Who’s at the table? The C-suite and 20 years of change

Richard Oldfield Global Markets and Services Leader

 

In the run-up to the 20th anniversary of our global CEO Survey, we’ve been reflecting on how the roles of the CEO and the team they lead have changed in that time. CEOs are often said to have the loneliest job in business. Yet arguably they are less lonely today than they were 20 years ago. That’s because the C-suite has significantly grown in size and changed in composition in the two decades since PwC’s CEO Survey began.

Given the proliferation of chief ‘something’ officers (CXOs) in 21st-century business, it is easy to forget that the acronym CEO itself is fairly new. It was first mentioned in Harvard Business Review in late 1971 and made the Oxford English Dictionary in 1972. Before then, the heads of Fortune 200 companies were usually titled president or chairman, although the term CEO was in common use by the end of the 1970s.

The size of the executive team in large businesses “has doubled, rising from about five in the mid-1980s to almost 10 in the mid-2000s” according to research from Harvard Business Review.

So why has the C-suite expanded over time? The answer to that question can probably be found in the rapidly evolving business environment, particularly in the wide-scale industry disruption that is taking place. As big businesses get bigger and move into more markets, they encounter more exciting opportunities but their challenges become more complex. If they are to embrace both globalisation and industry disruption, CEOs and their organisations must be more resilient and ‘decentralised’. Only by adjusting their business models and bringing in new skills can they respond to agile and innovative start-ups.

Technology is, of course, having a profound impact on the business landscape, consumers and society at large. An MIT study found that, on average, digitally adept companies could be up to 26 percent more profitable than their competitors. Yet 85 percent of CEOs who took part in our 18th Annual Global CEO Survey were dissatisfied with the way their companies were “anticipating the competitive advantages enabled by technology”. By responding this way, they gave a strong signal that most organisations must do far more to harness the power of digital.

This thirst for competitive advantage may explain why there has been a proliferation of jobs in the ‘digital C-suite’, from the longer-standing CIO and CTO to newer CXO titles such as chief data officer and chief digital officer. Big data is a particular area of focus for companies because it offers the potential to gain a deep understanding of customer behaviour. By 2019, 90 percent of major organisations will have a chief data officer (CDO), yet only half will be hailed a sucess according to Gartner. Experian has found that 70 percent of chief data officers now report directly to CEOs.

 

The evolution of the C-suite

 

Other CXO roles that are on the rise include the chief commercial officer, chief compliance officer, chief diversity officer, chief marketing officer and chief sustainability officer.

While the C-suite boasts more members and a wider range of skills than ever before, one long-standing CXO role has become scarcer. That is the chief operating officer (COO). Research by executive search firm Crist Kolder Associates in 2016 found that just 30% of S&P and Fortune 500 companies employ a COO, down from a high of 48% in 2000. In the past, the COO was typically regarded as the second-in-command – and natural successor - to the CEO in many organisations. As operations have become more complex, and increasingly digitalised, new leaders with more relevant skills are coming through and taking over some of the COO’s more traditional responsibilities.

Another interesting trend is that disruption is increasingly prompting boards to turn to external hires, rather than internal candidates, to fill CEO positions. They hope to capitalise on the experience and skills that these individuals bring from another organisation, or even another sector. Appointees from outside the company accounted for 22 percent of all CEOs brought in to the world’s largest 2,500 companies via a planned succession between 2012 and 2015 – up from 14 percent between 2004 and 2007, according to Strategy&’s CEO Success Study.

Thanks to the combination of disruption and the arrival of a generation of digital natives in the workplace, boards are also more willing to appoint young CEOs – such as Marissa Mayer, who was 37 when she took the top job at Yahoo!, and Daniel Schwartz, who was named CEO of Burger King when he was just 32.

The shape of the C-suite has already changed significantly. As organisations roll out new technology in future, and seek to know their customers better, the top team will have to evolve further still. Before long we may see the chief automation officer, the chief privacy officer and the chief relationship officer gathered around the boardroom table. Already the chief robotics officer (CRO) looks a likely contender for an executive job. A study conducted by Myria Research suggests that over 60 percent of global manufacturing, logistics, healthcare, energy and agro-farming companies will have a CRO by 2025.

Regardless of their age or background, the CEOs of the future can expect to manage a large and diverse executive team. While this may allow them to share some of the burden that comes with holding the most senior role in business, it will bring with it a fresh set of challenges – not least balancing the demands and expectations of a group of highly skilled people whose roles may put them in conflict with one another.

In our 1st Annual Global CEO Survey, launched in January 1998, we stated that ‘These are arguably great times in which to be a global CEO’.  Today it is still a great time to be a global CEO because even though the role may not be as lonely as it was in 1998, it is certainly just as challenging.

Watch out for our 20th CEO Survey, launching on 16 January 2017.

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Richard Oldfield
Global Markets and Services Leader
Tel: +44 (0)20 780 44788
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