In terms of activity in the market, we are anticipating a significant change in leadership over the next 24 months. Comparing FY21 to FY20, we have seen a 7% increase in ASX CEO appointments and a more notable 67% increase in ASX Chair appointments.
CEOs have been essential in steering companies through difficult times. However, as we now see some light at the end of the tunnel, we are anticipating an increase in movement. In comparison, there has been significant turnover in the Boardroom, Chairs in particular. Some have taken the opportunity to expedite their planned Chair transitions, electing to keep the CEO through the challenging times to allow for a smoother change of the guard.
In terms of ASX300 CEO gender diversity, there has been no significant change in the last 12 months; the percentage of female CEOs slightly increased from 6% to 7%. The ethnic diversity of ASX 300 CEOs over the last 12 months stayed at 4% (non-Caucasian). Interestingly, 90% of CEO appointments for top companies are for candidates 55 and under. Companies with a greater market capitalisation generally appoint older candidates as CEOs, i.e., closer to 50 than 45.
The gender diversity in ASX300 Chairs stayed at 9% (despite the significant turnover) over the 12 months. Non-Caucasian Chairs had slightly increased representation from 1% to 2%. In terms of diversity in experience, there are strong arguments surrounding the need to attract people who have an appreciation for the broader eco-system their company operates in and how this can help them pivot or grow into new markets.
In terms of the Boardroom, a balanced Board composition which includes a combination of industry experience, adjacency, exposure to target growth and relevant international markets has been put forward as what should be acceptable. We are seeing an emphasis on new Board Directors coming from entrepreneurial environments and those with the ability to address a “digital future” recognising the rise in prominence of AI, robotics, blockchain, the metaverse and virtual reality. Over recent years following Royal Commissions in different industries, there has been a strong focus on risk and corporate governance backgrounds. Now, there is an appetite for those who have had extensive P&L leadership positions, such as Chief Executives, to join Boards and contribute to turnarounds or efforts to enter or acquire new markets.
The number of Board meetings being held is also under consideration. There are discussions surrounding lessening the number of Board meetings supported by points such as the workload placed on Executives in preparing Board papers being excessive, the time requirement of Directors could be used better, the perceived and actual trade-offs between monthly and quarterly insights and the opportunity as a Director to meaningfully engage with and observe the nuances of the business outside of the Boardroom may be more beneficial. An alternative being proposed is having fewer Board meetings throughout the year but over a few days, supplemented with on-site engagement. Another question being put forward is should Board meetings continue via video? There is now a strong feeling in some circles to resume in-person meetings to not only better capture the contributions made by respective Directors but to illustrate support to the executive leadership team, that “we are in this together” as they too go ahead and commence the call back for their team members.
A number of female leaders have shared their concerns about the future of work and senior opportunities for women. They have expressed their worry that men will be more likely willing to return to the office rather than work at home and that women will continue under flexible arrangements balancing work and home. The concern is they will plateau and not advance, simply by being “out of sight and out of mind” noting the difference in the quality of engagement with video calls versus face to face. Secondly, the proposition of just doing your work over your day is positive for most but there are limitations to it when discussions, debates and decisions are in play. “The team need to get things done over the individual” was the comment made by a senior executive.” Having days beginning and ending at alternate times has its benefits to the individual but can be a disaster for the team and potentially for the individual. The pace of work is getting quicker, not slower.” No doubt video platforms have had a positive impact, allowing business to continue, and changing the dynamics of engagement and work but there are concerns over longer-term positioning and engagement, particularly at the senior level. This will impact both the executive leadership and longer-term Board composition from a gender diversity perspective.
Having been in the pandemic for the last two years – a significant amount of time – leaders have had the chance to “show their wares.” As some would say, the time to make or break and for others, to leave a lasting legacy. Employees are evaluating the bigger picture and their place in society. They like external stakeholders are examining the performance and vision of their current leadership. There’s a significant trend happening with regard to really wanting to be part of an organisation that provides more than return to shareholders or profit. There are conversations around purpose and whether leadership inspires confidence in assuring true alignment with their values, i.e., “Do I trust the leadership to take us in the right direction? Are they capable of doing that?”
