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10 Key Challenges for CEOs

Dec. 16, 2010
Chief executive officers must now be chief diplomat, chief talent officer and chief image manager, says a veteran executive recruiter.

Don't expect simpler times for CEOs just because the Great Recession is giving way to the Modest Recovery. Stephen A. Miles, vice chairman of executive recruiting firm Heidrick & Struggles, says CEOs will encounter a "wealth of new challenges" in 2011. Here are his top 10:

Moving from "Business Case" to "Social Business Case"

As companies weigh entering a new market, Miles says the business case must now be viewed through a new lens: How will this business decision impact the country/region/state/province they are going into? He warns, "It is no longer enough for companies to simply make a good business case or meet the 'legal requirements'; they must make the case to the local stakeholders that this move will benefit the target community, who may have concerns about, for instance, the environmental impact."

Stepping into the role of "Ambassador"

"Related to the development above, we are seeing that the CEO must actively engage with politicians and regulators around the world. The CEO must be conversant on policy -- be it financial regulation or healthcare reform -- that affects his or her company and industry. Policy makers or regulators do not want to speak with delegates, but to the CEO. Given this, the CEO must act as diplomat and build these relationships him- or herself."

Repairing the Corporate Image Problem

The financial crisis has sullied the image of corporations, and CEOs in all industries must work to repair their reputations, Miles says. "One way of doing this is through earnest CSR. Taking corporate social responsibility seriously not only helps to balance out the negative press, but also jibes in particular with the priorities of today's younger employees -- another important constituent that companies must consider."

Making the Board an Ally

"With first Sarbanes-Oxley and then the global financial crisis, corporate boards have stepped in to become more 'executive,' instilling themselves further into the role of scrutinizing and interrogating management," Miles says. CEOs must build a strong relationship with these key stakeholders, keeping them informed about desired initiatives and operating with transparency. Miles says "treating the board as a partner along a strategic path will only help your cause."

Building a Global Leadership Pipeline

Miles says every CEO should have "a robust and 'global' pipeline of talent throughout the organization, especially at the senior-most levels," and discuss multi-year succession regularly at the management and board levels. He points to a recent survey that Heidrick & Struggles conducted with Stanford's Rock Center that found 51% of companies cannot name a CEO immediately if needed and 39% have no internal candidates whatsoever. To that end, CEOs must "encourage their boards to recruit directors with succession expertise and experience, and to help make the all-important issue of succession a top corporate priority," he says.

Grappling with China

Partnerships in China can carry much risk, he warns. "As the joint-venture partners in China begin to learn and then take over the technological developments and processes introduced by their Western partners, these Western companies may be uninvited to the party. Chinese companies, supported by their government, are aggressively acquiring intellectual property, and are increasingly looking to go it alone in competing on the world stage. CEOs must thus be aware that they may be creating competitors if they enter into a JV in China -- and manage this risk accordingly."

Understanding Shifting Employee Values

"Managing the demographic changes as baby boomers move into retirement and 'millennials' come up through the ranks is something no CEO should overlook or just delegate to HR. The CEO needs to understand the motivations and values of his or her workforce in order to leverage organizational capabilities," Miles says, adding that the "need for constant real-time feedback and sharing of information is something new."

Operating in a World of Social Media

"Today's CEO is coming to realize that potentially all of his or her decisions and actions are broadcast in real time on company blogs or on Twitter and Facebook. Miles says CEOs should "embrace and become part of the new media social discourse."

Driving Diversity

Miles says it is time to move from a compliance-based approach to diversity to one where we "truly build (and value) diverse companies and boards." Along with the growing business case for diversity, he notes, "A number of countries are taking a legislative view regarding gender diversity on boards (UK and Australia), and are set to begin to mandate the percentage of female directors that must be on boards."

Managing a Globally Distributed Leadership Team

"A corollary to a more diverse and more geographically diffuse management team is the complexity of actually managing a team that is so spread out," says Miles. Expatriate programs, in which companies send executives abroad for experience, carry the risk of having those employees scooped up by competitors. Instead, he says, companies are increasingly turning to hiring local teams. They have two distinct advantages: "The local executives may be more likely to stay with the company and they may also be better able to compete with any local competitors who emerge on the market."

See Also:
Finding the Business Case for CEOs
Are You Prepared for BusiLeaks?

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