2024’s CEO Challenge: Implement a Systems Perspective by Accelerating the Speed of Trust

It has been two years since I last examined the challenges facing CEOs and other senior leaders. I developed my thoughts on the current challenges without looking back at my insights from two years ago. Once I had this year's themes identified, I looked back to see what I had written two years ago. To my surprise, I had titled the blog "Building Trust as a CEO in 2022."

In 2024, building trust takes on a very different set of challenges than in 2022. 2024's interlinked challenges for CEOs can only be addressed by viewing and guiding each of their organizations as a system that cannot be built without trust among the organization's people and its ecosystem.

Six key areas of the system need attention: three that require urgent and immediate attention and three that require ongoing focus and attention. All six themes are interrelated, and in some cases, the arguments I make could fit equally well under one of the other areas. Hence, CEOs need to focus on the organization as a whole, living, evolving system.

Following are the six areas (first urgent, then ongoing):

Urgent

1. Employee Centrality
2. Artificial Intelligence (AI) and Digital Transformation
3. Risk and Resilience

Ongoing

1. Environmental, Societal, and Governance (ESG) Responsibilities
2. Innovation
3. Mission and Vision Commitment
   

As in the past, I have combined what I heard from senior executives across sectors, what I read in blogs and publications, and what I learned from numerous studies.

I will briefly describe the 11 articles and studies that had the greatest influence on the current study, share information on each of the six themes for consideration in 2024, briefly relate how the 2023-2024 Baldrige Excellence Framework® addresses these topics, and provide some food for thought as the Baldrige framework is being revised (for 2025-2026) to remain at the leading edge of validated leadership and performance practice.

The 11 Articles

Four articles/studies were the most informative for me. The first, "CEO Priorities: Where to Focus as the Year Unfolds," is based on an April 4, 2024, McKinsey & Company podcast with Homayoun Hatami, Liz Hilton Segel, Roberta Fusaro, and Lucia Rahilly (McKinsey). The second article, "Leading for Tomorrow: Winning through Change and Disruption," is the 2024 Conference Board's C-suite outlook (CB). Co-authored by Charles Mitchell, Dana Peterson, and Paul Washington, it is based on a survey of 1,247 C-suite executives, including 630 CEOs. The third article, "The Forward-thinking CEO: How CEOs Can Turn Challenges into Opportunities in 2024," by Daniel Casteel, Petra Gerstner-Eilers, and Tony Kang of Stanton Chase, is based on conversations with leaders from diverse industries in the United States, Germany, and Korea (SC). The fourth article, "Looking Ahead-2024 Survival Guide: Navigating Leadership Challenges in a Rapidly Changing World," is a Forbes Small Business Entrepreneurs article by Rhett Power (Forbes).

The remaining articles are "14 Challenges Facing CEOs in Q2 (and How to Overcome Them)," by members of the Forbes Expert Panel® and Coaches Council (Forbes Council); "What Matters Most? Eight Priorities for CEOs in 2024," by Homayoun Hatami and Liz Hilton Segel from McKinsey & Company (McKinsey2); "What's Important to CEOs in 2024," PwC's 2024 CEOs agenda (PwC); "The 5 Biggest Hurdles for CEOs in 2024," by Joe Galvin for Inc.com (Inc); "Over Half of CEOs Expect Leadership to Be More Challenging in 2024-Here's Why," by Courtney Connley based on a survey of 600 C-suite executives by Chief (Chief); "Challenges for CEOs in 2024," by CIAL Dunn & Bradstreet (D&B); and, "New CEO Survey Finds Retaining and Engaging Employees Remains Top Priority and Challenge for 2024," by Isabella Mourgelas in Chief Executive (Exec).

The Six Areas for 2024

Employee Centrality

Without engaged employees, the entire organizational system falls apart. Finding and retaining those employees is a focus of all senior leaders in 2024. It is on their minds because of the many facets of employee centrality.

To introduce each theme area, I will start with some data. According to the CB, CEOs rate attracting and retaining employees as their number-one internal priority. In the CB survey, CEOs and chief human resource officers (CHROs) rate their top two employee management priorities as developing employee and leadership capabilities and strengthening organizational culture. According to Chief, 96% of executives believe they must support employees in both their professional and personal lives. Exec states that 60% of CEOs surveyed said retaining and engaging employees was their top priority for 2024. Finally, according to SC, 83% of Millennials state that working at an inclusive company increases their engagement, and 75% of Gen Zers would hesitate to apply for a job at an organization that did not invest in diversity, equity, inclusion, and belonging (DEIB).

