Leadership Confidence Falls to Three-Year Low
July 9, 2024 – During the three years that Russell Reynolds Associates has tracked leadership confidence, the world has faced a relentless cycle of multiple, conflicting, and often unpredictable issues. From the conflicts in Ukraine and the Middle East and their destabilizing effects on the world, to inflation, rising interest rates, and the launch of ChatGPT igniting massive interest in generative AI, the leadership landscape has been far from quiet. What’s more, the firm notes that nearly half of the world’s population is set to head to the polls for what many are calling a ‘super election year.’
“Leaders are taking note,” a recent Russell Reynolds report said. “At every level, leadership confidence in their executive team has progressively declined, implying that the executive team’s ability to address this ongoing uncertainty and ever-increasing complexity is waning.”
“Not only are leaders faced with a layering of issues, but they must also contend with rising expectations and scrutiny from a heightened diversity of stakeholders,” said Constantine Alexandrakis, CEO of Russell Reynolds Associates. “This provides a huge cognitive and emotional load for today’s leaders.”
Russell Reynolds’ Leadership Confidence Index captures board members, CEOs, C-suite leaders, and next-generation leaders’ confidence in their executive team across three constructs: capability, behavior, and issue management—all of which are in decline. This drop in leadership confidence aligns with data from Russell Reynolds’ recent Global Leadership Monitor, which tracks the top threats impacting organizational health and leaders’ preparedness to face them. In the last six months, the firm has found that leadership preparedness has dropped across all top five threats: economic uncertainty, the availability of key talent and skills, tech change, geopolitical uncertainty, and increased regulation.
“Unsurprisingly, these issues have consistently appeared as the highest-ranked threats for leaders,” the Russell Reynolds report said. “But, repeated and long-term exposure to these issues is failing to build leadership resilience. Uncertain economic growth remains a top-two threat for leaders; yet in the last year alone, leadership preparedness to face this concern dropped by 16 percentage points.”
Confidence in Executive Team Behavior
While confidence has fallen across all three constructs since 2021, the biggest decline is in leadership behavior, falling 6.5 points over the last three years. Russell Reynolds explains that this is particularly concerning because leadership team cohesion is needed now more than ever, as the issues that organizations face do not present vertically (impacting a single function or business unit), they present horizontally (across functions and business units).
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For example, the report notes that when implementing generative AI, it’s much more than a technical exercise impacting tech officers and their direct reports—it has implications for the entire organization. Yet, Russell Reynolds research on C-suite performance highlights that leaders are unprepared for the level of collaboration and engagement required to effectively implement complex technology solutions like AI, which likely also helps explain the low confidence scores around executive team behaviors. They study explains that leadership teams would be wise to work on the cohesion of their top team.
Global Hiring Intentions Hold Steady from Q2, Drop Year-over-Year
Global hiring intentions are holding strong for the third quarter of 2024, with a Net Employment Outlook (NEO) of 22 percent, though outlooks weaken since Q3 2023 according to the latest ManpowerGroup Employment Outlook Survey. “Though labor markets are holding strong in many markets, ongoing economic uncertainty continues to give employers pause,” said Jonas Prising, chairman and CEO of ManpowerGroup. “Most are incrementally more cautious than this time last year, prioritizing hiring for the core skills they need. At the same time – the promise of AI advances is front of mind for businesses across every industry. This data shows organizations are focusing on upskilling their current workforce and maximizing the potential of AI to drive efficiencies and boost productivity.”
“C-suite leaders need to engage in deep collaboration with their peers, but they are struggling because alignment around strategy, key priorities, and the lines of responsibility for the new issues are often unclear and the level of expertise to deal with the new issues they face is low,” said David Lange, global capability leader, development at Russell Reynolds.
To gauge sentiment on leadership behavior, Russell Reynolds asked leaders three questions: whether the executive team models the right culture and behaviors, whether they work together effectively, and whether they effectively embrace change. Only 53 percent of leaders agreed that their executive team models the right culture and behavior. And, when considering executive team effectiveness, only 56 percent of leaders felt that their executive team works together effectively, and 59 percent felt their leadership team effectively embraces change. “To be a high-performing leadership team that inspires confidence, role modeling the right culture, collaborating across functions, and demonstrating openness to change are all critical,” the report said.
A foundational component across all these measures is trust and psychological safety. In Russell Reynolds’ research on the importance of trust in today’s C-suites, they found that leaders at high-performing organizations are eight times more likely to feel that their C-suite team displays a level of trust that’s visible across multiple areas of the organization. And, as the firm noted in its article on how to inspire trust, it’s crucial for the executive team to demonstrate inclusive and transparent leadership, creating a sense of stability and reliability.
How confident leaders are in the behavior of their effective team varies greatly by level and role. Next-generation leaders are particularly lacking confidence in the executive leadership team’s behavior—only 51 percent feel their ELT embraces change, 43 percent feel their ELT works together effectively as a team, and 38 percent think that they role model the right culture and behaviors.
Confidence in Managing Key Issues Drops Significantly
Russell Reynolds also found that leadership confidence in their executive team’s ability to manage challenging issues—such as digital transformation, DE&I, and sustainability—has declined 5.8 points in the last three years. The firm’s research indicates that only 53 percent of leaders effectively harness ESG opportunities, 58 percent of leaders effectively embrace digital transformation, and 59 percent of leaders appropriately implement practices to improve DE&I. As unpredictable and volatile matters come to the fore, Russell Reynolds says that leaders are shouldering more responsibility than ever before, and running out of steam to tackle these issues effectively.
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In the U.S., there has been an even sharper decline in leadership confidence around issue management—falling 8.4 points in the last three years. Russell Reynolds’ data shows that this has been driven primarily by a lower level of confidence in the executive team’s ability to embrace the opportunities of ESG a DE&I. Confidence in ESG and DE&I efforts has declined by 14 percentage points and 18 percentage points, respectively, in the last three years. Now, only 48 percent of leaders in the U.S. agree that their executive leadership team effectively embraces ESG, and only 55 percent agree their executive leadership team is implementing practices to improve DE&I.
“While the decline in confidence around ESG and DE&I may signal that leaders have made little progress on these issues, it is more likely a facet of a maturing in leaders’ understanding of the complexity of these issues and the climate surrounding them,” the Russell Reynolds report said. “The debate—and at times polarized discourse—around ESG and ongoing changes to DE&I legislation in the U.S. have contributed to a more charged political and legal climate for U.S. leaders. Although confidence has fallen and leaders have backed away from public declarations of their ESG and DE&I efforts, many are still staying the course and seeing positive outcomes from these efforts.”
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Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor – Hunt Scanlon Media
