professional trades (such as builders and plumbers), who are four times less likely to struggle with innovation than those in governmental jobs.

Whatever the sector though, it is essential that all leaders create time and space for innovation and put mechanisms in place for ideas to spring forth. Even if they don’t appear to be game-changing initially, they could provide the spark of inspiration for someone else. Adopt the mantra that all ideas are worth hearing about.

A true culture of innovation demands leaders to be more risk-taking, experimental and collaborative but above all, they must recognise the crucial part innovation plays in their organisations’ future rather than merely paying lip service to it. The research also stands as evidence of companies still not listening to their people, which has an extremely detrimental effect on motivation and ultimately recruitment and retention.

And with the most creative and innovative brands of the 21st Century also among the most successful – Apple, Amazon, Google, Tesla, Netflix et al – how much more tangible evidence do business leaders need before they elevate a culture of innovation to the top of their corporate agenda?