Examine risk and treat all CXO appointments as CEO succession planning. Hiring organizations should look at every C-suite role through the risk lens: the risk in appointing a particular person and the candidate’s own risk tolerance. Good succession planning also looks beyond the role domain in play, considering the person’s potential as a future CEO. 

Take a lateral approach to C-suite appointments. The domination of traditional C-suite roles does not imply a traditional approach to filling them. As well as 7 core characteristics identified by Amrop, a good hiring process should include at least one ‘off spec’ candidate.

At global level, the legacy CXO domains still dominate. A 10-year analysis of Amrop data reveals a generally stable picture, with the core C-suite domains of Finance/Regulatory and General Management still the most sought-after.

Digitization is a volcanic force. Digitization has been re-shaping the ecosystem for some years. But today, given the twin forces of big data and AI, the rate of change is volcanic. Every CXO must address the implications on business models, operations and the commercial process. Digital know-how must be wired into the C-suite.

Everything begins with purpose. Strategy, vision: culture, values and sustainability determine the organizational story and must lead the composition and operation of the C-suite team. These factors also play a vital role in attracting and retaining top people.

Strategy must drive C-suite team design, not vice versa. Role proliferation and restless organizational redesigns may be a symptom of organizational drift. Again, structure must follow strategy, not vice versa. Ill-conceived roles are set for extinction.

The core C-suite domains should still suffice — and the CHRO must rise. Core roles should be enough for most organization types, our interviewees argue. Indeed, the Amrop data supports this viewpoint. Going forward, few companies will fail to include HR in their top team.

Engineering team dynamics: the C-suite must be fluid yet structured. Our interviewees support clear areas of responsibility and seamless interfaces, with role holders supporting and inspiring each other. But the C-suite still risks extremes: role ambiguity or silo thinking. The members of a well-composed team support but do not overstep each other. 

Now more than ever, the C-suite needs deep roots. CXOs must be integrated into the human fabric of an organization. This means resisting empire- and silo building, internal politics and the web of reporting matrices.

The importance of sustainability is soaring. Yet the ‘G’ of ESG has garnered less attention than its Environmental and Social bedfellows, according to the World Economic Forum. In a recent white paper, the WEF emphasizes the importance of leadership in Governance. This covers factors such as tone, knowledge, experience, power allocation and decision-making processes. The WEF¹ warns: “the comparative lack of attention on the G in ESG has led to confusion about the nature and role of corporate governance within ESG frameworks.” This matters because “In addition to being one-third of the ESG equation, the G is also foundational to the realization of both the E and the S.”

Get the CXO team right, and an organization’s sustainability performance benefits. This is less obvious than it sounds.

As the business environment becomes more complex, some have pointed to a proliferation of C-suite roles. Some suggest that companies will need more niche roles. But Amrop Partners believe that multiple role species at CXO level may signal strategic drift and cause confusion. Irrelevant roles have little chance of survival.

The context is transforming the business landscape. Is your top team ready?

All businesses are facing deep tectonic shifts. Digitization, for example, has been re-shaping the business landscape for years. But today, given big data and AI, change is volcanic. Every CXO must address the implications. Yet research by the Amrop Global Digital Practice² reveals a problem: only 30% of Chief Information Officers (and equivalents) really think that their board understands their challenges: “The step from vision to action is often missing, with support fading as hard questions of process and resources start to kick in.”

The data eruption is also transforming entire business models. Data-rich China is a powerful example, says one Amrop Partner. “Retail has gone from a distributive business to mass market modern trade, to e-commerce becoming history. Even streaming is coming down. It’s revolution after revolution.”

Never has trend-spotting and prediction been more critical or more difficult.

The impacts of data on the commercial process, too, has implications for the C-suite. “If we took the Chief Commercial level, selling is different now — it is much more a question of data,” says another Amrop Partner. “The impact with other roles is even more pronounced than on the commercial side. The Chief Revenue Officer has to address pricing, active revenue management, subscription models, new ways of interacting.”

Download the full report.  

Good CXO team composition can neither be organic nor formulaic. But there are guidelines

How can we pull these threads together? Good C-suite design requires a hard look at the organization’s context, based on a 5-year strategic view linked to its purpose, industry, targets and challenges.

But, how big should the C-suite team be? This Amrop Managing Partner does not believe there is a recipe. However, he does have some advice: “I’d say never go below five in your management team. And have one or two more people at the table so that you can really have the collective wisdom and enough time to think and strategize, rather than always being overburdened.”

The Amrop Partners argue that the core domains should serve most organizations and that the traditional ‘role species’ need preserving. The Amrop global assignment data confirms that Finance and Operations have remained stable over ten years. So, too, has IT/Digital. What of other roles? “Other CXO roles are a question of the smartest design for the next five years in terms of reaching your strategic goals,” a Amrop Managing Partner emphasizes. “It has to be geared and tailored to the situation.”

