The Evolving Role of the Chief Executive Officer in the 21st Century
A century ago, a CEO was practically a monarch. He (it was almost always he) held near-absolute authority with the help of a tiny team.
Today, America’s C-suite looks more like a democracy than a monarchy. CEOs may still have the final word, but shareholders and board directors far more temper their powers than in the past.
The CEO’s Role: Past vs Present
At their core, CEOs are responsible for making major corporate decisions and managing overall operations. They are accountable to their company’s board of directors or stakeholders and are often the organization’s public face. They are tasked with guiding their company toward success and profitability.
Traditionally, CEOs have led companies in hierarchical systems where leaders at the top hold ultimate power and direct every decision. When critical issues occur, CEOs must go into high-command mode and act like the proverbial captain of the ship.
Currently, however, C-suite executives work with various other leadership leaders and rely on them for their expertise in specific areas. This allows them to focus on the most critical aspects of their role while still ensuring that everything is running smoothly. In addition, today’s CEOs must constantly evolve their strategies and use new mechanisms to gather “outside-in” intelligence from customers, partners, and employees. They must be flexible and creative enough to make these changes happen.
CEO’s Impact on Business Evolution
As a leader, CEOs are responsible for motivating the company’s workforce to take on challenging projects to improve performance. They must also be able to identify trends that could impact the business and shape key performance indicators accordingly.
In addition, CEOs typically delegate many responsibilities to executive members and VPs in the business. This allows them to focus on broader issues such as strategy and direction, as well as overseeing the organization’s overall growth.
Most CEOs also participate in the hiring process for other C-level positions in the company. This is because the way these leaders perform their jobs reflects directly back onto the CEO. Therefore, a CEO must find leaders who can effectively collaborate and provide the necessary input to formulate strategic decisions. Lastly, CEOs may also serve as the public face of a company when it becomes of interest to the media or the public at large. This can include interviews, press conferences, and other public appearances.
The Modern CEO: A Closer Look
When you think of the modern CEO, do you imagine a young man in Ray Ban sunglasses and low-cut Chuck Taylors? A more appropriate vision might be the social media-savvy leader who has a finger on the pulse of the industry while building company culture and strengthening its reputation.
Exceptional CEOs spend significant time outside their offices, engaging with all stakeholders, from customers to regulators, trade unions, and social causes. They define the destination their organization is heading towards and develop bespoke strategies to get there.
They can also build strong relationships with other industry leaders and their workforce. They are not prone to the hubris that can stifle innovation and derail a company. They understand societal liberties’ role in allowing businesses to exist, and they are not afraid to stand up for them. In the future, we will see more CEOs pushing for greater diversity in their organizations and galvanizing influence coalitions to make for change. It’s a leadership style that has to be learned, not inherited.
CEOs and Digital Transformation
Whether you’re a seasoned executive in a major corporation or a small business CEO, your role’s responsibilities are vast. As a high-level leader, you have to be able to delegate tasks, set agendas, and drive profitability while remaining the face of your organization.
In addition to analyzing data and making decisions based on this information, CEOs also work with other senior-level managers to pursue and achieve goals in a business’s short and long-term life. This is why you must have various management and leadership skills.
You must communicate your vision, inspire others, and motivate the executives below you to help you succeed. It’s also your responsibility to assess how the organization is progressing toward its goals and how it could be improved. You also make critical decisions about when to raise funds and how to spend surplus cash, including paying dividends or reinvesting in the company. You often play a significant role in hiring for other C-level positions, and your decisions can impact the whole company.
The CEO’s Role in Sustainability
Although the idea of CEOs being involved with sustainability may seem obvious, it’s not always the case. Many chief sustainability officers (CSOs) don’t have a direct reporting line to their CEO. Instead, they often report to the COO when there is an emphasis on efficiency; to the CFO when attention is focused on investor relations; to the corporate communications officer when the focus is on public relations; or to the general counsel when attention is on compliance.
Regardless of how their role is structured, it’s clear that CEOs have an essential role in driving ESG efforts. Moreover, they must lead to ensure that these efforts are aligned with business strategies and goals—a significant task that requires cross-functional cooperation.
And according to Will Swope, VP and Global Manager of Sustainability Initiatives at Intel, the CEO must be a key spokesperson for these issues—at least internally. “You need a strong leader who can set strategy and communicate well,” he says. “You also need someone who can hold people accountable, which is the CEO’s role.”
CEO’s Influence on Employee Engagement
The CEO is a key figure in the company’s leadership structure. They make significant decisions about strategy, ensuring that the company is set up to succeed. They also lead, guide, direct, and evaluate other executive managers and senior leaders.
They are also responsible for developing and maintaining a positive workplace culture. This means fostering a culture of open communication, listening to employees, and supporting them in their endeavors. It also includes encouraging a healthy work-life balance and promoting employee wellness.
A CEO is often the face of a business, which can influence how employees feel about their employer. They need to be authentic and communicate a clear vision for the organization.
They are also responsible for bringing change to a company’s planning processes. Gone are annual planning cycles and 3-5 year roadmaps. CEOs need to set mechanisms and digital tools in place for gathering real-time intelligence that is both data-driven and experiential so that they can make the right strategic decisions in the moment.
CEOs and Corporate Governance
An essential CEO function is ensuring governance structures are in place to meet management, employee, and shareholder needs. This includes establishing the policies, relationships, and mechanisms by which a company is controlled. CEOs must also ensure the company is aligned with its mission, whether to maximize profit, as is common in most businesses, or to meet specific humanitarian and philanthropic goals, as is often true with nonprofit organizations.
Typically, a CEO is accountable to a company’s Board of Directors, elected by shareholders. This means that a CEO is not an all-powerful leader with unchecked power and decision-making authority but a senior member of the firm who must act as a guide and adviser for the rest of the executive team.
The CEO’s role also involves articulating the vision of the company’s future, which can include developing strategic plans to create long-term value with input from the board. This role can differ from the president’s, which is more concerned with marketing and cost-cutting efforts. In some cases, CEOs may serve as board chairs, but it’s more common to split these roles.
The Future of CEO Roles
A CEO is responsible for establishing company direction, managing overall operations, and overseeing the company’s strategy. They are accountable to a board of directors or shareholders and often serve as the organization’s public face.
Traditional leaders in hierarchical management structures go into a highly directive mode when critical problems occur, like the proverbial captain of the ship directing the workflow of special workgroups and oversight committees that help steer the company through troubled waters. This type of leadership is necessary in a crisis, but the business landscape now calls for more collaborative leadership.
Divisional CEOs can prepare to lead a broader scope by seeking regular feedback from their trusted colleagues and volunteering to take on visible enterprise-wide efforts that expand their awareness of functional and business interdependencies. In addition, they can start shifting their leadership style to empower employees to initiate ideas or solve problems without the need for prior approval from a corporate hierarchy.
Lastly, organizations can broaden their views about the best roles for developing future CEOs by recognizing that not all executives must be in the top quartile of their business to be considered potential skip-level options for the role. A high-growth division that requires an agile response to customer needs may be the perfect CEO development role for a talented leader.