10 Key Challenges for CEOs in 2013

The Miles Group

It’s never been a more difficult time to be a CEO,” says Stephen Miles, founder and chief executive of The Miles Group, which advises top CEOs and boards globally. “With 2013 around the corner, corporate leaders are facing some of the most challenging times of their careers. Companies’ unprecedented exposure on the regulatory and reputational fronts requires that CEOs get in and manage a lot of this themselves, in addition to providing inspiring leadership in the face of so much uncertainty.”

Mr. Miles identifies some of the top challenges for CEOs in the coming year:

1. Stakeholder overload – “When you talk to global CEOs and ask them what has been the biggest surprise in the role, one of the top responses is ‘stakeholder overload.’ Stakeholder groups have become very powerful; in recent years, governments, NGOs, regulators, and special interest groups (e.g., advocates in the environmental, climate change, sustainability, food safety, fighting obesity, and occupational health & safety arenas; Occupy movements) have taken to the ‘open microphone’ and people are listening. Companies can no longer send just a representative to address these groups – stakeholders want to interact only with the CEO. Mass movements are overthrowing governments like dominos, and expect the heat to continue to be turned up with global CEOs and their brands.”

2. Board engagement – “A primary message to CEOs is that ‘you get the board you deserve.’ Boards continue to be more involved and aggressive as it relates to transparency, company performance, and the interface with their CEO. Many boards are taking a much stronger leadership position and getting on the front-foot as it relates to the discharge of their fiduciary duties. CEOs who believe they can be ‘imperial’ or somehow dismissive – behaving as if their board is a ‘necessary evil’ – are going to have a shocking wake-up call. CEOs must really invest in these relationships at the one-on-one level as well as with the collective.”

3. “License to operate” – “A ‘social license to operate’ was once a term referring specifically to the regulatory approval required for petroleum and mining companies to operate in primarily developing countries, but the need for a ‘license to operate’ is now true in Western economies as well – and across a broad scope of industries and retail operations. Governments and regulatory bodies are using regulations to impose themselves on companies, and consumers are using their own forms of pressure – dictating what companies can and cannot do in their markets. New rules in the banking sector since the financial crisis, for example, have changed banks’ business model, upending everything from investing options to fees they can charge customers. Businesses in New York City, as another example, are now facing Mayor Bloomberg’s large soda ban initiative. The host of restrictions businesses face as they enter local communities will have massive implications for business models and returns.”

4. Who is controlling your brand? –  “Never before has company news become so instant and transparent. Every single citizen/employee/customer has a camera and a microphone, and they are speaking loudly on their ‘virtual stage.’ How do we handle an employee – or ex-employee – who has built up a personal brand online and is vocal about topics that may not align with the agenda and values of the company? Or recall the New York Times op-ed, ‘Why I Am Leaving Goldman Sachs,’ in which a relatively junior employee decided to quit in a very public way. The piece, which implicated CEO Lloyd Blankfein in the ‘decline in the firm’s moral fiber,’ captured the front page of most newspapers, eventually making it all the way to a ’60 Minutes’ interview. CEOs are increasingly facing this kind of direct attack on their leadership, which is incredibly magnified by social media. Today’s CEOs are operating in a goldfish bowl – you can hide in an aquarium!”

5. Activist investors – “Activist investors historically targeted smaller companies, where they could take a position and then demand certain outcomes. What has changed is they are now going ‘big game hunting.’ No matter how large the company is – from Yahoo! to J.C. Penney to Procter & Gamble – if these activists believe there is an opportunity, they will enter aggressively.”

6. Where will growth come from? – “A key item on every CEO’s agenda going into 2013 is ‘where can we find growth around the world?’ The last few years have been about streamlining and finding productivity improvements as the world has been in an economic shock. Now investors are getting more vocal around asking the question of where growth is going to come from. This will not be easy, and it is going to take a combination of M&A (consolidation and/or entry into a new product or market), innovation, and invention. Those companies that can maintain their ‘lean and mean’ operating structures while they invent and innovate will separate themselves from herd. The ‘weak elk’ will become very obvious through the next couple of years.”

7. Real succession planning – “Boards are more demanding of CEOs around succession planning processes. They are demanding greater visibility down into the organization and more exposure to developing candidates, and are expecting updates on a much more frequent basis. This can no longer be a perfunctory activity where ‘we do a little’ and everyone is happy – but we then don’t actually have viable candidates if we are tested. CEOs are being held accountable – as are boards – for truly having an ‘operational’ succession plan where the company has options when they need them, which is usually not in the planned time frame.”

8. Disruptive technology – “Understanding the complete disruption that technology is causing across all dimensions of business is an absolute requirement for CEOs. 2013 will demand even greater immersion in the threats and opportunities that technology is presenting to their business models and leadership. Social media, Big Data, mobile device dominance, and the Cloud are only part of the story; innovations are really about a whole new way of thinking and operating and organizing companies in order to reach consumers and other stakeholders.”

9. Global talent development – “The pursuit of global growth – through supply chains or consumer markets – demands a commitment to developing truly global talent that many companies are not yet making. There are a lot of expatriate programs, but not so many for repatriation; typically, another company ends up monetizing one’s investment in global talent, hiring the best people away once you’ve trained them. Additionally, with the massive push to ‘localize’ talent, there are fewer and fewer opportunities for this development to occur. Creating a real plan for retaining global talent and expanding the growth opportunities for executives is a directive that, frankly, must come from the top.”

10. Talent (im)mobility – “One of the toughest challenges in developing talent anywhere is the reality that fewer and fewer executives are willing to move, limiting the talent pool. Entire cities have formed around this – Minneapolis is a community where you see executives hop from one Fortune 500 company to another, with a strong reluctance to leave Minnesota. Companies are finding highly qualified candidates to apply for jobs but who then won’t commit to a move. This reality – however well-intentioned the reasons may be (usually family) – makes it tough for CEOs to tap into a truly diverse and long-term talent pool.”

Named by Bloomberg Businessweek as “the rising star of CEO consulting,” Stephen A. Miles is the founder and CEO of The Miles Group, which develops talent strategies for organizations, cultivates high-performing individuals and teams, and ensures effective leadership transitions through readiness coaching and succession.

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