There’s a Shortage of Talented CEOs
The past three years have been rocky, to say the least. 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 a mass wave of resignations (known as the Great Resignation), have caused additional friction for executives nationwide.
The United States 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.
Challenger, Gray, & Christmas, Inc. noted the highest CEO turnover on record during the first four months of 2022, as 518 CEOs left their organizations.
CEO losses at major companies like DocuSign, Pinterest, Under Armour, and Bath & Body Works left organizations struggling to find viable replacements. Some companies are still searching for a new CEO months later, leaving their organizations in flux.
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.
For instance, Macy’s executive training program 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. They simply don’t have the breadth of skills necessary to react quickly to a changing environment.
Where Today’s CEOs Are Falling Short
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. Here are 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’ve seen innovation at a scale that generations before us never witnessed.
Today’s CEO must be mindful of continuing changes that can impact their organization. Even if the company isn’t in the tech industry, it will likely feel some impact as new technologies like artificial intelligence become widespread.
Today, there are few regulations surrounding artificial intelligence (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, 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. 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.
Key to preparing for economic uncertainty is a reduction in operating expenses and maintaining a strong balance sheet. 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. They can’t hold on to age-old traditions; they must shift their strategies when conditions warrant.
For instance, 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 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.
CEOs must maintain a firm grasp on changes to customer buying habits, the supply chain, and their company’s financials. 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. Even if a company doesn’t have operations in either country, it can still feel adverse impacts.
For example, if a U.S. company relies on a supplier in Russia, it probably can’t make the same purchases it once did. 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.
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, 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.
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.
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