In our volatile, uncertain, complex and inter-connected world, the challenges facing corporate executives are often outpacing their cognitive abilities. This is undermining the sustainability of companies across North America, Europe and Asia. The need to find the right leader to navigate their corporations through these unchartered waters, teeming with unknown dangers and new opportunities, is paramount.
Increasingly, companies are hiring internal candidates for their top executive positions. Research reveals that CEOs brought in from outside the company succeed less often than those who are promoted from within. (Joseph L. Bower, More Insiders Are Being Hired and That’s a Good Thing, HBR, March 18, 2016). Hiring external senior executives is warranted however in some cases; for example, bringing in a Chief Digital Officer to overcome organizational inertia and to lead digital transformation and innovation. The ideal CEO is one who is promoted from within, but with as wide-ranging experience as possible working in different cultures and countries, a passion for deepening his or her knowledge and a rich network of contacts to broaden perspective. The ideal CEO looks at the “world in a way that allows one to weigh on opposing and contradictory demands and manage them on an ongoing basis.” (David L. Dotlich; Peter, C. Cairo and Cade Cowan 2014, The Unfinished Leader, p. xi) Companies with a history of success and innovation over the long-term, such as Johnson and Johnson and the Royal Bank of Canada, have placed the development of their next generation leaders at the top of their agendas.
Digital technologies are disrupting and transforming the economy. Nowhere is this more prevalent than in the media industry. According to a recent survey of 2,000 c-level executives, media companies anticipate massive disruption to their business models in the next 12 months (72%); followed by Telecom (64%) and Consumer financial services (61%). (Rhys Grossman, Industries That Are Being Disrupted the Most by Digital, HBR, March 21, 2016).
Even with digital strategies in place, the sheer rate of change has created a skills gap. This is undermining established companies, with legacy business models that still generate most of their revenues. It is difficult for companies and leaders to embrace change and break with the past. “Too many companies and leaders, and often the best companies and the most successful leader, struggle with the frustrating reality that the more deeply immersed you are in a market, a product category, or a technology, the harder it becomes to open your mind to new business models that may reshape that market or exciting way to leapfrog that technology.” (Bill Taylor, Companies Can’t Be Great Unless They Almost Failed, HBR, March 21, 2016).
In forward-looking companies, the task of driving growth and finding new meaningful revenue streams is often given to the Chief Digital Offer (or Chief Growth Officer). These companies create a culture of decision-making based on the best available evidence/data, which will enable them to manage the changes that lie ahead. This requires commitment that starts at the highest level of the organization: the board.
The management of board continuity and renewal, along with executive succession, is imperative for corporations. Increasingly, greater gender diversification is driving corporate governance , along with improved mechanisms for renewal of directors based on performance management and accountability.
A proper succession process for top executives requires considerable planning and time, sometimes several years, to implement successfully. The process of nurturing the most promising next-generation leaders within an organization is one of the most serious and complex issues facing business today. It is challenging for corporations, and their boards, to devote the time and resources required to properly nurture these leaders amid the intense pressure to achieve higher quarterly earnings. But those that don’t are falling behind.
The most successful companies understand that leadership development is one of the best investments an organization can make to ensure its future. Today, executive coaching is recognized as a vital component of leadership development. By committing to excellence in their corporate leadership, boards are fostering the enduring success of their companies.