What the Future Holds for CEOs
March 31, 2023 – The past three years have been up and down for business across the globe. Macroeconomic shocks affected by a global pandemic, large-scale riots and protests, and Russia’s war in Ukraine, have changed expectations for the role of a CEO. Other factors, such as the shift to remote work, the reopening of offices, and the Great Resignation have caused additional friction for executives nationwide, according to a new report from Cowen Partners Executive Search. The firm says that the U.S. deftly navigated through rising inflation and increasing interest rates over the past year. Cracks in the banking system were exposed as several well-known financial institutions collapsed after classic bank runs. New technology, known as generative AI, can potentially upend the internet as we know it and cause widespread shifts in the job market.
Where does this leave CEOs? “CEOs have been the guiding pillars for their companies during the past three years, but many of them are nearing retirement age, and some are simply tired,” the Cowen Partners’ report said.
Cowen Partners points to CEO departures at major companies like DocuSign, Pinterest, Under Armour, and Bath & Body Works that left organizations struggling to find viable replacements. “Some companies are still searching for a new CEO months later, leaving their organizations in flux,” the search firm said.
Today’s CEOs Need a Broader Range of Skills
In past decades, the road to the top role of an organization required planning. “Some companies grew their leaders internally, shifting employees from one department to another to round out their experience and prepare them for the next level,” the Cowen Partners study said.
Related: Preparing for Shorter CEO Tenures
For instance, the firms points to a Macy’s executive training program that hires promising employees for a year to 18 months, moving them through various roles in store operations, buying, and product development. At the end of the program, workers move to mid-management positions, readying them for high-level future executive positions.
“While training programs like those found at Macy’s are the gold standard across industries, companies are finding that rapid changes in technology, marketing, and the economy are too much for CEOs from traditional backgrounds,” the search firm said. “They simply don’t have the breadth of skills necessary to react quickly to a changing environment.”
Where Today’s CEOs Are Falling Short
Cowen Partners explains that CEOs must remain agile during macro and microeconomic shifts to succeed in today’s environment. “They’ll need to insulate the business from potential shocks, like a recession and increasing inflation, while adapting to technological changes,” the search firm said.
Cowen Partners provides a few actions that successful CEOs must be mindful of in the coming years:
Digital Disruptions
Since the advent of widespread internet in the 1990s, the growth of technology has been breathtaking. We have seen innovation at a scale that generations before us never witnessed. Today’s CEO must be aware of continuing changes that can impact their organization, according to the Cowen Partners’ report. “Even if the company isn’t in the tech industry, it will likely feel some impact as new technologies like artificial intelligence become widespread,” the study said. “Today, there are few regulations surrounding AI. While that may change in the future, the primary overseers of AI products are the developers themselves. Companies must examine where it makes sense to adapt AI into their processes but remain mindful of ethical issues like data security and job displacement.”
Mitigating Economic Risks
While the job market is holding steady and unemployment remains low, Cowen Partners notes that there is still a risk of recession. “The recent collapse of Silicon Valley Bank, a harbinger of collapsed funding for tech startups, startled the nation,” the search firm said. “Internationally, UBS took over Credit Suisse as worries about its solvency grew. No one can predict what the future holds, but CEOs with solid backgrounds in finance and economics can prepare their organizations for future challenges. They can complement their CFOs, leaning into their recommendations while providing insights of their own.”
4 Reasons to Hire a CEO From a Different Domain
When people set their minds to something, it’s hard to change them. It’s true in life — and in executive search when a board determines the type of CEO they want to hire. “I see it often in the staffing industry where a company intently focuses on hiring leadership talent only from within their domain,” said Lisa Maxwell, founder and managing partner of executive search firm Gerard Stewart, in a new report. “If their focus is light industrial (LI), they want a CEO out of LI. If their focus is healthcare, they are determined to keep their candidate lists clear of any talent outside of healthcare staffing.”
Cowen Partners notes that a key to preparing for economic uncertainty is a reduction in operating expenses and maintaining a strong balance sheet. The firm also says that companies with enough resources to weather a decrease in revenue will likely emerge from a recession with fewer adverse effects on their operations.
Remaining Nimble
“Now more than ever, CEOs must be adaptable and agile,” the report said. “They can’t hold on to age-old traditions; they must shift their strategies when conditions warrant.”
For instance, Cowen Partners says that inflation led to significant price increases across industries throughout 2022. “Companies that rely on supplies from other organizations found their cost of goods sold rose dramatically, cutting into their gross profit,” the report said. “The knee-jerk reaction is to change the pricing strategy for the company’s goods and services, but that’s not the right solution for every organization.”
Related: Should Your Next CEO be an Internal or External Hire?
CEOs must maintain a firm grasp on changes to customer buying habits, the supply chain, and their company’s financials and the best decisions come from real-time information, which usually requires investment in technology and staff.
Mitigating Geopolitical Risks
Many large organizations have a multinational presence, with operations scattered in various countries worldwide. However, relations between the U.S. and some other countries, including Russia and China, are at all-time lows, according to the Cowen Partners report. “Even if a company doesn’t have operations in either country, it can still feel adverse impacts,” the firm said.
For example, the firm explains that if a U.S. company relies on a supplier in Russia, it probably can’t make the same purchases it once did and it will need to find another source to provide the goods it needs.
“Maintaining a large pool of suppliers from various countries reduces the risk of a supply chain disruption if issues arise,” the study said. “Apple is an excellent example of a company that spreads its supply chain across multiple countries, sourcing its parts from all areas of the world. There’s no dependency on one country or vendor for fundamental components of Apple products.”
Planning for the Next Generation of CEOs
As baby boomer CEOs continue to retire and others leave due to the considerable demands of the job, Cowen Partners says that there’s a smaller talent pool of qualified leaders. “Appointing a new CEO requires assessing their basic skills, such as a growth mindset and leadership ability, against the demands of today’s world,” the firm said. “Organizations need to look past a CEO candidate’s essential capabilities to understand how they might perform in the face of the significant changes happening in contemporary society. They’ll need CEOs who can withstand crises and react swiftly to mitigate problems and emerge even stronger than before.”
Cowen Partners serves both small and large, publicly traded, pre-IPO, private, and non-profit organizations. Its clients are typically $50 million to multi-billion-dollar revenue Fortune 1000 companies or have assets between $500 million to $15 billion. Placements span the entire C-suite and include VP and director-level leadership roles. Cowen Partners has placed hundreds of candidates in industries including technology, healthcare, manufacturing, retail, financial services, and private equity.
Related: The Multifaceted Role of Today’s CEO
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media