Today’s challenges require younger leaders: 5 paths companies should try

Experience is important in leadership. But so is curiosity, innovation and risk taking.

Martin Reeves, chairman of Boston Consulting Group’s think tank, was therefore shocked to find that at a time when companies are facing tough challenges that require new solutions, boards seem to be doubling down on older leaders. The average hiring age of CEOs at Fortune 500 and S&P 500 companies has risen dramatically over the past two decades, from 46 years old to 55 years old.

Indeed, that was so counter-intuitive when his team initially came up with the statistic he didn’t believe it and sent them back to redo the calculations. But it was right, and he was dismayed, leading to a push for organizations to bring younger leaders into positions of influence and power earlier, with five techniques worth considering.

“Experience is valuable when the same thing is happening again and again,” he says in an interview. “But these days, relatively speaking, we are in an age of discontinuities.”

An executive experienced in lean supply chains, he notes, is having to shift as the resilience of those supply chains is under stress from political upheavals and tensions. A tech expert brought up in a world of platforms and ecosystems now has to grapple with the new world of generative artificial intelligence, which is different in its effects, economics and technical needs. Leaders schooled in an era when climate change and sustainability was an afterthought – a nice to do – now find it essential. Their experience is still important but he feels proportionately we need more innovation than ever.

The BCG Henderson Institute he heads prepares the rankings for Forbes magazine’s Future 50, companies with the greatest long-term growth prospects. The average age of CEOs of the top 50 firms with the greatest long-term growth potential is 52 years, compared to an average of 58 years for the rest of the roughly 1,700 companies. He says there is good evidence that the older the firm and the older the leaders, the less the vitality of the company and also that older executives, on average, are much more risk averse in terms of embracing new technologies.

“The message is to be future ready, make sure you are renewing the vitality of your leadership. Make sure you are not clinging to yesterday’s people and ideas in a way that might impede the very big change vectors business is facing,” he says.

Working with the St. Gallen Symposium, which pushes for cross-generational dialogue and collaboration – its 2023 conference and accompanying activities centred on “A New Generational Contract” – they have come up with paths companies can try:

• Consultation: The least disruptive approach involves more systematically consulting the next generation when setting strategic direction. The company can set up a shadow board or a young leaders’ council, in which a group of non-executives works with senior executives on key strategic initiatives or major decisions. They gain experience and might bring new ideas and perspectives to the table. Various companies, including Gucci, Mövenpick Hotels & Resorts and Total Energy have tried this approach.
• Co-leadership: At various levels in the organization, instead of having one experienced, aged leader, twin him or her with someone younger. “Even if the CEO level is what you care about, you would want this to be happening at lower levels to create the apprenticeships that can form an escalator for senior leadership,” he says. He points to when Google embraced co-leadership, bringing in an experienced executive, Eric Schmidt, as what was termed “adult supervision” for its then 28-year-old founders, Larry Page and Sergey Brin.
• Vertical separation: Just as governments can have two bodies involved in law-making, companies might have a lower chamber whose role is to propose novel policies and an upper chamber which either approves them or suggests alterations. In a Harvard Business Review article Mr. Reeves co-wrote, it was noted that “for such bold changes to governance structures, defining the scope of decision-making of the new bodies is crucial, as they run the risk of reducing efficiency and speed in decision-making. Experimenting to see what works is key before expanding the scope and responsibility of such bodies.”
• Horizontal separation: At least have youthful leadership in the specific businesses where innovation and energy is most needed. Some companies have a cash cow business where the essentials haven’t changed in years but also friskier, younger operations where new growth is to come from and where the need for more experimentation and entrepreneurship might be better helmed by younger leaders.
• Substitution: Accelerate the leadership pipeline by imposing term limits and stricter retirement rules or creating new roles for the most experienced leaders. That might be combined with targets or rules to ensure age diversity in key posts. The Harvard Business Review article notes leadership guru Peter Drucker wrote years ago: “Unless the seniors vacate top-executive slots, the juniors cannot move up.”

Mr. Reeves sees that final possibility as the most controversial and least likely to be addressed. But he believes the other four options are practical and needed. In an era of volatile change, leaders must be more agile and attuned to new ideas, and age can be a factor.

Cannonballs

• New research finds a large and growing divide in terms of who gets to work from home. Remote-work opportunities are rare in jobs with annual pay around $30,000 or with only a high school education. Jobs that require more experience offer more opportunities to work remotely. Full-time jobs are three times as likely as part-time work to offer a remote option.
• Don’t be coy with top candidates for jobs. Recruiting specialist John Sullivan says they often have multiple options so look for opportunities to consciously praise them for their capabilities and accomplishments.
• Allison Gabriel, a professor of management at Purdue University and faculty director at the Purdue Center for Working Well, warns that the central question in promoting employee well-being isn’t about the perks available but whether staff can make their own choices about how to invest in their physical, emotional and mental health. Not everyone wants to go to a company-sponsored yoga retreat, for example.

Harvey Schachter is a Kingston-based writer specializing in management issues. He, along with Sheelagh Whittaker, former CEO of both EDS Canada and Cancom, are the authors of When Harvey Didn’t Meet Sheelagh: Emails on Leadership.