Route to the Top 2022

The relentless events of the past two and a half years have delivered shock after shock to companies around the world. Leaders and companies have had to manage the impact of the ongoing COVID-19 pandemic, increased global calls for social and racial justice, and increased regulatory disclosure requirements related to sustainability. And the war in Ukraine continues to evolve in an unpredictable manner, with tragic outcomes for people and myriad impacts on economies and businesses.

As trust in governments is eroding, companies and their leaders are expected more than ever to step into a role in solving societal issues. In an environment of increased uncertainty, in which more stakeholders are demanding influence and many societies are becoming increasingly polarized, more is at stake. In the vacuum of political leadership and volatility across many countries, more is expected from CEOs in particular as the ultimate representatives of both their companies and the business sector in general.

CEOs in most markets are expected to speak on behalf of their companies on any issue. There is no doubt that the effects of the events of the past several years are playing a major role in trends both positive, such as diversity initiatives, and negative, such as the growing workforce fatigue, as well as a wide range of other challenges that companies face, from climate change to economic volatility.

But, as the role of the chief executive becomes more complex and demanding and requires more resilience, it could become less appealing—even for seasoned executives.¹ We saw a slowdown over the past two years in the rates of CEO appointments in all but 4 of the 25 markets we have been tracking.

However, one-third of the companies in our study have appointed a new CEO since January 1, 2020, which underscores the continued need for change even in the midst of volatility. Our research shows that the newer cohorts of CEOs, those appointed over the past three years, are bringing more diversity and fresh perspectives into the role and shifting the needle on the overall profile of the CEOs in our study.

For this report, we also looked in detail at the backgrounds of all of today’s sitting CEOs. We sorted them by the level at which they entered the company of which they became CEO, and we found five points of entry, or “on-ramps”: those who joined their company as the CEO or from the board of directors; those who founded their company, those who joined their company as the CEO, those who joined the company as a direct report to the CEO, those who joined as another senior leader, and those who have a long tenure at their company. These five groups bring different mixes of expertise to the table, and we hope that providing this perspective will help boards and CEOs shape their CEO succession planning efforts to meet their current, and future, needs, whether they are planning for a near- or long-term succession.

Key findings

Looking forward

The CEO today needs more than ever to be ready for anything, from dealing with crises to empowering employees to navigate the changing expectations of boards and a growing range of other stakeholders. We have seen a small but increasing number of boards looking at CEO succession through the lens of strategy and scenario planning, putting in place multiple contingencies for different contexts and time horizons, from CEOs who will retire in the role at a planned time to a number of emergency CEO succession options.

By viewing CEO succession as a living mechanism that continuously assesses potential candidates for the top role, these boards are giving themselves the best chance of success. In that context, understanding the different characteristics and routes to the top for executives who start at the company at different times gives boards another lens to understand their options. Because the majority of CEOs were promoted internally, albeit, at different stages of their careers, leadership development should be seen as a key instrument in shaping and retaining the necessary leaders. However, other research we have conducted shows that among executives not in human resources, only 16% consider their company to be industry-leading or world-class at placing people at the executive level, and only 14% think that their company’s executive learning and development programs and succession planning efforts are mostly or entirely connected. Among HR leaders, less than a third say their company’s leadership development programs are mostly or entirely connected to their succession planning processes.² This suggests that many companies have a long way to go in integrating these efforts. Furthermore, we believe that integration should extend all the way to the board’s work in defining CEO roles for various future scenarios—which of course differ significantly by industry and region, despite the fact that global companies face many similar pressures—as well as ensuring the company has processes to build the necessary capabilities for each.

We believe that integration should start by driving CEO succession planning deeper into the organization. Our analysis suggests that boards that dive at least to the pool of executives two levels below the C-suite—and ensure that that pool includes people with the right mix of experience, capabilities, and perspectives—will develop a larger internal group of strong potential leaders. These findings also highlight the importance of early talent detection systems.

These efforts will work best when they are complemented by tailored leadership development, transition, and onboarding for each CEO and potential CEO. A clear set of career paths may also ensure that home-grown potential candidates will be more motivated to stay with their companies. When boards bring CEOs straight into the role, their focus should be on using onboarding in the most effective way to allow the new CEO to learn very quickly how the organization works, as well as to build networks and teams to complement his or her particular mix of expertise and capabilities. And as more companies seek to become more global, many will need to reconsider regional traditions in CEO hiring and succession planning.

In essence, we hope boards will use these findings to help them understand the advantages and disadvantages of every route their new CEO may emerge from as they assess their options.

Acknowledgments

Thanks to the following Heidrick & Struggles’ colleagues for their contributions to this report: Alice Breeden, Bonnie Gwin, Jeremy Hanson, David Hui, Jeffrey Sanders, Claire Skinner, and Lyndon Taylor.

References

¹  A new Deloitte study found that almost 70% of C-suite executives surveyed are considering leaving their jobs for a role that better supports their well-being. See Steve Hatfield, Jen Fisher, and Paul Silverglate, “The C-suite’s role in wellbeing,” Deloitte, June 22, 2022.

²  Analysis of proprietary data from a survey of 101 human resources executives and 150 executives in other functions conducted in the summer of 2022.