When we look at company top brass in the past year, we have seen more CEO successions than ever. In the aftermath of the crisis that COVID-19 has caused in many industries, people have started to be more observant and critical of their leadership, and boards have started to rethink what kind of leaders are needed to make their organizations fit for the future.
Balancing profit and societal impact
Profitability remains key. But it is now no longer enough – ever since the US Business Roundtable, an association of chief executives of America’s leading corporations, redefined the idea of the purpose of a corporation to deliver long term value to all stakeholders. It has also become clear that today capable leaders must be able to balance financial results and societal impact. As Larry Fink, CEO of Blackrock, one of the largest global investment management corporations, recently wrote in his famous letter to the CEOs of the Blackrock companies he invested in: “In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.” With such pressure from investors no company which takes its own future seriously can ignore this any longer in its strategy. Following that logic, Luca Mucic, group CFO at SAP, recently wrote in a LinkedIn post: “The climate and social crisis is one that has a shared responsibility and needs collective action…we’ve witnessed the power of putting sustainability at the core of our strategy; it’s good for society and is good for business.”
The need for new skills
At this point, boards must consider the capability to balance profit and societal impact as a key requirement for any new CEO, as well as for members of the top management team. But what implications does this have on the skills that leaders need? What does a CEO profile need to look like to make sure that the leader is fit for the task? The focus on organizational purpose and the consideration of value creation for all stakeholders will create a need for new skills that CEOs need to master to successfully lead their corporations.
Skills to drive growth and profit.
CEOs will naturally need to continue to be able to drive growth and profit. CEOs that do not deliver strong financial performance alongside the new focus on societal impact may find themselves rapidly critiqued by investors as was Emmanuel Faber at Danone, who was removed from his position because investors believed he was focusing on driving societal value at the expense of delivering strong financials.
To drive growth and profit, traditional skills like having strategic foresight, being strong at sales, having financial acumen and strong negotiation and decision-making skills certainly continue to be top criteria that CEOs need to match.
But in a world where the very definition of success is dramatically changing, and where the views of multiple stakeholders can have an impact on the organization’s survival, these traditional performance skills have become only a fraction of what is needed for future CEOs. They are the entry card to the game but do not determine the winner.
Skills to create societal impact.
Future CEOs will need to understand a new generation of employees, with a degree of diversity never seen before, make them feel included and valued in the workplace and provide them with a purpose that motivates them to commit to their organization. As the trend of the Great Resignation during the COVID-19 pandemic has shown, CEOs can no longer take employees for granted. More than ever, people care for their work life balance and are less open to be told where to work or how to perform.
Future CEOs will also need to learn to embrace the perspective of stakeholders which in the past they preferred to ignore. Some companies have advisory boards to help their CEO engage in productive dialogue with NGOs that have been their fiercest critics. Others include employee’s representatives on their board to make the voice of the employees heard. Some boards are even thinking about inviting the most critical voices to the board to directly engage with the CEO and the executive team. Creating value for all stakeholders begins with listening to all stakeholders and taking their views seriously.
CEOs that have grown up in a traditional business, with probably no longer acceptable ways of working, still have an opportunity to continue their career if they can learn to feel comfortable to delegate, rely upon the collective intelligence of the organization and lead by coaching rather than trying to know and decide it all. CEOs are therefore well advised to really do as Steve Jobs advised: Hire good people and let them tell you what to do. This requires an unprecedented degree of open mindedness, a willingness to learn, and to challenge all your own beliefs.
Finally, future CEOs will need to exemplify what the organization stands for to internal and external stakeholders. In a time of change, holding the top job comes with higher expectations than ever. And whoever wants to successfully hold the post, needs to be a credible symbol of what the organization will stand for.
Where to find leaders with the needed skills
Individuals that possess the above skills continue to be rare in today’s business world. A number of CEOs and Chairmen that we had the pleasure to interview, have started to ask themselves if one of the main challenges of the current top level across industries, could be that the majority of them has grown on a linear path and also prefers to hire individuals with linear paths. One could start wondering if some of the skills which are needed for the future, are best acquired in non-linear careers that take the leaders outside of the beaten path and allow them to develop a breadth of capabilities that a linear career can never offer. For boards, this means they may need to step back from the often-used checklists for CEO replacements and become open to a different set of individuals. Many board members will need to go outside their comfort zone and engage with the succession process in a depth they never had to do before. And when embarking on such a learning journey, experienced boards may have the experience of a lifetime.
Written by Marianna Zangrillo.
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