Do financial services companies need chief executives with a background, or expertise, in technology?
As a sector increasingly dependent on advanced technologies to maintain links with its vast customer base, it turns out financial services has been slow to embrace the need for its leaders in the most senior positions to be steeped in all things tech.
A new survey from recruitment firm Robert Half shows that while the proportion of chief executives in the FTSE across all sectors with a tech background has risen 27%, for financial services there remains not a single tech head in a CEO’s seat. Traditional skills dominate financial services leadership, with all of them sharing a background in finance.
According to Charlie Grubb, Robert Half managing director for executive headhunting, this may be a problem. “With digital disruption transforming all sectors, established businesses need to embrace technology if they are to compete with the new waves of tech-enabled start-ups,” he said.
“Leaders are needing to navigate this increasingly competitive landscape, while also surrounding themselves with the expertise to manage the change effectively within their own company.
“Within financial services, this could mean re-evaluating the candidate mix to future-proof their business in the future of work.”
A quick look at some financial services CEOs’ CVs reveals the truth of Robert Half’s research. António Horta-Osório started work with Citibank and Goldman Sachs before moving to Santander then becoming chief executive at Lloyds. Maurice Tulloch, chief executive of Aviva, an insurance giant, has been with the company all his working life; Jes Staley of Barclays was with JP Morgan for more than 30 years; Mike Wells, CEO at the Prudential, started his working life at the brokerage Dean Witter.
Intriguingly, there has been commentary that financial services CEOs are not making the most of the technologies at their disposal. Could their areas of expertise be holding them back? Possibly. But the use of new tech also comes with well-publicised risks, especially cybersecurity concerns. Building a modern financial services business is all about customer data and how it’s used. But it also has to be protected.
Leaders in crisis
Analysts at Gartner, which takes a close interest in technology and leadership, concluded in July that leaders in all sectors and across the globe are suffering a “crisis of confidence”, with only half concluding they are well equipped to lead their companies.
That may be because of a lack of specific expertise in technology, its pace of development and its disruptive potential. But it may be for other reasons: global economic uncertainty and political upheaval chief among them. It could also be a general concern about the wide range of disciplines CEOs feel they should master to be an effective leader; after all, the world and business are simply more complicated places.
The answer, according to Gartner, is for leaders to realise they do not need to be experts in everything. According to Sari Wilde, vice-president of Gartner’s HR practice: “Leaders are not always best positioned to manage every responsibility they are tasked with; instead the best leaders identify others who have a stronger grasp of skills at which they are weak and share responsibilities with them.”
In other words, a leader who knows their limitations and can fill the gap with the right people remains a good leader. Gartner argues that companies should focus on creating “leadership partnerships, not just better individual leaders”.
Of course, there may be one good reason to have expertise at the top. At the end of last year the Financial Conduct Authority reported a 138% increase in technology outages in the previous 12 months. This was accompanied by an 18% rise in “cyber incidents”. Perhaps an expert leading the firm could arrest those alarming numbers.
However, Megan Butler, the FCA’s director of supervision for investment, made no claims that this was an expertise issue for financial services CEOs. She did however add: “The true test of the resilience of UK finance is not the absence of incidents. It’s how well incidents are managed.”
And that is as much a part of general leadership competence as it is technology expertise.