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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But in today’s volatile context, experience may be less valuable than ever, as it becomes outdated quickly.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.
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.
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