It keeps getting tougher at the top. CEO tenures are more tentative and they’re shortening. Disruption is multiplying. Investors and boards are applying pressure and increasing scrutiny. And yet, there’s a curious demographic dilemma developing in the C-suite: While CEO turnover is going up, in certain situations, older CEOs are remaining in their role longer.
The psychologist in me sees a complex mixture of anxiety management strategies being played out here: You’re going to live longer. You want to continue to have impact. Therefore, you need to work longer.
The job has never been harder. Staying at what you know makes sense, rather than starting over somewhere else. It also makes sense that your board will trust the devil they know over the devil they don’t. And as CEOs continue to be required to be the voice of all causes social and environmental—from WFH to ESG—best to stay in a sector or industry you know rather than one you don’t.
No wonder you’re staying put.
My commercial side looks at this as a significant issue for businesses. A few months ago, I wrote about succession planning. My thinking was prompted by my continued experience of working with boards for whom picking a successor was just, as Peter Drucker put it, "the selection of a weaker representation of yourself."
This highlights the underlying dilemma afoot in succession planning. All too often, it’s still seen as an inside-the-box exercise instead of a truly outside-the-box experience. From JPMorgan to Disney, boards of directors are going with the tried and tested. And yet by making the “safe” choice, what is being sacrificed by avoiding a more creative, forward-thinking choice?
Instead, it must become a context and situational-driven exercise. It should be built around scenarios and outcomes. Recognizing shifts in the external environment, disruption—both financial and non-financial—and the emergence of new competitors, seemingly overnight, and all now offering "added AI," all require different leaders, skills, and personalities in high office.
And, even then, succession plans don't make sense if your senior execs aren't getting out of the way. This recent article in Financial Times outlines the situation very neatly.
Right now, it's understandable that companies will want to hang on to high performers and people with a solid track record. Times are tough and taking a gamble isn't very attractive considering the current headwinds.
However, conservatism now may just create a larger problem down the road as frustrated talent leaves or circumstances shift dramatically, and those in charge aren't equipped to drive the business forward. We’ve seen more than a few businesses struggle where their executives have failed to grapple with major technological shifts or find themselves lacking relevance in the modern marketplace.
Now might be the time for many businesses to embrace the maxim "what got you here won't get you there."
As with any gamble, businesses can mitigate this with detailed, scenario-based succession plans. These require a deep understanding of your next-level leaders’ strengths and weaknesses, as well as their relative aptitude in different situations (growth, distress, change, reduction in size, etc.).
Modern executives, now more than ever, need to be chosen on a best-athlete basis. This requires a complete understanding of the potential candidates and a thorough understanding of the dynamic landscape they'll be navigating. To make this happen plans need to become action—and swiftly—if businesses wish to define their own future.