Active

Activists

“

I’m looking for CEOs

to show some courage.”

The Problem:

The number of activist campaigns is surging,
nipping at CEOs’ heels or creating wide disruptions.

The Solution:

Communicate consistently with shareholders—
but don’t give in when it doesn’t make sense.

Recently, an activist investor called a CEO’s business strategy “incoherent.” Another chastised a CEO for their social-media posts. A third threatened to boycott a firm’s products unless it changed its hiring practices.

Well-intentioned or not, activists can be a massive distraction to a company’s executive team, not to mention a huge cost of time and money. One Fortune 500 firm ran up a $65 million tab fending off a group that was trying to replace board members. Any time spent on activist campaigns is time not spent on product development, motivating employees, or strategic planning. Plus, there’s the high-profileness of it all. Campaigns that used to slip past most stakeholders are now out in public. “It can make it onto the front page,” says Stephanie Hill, head of index at Mellon Investments.

As if CEOs didn’t have enough going on, the volume of these campaigns has gone through the roof, with 1,162 ongoing in 2023, triple the year before, and continuing to a five-year high in the first half of 2024. Interestingly, it’s a strong, not weak, stock market that seems to be causing this jump, because CEOs can blame a low stock price on a faltering Dow. Activists have also become more aggressive because of a recent rule change by US securities regulators that makes it easier for them to win board seats.

Certainly, the rate of the campaigns could slow down, but activists aren’t likely to change a kind of outsider scrutiny that some CEOs see as nipping at their heels. Beyond financial matters, some activists have in recent years started questioning such areas as a firm’s commitments to social and environmental causes. Depending on where they’re headquartered, the occupant of the corner suite is being told to do a lot more—or a lot less. “It’s not just that you do it, it’s how you do it,” Korn Ferry’s Filler says. In response, experts say, one step is not to give activists reasons to show up. “If you want a less meat-grinder life as a CEO, grow the top line, predict profitability accurately, and have an engaged employee base,” says Korn Ferry global vice chair Jane Edison Stevenson.

At the same time, CEOs cannot allow activists to dictate their every move. Over the past five years, David Dotlich, a Korn Ferry president and senior partner, has seen no fewer than five CEO clients shelve growth ideas because developing them would also mean missing short-term earnings estimates. The bosses were afraid—of the market punishing the stock or activists coming after the company. “I’m looking for CEOs to show some courage,” Dotlich says.

What Activists Want

Source: Harvard Law School

Changes in digital transformation and innovation

10%

Environmental, social, and governance changes

Changes in

financial performance

and capital allocation

40%

20%

30%

Changes in board/leadership

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Strengthen the

leadership pipeline:

All executives should be great at managing conflicts, balancing stakeholders, and building networks.

1 of 3

Be transparent:

Accurately forecast earnings and

explain corporate strategies.

3 of 3

Think like an activist:

Proactively figure out company

areas of risk and be on the lookout for

cost savings, even in good times.

2 of 3

steps

Feet to Fire

What can leaders do when an

activist comes calling? How do you

avoid having them show up at all?

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The World—and the

Economy—at War

Empowered Employees

“

The moment you sneeze,

somebody knows about it.”

The Problem:

CEOs can no longer expect to make business decisions

without facing some employee dissent.

The Solution:

Be much more diligent and transparent in

how you communicate.

It’s a scenario that has happened more than once—in fact, it happens seemingly every quarter. The CEO calls an all-hands meeting to discuss the company’s performance. Sometimes the news is good, sometimes not so much. Usually, an in-house forum is opened up to employees

to ask questions and make comments online. It might not go well. It may even go very badly.

Some ask questions about raises. Others ask whether layoffs are pending. A few question why the leader doesn’t trust them. In short order, the comments end up on social media and then in the press. It’s the last thing a CEO wants to see, says Laura Fravel, an executive communications coach and trainer in New York, but has become much harder to avoid. “Employees are no longer complacent to just go with the flow and take the next command.”

In 2024, much of the focus has been on how much leverage employees have lost. Few people talk anymore about the Great Resignation. Tales of workers quitting on a dime and immediately landing higher-paying jobs are in the rearview mirror. But don’t try telling any of that to top leaders, who can see that corporate hierarchy has been turned entirely on its head. First and foremost, every CEO knows—or should know—that they are now operating in a glass house.

Any misstep—in a meeting, in a memo, even in a casual hallway conversation—can create havoc. “The moment you sneeze, somebody knows about it,” says Ellie Filler, managing partner of

Korn Ferry’s EMEA Human Resources practice.

“

Employees are no longer complacent to just go with the flow and take the next command.”

This is all a product, of course, of a number of demographic and multimedia forces clashing all at once. And it’s the price companies are paying for taking away employees’ pensions and other loyalty-ensuring perks. Most employees, even those whose families might have worked at the same firm for five or even six generations, are no longer incentivized to stay. The average tenure for millennials and Gen Xers? Under three years. To their parents’ shock, these younger workers have zero compunction about complaining about the boss to colleagues. Indeed, there is a sense of impunity among some. “When employees are not motivated, they have nothing to lose,” says Mark Royal, a Korn Ferry senior partner and expert in employee engagement.

Experts say the best way to motivate empowered employees is to create a more personal stake in the firm’s mission—so they do have something to lose. Many want to be in more autonomous teams with opportunities to learn skills and define their own career path. If spectacular pay raises aren’t an option, better benefits and flexibility can make a difference. A Korn Ferry workforce study, in fact, found that workers slightly favor strong benefits over strong pay.

It’s been a mantra for a while, but workers tend to respond positively when they feel authenticity from their leadership. “You don’t have to be nicey-nicey or sweetie-sweetie, you just have to be real,” says Filler. These days, a lack of transparency and authenticity is actually what leads to trouble: CEOs who say one thing and do another may be pilloried by their employees or fired by their boards. “Employees are only going to fill any information gaps with stories they already are telling themselves,” says Naomi Sutherland, global lead for Korn Ferry’s Life Sciences practice.

Trying to get a handle on any of this isn’t easy. Each quarter, Swapnil Shinde, the CEO of AI accounting-software firm Zeni, gathers his 350 employees for a video town hall about what’s going on in the company, everything from revenues to the number of customers to the firm’s margins and goals. After those discussions, individual managers make presentations covering more details. If there’s bad news, it’s delivered first, and, Shinde insists, not in a finger-pointing way. It seems to work. The engineering team at Shinde’s previous firm followed him when he started Zeni.

The Number of Work ‘Influencers’ on LinkedIn

The platform employees have to air their concerns and criticism has taken off in the 21st century.

*LinkedIn members with “influencer” in title

16K

14K

12K

10K

2004

2008

2012

2016

2020

2024

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Encourage collaboration:

Employees should be rewarded for coming

up with creative ways to solve problems.

1 of 3

Listen better:

Routinely ask for employee feedback on business and work/life issues, then act on it.

2 of 3

Be authentic:

Explain why things are

being done as transparently and

empathetically as possible.

3 of 3

steps

Finding A Balance

Workers may not have as much leverage

as they did during the Great Resignation,

but their loyalty to their employers continues to fall. They may often openly criticize (or praise) management decisions in their

social networks. What can CEOs do?

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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Empowered Employees