Executive Diversity Delivers Dividends

Leaders in every sector of the economy are under intense scrutiny, reinforcing the high stakes involved in ensuring the right person has been selected to lead.

Nowhere is that scrutiny greater than in ASX 200 companies and significant government enterprises. The Leadership Challenge, the seminal 1987 work by Jim Kouzes and Barry Posner, which essentially seeded the 360 feedback survey and other development tools, is still, more than 30 years later, a recruitment and leadership bible. It acknowledges that decisions entrusted to CEOs are inherently risky. And, in every sense, one of the more difficult but essential tasks faced by boards is getting succession planning and CEO selection as fine-tuned as possible. Board and Executive Search firm Johnson Partners advises clients to be prepared to set aside a couple of years and to use as many data points as possible for the task.

Founder & CEO, Jason Johnson, argues that fortune favours ASX 200 companies that are led by agile, humble CEOs selected by boards with clearly articulated values, an unshakeable commitment to diversity and an appetite for investing in ‘‘getting it right’’. He says the definition of a great CEO depends on context, adding that he makes no apology for setting high standards for CEO succession planning.

“A great leader, no matter what, will keep an employee group engaged, communicate effectively and create a vision that everyone feels they are working to, for a collective sense of achievement,” Johnson says. “Great leaders are agile, adaptable; they are able to pivot. We saw some phenomenal leadership through COVID-19 as many CEOs adapted their strategies and broader businesses to meet the new operating environment.” Exceptional leaders, he adds, put their customers, company and staff first.

“There’s no perfect CEO who is a 10 out of 10 in every respect,” Johnson says. “When running a CEO succession process, we are seeking to find the best person capable of delivering the strategy – and shaping the culture required – to drive the business forward.”

Every great CEO has a leadership team that supports them in achieving their vision and strategy, with strongly aligned values, complementary skills and experience. Johnson says no CEO has to be perfect because they can draw on the strengths and expertise of others in their team. “If a CEO is seen as a good P&L leader, but not a strong innovator, bring a strong innovator onto the team,” he says. “If they are great innovators but not as strong financially, make sure your chief financial officer is incredibly robust.”

Australian boards have lifted their game over the past decade, achieving improved numbers of female board members, but still fall short when it comes to the representation of diversity in their executive ranks. “We are right on the doorstep of Asia and we have such little Asian expertise on the leadership teams of Australia’s largest companies,’’ laments Johnson. ‘‘We need to drive harder to bring diversity into the executive – as well as onto the boards – of our biggest companies. Once they do this, others will follow.”

“"When running a CEO succession process, we are seeking to find the best person capable of delivering the strategy – and shaping the culture required – to drive the business forward."”

Johnson Partners’ passion for diversity was recognised last year by the global Association of Executive Search Consultants which awarded the Australian firm the inaugural IDEA Award for outstanding contribution to inclusion, diversity, equity and access. The award recognised the firm’s commitment during its talent searches to producing a shortlist with at least two female and one culturally diverse candidate among a typical list of four or five. Last year, two-thirds of the executive and board appointments it  was behind were female and 22 per cent were culturally diverse candidates.

Sometimes, companies may have to work a bit harder to ensure that a diverse candidate has a better prospect of success. But Johnson makes a compelling argument about the rewards that accrue to businesses prepared to invest in a deeper pool of potential future CEO talent by “supporting someone who may not be the ready-now executive but who, with the right support, could bring valuable and unique insights to the table.”

Reflecting on the groundswell of community concern about poor workplace behaviour, particularly around issues of sexual harassment and assault, Johnson says boards need to be absolutely clear and resolute about their values. “It’s a false economy to think you can back someone who has not lived up to a company’s values – or worse – and defend the appointment of that person as a CEO,” he says. “Contemporary expectations are appropriately high.

“Most progressive boards today would have a zero tolerance for harassment. They must have that absolute clarity at the outset. If a board becomes aware that a candidate – internal or external – has stepped outside those values, that should be fatal [for their prospects of becoming CEO]. “We have seen some organisations make some very poor choices about supporting internal candidates who have clearly violated community expectations in terms of their behaviour. The market will ultimately call them out.”

In any case, Johnson adds, being the CEO of an ASX-listed company is such a privilege that higher standards necessarily must apply. “Shareholders, staff, customers and the broader community deserve that,” he says.

Source – retrieved from Australian Financial Review, 26 March 2021. https://todayspaper.smedia.com.au/afr/default.aspx / Article

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