The Great Resignation phenomenon is a little exaggerated at the top level in Australia but the movement of senior executives is up and is in part a consequence of the working and living conditions created to adapt to COVID. We have seen a notable increase in movement, particularly in the US and other international markets. In Australia, we anticipate continued turnover, whether it’ll be as widespread as in the US remains to be seen. This is naturally more prevalent in junior roles to middle management, where the bulk of the workforce is. However, one can’t be quick to dismiss the themes and the repercussions at the senior level.
As we’ve learned in the past year after a record number of Executive and Board assignments, a lot of top-level individuals are more than happy to have the conversation. The level of curiosity surrounding opportunities has dramatically increased. At the senior executive level, we are seeing the “Great Consideration” more so than the Great Resignation. Executives are taking calls from home, away from the boss’s line of sight and are considering their options more deliberately than previously. Seeds of doubt are being sown across the executive landscape and people are weighing up their future. We are also seeing the early departure of those approaching retirement deciding to “call it a day” ahead of schedule.
Loyalty is being tested. With the widespread restructures we’ve experienced as a result of the pandemic, there are questions around organisations’ loyalty to their people and vice versa, loyalty to those organisations who went the extra mile. As some have argued there has been a short memory on both sides of the fence. Phrases such as the “Great Reshuffle” may not apply fully to the senior executive ranks but the impacts in emphasising wage increases for simply moving on unfortunately doesn’t take into perspective the loyalty and hard work undertaken by many Australian organisations in doing their best to retain and support their people over the difficult times. The dialogue is consumed by arguments that the grass is greener in the new world and that the old world has little to offer in terms of acceleration of one’s career and remuneration. With immigration numbers substantially down the squeeze has been tight and as such value proposition, authenticity, and perceived silos in organisations are under scrutiny. Remuneration has increased and so has the bidding wars. Retention programmes are being ‘beefed up’ and succession plans are being revisited.
History and heritage, whilst nice to have, are no guarantees for ongoing success. People are seeking not just clarity but also action with conviction. “Culture has to be the glue,” but how does culture work and create an invisible DNA when a large element of the workforce is at home? This is a vexed question with solutions being proposed from all angles. The world has shifted and all organisations large and small are working through their answer.
Bearing in mind the need to execute, leadership is factoring in the advancement of the hybrid/remote working model, which has opened up opportunities for part-time/consulting work and a rethink on work-life balance. The merits of this model are obvious. However, as some have noted the discussion has been very heavily based on the individual, and are questioning whether enough has been taken into consideration with regard to the team? There is certainly debate happening behind closed doors around:
- Productivity of employees in the work-from-home model; and does it readily take into consideration what can be achieved in terms of contribution from a team together in one room or setting. Does video stimulate the same level of creativity? Many senior executives are questioning productivity but are mindful of the market narrative. Others argue the game has changed.
- Cultivating team culture and the benefits of the social aspect of work; Is it a team, or a bunch of individuals working and reporting in? and,
- Developing leaders for the future: how can one learn to lead and position themselves to be seen as a future leader through a screen? Some are saying we are creating a generation absent of leadership.
For some, the discussion is not balanced. No doubt the world has changed. As one CEO expressed “We are competing on the world stage and cannot lose sight of this. The narrative has been too insular”. “Adapt and lead. The way you engage has shifted and as a leader do you have the flex for the future? was the reflections of one Chair. “What does the return to office look like? Is on every leader’s mind, Is it back to five days, four days or even three days a week? What happens to the ‘flexible’ or remote arrangements?” We are also seeing organisations using this time to outsource elements of their workforce to offshore markets and introduce new technologies. Some are reviewing remuneration arguing why they should pay “city levels” to those who choose to live in regional locations.
With all this, the market is positive. There is a market feeling, of “game on”. It’s all about execution. As restrictions ease allowing ideas to be put into action, those that can execute with speed and discipline will be well-positioned to seize the opportunities that the market offers. For CEOs, execution is paramount. They will need to keep in mind that employees want to work for a “good organisation”, good in terms of ESG, purpose and will have to continually articulate and communicate this to attract key people. Agility of mind and preparedness to act on opportunities, understanding adjacencies and being immersed in the market are central to their and the organisation’s success. Whilst this sounds logical, the execution of such strategies depends very much on the effectiveness and engagement of the Executive team. To attain this at the level of commitment required, the right signals have to be sent to inspire confidence internally and externally. Market challengers can narrow the gap; market leaders can leave others in the dust.