The New CEOs … society looks to business leaders for direction in a world of social and technological change

December 23, 2019

Indra Nooyi, the former CEO of PepsiCo for 12 years says that ‘there is a leadership vacuum today that CEOs are expected to step into” – as politics is no longer the respected force it was, as religion has become less relevant to many people, and as traditional family-based social structures have fragmented, the world is crying out for new leadership. 

CEOs used to be cheerleaders of sales performance, rallying the troops from their corner office, to do better year after year.  The economic crisis of 2008 onwards was a sudden wake-up call to many, that doing the same thing year after year, hoping the model of past success will serve you into the future, doesn’t work. And whilst the world’s economies have largely followed a positive path over the last decade, the role of the CEO has been changing significantly.

Globalization has been complicated by a wave of nationalism, which has sparked trade wars and new fears of immigration and racialism. CEOs are increasingly expected to take stands on issues ranging from civil rights to climate change. Artificial intelligence, big data and cybersecurity have gone from buzzwords to legitimate challenges facing the modern business leader, according to an analysis of PwC’s annual survey of CEOs.

“The game has picked up its pace a bit, and the consequences of screwing up have gotten worse,” says Noel Tichy, a professor at the University of Michigan’s Ross School of Business. Tichy says the basic job of a leader hasn’t changed much since he ran GE’s leadership-training centre in the 1980s, but today’s exec faces “more complexity, more technology change and competitors that are faster, stronger and bigger.”

The past decade has made giants of companies like Amazon whose size and muscle have forced many business leaders to change tack or be wiped off the map. As Silicon Valley startups have followed in Amazon’s wake, industries spanning entertainment to transportation to big-box retailers have been forced to seek blockbuster mergers or pursue radically different agendas.

Social media has heightened the pressure on CEOs to make the right move on big strategy issues. It also intensifies the spotlight on day-to-day decision making.

Facebook’s mishandling of privacy issues has turned Mark Zuckerberg from a celebrated entrepreneur to a CEO whom lawmakers and analysts routinely criticise. Boeing’s grounding of the troubled 737 Max earlier this year shows how the speed and efficacy of a response to crisis can make or break a leader.

CEOs as social warriors

Indra Nooyi says CEOs have a “bully pulpit” now more than ever. As political leaders are increasingly seen as overly partisan and willing to take divisive stands, she says, shareholders, employees, customers and suppliers are expecting top executives to use their position to help unite people behind social issues that—at times—may offend some customers, employees or other constituents. “There is a leadership vacuum today that CEOs are expected to step into and fill,” says Nooyi. “It’s because others are failing at the job.”

In 2019, the annual Trust Barometer from communications firm Edelman showed a sharp rebound in the public’s confidence in businesses from the beginning of the decade, with respondents ranking corporations as more trustworthy than the government, media and nongovernmental organizations. Three-quarters of those surveyed, however, say CEOs need to show leadership by supporting equal pay, standing against discrimination, caring about the environment and confronting sexual harassment. Back in 2010, respondents were far more likely to expect that behaviour from elected officials, academics, analysts, regulators and those running NGOs.

The new work contract

As the act of hiring has gone from feast to famine in recent years, CEOs are realizing they need to do more to attract and reward the workers needed to keep the business afloat. In survey after survey, employees—especially highly skilled younger ones—say they need to feel proud of where they work and see ample room for growth.

“The old CEO tendency would be to say, ‘I’m just going to pay them more,’ ” says Mat Ishbia, CEO of United Shore Mortgage, the No. 1 wholesale mortgage lender in terms of loan production volume. This old-school thinking was based on the belief that “a job is what you do only to make enough money to feed your family.”

Eva Karlsson, CEO of Sweden’s Houdini Sportswear, says changing demands are evident in job interviews. “Employees aren’t motivated as much by money. They may be in the job interview and ask, ‘How are you doing with biodiversity?’ If they don’t get the answers they want, they don’t take the job.”

Planning with purpose

The hottest debate in corporate America asks whether a public company exists for the enrichment of shareholders or in service of a broader constituency, including employees and customers. This summer, 181 CEOs in the Business Roundtable association chose the latter, signing a statement that committed their companies to serve the interests of all stakeholders.

The document is a proxy for a larger movement away from short-term thinking, which is most clearly seen in quarterly earnings reports that aim to make Wall Street happy. Earnings management (including share buybacks or cost cuts to meet profit estimates) is often good for share prices, but bad for long-term interests.

Ms. Nooyi says most CEOs no longer believe corporations are built for short-term results, saying the activist investors who pushed that agenda are losing popularity. “Somewhere along the way, capitalism got hijacked [by a] small fringe group of shareholders,” she says. “Now the pendulum is slowly swinging back.”

Acting with agility

While much has changed for CEOs, one thing has remained constant over a decade: the need to be nimble in an age of uncertainty and risk. Whether it is the policies of the Trump administration, threat of new regulation or geopolitical turmoil, wrestling with the unknown is as tough as it has always been. And CEOs have to be ready to turn quickly.

Karlsson, for instance, is just beginning Houdini’s expansion into the U.S., having recently notched a partnership with outdoor retailing giant REI. Revenue is growing rapidly.

Forget about creating a long-term blueprint, however. “There is such rapid transformation everywhere,” she says. “A few years ago, you could actually plan five years ahead and stick to that plan. Now you just have to set a framework with a clear goal.”

Houdini is in an industry where new technology is constantly emerging, including improved fibers that make clothing lighter or easier to recycle. Tariffs, mismatches in global regulations and fickle customer tastes also raise the need for more engaged and flexible leadership heading into 2020.