Q4 2022 | Global Leadership Monitor

Back to main page

Economic uncertainty and talent challenges continue to be top priorities for leaders.

In the past two years, six issues have consistently topped our rankings of external factors affecting organizational health: the availability of key talent/skills, changes in consumer behavior, geopolitical uncertainty, major health threats, technological change, and uncertain economic growth.

While the proportion of leaders focused on each of these has fluctuated over the last 18 months, there has been one constant – concern around availability of key talent/skills has consistently sat within the top 3 places of our ranking.

In early 2021, major health threats, economic uncertainty, and technological change held leaders’ attentions as organizations determined how to navigate a pandemic-affected world; geopolitical volatility spiked earlier this year following Russia’s invasion of the Ukraine; now, economic uncertainty is drawing even more leadership attention, jumping 23 percentage points over the past six months.

Going into 2023, the top two issues identified by leaders are availability of key talent/skills (68%) and uncertain economic growth (67%). The close gap between the two, as well as the fact that 39% of leaders chose both availability of key talent/skills and uncertain economic growth as a top 5 threat to their organization’s health, shows how intertwined these two factors are.

Figure 1. Top external factors impacting business in the year ahead (Q2 2021 vs. Q2 2022 vs. Q4 2022)

Percent of leaders ranking each item as a top 5 issue affecting organizational health from a list of 20 issues.

^{Source: Russell Reynolds Associates’ Q2 2021 Global Leadership Monitor, n = 1,327 CEOs, C-level leaders, next-generation leaders, and non-executive board directors; Q2 2022 Global Leadership Monitor, n = 1,590 CEOs, C-level leaders, next-generation leaders, and non-executive board directors; Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

This is a critical moment for leadership preparedness.

Although uncertain economic growth and availability of key talent/skills have consistently been top of mind concerns, leaders still do not feel prepared to address these risks.

When it comes to the availability (or lack thereof) of critical talent, most leaders still feel vulnerable, with only 43% of leaders reporting that the leadership team at their organization is prepared to address the challenge, compared to 41% in the Spring of this year. With the reality of an economic downturn looming ahead (or already upon us), leaders are less confident in how prepared their leadership teams are to address economic uncertainty; 46% of leaders say their leadership team is prepared, down from 50% earlier in the year.

Figure 2. Leadership preparedness to address external factors by priority

^{* Respondents were only asked to rate their leadership team preparedness if they selected the factor as a top 5 issue Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

The majority of leaders believe that a potential economic downturn is likely to happen in the next six months: 48% of leaders think we are experiencing it now or will be in one by the end of the year, and 28% of leaders expect it to begin early next year. This sentiment is heavily reflected by CEOs – 61% of CEOs believe that we are currently in a recession or will be in one by the end of 2022.

Of those leaders who indicated we are currently in a recession or will enter a recession, almost half (47%) anticipate the downturn to last six months to a year, and a third (33%) anticipate it will last even longer than a year.

Executives in Asia are most concerned, with 54% anticipating a downturn to last more than a year. Interestingly though, 27% of leaders in Asia do not think there will be a recession, highlighting a marked sentiment split in the region, with a notable proportion anticipating a long recession and a notable proportion responding that there will not be a recession.

Leaders are well aware of upcoming economic challenges and the high likelihood that they are here to stay – now is the time to take action.

Figure 3a. The majority of leaders believe an economic downturn is imminent…

Do you think there will be a recession (in the country in which you are based)?

Figure 3b….and will last at least for the next 6-12 months

How long do you anticipate the next recession to last?

^{Note: Only leaders that indicated that they think there will be a recession were asked to respond to this question. Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

Investing in talent is key to weathering economic uncertainty.

In considering how to prepare for or respond to a recession, 92% of leaders believe it is important for their organization to invest in retaining critical talent. Optimizing business portfolios (84%) and investing in digital and technology (83%) were the next two approaches most frequently noted as important ways to prepare or respond.

Figure 4. Invest in retaining critical talent to prepare for the economic downturn

How important is it for your organization to prepare for/respond to a recession in the following ways?

Percent of leaders responding important or very important

^{Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

Leaders recognize employees as a key stakeholder group and a strategic asset for competitive advantage, and have been increasingly focused on improving employee experience. In fact, engaging in workforce reductions was the least selected solution to addressing the economic downturn. Our data shows that CEOs in particular are taking this to heart, with only 29% thinking it is important to engage in workforce reductions as a way of preparing for or responding to a recession.

Economic uncertainty has heavily impacted the employee experience through inflation, cost of living concerns, and income inequality, and CEOs are quite conscious of this. When asked about the top external factors to impact organizational health in the upcoming year, 28% of CEOs selected rising wealth inequality as a top five concern, compared to only 8% of global leaders.

In fact, almost half (49%) of CEOs believe that if their organization experiences a notable decrease in revenue or an increase in costs, it is likely they will choose to manage down profitability levels in order to minimize impact on employees, customers, and/or suppliers. As organizations discern how to manage availability of key talent/skills amidst economic uncertainty, it will be important for CEOs to continue to spearhead talent-centric business strategies.

