Growth: It’s Vanishing

“

Where are the

big ideas?”

The Problem:

The traditional tailwinds driving sales and profit growth have faded,

and many companies are finding they can’t grow without them.

The Solution:

Leaders need to shift their company cultures to encourage

a greater tolerance for risk.

Imagine that your job’s most important metric suddenly fell off a cliff. For decades, this metric had been the one thing you could point to as evidence of your success. And now, like some horror movie, it’s starting to slip away.

Welcome to the world most CEOs inhabit. Outside of a few technology and healthcare niches, corporate growth charts are hardly impressive, which can make for some awkward questions come earnings season. For the five years ending in 2023, S&P 500 firms grew their revenues,

on average, by 6.9 percent a year. In 2024 that number is more than one-third lower, at just 4 percent. It’s the lowest annual revenue growth of any year in the 21st century that did not have

a recession. Experts say 2024 won’t be a one-off, either.

Academics will debate for decades why something so fundamental to business could dip so much. Certainly, many CEOs haven’t had particularly strong economic tailwinds to help them out. Twenty years ago, big established economies such as the United States, Germany, the United Kingdom, and Japan were growing, as a group, by 3.3 percent annually. As recently as 2018, those advanced economies grew 3.1 percent. In 2023, growth was just 1.8 percent, and 2024 is shaping up to finish close to that far lower number. And in places such as the UK, the economy isn’t expanding at all. Some CEOs, grasping for straws, have turned to mergers as a quick fix, but their expenses rarely pay off. “Stringing acquisitions together is boring and expensive,” says Korn Ferry’s Rossi. “Most destroy value.”

“

There’s been

a real hesitancy about making decisions that

need to be made.”

Some solutions may be right in front of CEOs’ noses, such as expanding more into developing countries or searching for more solutions for the climate. But the biggest

key to future growth, many experts believe, will come—as it usually has—from innovation: breakthrough manufacturing processes that make products faster, better, or cheaper;

or new gadgets that save consumers time and money. Aside from AI, says Grant Duncan,

a Korn Ferry senior client partner and the UK and Ireland consumer practice lead, most companies are focusing on incremental, not ambitious, improvements. “Where are the

big ideas?” he asks.

Talk to almost any CEO and you’ll find they’re as mystified about this idea drought as they are about the decline in growth. Sometimes the most obvious step can help: Telemetry, for example, found in its research for Korn Ferry that high-performing large firms were the ones that had simply hired more chief growth officers than others—by a whopping 541 percent since 2014. Of the firms named to Korn Ferry’s World’s Most Admired Companies list, eight in 10 say that growth depends less on investment in technology and more on people—hiring the right ones, aligning them properly in the right teams, and offering a skills- and career-development program that’s not based on a check-the-box webinar. “I’m surprised how long it took companies post-COVID to really look at how best to adapt to grow,” says Korn Ferry’s Manson-Smith. “There’s been a real hesitancy about making decisions that need to be made.”

It’s a complicated formula, to be sure, this business of creating a culture to foster innovation. And nobody can know with certainty what works. Still, when Humana, the giant healthcare provider, managed to double its revenues in five years, it was partly due to creating health goals not only for patients but employees simultaneously. One example: successfully improving the health of various communities the company serves by 20 percent, using the Center for Disease Control’s Healthy Days Measures. “You can’t have world-class customer engagement without world-class associate engagement,” says Tim Huval, the company’s chief administrative officer.

A Growth in Chief Growth Officers

Source: Telemetry

At companies with more than 2,000 employees

At companies with more than 5,000 employees

Now:

292

Now:

163

2014:

Change: 668%

Change: 579%

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Focus

on developing high-performing teams.

3 of 5

Go after

underserved markets rather than hotly

competitive, low-growth, established ones.

4 of 5

Attract

and retain great middle

managers and executives.

5 of 5

Assess

which skills are needed to grow the business, then hire and develop people who have those skills.

1 of 5

Create

a culture that rewards innovation

and experimentation.

2 of 5

steps

Plant the Seed and It Will…

Companies are aware that growth has gotten harder to come by. Indeed, the number of mid- and large-sized firms that have hired a chief growth officer has risen by nearly 700 percent over the last decade, according to research firm Telemetry. But a dedicated executive isn’t enough to get a company consistently growing.

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Up Next

Empowered Employees

AI:

A Stealth Weapon

“

You can’t put your head in

the sand for this one.”

The Problem:

Artificial intelligence could disrupt everything,

but few leaders really know how it will.

The Solution:

Dedicate a team to exploring AI and crafting

a strategy, then experiment.

Maybe the AI “revolution” won’t lead to much. So what if it makes emails more grammatically correct or speeds up coding? Perhaps it will never be able to provide information that reliable. One MIT researcher even feels the bump in corporate productivity might be as little as 1 percent over 10 years.

