Step Aside: The 5 roadblocks stopping firms from reaching their potential
By Russell Pearlman / Illustrations by Tim Ames
The Growth Zone. Good to Great. Leadership Levers. Shift Into Rich. Bookstore shelves are lined with tomes about the roadblocks leaders face. In fact, since 2020, no fewer than seven business books have been published with titles that include the word “roadblocks.” Each one (as books in this category typically do) focuses on timeless problems of the corporate world, from not communicating well with employees or stakeholders, to not having a fleshed-out strategy, to not having enough employees, to not knowing what to do when growth plateaus.
But these are issues that leaders have dealt with for decades. Welcome to 2023, where so many challenges confronting corporate leaders didn’t even exist a decade ago, and certainly not before the pandemic. Take the modern workday: many leaders can’t agree on where their employees should be working on any given day, or for what hours. Or the exploding world of artificial intelligence, which so many corporate chiefs are struggling to stay abreast of. Not to mention the fact that many leaders are disproportionately focused on millennials and know that they are not developing enough Gen Z workers.
“To succeed in the long run you need a growth mindset and a focus on innovation,” says Stefan Lindegaard, a Copenhagen-based corporate strategist. "But there's a series of current issues that leave very little time for shaping the future."
What are they? Are they easy to see, or lurking in the shadows? Here are some to consider.
1. "You don’t know what to do about AI."
ChatGPT seemed to come out of nowhere last year, waking firms up to the potential of AI. Today, global investment on AI might eclipse $150 billion this year, according to market research firm IDC—a giant leap from $38 billion in 2019. But many leaders admit they’re bewildered about what to do with AI. Previous iterations of chatbots and machine-learning software often haven’t worked as well as hoped, and experts worry that leaders have no strategy—that they’re just throwing money at the new technology. “Organizations have not figured out how to incorporate AI into their workforce or their work processes,” says David Ellis, Korn Ferry’s vice president for Global TA Transformation.
Employees can sense the indecisiveness and lack of coherence. Last year, MIT asked professionals—more than 1,000 of them, at large organizations in 22 industries across 96 countries—to state how, exactly, their own firms were approaching the development of AI tools. An overwhelming majority, 84 percent, said their firms needed to use AI responsibly, to make sure it not only delivers business results but also serves both the individual and social good. But only half, 52 percent, said their firms were emphasizing some degree of responsible AI practices.
While some companies are panicking, Ellis says that “you don’t need to solve AI in the next six months.” Experts suggest instead that leaders focus on what, exactly, they need AI to accomplish. Thus far, for example, AI tools have been pretty effective in automating certain processes. They’ve been less effective in helping employees make smarter decisions or produce new ideas. “At least right now, AI isn’t helping turn average employees into top workers.” says Doug Charles, Korn Ferry’s president for the Americas. For now, experts say, firms should shop for AI tech only after they have a good plan for its use. They will need to fully integrate AI into their work processes, Ellis says, not simply bolt it onto an existing program. For instance, a fully integrated AI program could actually shepherd a prospective candidate from the beginning of the recruitment process through a battery of evaluations, instead of just emailing reminders.
Integrating AI into work processes also could help existing employees get comfortable with it. If used intelligently, the technology can free employees at all levels from the kinds of repetitive tasks that sap worker engagement. “It actually enhances people’s careers,” Ellis says.
2. "You’re putting too much burden on middle managers."
During the pandemic, they were tasked with keeping productivity up while everyone else worked remotely. Next, they were overwhelmed by the need to replace employees who’d left during the Great Resignation (the fewer jobs they succeeded in filling, the more slack they themselves had to pick up). Now, experts say, they’re being asked to demote themselves to individual contributors, take pay cuts, or find other places to work.
It’s no wonder middle managers are not happy. When HR consultancy Ceridian surveyed middle managers across eight countries, 89 percent said they experienced burnout in 2022, and only 29 percent said they feel very or extremely valued by their organization. “Middle managers matter. They are not interchangeable parts in an organization,” says Ethan Mollick, a professor at The Wharton School of Business who has researched how middle managers affect firm revenues.
Experts warn that removing too many middle managers—and putting too much pressure on those that remain—can backfire over both the short and long term. In the short term, middle managers who stay must monitor a higher number of direct reports. That means they have less time for many other corporate priorities, such as improving innovation, strengthening diversity initiatives, or creating a cohesive culture.
For the most part, improving the situation for midlevel managers will involve more than just bumping up their pay. Giving them mentors and leadership-development training is a start. Middle managers want some assurance that all of their work will eventually pay off. In the Ceridian study, 84 percent said that seeing a clear career path would make them want to stay with their companies longer. Leaders can also free up midlevel managers’ time by investing in technology that handles administrative tasks, such as data analysis or workflow approvals. Experts also suggest giving middle managers resources to deal with burnout and other issues affecting their own mental health.
3. "You’re too cautious, and so are your direct reports."
In many cases, the world’s top bosses no longer believe that their direct reports have what it takes to make their organizations succeed. A survey from early 2023 shows that CEO confidence in executive-leadership teams fell from 74 percent in the first half of 2021 to about 66 percent in 2022. An increasing number of bosses have expressed pessimism about their direct reports’ abilities, overall behavior, and approach to tackling critical issues. “I hear with far greater frequency from CEOs who are hoping to upgrade the talent that reports to them,” says Alan Guarino, vice chairman of Korn Ferry’s CEO and Board Services practice.?
