Equip senior teams to solve the problems of today

The issue of Eskom’s poor performance has been a central topic in South Africa over the past few months. Naturally, the focus turned to the company’s leadership and whether these leaders were equipped to resolve the company’s issues and take it into a vastly different future than the one it operates in today.

The country came to one conclusion, nobody would want to take over the role of the utilities CEO, no matter how much money they were offered.

The issue of senior leadership being out of their depth is not limited to Eskom. Most companies are facing a landscape that is vastly different to that faced in the past. Senior leaders, led by the CEO, need to find a way to make their company relevant in this new reality.

I recently read two articles by PwC which sums up what CEOs are currently going through.

Issues of prominence

An insightful PwC article points out that CEOs are pursuing profound reinvention. As PwC has seen, 39% of CEOs believe their companies will not be viable in 10 years’ time without a sharp change in direction. This finding holds true across sectors, from tech to healthcare to manufacturing. CEOs see a range of forces—such as changing customer demand, regulatory changes, skills shortages, and tech disruption/data explosion—that will sweep away those who do not adapt. We’re seeing far-sighted CEOs rethink their company’s place in a world that’s changing under our feet. For example, PwC helped a global retailer reinvent itself from a chain of offline stores into an online multichannel company, and we’ve helped a global automaker diversify into car subscriptions to meet changing customer demands.

Action: Reimagine the firm’s value proposition. Reinventing a company for long-term success requires a willingness to re-ask the most elemental questions about a company, such as ‘What unique value do we contribute in today’s world—and tomorrow’s?’

The article adds that CEOs are cutting costs, but not people. Fifty-two percent of CEOs who participated in the PwC CEO Survey said they were cutting costs in response to near-term economic pressures, but only 16% are currently reducing the size of their workforces. The rationale was clear: leaders told us they expect employee attrition to stay the same or worsen, suggesting they see no end in sight to the “great resignation” and the consequent competition to attract talent with the right skills for the future. As a result, CEOs—with an eye to keeping their companies afloat in the longer term—are maintaining their investments in people despite acute near-term cost pressures. I believe this is the right approach; at PwC, despite economic headwinds, we invested more than half a billion dollars last year in building our highly skilled workforce.

Action: Attract and retain talent by delivering what today’s workforce truly wants. Last year, we asked 52,000 workers across the world why they choose and change jobs. PwC found compensation is important, as always, but employees also want flexibility/hybrid working, new skills to remain relevant, and the chance to contribute to a larger purpose (75% said they want to work for an organisation that makes a positive contribution to society). The lesson for CEOs? Keep investing in everything it takes to attract and keep great people.

The article points out that CEOs are building supply chain resilience. The PwC CEO Survey shows that leaders who believe their companies are exposed to geopolitical risks are taking actions; 46% are adjusting their geographic footprint or supply chains. Companies are not simply exiting the territories in question en masse; for example, the 2022 China Business Report, developed in partnership with PwC, confirms that only 17% of US companies are considering moving operations out of China in the next three years. This suggests some CEOs are seeking to mitigate potential impacts from geopolitical tensions while keeping their eyes on the long game of China’s economic importance. So instead of leaving, many business leaders are applying a range of strategies to build supply chain resilience.

Action: Storm-proof the supply chain. We’re seeing companies build diversification and redundancy into their supply chains and expand their reserve inventory (moving from just-in-time inventory to just-in-case). Firms are making their supply chains cleaner and greener, and they are embedding data and technology into them more than ever before—for example, with AI-enabled control towers that enable nimble adaptation to shifting risks.

The PwC article adds that CEOs are realising that climate change is not an issue for the distant future—it’s an issue for today. In contrast to the 2021 CEO Survey, when a minority (40%) of CEOs told us they had factored climate change into their risk management strategies, our latest survey shows a clear majority (58%) of CEOs are developing a data-driven, enterprise-level strategy for reducing emissions and mitigating climate risks. Perhaps this is because 50% of today’s CEOs expect their cost profiles to be impacted by climate change— not far off in the future, but in the next 12 months.

Action: Adapt now to a hotter world while mitigating emissions. PwC is helping many clients map and manage their climate risks from disrupted supply chains to lost staff productivity from heat stress, and in the process, often uncovering opportunities to innovate ahead of competitors while protecting the bottom line.

A jack of all trades

Another PwC article points out that there are two major issues that CEOS have to deal with on a personal basis:

• the scarcity of CEO time to focus on future reinvention; and
• the apparent lack of autonomy among leaders below them—are intertwined.

If CEOs can build more self-reliant, self-sufficient teams, they’re better able to break free from firefighting mode, as well as the tyranny of the next fiscal quarter, and solve the bigger problems they face. There are four ways to tackle this problem. 

Invest in leadership development for your senior leaders. The article points out that most companies have leadership and executive training programs for high-potential people in middle management, but that stops after people reach more senior levels. At that level, the thinking goes, they already know everything they need to know. But that’s just not true. In the current fast-changing environment, these leaders need just as much executive training and coaching—maybe even more—if they’re going to make sound decisions on their own.

Move people around. The career path for most senior leaders tends to be linear—the best accountants become finance managers, the best finance managers become CFOs. Today, with the level of interconnected challenges and uncertainty, leaders can’t rely on narrow, domain-specific expertise. They have to navigate ambiguity.

The article adds that companies can support them by shaking up career paths and moving leaders into situations where they have no expertise. That sounds counterintuitive, but it works. I currently live in Singapore, where the government makes these kinds of moves among senior leaders all the time. Its senior people move frequently to new roles and responsibilities, from professional services to design, from running health agencies to overseeing education.

These kinds of nonlinear career paths have two benefits: people quickly start to understand other points of view, and they build great networks. Both of these attributes are fantastic in managing complexity and learning to make decisions without asking for the CEO’s input.

Encourage failures. The article points out that when leaders and organisations don’t tolerate small-scale failures, they create the conditions for large-scale ones. I thought of this recently when I heard a podcast featuring Toto Wolff, principal and CEO of the Mercedes-AMG Petronas F1 team. F1 cars race at speeds of roughly 350 kilometres per hour, and races are won or lost by thousandths of a second. In that environment, small failures have large consequences. Yet Wolff’s leadership style is to treat small-scale failures as a process issue rather than a personal issue. If something goes wrong—and something always goes wrong—analysing it through a process lens helps the team make systematic changes to prevent that mistake from happening again.

Set clear parameters. Last, and most important, CEOs can help their teams become more independent by setting clear parameters. That means a vision, strategy and purpose—all communicated repeatedly and emphatically by the CEO to ensure that everyone is aligned. When CEOs set a bold vision like that, they give their senior team a clear set of overarching principles to apply in making decisions independently.

The article adds that Philips is a good example. The Dutch conglomerate had a sprawling portfolio of somewhat related business units a decade ago, including consumer electronics, lighting and medical equipment. Without a clear organisational focus, the company was underperforming. When a new CEO took over, he made an explicit decision to move away from lower-growth businesses and reorient the business around health technology. That meant shedding some units that had been central to the company’s DNA, but it worked—with all leaders rowing in the same direction, Philips has outperformed most of its competitors since the move.

The bottom line? Equip senior teams to solve the problems of today so that CEOs can be freed up to solve the problems of tomorrow.

Moses Singo is a Partner at Genesis Corporate Solutions and is a Junior Business Rescue Practitioner