Broadening the CEO selection pool – where will our future leaders come from?

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When we looked at broadening the CEO selection pool, we found that despite two-thirds of HR Directors harbouring ambitions to become chief executive, only a fraction of those interviewed work for companies where the HR Director has been awarded the top job. Having spent the last 20 years identifying the best HR leadership talent for UK and international organisations and knowing that most HR Directors want to test themselves in the role of CEO, we found ourselves asking the question: ‘Why don’t HR leaders typically make it to the top job in business?’. 

In our experience dynamic HR leaders combine specialist skills with broader commercial experience and well-honed leadership skills. Yet few become CEOs. We know that half of the world’s CEOs come from just three key backgrounds; finance, operations and marketing whilst the remaining 50% come from 23 backgrounds, ranging from legal to IT and strategy. Only 5% of those CEOs are accounted for by HR Directors. We wanted to know why so few made that jump. 

We set out to discover the underlying reasons for this and the barriers HR Directors face by interviewing 135 respondents on a global basis, with the majority from the UK, to explore their traditional career paths and ask them how the role has changed and adapted over the last five years; the pressures both internally and externally put on them by stakeholders and the impact changes in the economy has had on their job. We also wanted to find out as the role evolves, what skills and qualities now made the ‘model’ CEO.

When we studied the role of CEO over the last five years, four clear themes emerge in terms of how it has changed:

  1. the nature of the role
  2. shifts in the wider business environment
  3. evolving standards for leadership, and
  4. a greater focus on specific external relationships with various stakeholders 

Of those CEOs questioned, 45% say the area of their role that has encountered most change is the environment in which they operate. They said that accelerated pace of change combined with faster and more dynamic communication and pressure from stakeholders to outperform the market are the biggest changes to the environment in which they work. They say that economic volatility demands multiple strategies and forces them to maintain a competitive edge reliant on agility, creativity and innovation. Interestingly, a quarter of those asked say it’s their role which has changed the most with a requirement for greater transparency. The general feeling emerging from research was that the recession has led to customers having higher expectations in terms of social responsibility from big companies, particularly in the banking sector. Following the RBS scandal, exorbitant salaries, bonuses and pensions, banking has seen customers take on the role of watchdog. They have a new-found sense of ownership which CEOs must respond to. Most of those surveyed say compared to five years ago, customer expectations on standards of behaviour are much higher and therefore there is a greater need for transparency.

A fifth of CEOs survey say creative people leadership is the biggest change in reshaping the role of CEO. They have to have the ability to be people focused by building diverse talent and leadership capability and inspire and mobilise the whole organisation as well as creating a culture of innovation; all qualities which are native to HR practitioners and an area where they can distinguish themselves as CEOs. 

With more and more people leadership skills at the route of success, we think CEOs from traditional backgrounds could be left behind. When we asked our participants what skills and experience were essential to today’s CEO, the majority (39%) said people leadership. That means things like leading diverse teams and connecting and engaging with people at all levels of an organisation. 

When we asked them to list common personality traits that make the ‘model’ CEO, they identified 12 – with authenticity, strategic ability, inspiration and passion in the top four. They also said it was important to be a visible relationship builder and an effective communicator, which are both skills closely associated to the role of HR Director. 

Jonathan Chapman, Aviva’s Audit Director, Planning, Resources and Risk, defines the role of CEO simply as, ‘the ability to take people with you on a journey’, adding: ‘You can have the best strategy in the world, but if people don’t want to follow you then you won’t be successful’.

The need for strong people skills and leadership make the lack of HR Directors reaching top jobs all the more surprising. We already know that 63% of HR leaders want to move beyond their role. But only 40% have been offered the opportunity throughout their career to do it. The big question for us is why? It has got to the point where businesses run the risk of losing talent - 24% of those interviewed admitted they would have to leave in order to become a CEO - either at a smaller company or by setting up on their own.

A significant barrier to HR professionals getting the top job appears to be the way the function is viewed. The single biggest reason why HR people don’t get promoted is a perceived lack of desire or confidence. The 12% of HR leaders who have made it were able to demonstrate accountability, appetite and commercial acumen together with a real desire to lead combined with being fortunate enough to work in organisations which look beyond functional backgrounds and concentrate on individual ability.

We feel it is only a matter of time before talented HR individuals have the opportunity to demonstrate the positive impact they can make on the wider organisation. In doing so, they will change perceptions of the HR function. 

For those people with the drive to succeed, they need to share their career ambitions with others, build breadth of experience beyond HR, and demonstrate strategic thinking and strong commercial acumen in order to be in the running for senior roles. If they do that at a time when people leadership and talent management is regarded as the single most important success factor for a CEO, HR will bring a magnificent cocktail of capabilities to the boardroom. Let’s tap into this often overlooked talent source and access a broader CEO selection pool.

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