Leaders Are Losing Confidence In Their Executive Teams. Here’s Why

Article

1月 19, 2023

6 min read

Leadership Environmental, Social, and Governance Transformation Innovation Board and CEO Advisory C-Suite Succession CEO Succession Team Effectiveness

Executive Summary

Leaders’ confidence in their executive teams—their capabilities, behavior and management of critical issues—has fallen. We explore why.

Since the onset of COVID, many leaders proved their ability to overcome obstacles and confidently steer into the unknown. Yet, as we now settle into a new normal and a new economic reality, is this resilience now running out?

Our new Leadership Confidence Index shows leaders’ confidence in their executive leadership teams (ELT)—their capabilities, how they manage critical issues, and how they behave—has trended downwards between early 2021 and the end of 2022—falling 4.9 points.

A closer examination of the data, comparing the responses of CEOs, other C-suite leaders, next-generation leaders, and board directors, reveals three key findings. All have important leadership implications.

CEO confidence takes a big hit.

CEO confidence in the ELT has seen the sharpest fall, driven in part by CEO concerns about executives’ readiness to embrace the opportunities of tech transformation and sustainability.

Team dynamics and behavior a top concern.

Leaders are increasingly skeptical about how well the ELT works together as a team, embraces change, and role models the right culture.

Next-generation leaders at risk.

Next-generation leaders have the lowest levels of confidence in the ELT, creating retention and succession risk for organizations.

Methodology—How we track leadership confidence

The Leadership Confidence Index captures the view of CEOs, C-suite leaders, next-generation leaders (those 1-2 levels below the C-suite), and board directors on the effectiveness of the executive leadership team (ELT) at their organization across three constructs:

Capability. Does the ELT: have the right capability to lead the organization successfully; a strong grasp of competitive dynamics in their industry; access to the right information to support decision making; and receive good advice and input from the supervisory board?

Behavior. Does the ELT work together effectively as a team; effectively embrace change; and role model the right culture and behaviors?

Issue management. Does the ELT: effectively embrace the opportunities of digital transformation; effectively embrace the opportunities of ESG; have a successful strategy for leadership succession at the C-level; implement practices to improve diversity, equity, and inclusion?

Responses to these items are combined into an overall Leadership Confidence Index on a 100-point scale, as well as a sub-index on each of the three constructs.

CEO confidence takes a big hit

Who CEOs surround themselves with has big implications for organizational performance. Clearly, CEOs need confidence that their top team has what it takes to drive the business forward, make smart decisions, and successfully navigate existing and emerging threats.

Unfortunately, our index shows CEO confidence in the ELT has fallen sharply between early 2021 and late 2022 down from 74.2 to 65.7 (an 8.5 point drop). This is the biggest confidence decline across all leaders we measured (boards, CEOs, C-suite, and next-generation leaders).

CEOs are losing confidence in their executive teams

Leadership Confidence Index - CEOs

^{Source: Russell Reynolds Associates’ Q2 2021 Global Leadership Monitor, n = 1,327 CEOs, C-level leaders, next-generation leaders, and non-executive board directors; Q2 2022 Global Leadership Monitor, n = 1,590 CEOs, C-level leaders, next-generation leaders, and non-executive board directors; Q4 2022 Global Leadership Monitor, n = 1,690 CEOs, C-level leaders, next-generation leaders, and non-executive board directors}

CEO confidence is down across all three of the constructs we measure—executive capability, executive team behavior, and how the executive team tackles critical issues.

The largest decline is on issue management (10.7 points), with CEOs particularly concerned about the ability of the ELT to embrace the opportunities of digital and ESG.

As CEOs face a more constrained economic context, the ability of the ELT to embrace change, and drive forward digital and sustainability initiatives will be key to resilience and success.

Digital transformation and sustainable leadership are not set-and-forget processes. They require long-term prioritization, monitoring, and intervention from the top. We know that the most successful organizations focus heavily on thorny issues like these, even in times of volatility and uncertainty.

Does your leadership team have the necessary skills and experience to capture opportunities in 2023?

Leadership team behaviors and dynamics a top concern

The way senior executives behave has critical implications for team cohesion and culture—and their ability to lead the organization and its people. Whether an executive leadership team pulls together or pulls apart determines whether or not an organization can meet its strategic objectives and deliver stand-out performance.

Yet it appears the strain of leading in a hybrid world, the multi-dimensional nature of goals in an era of stakeholder capitalism, and new economic pressures mean that many leadership teams are starting to fray at the edges.

Across all leaders, confidence in ELT behavior declined 8 points between H1 2021 and H2 2022, with CEOs and next-generation leaders reporting the biggest falls.

In our index, our measure of ELT behavior focuses on how well executives work together as a team, how well they role model the right behaviors, and how well they embrace change.

Interestingly, even C-suite leaders themselves, who make up the executive leadership team, are growing increasingly pessimistic about ELT behavior.

CEOs and next-generation leaders saw the biggest falls in confidence in ELT behaviors

Confidence in ELT Behavior - by role

To succeed, CEOs must effectively conduct the executive leadership team—and this is both a matter of deploying their individual skillsets and expertise and ensuring they function together as a cohesive unit.

How are you creating strategic alignment and cultural cohesion within your leadership team?

Next-generation leaders at risk

Organizations need strong succession pipelines to create collective resilience, agility, and depth of leadership. This is not just about hiring next-generation leaders with future-oriented skills and experience. It is about engaging, retaining and developing them, too.

In our index, next-generation leaders’ confidence in their ELT remained relatively stable into H1 2022 but has fallen notably in H2 2022. It is now down 5.6 points since 2021.

In particular, next-generation leaders are growing concerned about ELT behavior (down 8 points) and how the ELT is managing critical issues (down 7.8 points).

Next-gen leader confidence in ELT behavior and issue management falling fast

Leadership Confidence Index - Next-Generation Leaders

Our research shows that next-generation leaders, who sit one or two levels below the C-suite and are typically tasked with executing the strategy that comes from the ELT, are growing concerned about how the leaders above them role model behaviors, operate as a team, and manage change.

Their current confidence levels are a red flag for engagement and retention, creating a real risk for C-suite succession planning.

How are you working to engage and develop your next-generation leaders?

Where next? How to ensure you have the right leadership team in place

With the tumultuous economic and social times that lie ahead for many organizations, it is critical that CEOs think carefully about the capability and culture of their executive team. This includes identifying any emerging gaps in skillsets, forensically reviewing succession pipelines, ensuring an engaged and productive culture, and keeping a careful watch on how they can best ensure their business is able to adapt to new changes and dynamics.

Three critical questions CEOs should be asking themselves to better understand the quality of their organization’s leadership team:

Does your leadership team have the necessary skills and experience to capture opportunities in 2023?
How are you creating strategic alignment and cultural cohesion within your leadership team?
How are you working to engage and develop your next-generation leaders?

At Russell Reynolds Associates, we can help your organization to succeed by:

Identifying and investing in the right leaders for your C-suite using our decades of executive search experience
Carefully examining the capabilities of your existing C-suite and benchmarking them against the current market
Carrying out executive assessments which look at how your executive team lead and their likely impact, their strengths, and areas for improvement
Psychometric testing to look for positive leadership traits and any potential behavioral derailers

To get a deeper understanding of the capabilities of your C-suite and uncover which gaps you need to plug, request a consultation with one of our C-suite success experts.