Business And Society

Businesses
Younger Need
Employees to Bring
into Their
Leadership Ranks
by Martin Reeves, Felix Rüdiger, Arthur Boulenger, and Adam Job
October 12, 2023

RichVintage/Getty Images

Summary. Businesses play a crucial role in tackling the challenges of our times,
such as climate change. To enhance their effectiveness in this arena, they must
become more curious to develop the innovations we require, as well as more eager
to adapt their behaviors... more

Addressing challenges like climate change and biodiversity loss

will require technical innovations. As such, a strong curiosity for
unearthing new approaches is key. But just as crucial is that we
are willing, even eager, to change our beliefs and behaviors
accordingly.

Organizations are being hampered on both fronts by their

leadership structures, as those with the most power to drive
change may not be the most eager to do so — and vice versa. A
seasoned leader may favor short-term results over long-term
benefits that won’t manifest during their tenure. Moreover, they
may be reluctant to challenge the mental models or
organizational structures that have underpinned their success.
Conversely, younger professionals may be more open to pursuing
new paths leading to long-term payoffs, given their longer career
horizons. Yet, they are usually not in the position to effect change
within their organizations.

As societies around the world continue to age, there are calls for
firms to increase the age diversity in their workforces and
improve the inclusion of older, more experienced workers. While
supporting this aim, we argue that age diversity also needs to be
enhanced in a different way: Aging leadership structures need to
involve less experienced talent in order to rebalance the tensions
of experience vs. curiosity and of efficient execution vs. bold
exploration. Striving towards intergenerational leadership can
accelerate companies’ efforts to build a sustainable future—and
unlock competitive advantages at the same time.

The Search for New Experience — and New Experience

Curves
Leadership in business is currently dominated by the most
experienced: The average age of CEOs of Fortune 500 or S&P 500
companies is 58 — and rising, with data showing that the average
hiring age of CEOs has increased by around 20% (from 46 to 55
years old) since 2005.
Hiring leaders for their experience is sensible if the future
environment is expected to be similar to that of the past and if the
firm’s main goal is to navigate this stable environment ever more
efficiently. This idea is enshrined in business strategy as the
experience curve, which states that costs decline logarithmically
as a function of cumulative experience.

But in today’s volatile context, experience may be less valuable

than ever, as it becomes outdated quickly. In his book Leading
Through Disruption, Andrew Liveris, former CEO of Dow
Chemical, points out that the advice he was given by other
company leaders in the early 2000s is now mostly obsolete. “The
business landscape today is so foreign from that of two decades
ago that figuring out how to deploy [lessons and skills from the
past] needs to be reimagined and retaught,” he writes.

When circumstances are changing, old paradigms not only

become obsolete — they can obstruct progress precisely when
new ideas and thinking are urgently required. Optimizing the
current approach becomes a path towards obsolescence. Thus,
instead of trying to descend further down their current
experience curve, companies increasingly need to develop an
ability to jump to new ones — by reimagining their businesses.

Research suggests that bringing less experienced people into

leadership roles can help unlock the requisite creativity and
flexibility. Age-diverse leadership teams create cognitive tension
that fosters learning. The younger generation helps brings
awareness to a new set of important topics, such as environmental
and sustainability issues. The involvement of younger leaders
may also counterbalance the tendency of more experienced ones
to lean towards less risky strategies (e.g., engaging in fewer deals
and investing less in R&D, which is reflected in fewer patent
filings by firms led by older CEOs). Finally, younger talent is more
(due to a lower aversion to changes in the status quo) and less
likely to be caught in the success trap (i.e., to becoming prisoners
of the assumptions underpinning their historical success).
These factors are reflected in firm-level outcomes: Corporate
vitality — a measure of a firm’s long-term growth potential, which
depends on its capacity to explore new options and renew its
strategy — is negatively correlated with CEO age (after controlling
for firm age and size, see below). Moreover, studies show that age-
diverse leadership teams are better positioned to drive the
adoption of sustainable business models and associated with
better corporate social responsibility outcomes.
 See more HBR charts in Data & Visuals 

Of course, these tendencies are not a simple function of age or

tenure and don’t apply to every individual. Nevertheless, we
believe that there is an argument to be made for rebalancing
curiosity and experience in leadership, and to reverse the aging
demographic of leadership at a time of tumultuous change.

How, then, can companies increase age diversity in their

leadership structures?

Scaling the Fast Track for Young Leaders

Many organizations are already active on this front: They have
talent fast tracks, young innovator awards, or mentoring
programs to build up a pool of potential future leaders. We
suggest firms begin experimenting with greater boldness and
urgency against this agenda. Below, we outline a range of
potential solutions and what we know about them so far.

Consultation
The least disruptive approach involves more systematically
consulting the next generation in strategic direction-setting. This
might take the form of a shadow board or a young leaders’
council, in which a group of non-executive talent partners with
senior executives on key strategic initiatives or major decisions.

This can help bring new ideas and perspectives to experienced

leaders and help bridge generational gaps. Companies from Gucci
to TotalEnergies have implemented shadow boards of younger
employees to consult on a variety of business topics — and their
reports are positive: For example, Mövenpick Hotels & Resorts
had been considering creating a booking app for their properties,
but their shadow board opposed the idea, stating that customers
would balk at having to download another app or remember
another password. Instead, they suggested developing a mobile-
friendly web interface, saving time and resources.

