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CEO: no longer a job for life

83 per cent of businesses plan to replace their leader over the next five years
By Kevin Young, Managing Director, SkillSoft EMEA

Who’d be a CEO in financial services today, wrestling with challenges such as damaged brand reputation, loss of customer trust, political scrutiny, an uncertain and volatile economic landscape, the impact of new and disruptive technologies and a full complement of demanding shareholders and Board Directors? Kevin Young

The top job is a tough job. The list of skills, expertise and insight required to be a successful CEO is growing. For example, no CEO of a major financial concern can now afford to be without polished media skills, something that would have been unheard of a decade or so ago. The requirement for specific subject or sectoral expertise is being overtaken by the need to be a strong and inspirational leader, who can drive performance, motivate teams and engage customers. In a highly competitive economic climate, Boards and shareholders are becoming increasingly ruthless about replacing CEOs who fail to achieve such targets. At the same time, some senior executives are simply choosing to walk away from the high levels of stress and public pressure that now invariably come with the top job.

Set against this landscape, we were not surprised when our recent study of CEOs revealed that a staggering 83 per cent of respondents expect to be replaced within five years, and admitted succession plans were already in place for their departure. A third of them (34 per cent) expect to be gone within three years or less.

The research suggested that the larger the firm, the more fragile the top spot: seven per cent of CEOs at enterprises with more than 1,000 employees expect to be succeeded within the next twelve months, compared to just two per cent of firms with fewer than 500 employees. With so many financial services organisations falling into the enterprise category, it is no surprise that the CEO ‘revolving door’ effect is particularly visible in this sector.

Take, for instance, the tale of two major international banks, each caught up in different ways in the European financial turmoil of the last few years.  One of the banks lost its CEO to the other one.  The new bank was delighted to secure this strategic external appointment, only to be faced with the CEO’s unexpected, if temporary, absence on sick leave a mere six months later.  The bank was widely reported as finding itself ‘rudderless’ in in the wake of his departure.  Meanwhile, the first bank had moved rapidly to fill the leadership vacancy with the internal appointment of an executive who had been with the business since 1988.

Both internal and external appointments have much to recommend them.  Bringing in an outsider, particularly one with existing experience as a CEO can bring fresh perspective, insight, expertise and energy into a firm.   Turning to a trusted insider can ensure consistency and commitment and a safe passage through turbulent waters.  Different solutions work for different firms; but one thing is clear: for either of these options to succeed in the long term, for both the individual concerned and their organisation, there must be a strong focus on skills.

Skills are often thought of as something for more junior employees. IT, presentation, project and time management skills are courses we’ve probably all attended at some stage in our career.  But skills development for senior executives is equally vital, if not more so, although far less easy to pigeon hole into a two-day workshop with checklists, slides and hand-outs.

What are the skills needs of this rather exclusive group of highly intelligent, talented and driven individuals? Our experience in delivering blended and e-learning solutions to global enterprises and governments, among others, suggests these needs include ‘softer’ communications and interpersonal skills as well as management and leadership skills.

In a world where perception is reality and change is the only constant, companies need to prepare for the unexpected.  Individual CEOs need to ensure they have the skills to manage and lead a business while the world looks on; while companies need to have robust professional development programmes in place to ensure a strong pipeline of talent is available should a crisis occur at the top.

A recent study  found that a fifth of UK firms that had suffered an unexpected change of leadership over the last twelve months had seen business growth slow or even stall due to a lack of direction; and a third said it had damaged morale. In the example quoted above, the sudden absence of the new CEO and the perceived leadership vacuum left behind resulted in almost £1billion being wiped off the bank’s market value.  Companies can simply not afford to let this happen.

A strong roof is not enough to hold a house together; it needs to be supported by strong pillars and walls – and underpinned by a strong foundation.  Succession planning is nothing without a focus on skills.