Employee centrality is so challenging because it encompasses more priorities than ever before. Beyond the traditional concerns of finding, hiring, and retaining the right people, today's challenges also include providing employee reskilling and career development, building an inclusive culture with five generations in the workplace, offering flexible hours and benefits, and building trust and transparency within a workforce that has remote, hybrid, and on-site workers. According to SC, 98% of workers desire to work remotely at least part-time. Requiring workers who got comfortable at home to return to the organization's worksite for reasons that they might well agree with but still not applaud, especially when other workers may remain remote or in hybrid status, has become a big obstacle to the retention of mobile employees.

Employees are loyal to employers who commit to workforce DEI and support DEI in the larger community. These are the key ingredients in building a culture of "belonging," the ultimate goal for enhanced productivity, innovation, and loyalty.

Leaders must also change their mindsets and approaches to embrace this new complexity of employee centrality. They must coach middle managers on their changing responsibilities and co-create change with them. Leaders and middle managers must be truly concerned about their employees' well-being.

In addition to everything else, all organizations are competing for employees who are adaptable, are comfortable with change, and possess exceptional interpersonal skills.

The Baldrige Excellence Framework® currently addresses employee centrality as part of several of its core values including visionary leadership, valuing people, and organizational learning. It is also the subject of Baldrige Criteria for Performance Excellence'scategory 5, Workforce, and item 7.3, Workforce Results. There are additional references to the workforce in the Organizational Profile, the Leadership category, and elsewhere in the framework booklet.

AI and Digital Transformation

Probably the area of greatest disruption during the past two years has been the explosion in hype and use of artificial intelligence and generative AI. Some data follow to substantiate this claim and claims about the digital transformation of organizations. According to McKinsey:

• Generative AI could be worth more than $4 trillion in value.
• A third of organizations surveyed said generative AI is already in at least one business function.
• Companies are estimated to have, on average, captured less than a third of the full potential to be derived from digital transformations.

According to the CB:

• 94% of CEOs say AI will require new skills and training for employees. 50% believe AI will displace labor in their organizations, requiring a need for clear communication on how the organization will upskill, retrain, or repurpose employees (employee centrality).
• 56% of CEOs and 62% of all C-suite executives believe AI creates additional levels of organizational risk (risk and resilience).
• More than 91% of CEOs and 93% of C-suite executives say their organizations have either already incorporated AI into their operations, plan to do so immediately, or are actively exploring options for the future.
• CEOs see AI increasing employee productivity (91%); increasing innovation and productivity (87%); increasing sales, revenue, and profit (68%); and increasing employee engagement (62%) (employee centrality and innovation).

How does an organization begin to use AI productively? I think there is general agreement that digitally transforming current key processes is the starting point.

Questions CEOs are addressing include balancing the rewards from AI with its inherent risks (risk and resilience), reskilling employees to maximize the benefits for the organization and its employees (employee centrality), and knowing when and how deeply to commit resources to AI (a particular challenge for smaller and mid-size organizations).

The displacement of workers by AI creates a major challenge to employee centrality. Organizations will have to be transparent about this challenge and communicate to employees the opportunities for retraining, upskilling, and repurposing of their employment opportunities. The silver lining is that organizations dealing with employee shortages have an opportunity to repurpose the displaced employees toward tasks that focus on creativity and strategic challenges (innovation).

Organizations will need well-defined AI usage policies and a governance structure to make sure AI is used in an ethical manner (ESG responsibilities). According to D&B, in 2024 AI is already being applied to cybersecurity, supply-chain efficiencies, software development, further automating customer service, and job candidate screening. With each new use, scaling from one application to the next will have to be addressed.

The Baldrige Excellence Framework® currently addresses AI and digital transformation at a conceptual level due to its broad inclusion in the topics of risk, resilience, innovation and intelligent risk taking; cybersecurity; and strategic challenges, threats, and opportunities. AI is specifically considered in Baldrige Criteria item 4.2, Information and Knowledge Management, for use in analyzing data and information, and in item 6.1, Process Management, in considering new technology in key process (re)design. My colleague Dawn Bailey recently wrote a Blogrige blog with a general introduction to Baldrige and AI.

