As leadership attributes evolve in a constantly changing world, so does the focus of effective leaders.
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In a new study, The Changing Ranks of Corporate Leaders, Professors Peter Cappelli, Rocio Bonet and Monika Hamori examine attributes of the 10 most senior executives of Fortune 100 companies and compare how they’ve changed from 1980 to 2021. During this period, many characteristics of the businesses and the people who run them changed.
For example, manufacturing and utility companies gave way to financial services, technology and retail, representing a shift in focus from physical to intangible assets. A study by Ocean Tomo, highlights that intangible assets as a percentage of corporate valuations grew from 17% in 1975 to 90% in 2020.
Companies studied by Cappelli et al. became much larger on average in terms of number of employees (165,000 versus 89,000, an 85% increase) and revenues ($85 million versus $11 million, a 672% increase). While some revenue gain was due to inflation, the majority likely resulted from worker productivity, increased reliance on technology and other factors. Arguably, these changes in scope and efficiency had a material impact on the role of leaders.
Top leaders became more diverse with broader experience than in 1981. For example:
There were significantly more women (28% versus 0%), foreign-born executives (15% versus 2%) and outside hires (26% versus 10%).
Company tenure decreased (12.7 versus 18.8 years).
Outside work experience increased (15.1 versus 10.2 years), with more industries experienced (2.25 versus 1.35), more employers managed (3.3 versus 2.2), more MBAs (36% versus 14%) and more leaders with a background in finance (35% versus 19%).
More leaders spent time outside the Fortune 100.
What didn’t change materially was:
The age of top leaders (55.2. versus 55.6), their years of education (17.8 versus 16.8 years), or how many years it took to get to the top (27.6 vs. 28.0 years)
Tenure in current job (3.8 versus 4.0 years), though this may have changed during the pandemic due to broad shifts in the leadership workforce
In parallel with this evolution, WTW research and discussions with clients suggest the focus of top leaders has also changed markedly in five key dimensions:
Emerging geopolitical and interdependent risks. WTW’s Lucy Stanbrough writes in a recent article that future-prepared firms – those that have invested in building corporate foresight units – outperform the average with 33% higher profitability and 200% higher growth.
Particularly relevant this year, The Economist called 2024 “the biggest election year in history,” with national elections scheduled in more than 64 countries and concurrent perils including war and territory conflicts, social stability, supply chain, reshoring/offshoring, regulatory change and international investment shifts. Effective leaders factor geopolitical trends into their intelligence monitoring to identify opportunities for growth and risk mitigation, preparing to act quickly and decisively when events occur.
Increased focus on health and safety as well as technology risk. WTW’s 2024 Global Directors and Officers Survey Report identifies the top seven risks across more than 50 countries. Health and safety emerged as the top risks, followed by technology-related risks. New list entrants included systems and controls, and breach of sanctions. Effective leaders adopt an enterprise-wide approach to analyzing emerging risks and create new approaches to mitigate them.
Impact of artificial intelligence (AI) and new technologies. Effective leaders understand automation: The more sophisticated and complex technology gets, the more vital human users become to its operation. While AI isn’t new, advancement of the technology through generative AI has been so rapid that many business leaders have had trouble keeping pace with the changes.
Effective leaders govern the use of AI and other technologies effectively and ethically during these early stages, including:
Keeping technology honest, accurate, ethical and legal
Keeping confidential information safe
Maintaining transparency, providing context
Addressing bias and ensuring humans are in the loop in key functions
Skill shortages (and new skills). Even as talent markets stabilize in 2024, effective leaders manage hot jobs and high-demand skills deliberately and thoughtfully to avoid skill shortages and escalating labor costs. WTW’s 2024 Hot and High-Demand Jobs Report identifies the top job categories to watch, including AI, information and cyber strategy, technology/digital product ownership, technology strategy and user experience.
Outside of tech roles, the research shows hot jobs include general operations management (manufacturing), secretarial/executive administrative assistance and geophysics. Leadership skills also are in demand, such as cognitive flexibility, judgment and decision making, emotional intelligence, authenticity and critical thinking.
Managing volatility through stewardship. In today’s volatile and unpredictable world, disruption and risk have become mainstream currencies of business. Effective leaders recognize that risk plays a heightened role in routine business assessments, decisions and actions. They also understand that the time horizon for risk mitigation isn’t just a quarter or a year. A long-term view often requires a change of culture and steady stewardship – the careful and responsible management of assets, liabilities, intangibles and equity regardless of external factors.
Top leadership and the business environment have evolved over the past four decades; effective leaders must act as corporate stewards to preserve, protect and increase value over time.
A version of this article originally appeared on Forbes on July 25, 2024.