Figure 5. Half of CEOs see managing profitability levels down to protect stakeholders as likely

If your organization experiences a notable decrease in revenue and/or increase in input cost, how likely is it that leadership will choose to manage down profitability levels in order to minimize impact on employees, customers, and/or suppliers?

^{Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

In preparation for the economic downturn, investments in sustainability vary by region.

Our research shows a strong link between the robustness of sustainability strategies and preparedness to face economic uncertainties.

More than half (53%) of global executives that we surveyed this fall noted that investing in sustainability is an important way for their organization to prepare for or respond to a recession. To better invest in sustainability, organizations should align the sustainability executive with the CEO, develop sustainability acumen in leaders, and build a strong vision-oriented board that brings sustainability expertise.

There are, however, notable regional differences: the majority of leaders in Asia and Europe, 86% and 74% respectively, note that investing in sustainability will be important, while a lower percentage of leaders in the Americas and Australia & New Zealand, 47% and 55% respectively, feel similarly.

Sustainability has been integrated into the business environment in Europe longer than in the US, and the regulatory environment in Europe is also more built out – and that is reflected in the numbers here. What is important to note is the high level of focus investors in the US are placing on the subject now, and there is no sign of that abating. Investors are building out their own expertise and teams. That in turn will further increase the urgency for other businesses to make progress on sustainability. This is a recession proof issue. One of the key questions for businesses is: ‘Do we have the leaders we need to drive sustainability into our business?’ Talent that combines leadership capability with technical and operational know-how on issues like decarbonization are highly prized right now.

Kurt Harrison,
Global Sustainability Practice Co-Leader, Russell Reynolds Associates

Figure 6. Sustainability investments, in preparation for the economic downturn, vary by region

Percent of leaders indicating that investing in sustainability is important to respond to or prepare for a recession.

^{Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

Economically prepared organizations are more likely to have established successful C-suite succession practices.

This spring, our Global Leadership Monitor revealed that only 28% of C-suite leaders think their organization has a successful strategy for leadership succession. This sentiment has not changed.

A closer examination of leadership sentiment on succession practices reveals that C-suite leaders can benefit from more communication on succession strategies, especially around what  processes exist and how the organization is implementing unbiased practices. Only 22% of C-suite leaders feel that their organization’s succession practices are transparent and clearly understood, compared to 31% of CEOs. Additionally, only 36% of C-suite leaders feel these practices are equitable and inclusive, compared to 56% of CEOs.

Our data shows a relationship between the strength of succession practices and leadership preparedness to face economic uncertainty. Economically prepared organizations are more than twice as likely to have successful C-suite succession practices.

More importantly, the majority of economically prepared organizations appoint senior leaders according to a long-term business strategy, whereas less than half of economically unprepared organizations carry this mindset. While this data does not confirm causality, it is reasonable to infer a link between the strength of succession planning and the degree to which leadership teams can respond effectively to market conditions.

Building an agile leadership pipeline and using it to quickly bring new talent into the C-suite as conditions change can be a critical advantage.

Dana Krueger,
Global Capabilities Co-Leader, Russell Reynolds Associates

Figure 7. Leadership succession practices by economic preparedness

Percent of leaders responding Agree or Strongly Agree

^{Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 608 global executives responding to economic preparedness}

Economically prepared organizations recognize the value of strategic technology advancements.

As other issues such as economic uncertainty and geo-political challenges have risen to the forefront, the relative importance of technology change has been dampened. While 48% of leaders selected it as a top 5 factor in spring of 2021, it has fallen in priority to 33% in fall of 2022.

It is important though for organizations to maintain focus and drive momentum on digital transformation and technological innovation. Our data continues to demonstrate that economically prepared leadership teams are more likely to engage positively with digital adoption and transformation, as well as effectively embrace opportunities for change.

CEOs at economically prepared organizations indicated that they invest strategically into cutting-edge technology advancements, such as Web 3.0 and the metaverse, rather than taking ad-hoc actions simply because of buzzwords.

Figure 8. Economically prepared organizations are strategically investing in technology advancements

New Technology Leap Investments by Economic Preparedness

To what extent is your executive leadership team engaged with planning for the next technology leap?
% of CEOs selecting relevance

^{* Section only asked of CEOs. “The next technology leap” refers to novel digital experiences, the next iteration of the internet (“Web 3.0”) and virtual worlds (“the metaverse”).}

^{Source: Russell Reynolds Associates’ Q4 2022 Global Leadership Monitor, n = 94 CEOs responding to the next technology leap}

Even for organizations that are not quite ready to make the leap into the metaverse, it is important to prepare for technological change, as executive team health and technology readiness can cyclically impact each other, and digitally attuned organizations boast better hybrid work experiences and retention, all important priorities as organizations continue to evolve new ways of working amidst economic uncertainty.

Authors

Joy Tan and Tom Handcock of RRA’s Center for Leadership Insight conducted the research and authored this report.

Learn more about the authors and The Center for Leadership Insight

The authors wish to thank the 1,600+ leaders from RRA’s global network who completed the 2022 Global Leadership Monitor Fall Pulse. Their responses to the survey have contributed greatly to our understanding of leadership in 2022 and beyond.

2022 Global Leadership Monitor

Download the report or connect
with our experts