Wednesday October 1, 2014

Stakeholder Overload and Other Challenges

CEOs and boards will be up against enormous challenges that affect the very survival of their companies in the new year.

The New Year promises to be a year of “stakeholder overload” for corporate leadership. The growing number of constituents weighing in on company operations—going far beyond activist investors and shareholders to include many more regulators, local governments, NGOs and a host of special interest groups—is placing greater demand on leaders and on the corporate brand itself.

Never before has company news become so instant and transparent. Every single citizen/employee/customer has a camera and a microphone, and they are speaking loudly on their “virtual stage.” How do we handle an employee—or ex-employee—who has built up a personal brand online and is vocal about topics that may not align with the agenda and values of the company? Or recall the New York Times op-ed, Why I Am Leaving Goldman Sachs, in which a relatively junior employee decided to quit in a very public way. The piece, which implicated Chairman and CEO Lloyd Blankfein in the “decline in the firm’s moral fiber,” captured the front page of most newspapers. Corporate chiefs are increasingly facing this kind of direct attack on their leadership, which is incredibly magnified by social media.

Under this microscope, CEOs and boards will be up against enormous challenges that affect the very survival of their companies. Today’s hyper-competitive global market creates greater demand particularly in the areas of innovation and talent. Other top challenges will include:

  • Find new areas of growth. A key item on every corporate agenda going into 2013 is “where can we find growth around the world?” The last few years have been about streamlining and finding productivity improvements as the world has been in an economic shock. Now investors are asking, “Where is growth going to come from?” It will not be easy, and it is going to take a combination of M&A (consolidation and/or entry into a new product or market), innovation and invention. Those companies that can maintain their “lean and mean” operating structures while they invent and innovate will separate themselves from the herd. The “weak elk” will become more obvious in the next couple of years.
  • Leverage disruptive technology. Understanding the complete disruption that technology is causing across all dimensions of business is an absolute requirement for CEOs and boards. The New Year will demand even greater immersion in the threats and opportunities that technology is presenting to their business models and leadership. Social media, Big Data, mobile device dominance and the Cloud are only part of the story; innovations are really about a whole new way of thinking and operating and organizing companies in order to reach consumers and other stakeholders.
  • Develop truly global talent. The pursuit of global growth—through supply chains or consumer markets—demands a commitment to developing truly global talent that many companies are not yet making. There are a lot of expatriate programs, but not so many for repatriation; typically, another company ends up monetizing one’s investment in global talent, hiring the best people away once they’ve been trained. Additionally, with the massive push to “localize” talent, there are fewer and fewer opportunities for this development to occur. Creating a real plan for retaining global talent and expanding the growth opportunities for executives is a directive that, frankly, must come from the top.
  • Navigate talent (im)mobility. One of the toughest challenges in developing talent anywhere is the reality that fewer and fewer executives are willing to move, limiting the talent pool. Entire cities have formed around this—Minneapolis is a community where you see executives hop from one Fortune 500 company to another, with a strong reluctance to leave Minnesota. Companies are finding highly qualified candidates to apply for jobs but who then won’t commit to a move. This reality, however well-intentioned the reasons may be (usually family), makes it tough for companies to tap into a truly diverse and long-term talent pool.
  • Real succession planning. Boards are more demanding of CEOs around succession planning processes. They are demanding greater visibility down into the organization, more exposure to candidates in development and expecting updates on a much more frequent basis. This can no longer be a perfunctory activity where “we do a little” and everyone is happy, and then don’t actually have viable candidates if tested. CEOs and boards are being held accountable for truly having an operational succession plan where the company has options when they need them, which is usually not in the planned time frame.

To take on these and other issues, CEO-board engagement is going to be more important than before. Although coming at the challenges from different perspectives, CEOs and directors will have to have a real working relationship to effectively manage the multiple stakeholders and their sometimes conflicting interests.

Stephen Miles is CEO and founder of The Miles Group, which advises top CEOs and boards globally.

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