Writer and Editor, Korn Ferry Institute
This Week in Leadership (Sept 20 - Sept 26)
Why job switchers aren't getting that much more money. Plus, leadership lessons from Angela Merkel and her very long tenure.
See the new issue of Briefings magazine, available at newsstands and online.
By: Annamarya Scaccia
Image this: For six decades, your family’s bank was the go-to financial institution in the neighborhood. But four years ago, an edgy local start-up launched, promising better banking through mobile apps. You’ve noticed your client list start to dwindle, which means lower profits and suddenly fewer resources to get ahead of this new competition.
Or maybe your health-food company is only a decade old, but new state regulations are threatening its viability. The stricter rules call for changes to your products, which would mean altering your entire supply chain. The modifications will be too costly to make, but if you don’t make them, then you’re out of business for good.
If such scenarios sound familiar, it’s because as any corporate leader has discovered, each year, if not each month, seems to bring a new “crisis” for one company after another. It wasn’t always this way—in fact, firms of the previous century were lauded for creating stability in their businesses. But in today’s world, it’s reasonable to assume that the power of, say, artificial intelligence or 5G technology will upend your business—if not today, then tomorrow. Or that a certain giant retailer will summarily decide that “one-day delivery” is now the order of the day, flattening one competitor after another. All of which, like a looping nightmare you can’t wake up from, is familiar in C-suites across the globe. What is less known: how to deal with it.
(click image below to enlarge)
Naturally, there are tomes on leadership that preach principles that can apply even to a volatile culture. But experts say that much of the advice has become a little too quaint. With unprecedented technology and mounting expectations from both workers and customers, the speed of all things in business is accelerating: organizations are innovating faster, consumers are spending faster, and systems are crumbling faster. “It’s always been tough to be CEO, but it’s tougher today,” says economist Linda Hill, a founding partner of Paradox Strategies and a professor at Harvard Business School. “CEOs are realizing the way things worked in the past doesn’t work in the future.”
One thing they’re realizing is that their staying power is not what it used to be. Although average CEO tenure is slowly increasing, a recent Conference Board report found that the rate of CEOs fired from S&P 500 companies increased by 38 percent in just a one-year period, from 22.1 percent in 2017 to 30.5 percent in 2018. Meanwhile, a medium-sized firm is about four times larger, on average, than it was 20 years ago, according to the Harvard Business Review. And in this rapidly changing business landscape, a new kind of leader needs a new toolbox of skills and traits. “CEOs need to build organizations where they’re not leading people into the future, but cocreating the future with them,” says Hill. “That requires different muscles.”
To see this kind of modern leadership in action—the kind that will likely get firms through the newborn decade—Korn Ferry interviewed three CEOs who each pulled through their own unique challenges. Among them were the head of the world’s premier provider of credit ratings, benchmarks, and analytics in the global capital and commodity markets; the founder of a rising Canadian technology firm; and the leader of a giant food-products firm with 11,000 employees. Each CEO, we discovered, has had their share of “on edge” moments—and each said they came out ahead by tapping into skill sets their predecessors might never have needed.
The Crucial Curiosity Gene
With roots dating back to the 19th century, S&P Global is the foremost provider of financial information. It operates the well-known ratings agency, is the primary source of research and real-time data to institutional investors holding billions in assets, and is the world’s largest resource for indices—the most common, of course, being both the S&P 500 and the Dow Jones Industrial Average. But today, disruption spares no business, which is why the company’s CEO, Doug Peterson, decided a few years ago that he needed to, in his words, “transform the business” from a conglomerate with publishing and financial information assets to one narrowly focused on the financial markets.
Peterson knew that to transform S&P Global, a comprehensive strategy would need to be created that elevates customer orientation and technology to completely new levels. So he took the challenge to his Operating Committee. “First and foremost, we collectively agreed that to continue to be successful we must put the customer first in everything that we do. And every single scenario we looked at ended with a strong focus on data and technology as a core strategy,” he says. Artificial intelligence, machine learning, analytics, automation, and robotics—these data-driven technologies kept coming up in the situations that the organization examined as necessary capabilities to be successful in the future.
All of which would ultimately shape the acquisition strategy Peterson would take, including the $550 million purchase of Kensho Technologies in 2018, the largest AI acquisition at the time in the United States. This acquisition is playing an important role in S&P Global’s continued development of AI, cloud, machine learning, and robotic tools to help its clients make timely and well-informed decisions. Along these same lines, Peterson also recognized that the upskilling of employees is core to the company’s success. In 2019, S&P Global employees completed tens of thousands of technology courses, giving them vital new in-demand skills and helping solve important business problems. But when asked which skills may have mattered the most during this period, Peterson says he and his team needed not only the ability to view the future but to also be curious about it. “I had the curiosity gene since I was 5 years old,” he says. “One of the things that has grounded my career is that I always want to be learning.”
