Has your C-suite changed to reflect the changing times?

Authors

EYQ

EYQ is EY’s think tank.

By exploring “What’s after what’s next?”, EYQ helps leaders anticipate the forces shaping our future — empowering them to seize the upside of disruption and build a better working world.

John de Yonge

EY Global Markets EYQ Global Insights Director

Analyst and thought leader focused on disruption, sustainability and megatrends. Proponent of innovation for meeting global resource challenges. Skier. Fly-fisher. Tae kwon do black belt.

6 minute read 24 Sep 2019
Related topics Growth Risk Disruption

Delivering growth requires leaders to take a hard look at the structure of the C-suite and how it operates.

The market demands that large companies innovate differently, embrace digital, create ecosystems and transform customer relationships at a breath-taking pace. Succeed, and the rewards may be exponential; fail, and irrelevance quickly follows. With disruption raising the stakes, shouldn’t the C-suite be optimally structured to rise to the challenge?

Yet our research shows most CEOs, board directors and institutional investors from the world’s largest companies and institutions believe that the current C-suite model fails the test.

In this final article of our CEO Imperative series, we find fixing that requires more than merely adding more roles with a “C” in the title. Companies must actively address how leadership teams operate by examining fundamental issues of hierarchy, agility and the elimination of organizational silos.

“The heat is on CEOs and their C-level teams,” notes Gil Forer, EY Global Markets Digital and Business Disruption Lead Partner, and EYQ leader. “The list of imperatives — from digital, to customer, to global challenges — does not diminish, and responding successfully will require C-suites to undergo substantial change.”

C-suite model not suited to the demands of the next decade

Today’s C-suite model is a legacy of the post-War period, a vastly different time. In 1964, the average tenure of a company on the S&P 500 was 33 years; today, it is 22 years and headed to 12 years by 2027. It’s no wonder then, then, that two-thirds of our study participants conclude that the legacy C-suite model is not well-suited to the imperatives of the next decade.

CEO imperative 3 graph 1

Rapid change in C-suite titles

C-suite change has come mainly by companies adding new roles to bring organizational focus to new market challenges. This practice continues apace — 82% of CEOs report adding a C-level position in the last five years. The additions telegraph new C-suite priorities: innovation, digital and strategy. 

CEO imperative 3 graph 2

More C-suite role change is on the way

More change to the composition of the C-suite is on the way as companies grapple with fast-emerging new imperatives — almost three quarters (72%) of CEOs in the study say they are currently considering changing or adding C-suite roles.

CEO imperative 3 graph 3

Looking ahead to the next five to 10 years, survey participants identified a set of new C-suite capabilities that will be critical to continued growth. Chief among these are digital transformation, artificial intelligence, innovation and data science. Behavioral science, increasingly recognized as an important capability for improving customer experience and product adoption emerges in the top five.

CEO imperative 3 graph 4

New challenges for the CEO

These new capability requirements make the CEO’s job even harder, respondents said, by requiring them to have expertise in many areas that were not formerly in the realm of their expected competencies. CEOs must be able to develop and access a broader ecosystem — bring the outside in — to fill knowledge and capability gaps and surround themselves with people who bring all kinds of diversity to ensure more innovative outcomes.

“Gone are the days of Peter Drucker and the belief that anybody can be a CEO of any company,” said the former CEO and Chairman of Quest Diagnostics, Surya N. Mohapatra, now an independent director of Xylem Inc. and Leidos. “In the time of the Fourth Industrial Revolution, where technology and expertise matter, you have to have industry experts or sector experts to move really quickly. The next CEO, apart from having the qualities like integrity and high values, has to be a subject matter expert.”

New approaches to C-suite transformation

So, is remixing the composition of the C-suite the best way to respond to fast-changing markets? Our study participants suggest other kinds of changes to the C-suite model are needed to thrive in the next decade.

Less hierarchy; multi-stakeholders

“It can no longer be just about the CEO,” Mohapatra says. “Boards are going to get more and more involved in talking to investors, and with the CEO and the management. As a result, the C-suite is going to become at a minimum a hybrid C-and-B-suite. But eventually it will become a multi-stakeholder suite where the investor has a say, the customer has a say, along with the board and CEO. You may have a rotational CEO.”

Ute Gerbaulet, General Partner at Bankhaus Lampe, and Supervisory Board Member of RWE, also predicts change. “The very hierarchical C-suite is going away, even in traditional family-owned companies. Management is becoming more transparent, more in communication with people. It is more about a shared purpose.”

Greater agility; breaking silos

“In some cases, I’m not sure that the traditional structure of the C-suite is best suited for the future,” says World Wide Technology CEO Jim Kavanaugh. “If the decision-making process is too slow and cumbersome, that could be problematic for organizations. As markets move and get digitally disrupted faster than ever, organizations need to make sure that they have the right level of governance and structure in place that’s tied to a more agile, nimble and creative organization.”

The CEO of Mashreq Bank, Abdul Aziz Al Ghurair, says: “The way organizations are run should change dramatically because we are still driven in silos. Being agile means that you put the product, the sales, the marketing, the operation, the risk and the technology as one group.”

Al Ghurair warns: “There will be a lot of resistance from within the organization because it just destroys all the organization's structure that you have, and you rebuild it all over again. And in this process, you may even need a different caliber of people, because some people may not be fit to run that new role. People are scared of these changes.”

Ask yourself: Does your C-suite need overhauling?

Given the increasingly high stakes of executive decision-making, now is the time for business leaders to assess their C-suite in light of the challenges and opportunities likely to present themselves over the next decade.

“Amidst the upheavals rewriting the rules of business strategy, yesterday’s leadership model isn’t likely to work tomorrow,” observes Michael Kanazawa, EY Global Innovation Realized. “CEOs and their C-level teams must broaden their horizons, looking beyond current market drivers to capture a fuller, more dynamic picture of what a less obvious future may hold. C-suites must develop the governance and agility to innovate nimbly against this intentional view of the future.”

The C-suite assessment must go beyond roles and responsibilities and consider more fundamental issues of hierarchy, agility and organizational silos. Business leaders will likely find the legacy C-suite structure to be wanting in important dimensions. Here are some key questions to consider:

  • What new C-suite capabilities do you need to ensure continued growth? Is adding new C-level roles the best way to acquire them?
  • Is your C-suite too big to support agile decision-making? Do C-level roles break silos or contribute to them?
  • Does the governance and structure of your C-suite promote agile decision-making in line with the pace with market change?
  • How can you embrace the demands of a broader set of stakeholders to have visibility and input into corporate decision-making?
  • What expertise is critical for the CEO to possess? How can that role be bolstered with diverse, outside-in perspectives?

Summary

C-suites must become less hierarchical, more agile and considerate of a broader set of stakeholders to deliver growth in the face of new business imperatives. The stakes for executive decision-making have never been higher: succeed, and the rewards may be exponential; fail, and irrelevance quickly follows.

About this article

Authors

EYQ

EYQ is EY’s think tank.

By exploring “What’s after what’s next?”, EYQ helps leaders anticipate the forces shaping our future — empowering them to seize the upside of disruption and build a better working world.

John de Yonge

EY Global Markets EYQ Global Insights Director

Analyst and thought leader focused on disruption, sustainability and megatrends. Proponent of innovation for meeting global resource challenges. Skier. Fly-fisher. Tae kwon do black belt.

Related topics Growth Risk Disruption