Risk and Resilience

With increasing risks across a broad spectrum of an organization's operations and plans, building approaches to resilience into organizational strategy has become an imperative for CEOs. According to PwC, 45% of global CEOs think their organizations will not be economically viable in ten years if they continue on their current course. In their survey of 600 executives, Chief found that 40% of executives see navigating change quickly as a top leadership competency in 2024. According to SC, challenge number-one for CEOs in 2024 is "economic ambiguity and adaptation." In the SC study, 36% of the leaders said they had plans to nearshore or reshore their supply chains to reduce risk.

Risks facing CEOs in 2024 include geopolitical crises, economic uncertainty, supply-chain problems, and cybersecurity. Many CEOs feel like they are dealing with an endless set of crises. The challenge is remaining agile, being strategically prepared, and staying ahead of the challenges as much as possible.

In the CB study, CEOs cited higher energy prices, increased cyberattacks, war in the Middle East, a broadening of the Ukraine war, and import tariffs/trade wars as the five highest geopolitical risks. Leadership teams need to build resilience into their plans to deal with both random, unexpected events (black swans) and highly likely, high impact threats that are overlooked by decision makers (gray rhinos).

The bottom line is that CEOs need to focus on proactive strategies, effective communication, and recovery plans.

The Baldrige Excellence Framework® references risk and resilience throughout its seven categories and items within the categories. Baldrige Criteria item 1.1, Senior Leadership, asks how senior leaders cultivate organizational agility and resilience. Item 2.2 on Strategy Development asks about potential changes and disruptions in your regulatory and external environment, potential blind spots in your information, and potential supply limitations or disruptions. Item 4.2, Information and Knowledge Management, asks about awareness of emerging cybersecurity threats and how you respond to and recover from cybersecurity incidents. Item 6.2, Operational Effectiveness, asks about mitigating risk, enhancing supply-network agility and resilience, and business continuity and resilience in case of disruptions, as well as your overall approach to risk management. Item 7.1, Product and Process Results, asks for emergency preparedness and supply-network results. The Baldrige Excellence Framework® also addresses risk and resilience in its core value of agility and resilience.

Environmental, Societal, and Governance (ESG) Responsibilities

While many CEOs are focusing attention on reducing environmental impact of their processes and product use, senior executives and governance/advisory boards are also focusing on the larger issues of overall societal responsibilities and benefits as well as good governance. According to the SC 2023 ESG survey, 90% of S&P 500 companies, 70% of Russell 1000 companies, and 81% of all companies have put ESG initiatives into action. Furthermore, SC concludes that the corporate focus on (environmental) sustainability is becoming "a line graph resembling the steepest hill you've ever had to climb," as consumers demand sustainable products. According to PwC, 50% of business executives state that climate change is a moderate or serious business risk. According to the CB, despite growing energy costs, 65% of C-suite executives and 65% of manufacturing CEOs say the transition to renewable energy will be significantly positive for their organizations. According to McKinsey, emissions of methane from oil and gas operations could be reduced by 30% at no or nearly no net cost.

This year has already seen implementation of a new European Union reporting directive. Companies must not only implement new sustainable practices but also must institute internal processes for collecting, verifying, and presenting results to comply with new disclosure requirements. Implementing the directive will almost certainly require innovation, supply-network modifications (risk and resilience), and digital transformation of processes. This European directive serves as an incentive toward the overall goals of achieving or addressing carbon neutrality, low-carbon energy systems, a circular economy, climate change, and societal goals that citizens/consumers desire.

It is also important to put environmental sustainability in context. It is just one part of the ESG goals in which corporate citizenship plays a significant role. According to the CB, CEOs and board members are in agreement that the top three ESG goals are education, economic opportunity/equality/security, and carbon and other greenhouse gas emissions. Addressing all three goals should lead to new areas for growth and to an organization's reputation as a societal leader.

