Looking Beyond the CEO

Foreword     Chapter 2: Equality At The Top     Chapter 3: Factor 30 is Hotting Up

The 2023 total for departing CEOs reflects the recent trend of high CEO turnover with 178 leaving their post in the calendar year, a figure broadly in line with the annual average of 181 since 2018.

The NSE Nifty 50 saw the highest proportional turnover at 14%, followed by the Hang Seng at 13.8% and the STI at 13.3%. Turnover levels were lower across Europe, with the CAC 40 and DAX 40 both recording 5%, and the Euronext 100 slightly higher at 8%.

Global number of outgoing CEOS from 2018 – 2023

This level of turnover is drawing attention from investors and as a result boards will need to double down on their succession planning. And fast.

Complexity taking its toll

Luke Meynell, who leads RRA’s Board & CEO Advisory Partners globally, thinks the results reflect the growing complexity of the role: “The challenges CEOs must now address have multiplied considerably, including achieving net zero, high inflation, ongoing supply chain issues and the possibility of restructuring given the uncertain economic outlook. Accordingly, boards worldwide will be carefully considering whether they have the right person in place at the top."

Rusty O’Kelley, RRA’s Co-lead of the Board & CEO Advisory Partners in the US, agrees, saying that in 2024 boards are increasingly looking beyond their CEOs, fueled in part by increasing investor attention on high CEO turnover: “In their engagement meeting, we are seeing large institutional investors increasingly asking companies not only about their plans for long term CEO succession planning and emergency CEO succession planning, but also about their executive planning for the entire C-suite. This is because they’re deeply concerned about CEO turnover, and they recognize that the CEO ‘bench’ comes from the C-suite. This level of succession planning helps prevent failures when changes happen at the top of the organization. Investors cannot model unplanned CEO succession events and they believe that long term value creation is better driven by robust talent assessment and development among the senior team and the pipeline of high potentials under them. Thoughtful, robust multiyear talent development leads to better strategic and operational excellence and, by extension, shareholder returns."

The less visible CEO

In 2024, the world is changing fast—and so is the CEO role. What boards are looking for in their next leader continues to shift significantly.

As Stephen Langton, who leads the firm’s Board & CEO Advisory Partners in Asia Pacific, says: “While traditional CEOs were expected to embody their organization’s success, CEOs of the future will partner with senior colleagues to create the conditions for it.”

It’s an important distinction to make, as he explains: “You could call it ‘premature succession’ but we’re seeing evidence of an increase in the frequency and acceptance of CEOs stepping down from their roles, citing pressure, life priority choices, or simply that the conditions for their success are compromised. As a result, the many boards that we support on CEO successions are, more than ever, seeking CEOs of the future who will be less visible and less famous and will lead through a team. They will convene an agenda, but not be the only decision maker.”

CEOs of the future may be less visible than their predecessors, but in reality, they will be even more powerful, as they’ll have the strength of numerous leaders behind them. In fact, we are seeing this trend take hold sooner than expected.

Of course, no CEO is perfect. This is a concept we explored in detail last year. But this isn’t something to be feared; it’s something to be embraced, because when everyone acknowledges this fact it can act as a powerful catalyst for growth.

Rather than striving for perfection, organizations should embrace CEOs’ flaws and use them as an opportunity for growth and development. By doing so, the organization will be more authentic, innovative, and able to manage challenges—all essential elements of long-term success.

An Outside/In approach

It’s critical that CEO development is done in tandem with the company ecosystem, as RRA leadership advisor Marie Osmonde Le Roy de Lanauze-Molines highlights: “Developing a CEO in isolation from the ecosystem in which they operate leads to an Inside/Out perspective. This is insufficient, as the CEO will clearly have a direct impact on the ecosystem in which they operate."

“What we need is an Outside/In approach. The preparation of an internal CEO candidate should fit with the specific ecosystem, and this should be supported by a customized approach that can build the link between assessment and development, accelerate the preparation, and secure the risk for the board.”

Authors

• Stephen Langton leads Russell Reynolds Associates’ Board & CEO Advisory Partners in Asia Pacific. He is based in Sydney.
• Marie-Osmonde Le Roy de Lanauze-Molines is a senior member of Russell Reynolds Associates’ Culture capability. She is based in Paris.
• Luke Meynell co-leads Russell Reynolds Associates’ Board and CEO Advisory Partners. He is based in London.
• Rusty O’Kelley co-leads Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in Miami.
• Laura Sanderson leads Russell Reynolds Associates’ operations in the UK and oversees the firm’s Board & CEO Advisory Partners team throughout Europe. She is based in London.