With such uncertainty surrounding AI, leaders might be tempted to hold off for now—to let other firms spend big on AI and expand resources making mistakes—until there’s clear proof that it makes a difference in their specific business. Dave Rossi, president of Korn Ferry’s Global Industrial Manufacturing Advisory, says he’s currently seeing that approach across C-suites and boardrooms. “You feel like you have to invest in it, even if you don’t believe in it,” he says.

But CEOs who delay could face the danger of not committing to a valuable new technology—or embracing it too late. Business historians can recite a host of lessons from the past along these lines, pulling out such latecomers to new technology as Blockbuster and Sears, Roebuck and Co. But while the first functional artificial intelligence dates all the way back to 1951, most of the world only woke up to the once-in-a-generation potential of AI when ChatGPT hit the scene much more recently. This, many believe, could be the next internet or combustible engine—if only people, especially CEOs, knew how to use it and when. “It’s seen as a technology waiting for a problem,” says Jean-Marc Laouchez, president of the Korn Ferry Institute.

“

We’re seeing
how critical hiring
AI talent has
already become.”

Some CEOs, like Peter Ross of Senior Helpers, a $500 million-a-year firm offering in-home healthcare, are already looking to the future. “I’m excited and nervous at the same time,” he says. He’s hopeful the technology will make it easier to monitor the health of the company’s patients, among other tasks. But the real game changer for Senior Helpers would be for AI to streamline the massive task of organizing, assigning, and deploying the firm’s 20,000 caregivers in its more than 380 franchise locations. Sure, to an outsider, none of this is as thrilling as watching Will Smith take on an army of robots, but it’s where the battle for survival in Ross’s business will be fought. “You can’t put your head in the sand for this one,” he says.

Of course, one pressure follows another. Already, a variety of stakeholders are demanding to see the return of investment firms who are pouring resources into AI, which is virtually impossible to calculate at this stage. And yet CEOs know they’re risking market share, even their entire businesses, if they don’t invest. Indeed, the cost of not reacting is already being felt in many sectors. According to a survey of nearly 8,000 firms that Korn Ferry commissioned from Telemetry, a talent data specialist that probes publicly available workforce data, high-performing companies had twice as many AI and machine-learning employees as their low-performing counterparts. “We’re seeing how critical hiring Al talent has already become,” says David Ford, managing director of Telemetry.

Experts say one of best ways for leaders to deal with AI is to make sure others in their firm aren’t feeling the same pressure they’re under. In other words, don’t overload managers of other divisions with AI responsibilities. Dedicate a leader and a team to assess which of the firm’s functions could be positively affected by AI adoption (or directly hurt if a rival adopts AI). Task the team with crafting and implementing an AI strategy, understanding that ultimately its use will be decentralized among employees to use effectively. Key AI roles don’t necessarily have to be permanent, either: Hiring interim talent can bring in the required expertise without a long-term financial commitment.

Smart firms know they need to set up safeguards for the use of AI tools, given concerns both about data privacy and error-prone output. That said, Paul Dinan, an advisory leader in Korn Ferry’s Global Technology Market practice, says the best leaders are finding ways to protect their business while still encouraging their teams to embrace AI and make informed decisions. “Don’t be disappointed in the apparent lack of progress. Change needs a long runway,” Dinan says. It’s advice Ross at Seniors Helpers is actually taking. Instead of immediately demanding that the organization’s 380 franchisee-owned offices adopt the technology to organize caregiver schedules, he’ll test it out at the five locations he directly controls. “Don’t put technology in until it’s ready,” Ross says.

Worldwide spending on AI (estimate)

Source: IDC, Gartner

$200

billion

2024

$154

billion

2023

$118

billion

2022

$85.3

billion

2021

$50

billion

2020

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Get answers to the right

AI questions:

What are the challenges and opportunities? How can AI’s power best be distributed among employees? What are the potential ethical implications?

1 of 3

Encourage experimentation (within boundaries):

The goal is to experiment, iterate, learn, and improve, rather than to achieve perfection.

2 of 3

Help employees adapt to AI:

Train employees, foster a culture where AI empowers—rather than intimidates—employees, and develop strategies to integrate the technology while still encouraging the strengths of human workforces.

3 of 3

steps

Getting the Jump on AI

According to one Korn Ferry survey, 82 percent of business leaders say AI will profoundly affect their businesses—they

just don’t know how yet. What is known

is that it’s expensive. So how should

leaders think about this technology?

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The Breaking

Point

CEOs are hired to handle pressure, but how much is too much? We look at 5 of the most daunting pressure points in today’s world—and new ways to navigate them.

