While it’s certainly not yet in the rear-view mirror, as we start to see COVID-19 begin to fade as an all-consuming crisis for business—thank you science and scientists!—what are the next issues that corporate leaders must face and how ready are they to face them? Consultant Russell Reynolds Associates has just released its 2021 Global Leadership Monitor, designed to track top business issues and monitor leadership preparedness. Some of the more interesting findings: In terms of “stakeholder capitalism,” while customers are top of the heap, employees come in second as key stakeholders—ahead of stockholders. Most fascinating perhaps is this revelation: 40% of CEOs and other C-Suite executives “don’t believe the executive team receives good advice and input from the board.”
In February and March of 2021, RRA surveyed 1,327 business leaders—CEOs, C-suite executives, board members and “next-generation leaders” (described as “those one or two levels below the C-suite”)—across 53 countries and all major industry sectors, including consumer, financial services, healthcare, technology, industrial and natural resources, and professional and business services. The participants included a variety of business sizes and types, including 60% with annual revenues of $1 billion or higher, 52% with 5,000 global employees or more, and 50% publicly traded, 17% private equity or venture-backed and 28% privately held.
Below are some of the key findings from the survey:
- External factors affecting business. Leaders were asked about external factors that will most impact “organizational health” over the next 12 to 18 months and how well prepared they were to address these challenges. The top issue cited was uncertain economic growth (61%), with 63% responding that leadership was prepared for that. Surprisingly, availability of key talent and skills was the second most cited factor at 59% (especially among business leaders in healthcare, technology and professional services), with only 55% responding that leadership was prepared to address it. RRA reports that the pandemic has indirectly accelerated the widening skills gap by catalyzing digital transformation, which has increased demand for professional and leadership talent with digital capability. Major health threats came in fourth at 48%, with preparedness rated at 75%. Cybersecurity came in at only 26%, with 72% considering leadership to be prepared. (Would the results have been the same post-pipeline ransomware attack?) ESG-related issues were near the bottom, with climate and other environmental damage cited by only 19% (preparedness at 61%), heightened scrutiny of diversity at 11% (58% preparedness) and rising wealth inequality at 7% with only a 25% preparedness score.
- Talent mobility. One factor that may be influencing the serious talent concerns observed above is the willingness of C-suite executives (61%) and next-generation leaders (73%) to change their employers for the right opportunity, reflecting increases of five and eight percentage points from the period prior to the pandemic. Only 38% believe that the executive leadership team has a “successful strategy for C-level succession.” These statistics suggest both that there is an available pool of talent outside the company and that companies are at risk of losing their current talent for perceived better opportunities.
- Stakeholder impact on business strategy. RRA contends that the “concept that organizations need to consider multiple stakeholders in how they run their business is now firmly rooted in business discourse.” In its survey, although consumers and customers took the top spot (70%) among stakeholders that will impact strategy over the next five years, employees came in second (41%), eclipsing both investors (37%) and the board (33%). However, the sway of stakeholder capitalism might be somewhat questionable given that communities came in at only 5%, social activists and movements at 4% and NGOs at 2%. While it may not be entirely surprising that customers were central to strategy—given that customers are necessary to sustain and grow the business—the second-place finish of employees was somewhat unexpected. RRA suggests that this result
“indicates that leaders are increasingly aware of the influence that employees can exert over public discourse, with social media a ready platform for airing concerns. From this discourse, it has become clear that the next generation of talent expects employers to have a higher purpose than just making profits, including prioritizing DE&I and sustainability, among other social issues….Leaders must pay attention to the full range of employee issues, or they risk suffering serious talent acquisition, engagement and retention challenges. Success on this front is not simply a matter for human resources or internal communications leaders; instead, it is a matter of broader leadership capability and culture.”
- The question, RRA asks, is whether leadership is “prepared to lead an employee base that strives for purpose and holds a high bar on the organization’s impact on the environment and society?”
- Leadership confidence. In this category, there were disparate views among the different groups of survey participants, pointing “to possible disconnects within leadership teams as well as between management and the board.” The only question that received a uniform response—91%—was the positive reaction to the responses of their companies’ leadership teams to the COVID-19 pandemic. Otherwise, RRA found that generally “board directors and CEOs were most likely to rate the executive team highly, while next-generation leaders tended to be more critical.” RRA also found that “C-suite members and next-generation leaders were less positive about their board members.”
For example, with regard to whether the leadership team is “effectively embracing the opportunities of ESG,” 74% of CEOs and directors said yes, but only 57% of other C-suite executives agreed. Similarly, with regard to whether company leadership is “implementing practices to improve diversity, equity and inclusion,” CEOs, directors and next-generation leaders all hovered around 80%, while C-suite executives were much less confident, agreeing at only a 60% level. RRA observes that, because “these areas are typically overseen by C-level leaders, their limited confidence may come from a more realistic and less idealistic vantage point than that of others.” And when it comes to the level of confidence in board oversight of these issues, the responses from management were dramatically lower. Although CEOs were positive at a 70% level about the board’s effectiveness at embracing the opportunities of ESG, the C-suite expressed much lower confidence at around 48%. CEOs also had less confidence (65%) than directors about the board’s efforts to improve DE&I, while C-level executives agreed at only a 45% level. Boards gave themselves much higher marks on these efforts.
One of the most startling results was regarding the quality of advice and input that managements believe they receive from the board. While all survey groups agreed at levels between 70% and just under 80% that managements have access to the right information to support strong decision-making, there is a significant split on whether the board provides management with good advice and input: directors agree at a level of about 85%, but almost “4 out of 10 CEOs and C-suite leaders do not believe that they receive good advice and input from the board.” RRA concludes that the “wide gap between perspectives suggests that the executive team and the board hold very different expectations for what input and advice the board should provide the management team,” and speculates that the difference may be due to boards’ overreach as directors become “increasingly active on topics traditionally seen as management’s domain.” (But compare that perspective with the rationale ascribed to a similar survey result by PwC and The Conference Board in the SideBar below.) Looking ahead, RRA observes that “it will be essential to repair these fracture lines, as the board’s ability to provide effective advice to management is now more crucial than ever.”