Boards have responded to volatility in the current business environment by employing a risk-averse approach to recruitment—appointing previously experienced and slightly older CEOs—according to new research.

The findings come despite more than a third of respondents, 38%, saying that their “CEOs strengths do not match the skillset their organisation will most need” over the next two to three years.

The annual Heidrick & Struggles Route to the Top survey finds that almost half the CEOs in Europe, including the UK, were previously a chief executive elsewhere, while their average age has risen over the past five years to 57.5.

Kit Bingham, head of the board practice at Heidrick, told Board Agenda: “What we’re seeing is that boards are a bit more risk averse, they have a bit of a safety-first instinct.” He adds: “There’s less of an instinct to roll the dice, as it were, on a higher risk or less proven candidate.”

Look to the future

The misalignment of executive talent with corporate strategy has emerged as a key issue for companies. Bingham says: “That takes you into investing in the next generation—future development of talent.”

“It’s the role of the board to think … what are we going to need in the next individual? What are we going to need in six years’ time? What’s our market going to look like? What’s our business going to look like? Where do we both allocate capital and what sort of leadership are we going to need in that phase?

“Companies are not feeling very positively that they’ve got that right yet.”

Bingham says the “flight to safety” in CEO recruitment is likely driven by the “macro environment”, including the management of higher inflation, energy costs and interest rates. He adds that AI may be an adding a “sense of dislocation” and “disruption” to recruitment considerations.

However, hiring a CEO with AI expertise is unlikely to be the answer or possible, he says.

While the research does not cover the relationship between the CEO and non-executives, Bingham says sentiment among board members is not to allow the “governance tail to wag the dog.”

“There’s real focus from boards to say, OK, get the governance right. We get it: it’s important. But, for God’s sake, let’s focus on performance…”

The current risk averse recruitment decisions may continue, Bingham says.

“The flight to safety will continue, as in boards will continue to appoint people that the market recognises, have a track record and are familiar.”

Bagging a first CEO role, he adds, will be difficult without experience of investor relations, building relationships with external stakeholders and without having done the media rounds.

“Boards are going to want to make appointments that everyone else recognises,” he says.