The Baldrige Excellence Framework® directly addresses ESG responsibilities. Governance practices and societal contributions are the topics of Baldrige Criteria item 1.2 (within the areas to address 1.2a and 1.2c). Item 6.2, Operational Effectiveness, addresses waste reduction associated with your operations and products/services. It also asks about supply-network management related to expectations of societal and environmental impact. Related results are addressed in items 7.1, Product and Process Results, and 7.4, Leadership and Governance Results. In addition, the Baldrige Excellence Framework® focuses on societal responsibilities in its core value of societal contributions.

Innovation

CEOs see innovation as the means to an end, with the end being addressing the challenges in the above four focus areas (among others). The data presented in the areas discussed above are all indicators of the need for constant, ongoing innovation. Business model innovation is frequently mentioned because the challenges of AI and digital transformation, employee centrality, risk and resilience, and ESG responsibilities require not only technical innovation but also rethinking of business models. CEOs also see the resulting innovation as a source of new business opportunities with existing and new customers and through new products/services. To achieve the desired outcomes, CEOs believe innovation must become part of the organizational culture.

The Baldrige Excellence Framework® has the concept of innovation fully embedded. From the core value of focus on success and innovation to virtually every category of the Baldrige Criteria for Performance Excellence®, innovation is addressed. Innovation begins with leadership encouragement and support and includes decisions on intelligent risks for the organization to pursue.

Mission and Vision Commitment

CEOs and other leaders have a key role in keeping the organization focused. With all the challenges-characterized by the data already presented above-staying focused on the relationship between the challenges and the mission and vision for the organization enables CEOs to avoid being mired in non-essential efforts. Devoting time to mission and vision commitment gives employees a sense of purpose and avoids disengagement through non-value-added and frustrating time consumers. The Forbes Council recommends that CEOs read their mission and goals daily as a guiding star in decision making.

Mission and vision also play a role in meeting ESG responsibilities, showing a leadership role in ESG, and gaining a competitive advantage in the marketplace. Fulfilling ESG goals can lead to innovative, new products and services that align with the organization's mission.

CEOs are responsible for taking a position on key social issues that impact the organization's mission, vision, and values. Articulating a position before being forced to take a stand gives employees a sense of pride and purpose.

Finally, if "the right" position to take does not align with the organization's current mission, vision, or values, it may be a signal that they need to be reexamined.

Implications for Future Baldrige Framework Revisions

While the next set of Baldrige framework revisions are still being developed now, some of the 2024 CEO focus areas will certainly be played out over more than the next few years. The Baldrige Excellence Framework® has a systems perspective as its first core value. This year's CEO challenges place a primary demand on integration and guiding the organization as a system.

The challenges of AI and related employee reskilling, as well as a more inclusive workforce, and the permanent blending of on-site, hybrid, and remote workers will require CEO sensitivity to building the necessary sense of trust that encourages employee engagement and retention.

The use of AI and generative AI, combined with the inherent risk and necessity for organizational resilience are strategic considerations worth highlighting in future Baldrige framework revisions.

Accommodating all the systems' changes that are challenging CEOs will require business-model innovation. The Baldrige framework's definition of innovation already identifies making meaningful change to the organization and societal well-being as part of the definition. Further embracing business-model and societal well-being innovation in the Baldrige framework will be part of adapting to the new systemic changes.

While establishing and deploying the organization's mission, vision, and values and relating your core competencies to them is well-embodied in the current Baldrige framework, their regular examination and validation, as appropriate, should be an ongoing part of ensuring business resilience and future success.

Finally, while not specifically called out above, implementing a systems perspective by accelerating the speed of trust will require constant and effective two-way communication with and among employees and other key organizational stakeholders, including the community.

Some Summary Thoughts

Trust will be the differentiator in the speed of acceptance and engagement on the part of employees, customers, and the community the organization serves. Leaders will be judged not only by their organizations' profitability or financial success, but also by the accomplishment of their responsibilities to employees, customers, and their communities. These accomplishments can only be achieved with a systems perspective operating at an accelerated speed of trust.

I look forward to observing ongoing changes in resilience and performance excellence over the next few years. And I look forward to another look at CEO opportunities and challenges a few years down the road, with ever-evolving insights on the road to performance excellence!

Resources

Senior Leadership Succession Planning: Who Cares? (April 2024)
Do You Really Want Employees to Stay? (March 2023)
Archived Columns