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A primary issue, it seems, is that CEOs don’t think their direct reports are aggressive enough. Guarino says that too many of these executives shy away from attempting changes if there’s more than a hint of risk involved. “Taking chances could be extremely costly if it derails the executive’s career,” Guarino says. But that lack of risk tolerance works both ways. As the economy has slowed, the first reaction of many top leaders has been to retrench nascent, not-as-profitable businesses, and to cut long-term training programs—or both. All the while, those bosses are also demanding more innovation. “You can’t have innovation if you have no tolerance for failure,” says Maria Amato, Korn Ferry senior client partner.
Ironically, companies had more risk tolerance during the pandemic, says John Long, North America Retail sector leader at Korn Ferry. Firms threw money at remodeling supply chains, even if it meant slowing down existing production and hurting short-term sales. Some executives were willing to ditch business models entirely. “It’s kind of boomeranged back,” Long says, “and you could argue that now is the time to actually be more tolerant of risk.” Risk aversion, experts say, will hurt companies down the road as rivals jump on business opportunities. A tolerance for risk, on the other hand, could help a CEO’s own career. According to a new analysis of CEO tenure over the past 20 years, bosses had longer job tenures if they came into the job displaying high levels of talent for the development of ability, resilience, and courage.
4. "You can’t figure out a work schedule."
It all seems silly to Harvard Business School professor Ethan S. Bernstein. During the pandemic, nearly everyone figured out, without debate, how to work productively outside the office. “We were just rolling up our sleeves collectively and getting work done. The choice, now that we have it, is what makes this hard,” Bernstein says.
The inability to settle on who will work, when, and where not only frustrates leaders but also hampers an organization’s ability to grow. Companies continue to revise their return-to-office plans two years after the deployment of COVID-19 vaccines, only to end up with scattered attendance that’s demoralizing to those who do come in. When Korn Ferry surveyed US professionals in April, nearly two-thirds (62 percent) said their employer was mandating a return to the office, but more than half (58 percent) said going back would have a negative impact on their mental health. The result is an official stalemate. The average US office-usage rate crossed 50 percent of pre-COVID-19 levels at the beginning of the year…and has remained around there ever since, according to Kastle Systems. Kastle tracks return-to-office numbers in 10 major US markets by monitoring security-badge swipes. That figure is somewhat higher in Europe and Asia, but it’s still not near 2019 levels.
Most experts agree there are three basic strategies, all with potential long-term advantages—and all with almost certain short-term risks. Requiring everyone to work at the office can encourage innovation and improve young workers’ development and mentorship opportunities, but it almost certainly will encourage more people to quit. It may also turn off potential candidates. Allowing employees current and future to work anywhere, any time could be incredibly attractive, but many leaders will continue wondering if productivity would be higher if everyone was back in the office. Hybrid schedules—whether splitting the week or having individual managers choose their direct reports’ work locations—could be a boon for everyone, but they can easily go off the rails without employee buy-in and managerial vigilance.?
Experts say the best strategy will vary by organization and even within divisions. The onus is on leaders to use data to measure how productivity is really impacted—sales and profitability, yes, but also total output and accomplishments, rather than hours worked or even office attendance. At the same time, leaders need to canvass their employees to gauge the impact of each decision on the workforce. “Decide what matters,” Bernstein says.
5. "You’re holding back Gen Z and female employees."
Given that millennial employees are predominant in the workplace, firms’ fixation on them makes sense. But experts warn that leaders are neglecting the group of workers just behind the millennials: Generation Z. If millennials primarily seek jobs that provide stability, convenience, and balance, Gen Z candidates prioritize roles that fuel their passions and enable them to take pride in their work, according to recent studies. So far, corporations aren’t doing a particularly good job of reaching Gen Z. According to a 2022 Gallup poll, 54 percent of Gen Z employees—slightly more than any other generation—are ambivalent or disengaged at work. And unlike prior generations, they have no qualms about quitting for a position elsewhere that gives them meaningful work and career-advancement opportunities.?
Experts say developing diverse young workers has to be a priority of the organization, regardless of economic conditions. “Development opportunities not only get Gen Z in the door, but also keep young talent interested and engaged over the course of their employee experience,” says Amelia Haynes, associate researcher at the Korn Ferry Institute. Unless firms develop their youngest employees, they’ll have to constantly replace them, which will leave a massive hole in their pipeline of frontline managers.?
Leaders should also be doubling down on advancing more female employees. Sure, there are now more than 50 women leading Fortune 500 firms, and women are taking about 40 percent of open board-director seats. “But those are just milestones, not end points,” says Evelyn Orr, Korn Ferry’s head of executive assessment for North America. Though women comprise about 47 percent of the US workforce, they make up barely one-quarter of all senior executives at large US public companies. To improve representation at the senior levels, experts say, firms need to incentivize managers and leaders to bring more women and underrepresented talent through the pipeline. That also means holding those managers accountable for their progress in this area, or lack thereof.
Not having enough women in leadership roles could impair an organization in multiple ways. “A lack of women in senior roles isn’t just a social issue, it’s a business problem,” says Jane Stevenson, Korn Ferry’s global leader for CEO Succession and vice chairman of the firm’s Board and CEO Services practice. Studies show that women leaders consistently have higher levels of emotional intelligence than their male counterparts. Decades of studies show women leaders help increase productivity, enhance collaboration, inspire organizational dedication, and improve fairness. What’s more, women outside the organization influence 85 percent of consumer purchases, controlling about $20 trillion in annual consumer spending globally.
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