By Russell Pearlman / Illustrations by Tim Ames

CEOs by the Numbers

Average Age:

2015: 58

Now: 57

Average Tenure:

2015: 10.8 yrs

Now: 7.2 yrs

Average Total Compensation

S&P 500 CEOs. Source: Georgetown University, Equilar

2015: $10.5 million

Now: $16.3 million

Demographics

S&P 500 companies

2015:

Now:

96% men 4% women

93% men 7% women

CEOs Admitting to ‘Imposter Syndrome’

Source: Korn Ferry Workforce Report 2024

US:

71%

UK:

45%

India: 73%

Middle East:

57%

Australia: 47%

In one way, the pressure Richard Kerr faces today hasn’t changed much since he became CEO nearly 25 years ago. The formula for the

job was pretty basic: Make something, sell something, and make a profit on that something. But in the post-pandemic era, Kerr, the head of a Dallas-based insurance firm, feels something has changed about his job. The pressure, it seems, is decidedly different.

Some of this is attributable to the looming shadow of artificial intelligence. Sure, Kerr has been around long enough to remember when computer terminals were as big as TV sets, and the only clouds were hanging in the sky. Artificial intelligence feels like an entirely different animal, disruptive beyond imagination. He sees some great opportunities—like using AI’s machine learning to assess a potential new region for business, as opposed to the clunky method of sending people there. But he can’t say when those tools might come around. How do you decide how to expand for the long term in such a world? How do you make sure competitors don’t beat you to the punch?

People pressures are different too. Kerr says his firm’s growth has mainly come from his staff’s skills and experience, something that

young recruits working remotely don’t pick up from veteran staffers. “Even though we’re connected, you wind up out of sync,” he says. Meanwhile, he must make decisions with two private-equity investors tracking his every move—this, while living in a world with so much turmoil in various governments, a shaky global stock market, and not one, but two major wars. How do CEOs run the show in such an environment? Projecting confidence, a critical leadership trait, is pretty tough. “You can’t just sit back and say ‘I’m smart. I know what

I’m doing,’” he says.

Not even for a day.

The term chief executive officer is thought to have originated in 1917, around the time corporations started using sophisticated techniques to measure a firm’s success. In the 100-plus years since, certainly many CEOs have faced some tough times. In the 1930s, there was a global worldwide depression. In the 60s, leaders grappled with amazing but threatening new technologies. The 21st century brought

two new pressures: globalization, and the challenge of integrating the internet into business life.

But in the minds of some experts, the pressures CEOs face now are unprecedented both in quality and quantity. A decade ago, a new

CEO could confidently rely on a playbook to face most challenges. These days, experts say, there’s no such playbook. There is just too much happening—leaders say they can hardly catch their breath. Indeed, one Korn Ferry study found that 71 percent of CEOs in the US alone confess to having “imposter syndrome,” a corner-office crisis of confidence unheard of in the days of Jack Welch. Bosses can't

even take their personal safety for granted.

For many, it’s as if the walls are closing in, slowly but surely. “There’s no one solution that fits all,” says Laura Manson-Smith, Korn

Ferry’s global leader of organization strategy consulting, a role that puts her smack in the middle of the disruption so many firms have encountered. For his part, Simon Freakley, chairman and CEO of management consultant AlixPartners, puts it this way: “CEOs are truly

in the hot seat.”

This is all in addition to the personal safety threats some CEOs felt after last year's shooting in New York of one of their ranks. Sure,

chief executives know they are paid well to overcome nerve-rattling pressures. Yet some experts are now wondering if CEOs have reached their breaking point. In 2023, CEO turnover at the world’s largest companies was only slightly lower than the record level of changes in 2022. This year the turnover continues near 2022’s record pace, with the difference that much of it hasn’t been voluntary. Of the 191 Russell 3000 Index company heads who have left in 2024, 74—or nearly 40 percent—were reportedly fired or forced out, according to data compiled by independent researcher Exechange. That’s the most at this time of year since the firm began tracking CEO departures last decade.

What’s behind all this drama? No one can know for sure. Academics may debate it for years. But in search of answers, Briefings dug

into every nook and cranny of the corner office. We consulted dozens of pros inside and outside Korn Ferry, and, of course, hundreds

of CEOs—as well as the workers who have a front seat to all of it—as we considered the most daunting pressure points CEOs face

today. In the end, we settled on five. Some are familiar, others are not. And for each one, we raised the question: How can CEOs

solve it?

AI: A Stealth Weapon

“You can’t put your head in the sand for this one.”

The Problem:

Artificial intelligence could disrupt everything, but few

leaders really know how it will.

The Solution:

Dedicate a team to exploring AI and crafting a strategy, then experiment.