CEOs need to draw on EQ, not just IQ, in tough times: Egon Zehnder

THE most successful chief executive officers (CEOs) tap into their emotional quotient (EQ), not just intelligence, to ensure interests among stakeholders are aligned in navigating recent social and economic challenges, according to Egon Zehnder.

On Thursday, the management consulting and executive search firm released its 2021 Global CEO Reflections Study, which polled 972 respondents from consumer and financial services to technology and healthcare sectors across 15 countries.

According to the study, many CEOs are slowing down amid recent upheavals and are considering how to do things differently. Self-reflection and personal development have jumped to be among the top priorities.

With heightened demand for environment, social and governance (ESG) awareness as well as new pressures from hybrid work arrangements changing business culture, CEOs are re-evaluating their role, team engagement and accountability to their organisation and themselves.

"Today, CEOs view prioritising their own development and tapping into the intrinsic sources of energy of the people in their organisations as crucial to navigating through complex business environments," the report said. Nine in 10 CEOs have moved into the centre of louder, more diverse and diverging voices.

Most say their organisations face accelerated decision-making and change, along with greater economic uncertainty.

The confluence of the Covid-19 pandemic, calls for social justice, and mounting environmental concerns has stretched CEOs immensely. These challenges come on top of megatrends that are disrupting long-established business models. The rapid advance of technology, fast-changing customer demands, and the emergence of new competitors require CEOs to innovate at unprecedented pace and scale.

Jill Ader, Egon Zehnder's global chairwoman, said many of the CEOs she counsels are wondering "Am I enough?". Some of them have confessed they are disillusioned or burnt out.

"One of your peers forecast that there will be significant turnover in the CEO ranks in the months and years ahead. Our research indicates they are likely to be proven right," she added.

Egon Zehnder's analysis of 214 large, publicly traded companies worldwide found that half of them had appointed three or more CEOs in the decade from 2011 to 2020. CEO departures are becoming increasingly frequent. Almost every year since 2011 has set a new record, and 2021 looks likely to break the record again.

Some 39 per cent of leadership transitions were unexpected departures, and a significant number of departures were due to serious illness or death.

Compared to three years ago, some 83 per cent of CEOs find it essential to reflect on their own leadership style. This is up from 66 per cent in its last study in 2018.

"CEOs are expanding their ability to be adaptive, relational, and self-aware. They are committed to listening to diverse perspectives and are increasingly seeking feedback from new places - including team members, chairs, mentors, consultants, and other CEOs."

Female CEOs are more likely to gather feedback from a wide range of sources, and are more likely than their male counterparts to seek guidance from fellow CEOs, mentors and family members.

Some 78 per cent strongly agree that they need to continue their self-transformation - three times as much from 2018.

The commitment to feedback, learning, and reflection powerfully underscores CEOs' realisation that they must transform themselves in order to transform their organisations, in a "dual journey" process.

Two-thirds of CEOs said traditional metrics continue to be the dominant decision driver. The top five in order of importance are financials, growth, talent management, health and safety, as well as innovation. Environmental, social and governance (ESG) ranked in sixth place.

While two-thirds said the skill of relating to others with empathy and authenticity is important, more than half admitted they have fallen short.

Only 46 per cent are fully aligned with their executive teams, and even fewer - 40 per cent - are aligned with their boards, a reflection of heightened levels of tension and increased need for collaboration, Egon Zehnder noted.

Ms Ader said today's unprecedented business complexities require a significant shift in leadership, and that change must begin by looking inward with new levels of self-reflection and personal development.

"This isn't self-indulgent navel gazing; it's what our teams, organisations and stakeholders expect of our CEOs.

"Now, more than ever, traditional business acumen must be equally balanced with empathy and compassion in order to gain their teams' and organisations' emotional commitment, navigate business complexities and build productive, inspiring workplaces," she said.

Kati Najipoor-Schuette and Dick Patton, who co-lead Egon Zehnder's CEO advisory group and co-authored the study, stressed that personal skills need to be increasingly balanced with traditional leadership strengths, strategic planning and a relentless performance orientation.

"Mastering these skills requires leaders to increase their capacity to listen, trust in a broader network of stakeholders and communicate more authentically than ever before.

"By honing these skills and taking a more human-centric approach to leadership, CEOs will evolve the resiliency, leadership and adaptability of themselves and their organisations."