SOURCE: The Boston Consulting Group

The Boston Consulting Group

November 11, 2014 10:10 ET

When Choosing New CEOs, Boards Are Increasingly Skipping Levels of Management to Appoint Younger or More Modern Leaders With Fresh, Forward-Looking Perspectives, Finds The Boston Consulting Group

These 'Leapfrog Leaders' Understand Disruptive Realities of the 21st Century and How to Lead Through Them; Many of Today's Companies Need Proven Innovators With Digital Savvy, Multi-Cultural Social Sensitivity and the Courage to Act

By Accelerating the Promotion of These Leaders, Companies Hope That the New CEOs' Ability to Understand and Act Upon Signals in Today's Unpredictable Environment Will Trump Their Lack of Experience

BOSTON, MA--(Marketwired - Nov 11, 2014) - When choosing new CEOs, Boards are increasingly skipping levels of management to tap younger or more adaptive leaders with forward-looking perspectives to advance rapidly into the chief executive position, finds The Boston Consulting Group (BCG).

By accelerating the training and promotion of these "leapfrog leaders" from below the second layer of leadership, corporate boards have two goals: first, they hope to promote someone with a different leadership profile from the departing CEO, and second, they hope to find a leader who understands the fast-paced and uncertain dynamics of the 21st century.

"If most CEOs traditionally hail from the second management level, or L2, these new CEOs more often come from L3. Boards increasingly perceive L2 candidates as too similar to the departing CEO," says Roselinde Torres, a BCG senior partner and leadership expert in the firm's People & Organization practice. "A leapfrog leader, attuned to the spirit of the times, has a stronger chance to uncover and release a company's latent potential, defying traditions if necessary."

What Defines a Leapfrog Leader?

Although many of the qualities that define traditional CEOs -- like intelligence, integrity and stamina -- are still imperative for leadership in the 21st century, Torres identifies several other characteristics that boards are now seeking and that help this new generation of CEOs, and their companies, thrive.

"The most important skills for a fast-tracked new CEO have to do with innovation, disruption, and leading amid uncertainty," says Torres. "These leaders understand disruptive forces like social media and big data, have proven records of innovative development, and recognize demographic shifts and their potential effects on customer strategies."

These CEOs are confident, global citizens comfortable working in emerging markets and diverse cultures, with experience leading teams of their former peers. And they are adaptive in the sense that they have demonstrated exceptional curiosity, self-awareness, social sensitivity, open-mindedness and courage.

Some boards may worry that leapfrogging could result in two negative outcomes: poor performance by the inexperienced new executive, or demoralization of the higher executives they do not choose. However, companies that have leapfrog leaders have reported neither regret nor low boardroom morale, and so far these new CEOs' performance is comparable to that of their more traditional counterparts.

Industries Leading the Way

According to Torres, this phenomenon of rapid CEO succession occurs most often in the retail, technology, media and telecommunications sectors. Examples include Google's Larry Page, 38 at the time of his appointment; Yahoo!'s Marissa Mayer, 37; Burger King's Daniel Schwartz, 33; Microsoft's Satya Nadella, 47; PetSmart's David Lernhardt, 43; and GameStop's Paul Raines, 46.

"Companies in these sectors are all especially affected by disruptive change -- it follows that their boards are motivated to appoint CEOs who are able to anticipate future business models," adds Torres.

What Boards Can Do to Groom Future CEOs

Torres describes three practices that corporate boards can employ in the grooming and transition of new leaders:

  • Prepare candidates in advance of their promotion to CEO by placing them in the general manager role of a sizable operation, or appointing them as president, COO or CFO -- if timing allows. Boards can also have the candidate sponsor a major initiative to gain experience mobilizing other leaders across the organization.

  • Anticipate disappointment among senior leaders and prepare for some resignations. Companies should establish contingency plans to appoint replacements quickly and responsibly. They might also expand the current responsibilities of bypassed executives.

  • Broaden the radius of CEO candidates and reconsider what it takes to be part of the top team. It is important for companies to identify candidates early in their careers and sometimes to move senior leaders in order to give L3 candidates necessary leadership experiences.

"If a CEO succession choice is based on compromise or a 'least-worst' option, he or she may flounder -- to everyone's detriment. So boards should identify front-runners in advance, groom them, track their progress and set them up to succeed," says Torres. "Tapping an L3 leader for the CEO spot should not be an act of desperation, but the product of a deliberate strategy."

A copy of a new article coauthored by Torres, "Leapfrog Succession: A New Trend in Appointing CEOs?," is available on bcgperspectives.com at http://www.bcg.com/expertise_impact/PublicationDetails.aspx?id=tcm:12-175693&mid=tcm:12-175692.

To arrange an interview with Torres, please contact Frank Lentini, Sommerfield Communications at +1 (212) 255-8386 / Lentini@sommerfield.com.

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