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Where is the next generation of CEOs coming from?
A rapidly changing operating environment demands a CEO with a different kind of CV
The speed at which technological innovation is transforming our daily lives is exceeded only by the impact it is having on businesses. The responsibility for overseeing this change falls on the world’s CEOs and it will be their response and decisions that ultimately decide the fate of the businesses they lead. What skills and values are the Board of Directors looking out for in 2018?
This change is not confined to any single sector; the commercial landscape continues to evolve and the role of a CEO is as much to be the custodian of change as anything else. A Forbes CEO outlook report notes that globally 71% of CEOs consider the next three years to be more critical for their industry than the whole of the previous fifty.
CEOs are under unprecedented scrutiny. As they steer their organisation through often stormy waters, they must be customer facing, politically minded, social influencers and brand ambassadors. Rapid change and widespread uncertainty bring huge challenges and those willing and able to adapt are the ones best placed to succeed.
Rapid change and widespread uncertainty bring huge challenges and those willing and able to adapt are the ones best placed to succeed.
In this new world of economic and political uncertainty, social media exposure, corporate responsibility and rapid transformation, how is the role of the CEO changing, and from which business functions are we likely to see future CEOs emerge?
The digital revolution creates opportunities for the CIO
A new skill set is required of the CEO when business is increasingly driven by technology, which brings both opportunity and threat. CEOs currently in post are unlikely to be digital natives. In contrast, those CIOs and CMOs who have spent their careers witnessing and driving drastic change in their field are perhaps best placed to take the helm of organisations that are most impacted by the digital revolution and undergoing fundamental change.
“The focus within many businesses is moving away from traditional areas and is engaging more and more in the realm of technology and digital,” explains Joss Godbold, Page Executive Regional Director for Asia Pacific. “This is heavily influenced by UX/CX, that is, the user experience and the customer experience, with increased customer focus, mainly driven by a desegregation of where customers are coming from and how consumers engage with businesses nowadays. As a result, CEOs from technology and digital backgrounds will become more common.”
Marketing has not typically been a route to the top. However, in the modern world of metrics, measurement and technology, marketers are now able to show tangible evidence of their contribution to profitability and growth. What is more, they are likely to be tech savvy and have a solid understanding of the customer base. That’s a powerful combination in the modern business environment. Currently, 21% of European chief executives have a marketing background, second only to those with a finance background.
In the modern world of metrics, measurement and technology, marketers are now able to show tangible evidence of their contribution to profitability and growth.
Commercial experience favoured
In the APAC region, companies tend to be more comfortable with a commercially-minded CEO. When a business leader is appointed, those from a marketing, procurement or operations background are often pipped to the post by someone with commercial expertise.
This is likely due to the rapid growth in the region’s many emerging markets. Businesses seeking to push growth are more confident that a leader with a strong commercial background will be able to achieve their ambitious targets.
Again in APAC, consumer-driven organisations are likely to favour the appointment of chief executives who exhibit sales acumen. However, they are now becoming more open to considering heads of digital or marketing.
In the APAC region, those from a marketing, procurement or operations background are often pipped to the post by someone with commercial expertise.
The type of company, how it interfaces with its customer base and where the interaction takes place can be a factor here. An enterprise that conducts a large part of its business digitally is far more likely to appoint a CIO as chief executive than a company reliant on a ‘boots on the ground’ salesforce, where someone commercially minded usually heads the list.
This is not so much the case in established Western markets, where growth is slower and more established companies show more confidence in promoting leaders with an operations or finance background. In the UK, 50% of FTSE 100 leaders have a finance, accounting or financial services background.
Selecting a safe pair of hands
A potential barrier to the promotion of a wave of CEOs from new business areas is that company boards tend to be highly risk averse. If the ultimate test of a CEO is the bottom line, then it stands to reason that the individual or business function that has the most impact on profitability represents the safest pair of hands.
One of the world’s largest companies certainly thought so when Apple appointed Tim Cook to the position in 2011. Bringing his procurement background to the fore, he implemented wholesale changes at the ground level that have helped the company habitually post record profits during his tenure.
“There is a very significant focus on adaptability and change management,” notes Simon Nolan, Head of Practice Consumer at Page Executive UK. “The capacity to manage rapid change, combined with appropriate interpersonal and leadership skills, is a powerful combination in a modern CEO.”
The capacity to manage rapid change, combined with appropriate interpersonal and leadership skills, is a powerful combination in a modern CEO.
Simon Nolan, Head of Practice Consumer, Page Executive UK
Appointing in their own image
Culture fit remains a huge factor and even though business need is often now moving away from traditional areas and toward the realm of technology and digitisation, there can be a tendency for decision-makers to take the perceived safe option and appoint from within their own industry. Unfortunately, this approach leaves scant room for innovation and fresh thinking, which are more likely to be injected if the new CEO brings experience of a different business area or sector.
Most modern CEOs and other senior leaders would insist that their skills are highly transferable and that the role of a leader is to get the best from all business functions. Looking outside the traditional areas for new leadership, therefore, becomes fundamental to business evolution, innovation and, ultimately, survival.
- The selection of a CEO is subject to a wide array of considerations, including the company’s growth ambitions
- A successful CEO must foster and embrace change and innovation
- Today’s senior leaders need to grasp the opportunities that technology affords
- Being too risk adverse in selecting a CEO can lead to the organisation becoming stagnant
- Despite some industries remaining conservative in their choice of CEO, many are widening their search for candidates for the top post
We hope you enjoyed reading this article, which is part of our Executive Trends’series where we explore the biggest challenges facing senior business leaders and executives today. The series is already in its 3 edition, and you can access all previous articles by clicking here.