Change in the air for C-suite team composition.

As one Amrop Partner reports. “We now commonly have hiring organizations where the top level consists of two people: the CFO and CEO. At the same time, very much emerging are clients where the leadership team consists of 19 people.” He sees operational roles moving ever closer to the C-suite orbit to the point of becoming a C-suite role. Ultimately, he says, a CFO and COO should almost always be present, and few modern companies will fail to include HR: “in some shape or form. The companies where HR remains a box-ticking, or a legal, contractual, payroll exercise — those days are gone.”

What of digital know-how? This must be wired into the C-suite, even if it is embodied by a C-level role holder in only around ten per cent of organizations served by Amrop, according to Amrop’s own data. Whatever the case, all senior digital executives require board support. But as Amrop’s research demonstrates, this is often failing them.

Now more than ever, the C-suite needs deep roots

If C-suites need integrating with an organization’s strategy and higher purpose, the same goes for its human fabric: CXO’s must resist empire/silo building, internal politics and reporting matrices. An Amrop Partner: “I advise my candidates: if you want to be truly successful and happy, don’t waste time building silos and fighting internal politics and matrices. Ultimately you serve the consumer by helping your sales team, your finance team, HR, supporting others and enabling them.”

Engineering team dynamics: the C-suite must balance fluidity and structure

Our interviewees generally support clear areas of responsibility and seamless interfaces at CXO level. But the C-suite risks extremes: role ambiguity & blurred boundaries, versus silo thinking & rigid walls.

Given today’s need for agility, are relationships between C-suite members becoming more fluid, signaling the death of the silo? Not so fast, says one Amrop Partner. “The good thing about silos and compartmentalizing is that you know ‘this is your responsibility’ and that you shouldn’t meddle with ‘this person’s responsibility over here’.”

“We’re a long way away from silos, thank goodness,” says an Amrop Board Member. “It’s definitely becoming more fluid. And there are times where one could say roles are getting a bit blurred, because people may overstep their boundaries. And so, they just need to be reined in.”

Role ambiguity signals shaky architecture, one Amrop Managing Partner insists. Without clear roles and responsibilities underscored by a sense of meaning, “it’s not a good organizational structure.”

But balance is not self-evident

With structure and fluidity comes cross-fertilization as domain owners translate their specific knowledge into an over-arching business strategy. But there is a problem: mental shortcuts. As one Amrop Partner puts it. “Even though we’re a smart bunch, we tend to compartmentalize things in order to understand them. Not out of bad intentions or a lack of values in terms of understanding the need for fluidity, but simply because in understanding every possible type of risk that could hit this company you couldn’t do anything else. And it would burn your mental capacity just thinking about it.”

Nonetheless, some binomes should be cultivated, according to this Amrop Board Member: “Some of the most successful companies have a strong relationship between the CEO and the CHRO, the CEO and the CFO, and the CEO and the COO. Those three are absolutely critical to the success of the leadership team and CEO.

Apart from content expertise, what are the Amrop interviewees looking for in candidates? Seven core characteristics emerge:

• Purpose
• Credibility
• Gravitas
• Resilience
• Risk tolerance
• Relationship building
• Transformational leadership

View all appointments through the risk lens, with CEO succession in sight

As an Amrop Board Member puts it: “Firstly, what is the risk in appointing this over that person? Secondly, what is their risk tolerance in dealing with the situation they would be stepping into?” Succession planning also means looking beyond the role domain in play during a hire. “Often on a C-suite search our clients want us to look at people who could be successors to the CEO, for instance. So, in any senior role, think of this person also in terms of what development they would need over the next five years to be a contender for the CEO role.”

Exercise lateral thinking in C-suite hiring

“I think we in the search community have a role to play whereby we can challenge the thinking of our clients too,” says the Amrop Board Member. “My objective in any senior role is to have at least one person who is not on spec — who is different, who can truly challenge his or her thinking. Because companies don’t know what they don’t know until they explore what someone could bring to the table differently than where they’ve historically gone.”

Look out for further articles in this series: the evolution of the CEO, CFO, COO, CHRO and CIO

Sources:

¹ ‘Defining the ‘G’ in ESG; Governance Factors at the Heart of Sustainable Business’ (June 2022).

^2,5 ‘Digitization on Boards 4th Edition (2021)’. The Amrop Global Digital Practice.

³ ‘The Amrop Talent Observatory (2021).’ A survey of 443 senior executives from all world regions.

⁴Fernández-Aráoz, Claudio, et al, ‘The High Cost of Poor Succession Planning: A better way to find your next CEO’. The Harvard Business Review, May-June 2021.