Rapid change seems to the only constant in our world, from the evolution of automation and AI to frequently fluctuating views on whether employees need hard or soft skills. One thing that seems untouched is the business model of the past few decades–one that puts capitalism above all else. However, the business-enterprise model that champions big businesses may not be the reigning model for much longer, according to data from Deloitte’s 2018 Human Capital Trends report.
Throughout the report, authors predict that the next iteration of the business model will be the social enterprise, which the report defines as “an organization whose mission combines revenue growth and profit-making with the need to respect and support its environment and stakeholder network.” This involves listening to, investing in and managing societal trends. Such organizations practice good citizenship, encourage collaboration at every level and serve as role models.
Experts and survey respondents agree that the most important trend to address first for organizations moving to a social-enterprise model is the idea of symphonic C-suites. These leaders are best suited to keep pace with the complexity of change involved, and the stakes are too high to delegate this responsibility or operate independently.
The idea of symphonic C-suites is hardly a new trend, or so experts thought. There have been calls for collaboration for years, says Josh Bersin, principal and founder of Bersin by Deloitte, but the company’s recent research revealed few executives are actually following through.
“I was really shocked to find that the C-suite isn’t working together. That was almost a sideline finding that became big as we looked at the data,” says Bersin. “Companies have, over many years, set up C-suites as independent functional operational owners, but they need to be engaged and integrated.”
Deloitte surveyed more than 11,000 business and HR leaders for its report, 85 percent of whom rated C-suite collaboration as “important” or “very important.” However, nearly three-quarters of respondents said their executives don’t regularly collaborate (73 percent).
This finding also resonated with Ravin Jesuthasan, a managing director and global practice leader at Willis Towers Watson. He says that the C-suite of the past won’t work for the future of a social enterprise.
“In the past, it was siloed–CEOs wanted to protect intellectual property and felt that employees belonged to the company, so much so that departures were seen as a personal betrayal,” says Jesuthasan. “As we went through the ‘90s with restructuring, there was a lot of emphasis on technical excellence, looking for more efficiency, so these silos were strengthened.”
Jesuthasan says that in each silo was an expert who had, say, the most knowledge on compensation practices. Instead of sharing that knowledge, it remained solely with this expert, thus reinforcing his or her importance within the business. For decades, these technically competent leaders have been developed, but now they’re being asked to deliver a greater impact–not through their own silo or skills, but by making the “whole greater than the sum of the parts,” says Jesuthasan.
This traditional business model is still deeply engrained in many organizations, according to the survey findings. If CEOs are having a difficult time letting go of their four walls, it may be up to other executives to begin the process of silo removal.
If the C-suite doesn’t sort out how to best collaborate, an organization will risk competitive disadvantage, could fall behind on responding to other HCM trends and lose out on growth potential, experts say. Research indicates that companies with symphonic C-suites are more likely than those operating in silos to anticipate organizational growth by 10 percent or more (34 percent versus 22 percent, respectively).
If the CEO needs nudging, CHROs and other executives can take the lead on executive cohesion. Jesuthasan says there are several things CHROs can take control of, including rethinking organizational design and leadership competencies. It’s particularly important that CHROs not only review the required “hard” skills leaders need, but that they also examine soft skills and demographics of the C-suite, too, adds Bersin.
“The C-suite needs to be diverse in gender, age, race, etc., and respectful of community. Most people–including customers, employees and even stakeholders–don’t feel well represented when the C-suite comprises all white males from similar backgrounds,” he says.
A study published in the Journal of Corporate Finance found that CEOs with strong, diversified connections create higher firm value. The study authors examined the economic impact of a diversely connected CEO and found that such leaders “generated an approximately 16-fold firm market value increase relative to their compensation.”
“Today’s CEOs require expansive knowledge to innovate and respond to increased competitive pressure,” write the authors. “… [O]ur findings suggest that the more diverse the social networks of the CEO … the greater the growth opportunities are for the firm.”
Jesuthasan agrees that addressing the issue of siloed executives is important but suggests that leaders and employees first understand the “why.”
“Absent the why–Why do we need to change? What’s the business value and opportunity? Why is it beneficial to me as an individual?–they’ll tolerate your conclusions but act on their own beliefs and intuitions,” he says. “It will be difficult to get people to have real behavior change if you don’t address the why first.”
