New DDI Study Reveals Weak Leadership Outlook Leaves CEOs Struggling With Current Senior Teams, Future Leaders

CEOs aren’t confident in the leadership performance of future leaders and, after taking office, quickly start losing faith in even their senior leaders. CEOs’ and CHROs’ concerns are fueled by expanded and shifting markets, changing consumer behaviors, workforce demands, technology requirements and skillsets required to drive business, according to DDI‘s CEO Leadership Report 2021.

Part of DDI’s Global Leadership Forecast series, the report examined the talent-based issues facing CEOs and CHROs in one of the most challenging talent markets ever. It includes data from 368 CEOs and 2,102 human resource professionals, globally, with an average company size of 28,000 employees.

“For any new CEO, there’s a honeymoon phase that usually lasts about six months, during which they may overestimate the strength of their teams,” said Matt Paese, Ph.D., senior vice president of DDI’s Executive Services. “New CEOs start off in learning mode, dependent on the knowledge and expertise of the other C-suite executives. It takes CEOs a bit of time to fully assess their teams, and we see confidence drop as they gain a deeper understanding of the accountabilities and performance of their top players.”

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The study found that new CEOs overestimate the strength of their executive teams, but their confidence erodes over time. When a CEO enters, they are 32 percent more likely to say their senior executives operate as an effective team. But as CEOs settle into their role, their rating of senior executives’ effectiveness continues to drop year after year over the first five years of tenure. This suggests that senior executive performance issues take time to discover. But among organizations that leverage objective data to make strategic talent decisions, 64 percent of tenured CEOs rated their senior teams as effective, suggesting that accurate assessment can accelerate insight and the ability to optimize senior-level talent.

When looking at frontline and mid-level leaders, only one-in-three CEOs said their organization’s frontline leadership quality is “very good” or “excellent.” Mid-level leaders also met harsh criticism, with only 38 percent of CEOs rating them as “very good” or “excellent.” This differs from other leaders across organizations, who give frontline and mid-level leaders higher ratings.

“These ratings suggest CEOs struggle to understand their leaders’ capabilities,” said Stephanie Neal, director of DDI’s Center for Analytics and Behavioral Research. “Whether lower-level leaders really are struggling or not, CEO ratings suggest organizations really need to prioritize development for this critical first step into leadership. Leaders at every level could benefit from having better internal coaching, systems to accelerate talent fairly from diverse talent pools, high-quality leadership development, along with rich insights from high-quality leadership assessment and feedback programs.”

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In addition to a lack of confidence in current senior and future talent, the CEO Leadership Report 2021 also revealed:

• CEOs and CHROs have a dramatically different view of talent in their organizations, which can lead to poorer outcomes. The study found less than half – 47 percent – of CEOs and CHROs from the same company align on their perspectives on senior leadership quality. This relationship sets the tone for the entire organization and its performance. When a company’s CEO and CHRO are in alignment, they are 1.5 times more likely to be among top financial performers and have 36 percent fewer leaders who intend to quit within a year, compared to those who are not aligned.
• CEOs aren’t getting the development and feedback they crave. Once becoming a CEO, many have reported not getting the feedback and development opportunities they need. About 60 percent of CEOs want external coaching and feedback about their performance. While 85 percent of CEOs reported going through some leadership assessment, only 23 percent said they received the high-quality feedback they needed to further develop.
• Essential leadership skills aren’t being reinforced in the C-Suite, creating vulnerable C-level executives. Only 53 percent of C-level executives believe they are effective at showing empathy, while 61 percent rated themselves as very effective at communicating. Less than half of C-level executives feel effective at creating an inclusive environment. While C-suite roles require an amplified ability to use these basic leadership skills, many executives may not have anywhere to turn for the high-level development they need.
• New executives are often left on their own and silently struggle through their transitions. The move into an executive position is often one of the biggest – and most stressful – steps in any career. But only 35 percent of senior executives received any coaching during their transition, and only 21 percent were assigned a formal mentor or coach. Only 49 percent of transitioning or new senior executives underwent an assessment to identify strengths and development areas. Only 60 percent of CEOs went through an assessment to during or prior to their transition. When receiving high-quality assessments, senior executives transitioned 20 percent faster into their current role and were 83 percent less likely to have a stressful transition.

“C-suite and senior-level executives are facing one of the most challenging environments when it comes to conducting business, as well as attracting and retaining top-level talent,” Neal said. “If organizations and their leaders hope to thrive in a constantly changing world, C-suite and senior executives need to align their priorities and find ways to become more confident in the quality of their talent. In many cases, they may need to take a back-to-basics approach and focus on assessing and developing essential leadership skills that are reinforced by high-quality coaching and mentoring opportunities.”

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