June 18, 2012

Leadership Crisis Redefined: CEO Concerns Reflect Leadership Realities of a Rapidly Changing Market — Chief Execs Struggle to Identify a Successor Who Will Meet the Needs of the Future, New RHR International Study Finds

The top succession challenges weighing on the minds of chief executive officers reflect the realities of an increasingly competitive and unpredictable marketplace. When asked to identify the most difficult aspect of the succession process, a recent survey of 100 CEOs found that for over one quarter of CEOs (27%), their top concern is with identifying what kind of leader their organization will need in the future. Another 25% of CEOs were most concerned by worries over relinquishing the power and prestige that comes with the role. These were followed by creating a legacy to leave behind (19%), cultivating a fulfilling life after stepping down (16%), and miscommunication with the board of directors about succession decisions (13%). This bi-annual survey of CEOs from RHR International, a global executive talent development firm, reveals that corporate leadership is in an era of transition. Faced with an ambiguous future, CEOs are grappling with new criteria for effective leadership. At the same time, they are confident in the management practices that have faced increased scrutiny in recent years. "The top succession concern of CEOs reveals an important aspect of the executive mindset," said RHR International chairman and CEO Dr. Thomas J. Saporito, in a news release. "CEOs are less effective than they think at reading talent. Most importantly, CEOs struggle to combine this gauge of talent with an understanding of their organization's leadership requirements for the future. It is this combination of talent and fit that ultimately makes or breaks the succession process."

Other key findings of the survey include:

• CEOs Confident in Dual Roles: Despite increased calls for separating the CEO and chairman roles, 63% of CEOs say they would recommend a combined role for the next CEO of their company. CEOs understand accountability and the role of the board, and are unwilling to sacrifice leadership structures despite exploits of misguided CEOs. Nonetheless, as the media attention surrounding dramatic proxy fights and misbehaving executives intensifies, 50% of CEOs surveyed report that increased scrutiny of CEO performance affects their perceptions of their job security.

• Lead Director is Valuable Confidant: Feedback is crucial to CEO success, but difficult to find — particularly since CEOs often find themselves surrounded by advisors who tell them what they want to hear. Encouragingly, 84% of CEOs say that they have at least one individual they can go to who will tell them the unvarnished truth about their decisions and how the organization perceives them. The majority of CEOs (52%) report that this person is the lead director, followed by a member of their executive team (46%), and a non-executive board member (29%). (Note: respondents able to select more than one option). The role of the lead director is more crucial than ever as increased shareholder scrutiny and performance pressures keep boardroom tensions high.

• Loneliness is Part of the Job: The high-wire act of running a company is an experience no individual can truly anticipate until they are in the role. This unique position is often accompanied by isolation, and 41% of CEOs say they experience loneliness in their role as CEO. Public company CEOs are particularly susceptible to these feelings, with nearly half (47%) reporting feelings of loneliness compared to 31% of private company CEOs.

The CEO Snapshot Survey data collection was conducted online in March and April 2012 by Harris Interactive Service Bureau. It examines the opinions of 100 U.S. chief executive officers at public and private companies.