Building a Future-Proof Automotive Leadership Team
Technology and InnovationTransformation InnovationLeadershipConsumerHuman ResourcesTechnology, Data, and DigitalAssessment and BenchmarkingDevelopment and Transition
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March 16, 2020
6 min read
Technology and InnovationTransformation InnovationLeadershipConsumerHuman ResourcesTechnology, Data, and DigitalAssessment and BenchmarkingDevelopment and Transition
EXECUTIVE SUMMARY
Software and technology continue to alter how automotive companies operate, bringing a change in leadership to handle this new dynamic.
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Whitin the next two to three years, we will change 80 to 90 percent of our senior leadership at the director level and above to reflect the impact of software and technology.
- SVP, Mobility at a leading global automotive technology company

Software and digitization have redefined the automotive/mobility industry

The mobility solutions of the future will require higher levels of data processing, communication between infrastructure and cloud-based systems and, critically, a different executive profile. Russell Reynolds Associates recently spoke with 13 senior automotive executives who are at the forefront of this transformation to discuss the implications for talent and leadership.

The total value of software in a passenger vehicle is expected to grow from approximately 10 percent now to 30 percent by 2030.1 This rapid growth and enhanced value proposition will put further pressure on automotive/mobility companies to attract and develop software and technical talent that can help them partake in this growth story. Identifying, attracting, retaining and developing blue-chip software and mobility talent poses a huge issue for both OEMs and suppliers.

The DNA of a future-focused automotive/mobility leader

Based on our proprietary executive data pool, we used our Leadership Span tool to benchmark the psychometric profiles of automotive C-suite executives against those in software and cloud, hardware and IoT, as well as cross-industry executives.

In general, the automotive executive group can be described as disruptive risk takers, who tend to operate behind the scenes rather than leading in a highly visible and galvanizing manner. Furthermore, the automotive executives “span” less across the competencies than their counterparts in technology and may thus be a bit less agile. This may indicate that they are in general more traditional in their approach or more used to operating and leading in a certain way.

About RRA Leadership Span

In conjunction with Hogan Assessments, Russell Reynolds developed Leadership Span, a unique assessment methodology that measures the ability of senior executives to span and adapt with ease to new situations.

Leadership Span is a proxy for agility, in that leaders who have higher span tend to be better at adapting and adjusting their leadership style and deploying different approaches as the business context changes.

AGILITY SHOULD BE IN THE AUTOMOTIVE LEADER’S DNA:

As automotive businesses seek to future-proof their business models, agility will be key. Automotive boards, CEOs and CHROs should therefore reflect on how they can embed individuals who “span” more broadly than traditional automotive executives. For example, not only do technology executives score higher on disruptive and risk taking, they score significantly higher on heroic and galvanizing.

FOCUS ON EXECUTIVES WITH A CUSTOMER-CENTRIC MINDSET:

With changing customer needs and preferences at the heart of the transformation of the industry, executives will need an increasingly customer-centric mindset to succeed. We know from our Leadership Span data that “customer activators” are pragmatic risk takers and team-oriented relationship-builders. This allows them to make fast decisions, course-correct and iterate quickly based on an influx of data and information. Their pragmatic nature means they appropriately filter this information and determine where to focus and when to pivot.

Automotive/mobility needs “future-proof” leaders with new skills
In addition to looking at our proprietary Leadership Span psychometric data, we spoke with several senior industry executives to find out what traits the future focused automotive leader has, and where the gaps are between the current automotive leadership population and the mobility leaders of the future.

Everyone we spoke with agreed that the current dynamics in the industry have manifested themselves in a more complex skill set demanded of automotive leaders. Historically, automotive players valued hiring leaders who were industry veterans, pragmatic revenue/growth-driven. Notably, future automotive leaders will need to engage beyond the automotive realm with automotive technology, the startup ecosystem and smart cities. At the core of all of the aforementioned lie changing consumer demands and expectations, which vary widely by region (and sometimes even by country).

In order to harness this kind of talent, automotive companies should today be looking at potential candidate pools outside the industry. For external hires from outside the automotive industry, each industry, as well as each function, will have pockets of strength—for example, the best talent in infotainment and telematics can bring world-class customer experience knowledge related to the connected car. The strategic agenda of the company, and the value-add needed by the hire in question, must inform which talent pool is to constitute the “bull’s-eye” for talent.

Three key steps to future-proof an automotive/mobility business

1 Enhance leadership buy-in

In our interviews, several executives addressed the concern that many C-level leaders and board members need a deeper understanding of software and its impact on the industry. According to Russell Reynolds Associates’ latest Digital Pulse survey, the automotive industry overall lags a bit behind other industries on the digital journey, especially when it comes to full organizational commitment to digital, the drive from the top and the ability to change and react fast enough.

Our advice on enhancing leadership buy-in

DIGITAL INITIATIVES SHOULD BE BACKED BY THE CEO AND DRIVEN “TOP-DOWN”:
Automotive CEOs need to reinvent themselves as software and technology advocates in order to allocate resources optimally, create board engagement, set out a clear agenda for transformation and redefine ownership between business functions. When planning out succession for future leadership, companies need to look for CEO candidates who span broadly (see page 4) and have an agile mindset. CEO candidates will increasingly have had exposure to software and digital enterprises as opposed to having spent their entire careers in traditional automotive.

