The Great Recession shook up many things, not just investors’ retirement savings.
Due in part to the financial crisis and the high-profile role that many CEOs, particularly bank chiefs, have subsequently played in the public debate about the economy, tomorrow’s executive leaders will need a broad set of financial, operational and executive skills.
“We are entering a new era in corporate leadership,” said Stephen Miles, vice chairman and head of leadership advisory services for Heidrick & Struggles, an executive recruitment firm. “The recession had the effect of shaking out a lot of deadwood from the top ranks and forcing decisions that companies have been sitting on for five to 10 years.”
The result is a new generation of leaders who combine the best qualities of CEO, COO and CFO. In the post-recession world, these leaders will be called upon to spend their time differently than in the past, when most CEOs could focus on running the business.
“You need people who are very organized, disciplined and have formal management processes in place so they can run the company, ask the relevant questions, conduct business reviews [and] do the things that really matter for the business, but still allow them to deal with meaningful new constituencies,” Miles said.
The need to manage new organizational constituencies is particularly important at companies that took federal money during the recession to bolster the balance sheet. Executives of these companies now have government regulators examining the books and asking questions of the company’s leadership.
“CEOs who don’t take that shift seriously are going to do it at their peril because things are going to happen to them, as opposed to being part of the discourse, dialogue and influence around that,” Miles said.
In addition to new stakeholders, company executives also are facing increased scrutiny from the corporate board of directors. The Securities and Exchange Commission released a legal bulletin in October 2009 that provided support for shareholders seeking more transparent executive succession plans. The goal is to minimize shareholder risk during leadership transition.
“Boards have gone from being under the microscope to the electron microscope,” Miles said. “The level of scrutiny on each director and their effectiveness has gone up exponentially. As a result, they have shifted their eyes into the company even more than they were previously.”
That means CEOs and emerging leaders will need strong analysis and communication abilities, even more so than before. The directors want more information beyond the regular board meetings and are increasingly asking detailed questions that require substantial work to answer.
“This draws the CEO’s time down because they are the ones that need to interface with the board,” Miles said. “It can’t be delegated to anybody. They’re not running the company when they’re doing that.”
In addition to the ability to effectively communicate with the board and other, sometimes new, organizational stakeholders, tomorrow’s CEOs will also need deep global experience to thrive. CLOs should look for opportunities to give emerging leaders assignments in Asia, Europe or South America.
“The macro and micro issues that are happening are global today,” he said. “Things are not just happening in New York and San Francisco. The world is big, and you have to have a view on that world. The only way to have that view is if you actually immerse yourself in a different place and look back in the U.S.”
But most importantly, emerging leaders should polish their financial and operational skills, not just burnish their executive competencies. The best CEOs in the world are a combination of CEO, COO and CFO — they are inspirational, financially literate and know the ins and outs of their business at a sophisticated level.
“They don’t need an entourage with them to describe what their company does,” Miles said. “They can sit in a room, for a week if you want, and tell you every business, every person, how they make and lose money, country by country, product by product.”
The leader of the future are what Miles calls micro-leaders, not micro-managers: executives who understand business in a detailed, hands-on way.
“The next generation of CEOs coming in are much better bottom-line leaders than their predecessors, and they truly understand the levers of the business,” Miles said.
CLOs who take heed may find an opportunity to develop their future CEO today.Filed under: Leadership Development