Indeed, curiosity, like the ability to anticipate, is becoming a coveted leadership trait in today’s economy, experts say. And that curiosity translates into results: Research by the Korn Ferry Institute (KFI) has found that midcap companies with highly curious CEOs tend to post operating profits 32 percent higher than companies with less-curious leaders. What’s more, CEOs who are curious and learning agile have a strong advantage over competitors because they’re better at building up the digital literacy needed to fully understand and deploy emerging technologies. Without that understanding, experts add, few organizations can survive.
“It’s not the technology that causes the disruption. It’s application of it,” says Vivek Wadhwa, a technology entrepreneur and professor at Carnegie Mellon. “Companies either have to learn about these advancing technologies and how to survive them, or they’re going to be out of business.”
(click image below to enlarge)
THE REACH OF Emotional Intelligence
Clients were raving about the firm, saying “It saved our business” or “Please, don’t hire them, because they are ours!” And it was easy to understand why: MonetizeMore, a decade-old ad-tech firm based in Victoria, British Columbia, had found the technology and creative team to help publishers with their long and critical struggle to optimize digital ads.
But CEO Kean Graham knew that none of that was going to matter if he couldn’t figure out how to help his clients navigate a new European Union law known as the General Data Protection Regulation (GDPR). The law, implemented two years ago after a public uprising over privacy leaks on the web, set out a series of mandates requiring key disclosures and greater protections. Fines alone could run as high as 20 million euros, or $22 million US. “It was very definitely a scrambling point,” says Graham, “something that we needed to take head-on.”
This is what the now and the future can look like—the need to reinvent a sizable portion of your business, and fast enough to keep up with competitors. Graham and his executive team created a consent-management platform that made it simpler for MonetizeMore’s clients to become GDPR-compliant, a task that took some obvious solutions-oriented mindsets, among other skills. But Graham believes that a high level of emotional intelligence, or EI, may have mattered even more. The term, popularized by best-selling author Daniel Goleman 30 years after its formulation, represents a capability that allows for deploying level-headed empathy during frenzied times. “Emotional intelligence is so far-reaching amongst everything that you do,” Graham says. “At the end of the day, [a CEO’s] most important responsibility is making decisions, and the underlying derivative of making those decisions is based on your emotional intelligence.”
Though growing in prominence now, emotional intelligence wasn’t considered a big deal in most C-suites a decade ago. Instead, the emphasis was on whatever traits it took to improve the bottom line. But, experts say, the changing business environment is placing a higher premium on so-called “soft” skills like adaptability, communication, and EI. These skills are gaining a bigger spotlight in boardrooms and corner offices. And studies seem to support this importance: One recent KFI study found that reflective, self-aware leaders ran 62 percent of the most highly effective teams, translating into higher profitability. Those with low EI ran more than half of the lowest-performing teams.
“It’s about authentic relationships with each other and as a team,” says Padma Thiruvengadam, chief human resources officer for Takeda Pharmaceutical Company. “It goes beyond a transaction.”
Leading with a Purpose
For his part, Bill Gisel’s “on edge” moment wasn’t related to tech or new laws. Instead, in 2013 the CEO of the large food maker Rich Products initiated a recall of a dough-based ingredient after the company discovered a serious contamination in some of its consumer-branded retail products. Rich Products came to the decision that the potential contamination came from a raw material and pulled all of the affected food items from store shelves.
The scope of a recall—that is, the amount and kind of product to be removed—would have been set by regulatory requirements. But CEOs today need a wider vision that looks beyond profits or legal directives. Unsure whether other batches were affected, Gisel decided to expand the recall scope far beyond federal regulations to ensure all Rich products were 100 percent safe—a potentially costly measure. “I knew in the short term that it would hurt, but in the long term, it reinforced the values of the company,” he says. And it did hurt: expanding the recall created extra work for staff and negatively impacted incentives, he says. Still, he adds, “We never, ever heard one whisper of a complaint, because they recognized the sincerity behind the decision.”
Unlike the days of Jack Welch, the legendary honcho at General Electric, this type of authentic, purposeful leadership has become more of a key differentiator for CEOs than traditional skills like strategic thinking, experts say. In fact, according to other KFI research, 67 percent of investors surveyed across 18 economies believe that legacy leadership is not fit for the future. Instead, being able to transform constantly, adapt quickly, and lead with a compelling purpose have become enablers of success for CEOs.
“For the first time, people are worried about if the CEOs are coming in and asking what companies are doing about social issues,” says Bernhard Raschke, a senior client partner leading Korn Ferry’s EMEA Supply Chain Center of Expertise. In other words, organizations need to have purposeful leaders at the helm if they want to stand out in today’s hyper-changing business landscape, with studies supporting the notion that when it comes to profits, purpose pays.
But it only pays, experts say, if that value-driven leadership is more than lip service. Leaders, like Gisel, have to live and breathe their purpose—and make sure their companies do too. “A lot of organizations pride themselves as having core values that reflect their principles,” says Eric Frazer, a psychologist and the author of The Psychology of Top Talent, but many lack the comprehensive follow-through. “Companies that have parity between their programs and values are doing the best,” he says.