INCREASE THE DENSITY OF DIGITAL TALENT IN THE ORGANIZATION:
The automotive industry not only needs to recruit an army of software engineers and data scientists to build in-house data/software capabilities, but also needs general managers and P&L leaders who can effectively understand and lead different parts of the business. Such leaders should bring knowledge of new business models and data monetization models from other industries.

BROADEN LEADERSHIP’S DIGITAL ACUMEN AND APTITUDE:
Automakers should actively broaden their current leadership team’s digital acumen. One solution is establishing a technology advisory board to provide advice and insights pertaining to a variety of evolving technological trends that impact the business. Ideally, the advisory board is comprised of members from diverse backgrounds and from other disruptive functions and industries. Exposing the advisory board to the broader group of executives can have a profound impact on the leadership team’s knowledge of the disruptive trends in the industry.

2 Define clear organizational ownership of the software transformation agenda

Similar to any other industry undergoing digital transformation, software initiatives and digital efforts in automotive companies often start with specific projects isolated within traditional functions. Digital teams are embedded in different functions of the organization and are not necessarily linked or driven by a common strategy. This type of “early adopter” structure helps the company develop go-to-market strategies quickly but could lead to potential issues in terms of consistency across the business and missed opportunities for digital synergies.

As the digital element becomes more complex, automakers will need to evolve into a “digital-native” mindset, where the digital strategy is set at the top of the organization and capabilities are embedded in all functions. It is critical that the strategy is well communicated and understood by the entire organization. A digital “center of excellence” (often led by the CTO/CDO) can be established as a standalone, cross-functional unit that links the business efforts in different functions that pertain to digital mobility.

CTOS AND CDOS NEED TO BE THE “CAPTAINS” DRIVING THIS CHANGE:
While CEOs and board members need to be sold on the benefits of the digital initiative, CDOs/CTOs should be elevated to the ExCo to advise on the possible advantages of particular software and technology. For the transformation agenda to succeed, CDOs/CTOs need to actively engage and manage stakeholders—including convincing the board and the traditional functions—as they invest in the future. When hiring for the next CDO/ CTO to be the change agent, companies need to assess for a disruptive mindset, personal impact and change management skills.

ALL LEGACY BUSINESS FUNCTIONS SHOULD BE INVOLVED:
As it becomes an increasingly table stakes strategic issue, it is crucial that not only the C-level executives have a clear vision for software, but that each function and department be fully equipped with both digital capabilities and the software talent to implement the strategy. Companies should not only place digital talent at the top, but also gradually embed digital brainpower across each legacy business function.

3 Transform your culture into one that is agile and entrepreneurial

Virtually all automotive executives identified two common pitfalls: the traditional “build-test-perfect” automotive culture and rigid compensation models. These two features currently prevent companies from being competitive in attracting and retaining top software talent as well as fulfilling the full potential in talent when integrating software leaders into the current automotive leadership team.

Like any organization undergoing transformation, culture is central to success. In order to cultivate a future-proof culture, the mindset in automotive companies must thus switch from being rigidly engineering-/product-driven to being more agile, flexible and decentralized.

When talent joins us from a small startup environment, their speed to move from concept to prototype testing can be as short as a few days or weeks. In automotive, they are finding that this method is challenging, as the processes take years and are incredibly expensive.
- CTO, leading global automotive technology company

 

Our advice on cultural transformation

ESTABLISH “INTERNAL INCUBATORS”:

Many automotive players have begun to adopt new strategies to tackle the culture issue, one being to relocate “disruptive” talent away from the HQ and to a tech hub (such as Silicon Valley) so they are in an entrepreneurial environment. Setting up local tech labs/centers allows automotive companies to promote entrepreneurship and recruit top-tier software talent directly from the front lines.

ALIGN MOTIVATION WITH SOFTWARE/DIGITAL STRATEGY:

C-suite leaders and HR must partner with software experts, internally and externally, to design KPIs that reward software innovation and the monetization of data. The compensation structure also needs to evolve from the traditional “base, bonus, equity” to an incentive- and equity-driven formula more aligned with the technology community.

PREPARING THE WORKFORCE FOR AGILITY:

In addition to redesigning the organizational structure and company culture, developing talent is the key success factor for agile transformation. Developing the skill set and mindset for agility within the current workforce and leadership should be among an automotive company’s top priorities. Senior individuals can get valuable experience by serving in board positions on startups (for example, the ones their business invests in).

SET UP NEW LEADERS FOR SUCCESS:

Once the right external talent has been identified and hired, it is crucial that they are empowered to create highperforming teams and provided with the right resources to execute on their mandate. This is paramount to the success of the new talent as well as their ability to have a positive impact on the organization.

Authors

DIANE GE is a member of the knowledge team for the Automotive Practice. She is based in Shanghai.
GRAHAM RUDDLE is a senior member of Russell Reynolds Associate’s Global Automotive Practice. He is based in Chicago.
PAUL STOHR leads Russell Reynolds Associates’ Global Automotive Practice. He is based in Minneapolis.
NATASHA TRESCHOW is a member of the knowledge team for the Automotive Practice. She is based in London.