CEOs may not admit it publicly, but many are losing faith in their direct reports.
A recent survey by Russell Reynolds found that, compared to early 2021, chief executives of public companies are not as confident that their C-suite leaders have the agility it takes to meet today’s challenges. CEO trust that their team can model leadership behavior, another metric captured by the index, is also sinking.
Out of a possible 100 points on the Russell Reynolds’ Leadership Confidence Index, CEO confidence in top teams dropped from 74.2 in early 2021 to 65.7 at the end of last year.
“We're all coming out of this kumbaya pandemic,” Constantine Alexandrakis, president and CEO of Russell Reynolds Associates, tells Fortune. Last year, leaders felt pleased with their performance, especially in light of the extraordinary challenges. They thought: “Wow, that was a big deal, and we made it through. We built up our resilience. We can basically tackle anything,” Alexandrakis says. “There was a halo that developed over the corporate world.”
That warm glow didn’t survive 2022. How could it? In the years immediately preceding the pandemic, CEOs lost little sleep over geopolitical issues, inflation, interest rates, and faltering global markets, but those concerns and others came rushing to the forefront—at the same time—last year. “Everyone went through their budgeting and planning process and realized that it's almost impossible to plan for the unpredictability of 2023,” says Alexandrakis. Confidence took a hit as a result. CEOs now see weaknesses in their C-level executives’ ability to tackle hot-button issues like digital transformation, DEI, and climate change.
Although the survey reached more than 1,300 CEOs, the index is too new to tell us about lasting trends. The same speed of change that’s making CEOs nervous also means this survey could turn out dramatically different results six months from now, Alexandrakis notes.
However, the figures speak volumes about the current mood in the upper corporate ranks, and leadership pressures. For example, the index shows that the C-suite is facing heightened doubts from above and below. Next-generation leaders, who sit one or two levels below the C-suite, “are growing concerned about how the leaders above them role model behaviors, operate as a team, and manage change," the report states.
Interestingly, surveyed board members showed the greatest confidence in companies’ executive teams—which could be read as a bug or a feature. Perhaps directors are out of touch, too ready to believe the stories told to them about digital transformation or DEI progress at a company. A more optimistic take is that boards may be less vulnerable to short-term turbulence and its attendant concerns because directors consider long-term perspectives.
Either way, the index suggests that boards and CEOs need to act fast. Boards that do not deeply understand an executive team’s strengths and vulnerabilities must develop that now and build short-, mid-, and long-term succession plans. Boards must also help fill talent gaps and shore up skills in executives who are not inspiring confidence, Alexandrakis says. More importantly, CEOs must be optimistic about their teams’ abilities. “You don’t want to create a self-fulfilling prophecy,” he warns.
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
