Picture: 123RF/DMITRIY SHIRONOSOV
Picture: 123RF/DMITRIY SHIRONOSOV

If you want to land a job as a CEO, your chances are vastly improved if you’re already a successful CEO elsewhere. This catch-22 helps explain why it’s so hard to improve diversity at the top of corporations. But this may be changing.

Boards have been catching up with hiring new CEOs after the pandemic put the brakes on leadership changes. A study by headhunter Heidrick & Struggles International has found a sharp bounce in appointments in the first half of this year after a lull in the second six months of 2020.

One notable shift is a reversal of the dip in female hires. In the first six months of 2021, women accounted for 13% of the 103 appointments made. The proportion was just 8% (of 89) in the first half of 2020 and 6% (of 49) in the second. Heidrick & Struggles suggests the likely explanation is that when the pandemic first hit, boards had been prioritising CEOs with existing experience in the role, and such candidates are more likely to be men.

Today, boards seem to be taking a more holistic view of the job. A previous stint being the boss elsewhere remains the most common marker on CEOs’ curriculum vitae. But its relative importance appears to be diminishing.

For starters, the serial CEO is becoming less prevalent. Looking at newly appointed bosses’ past two jobs, a prior CEO role was less common in the first half of 2021 than during the same period the year prior. New CEOs were also less likely to have previously been a CFO. That’s the traditional stepping stone to the top job given it’s the other common executive board role. Chief risk officer, chief strategy officer or chief technology officer are becoming common pathways.

It's hard to find bosses who both add to diversity and have existing CEO experience. So why not cultivate leaders internally?
It's hard to find bosses who both add to diversity and have existing CEO experience. So why not cultivate leaders internally?
Image: Bloomberg

With better and more nuanced succession planning, companies are increasingly finding suitable candidates internally rather than poaching bosses from rivals. And these appointments are more often women.

It’s welcome that boards are gradually taking a different approach and looking within, rather than just hiring automatically from the existing pool of CEOs and CFOs. Divisional heads below the board may have skills just as useful for running big companies. And it’s possible to support that layer of talent to make the leap to the CEO directly.

One way is to encourage potential leaders to take up non-executive positions elsewhere, giving them a taste for boardroom dynamics. Another is to offer them more opportunities to present to their own board and to participate in directors’ deliberations, as well as giving them airtime on earnings calls with investors and analysts.

It will take a while for such initiatives to really bear fruit. The gender mix among CEOs could well look more balanced in the years ahead. But it will need more companies to embrace the philosophy that they can cultivate their next leader by themselves.

More stories like this are available on bloomberg.com/opinion

Bloomberg

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