As Gucci’s CEO Mario Bizzarri puts it, a shadow board’s insights

“serves as a wakeup call for executives.” To make these initiatives
successful, it must be clear that they are a safe space for exploring
new ideas. At the same time, it is crucial that the suggestions are
given serious consideration by being embedded into
organizational decision-making.

Co-Leadership
Firms can also experiment with models in which seasoned and
younger leaders share accountability and decision-making power.
This could manifest as a co-CEO model, which research shows
can yield a positive impact on shareholder value — with success
dependent on co-leaders having complementary skills, well-
defined responsibilities, and a robust mutual commitment.

While formalized multi-generational leadership teams are

relatively rare, there are some noteworthy examples: In 2001, the
co-founders of Google (Larry Page and Sergey Brin, both 28 years
old at the time), convinced Eric Schmidt (then 48 years old), a
seasoned technology executive and former CEO of Novell, to join
the firm. Schmidt became CEO and chairman, providing what
Page and Brin called “adult supervision,” while the founders took
on the roles of presidents of products and technology,
respectively, maintaining significant decision-making power as
key executives and majority owners. This intergenerational
triumvirate setup allowed the innovative prowess of the co-
founders to thrive under the guidance of Schmidt’s experience.

Vertical Separation
Another route to strengthening the voice of the next generation
involves vertically separating decision-making bodies. One way to
implement this could be a bicameral governance setup,
borrowing from longstanding practices in national governments.
This structure would include a lower chamber whose role it is to
propose novel policies, and an upper chamber, which either
approves them or suggests alterations. Membership in these
chambers would reflect different experience levels. In one version
of this setup, younger leaders could be responsible for proposing
new policies, which would be vetted and refined by the more
experienced leaders.

This idea has some precedence in the technology sector: Meta’s

Oversight Board functions like an upper chamber, reviewing
content moderation verdicts made within the company and
offering policy recommendations based on case decisions.

For such bold changes to governance structures, defining the

scope of decision-making of the new bodies is crucial, as they run
the risk of reducing efficiency and speed in decision-making.
Experimenting to see what works is key before expanding the
scope and responsibility of such bodies.

Horizontal Separation
A variation of this separation approach that extends beyond
governance would be to construct “temporal business units,” each
charged with developing capabilities or offerings on different
time horizons, according to life stage of each business. Senior
leadership’s role would be to weigh and synthesize these different
perspectives, which might contradict or synergize with one
another.

One illustration of this is Alphabet’s differentiated approach to

machine learning and AI development. Google is responsible for
short-term improvements to the technology underlying its search
algorithm, while DeepMind is focused on developing an artificial
general intelligence in the long term — though their
breakthroughs may also have more immediate payoffs, as with the
recent introduction of the Bard chatbot, which emerged from a
collaboration between both groups.
Substitution
Most boldly, paving the way for the next generation may also take
the form of creating space for more junior leaders by imposing
term limits, implementing retirement rules or creating new roles
for the most experienced leaders.

Peter Drucker was in favor of this, writing: “Unless the seniors

vacate top-executive slots, the juniors cannot move up.” More
than half of S&P 1,500 companies have put in place mandatory
retirement policies for CEOs and directors based on age, while
rules based on tenure remain rare. These hard rules should be
paired with regular performance assessments and succession
planning to take into account specific circumstances.

Finally, enhancing the representation of the next generation can

also be accelerated through instituting compositional targets or
rules to ensure age diversity in decision-making bodies.

...
Businesses play a crucial role in tackling the challenges of our
times, such as climate change. To enhance their effectiveness in
this arena, they must become more curious to develop the
innovations we require, as well as more eager to adapt their
behaviors accordingly. Current leadership structures can hinder
this. Striving towards intergenerational leadership is key to
overcoming these issues and unlocking competitive advantage by
enhancing businesses’ capacity for renewal.

Author’s note: This article is inspired by the 2023 St. Gallen

Symposium, a student-driven global platform for cross-
generational dialogue involving senior and emerging leaders, to
discuss pressing issues and enact change. Under the title “A New
Generational Contract,” this year’s main symposium and year-
round initiatives explored intergenerational connections, mutual
obligations, and shared responsibilities for future generations.
Martin Reeves is the chairman of Boston
Consulting Group’s BCG Henderson Institute in
San Francisco and a coauthor of The
Imagination Machine (Harvard Business
Review Press, 2021).

FR
Felix Rüdiger is head content & research of the
St. Gallen Symposium, a global platform for
cross-generational dialogue at the University of
St. Gallen. He co-leads the symposium’s joint
initiative with the Club of Rome for “A New
Generational Contract,” which fosters long-
term, sustainable strategizing in business and
public policy.

AB
Arthur Boulenger is a consultant in BCG’s
Dubai office and an ambassador to the Strategy
Lab at the BCG Henderson Institute.

AJ
Adam Job is the director of the Strategy Lab at
the BCG Henderson Institute.
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