by Julius WiedemannMar 31, 2022
I recently met a CFO who is an example of what seems to be a movement for businesses with a few faces. Maybe a facelift. After filling their pockets with a few million, working as top executives for 15 to 25 years, and accumulating bonuses after bonuses, professionals realise that they don’t need to have more money to be able to enjoy life more than they already do. C-Level professionals are on a new type of creative wave. This year, CEOs will earn, in average, 351 times more than the typical worker. Their salaries have skyrocketed 1,322 per cent since 1978. Needless to say, that the technology sector is one of the biggest beneficiaries of this uprise. Even with all that, there will be always other options, even for the most successful people on earth. Not really the joke recently expressed by Tesla Chief Executive Officer, Elon Musk, when he declared he was “thinking of quitting” his job and becoming an “influencer full-time”. Jokes apart, professionals are searching for purpose, and for working for themselves instead of corporations. They are also not naïve, and many of them will end up selling their businesses to bigger competitors, generating an even larger amount of money for their retirement.
But the point here is, a new cycle of businesses which is not to be ignored. Larger corporations are apparently having more difficulty today to attract businessmen for a longer time than they had before. By giving them more prizes for their results, they make them realise that they can stop working at an earlier stage. According to PWC, the average time of a CEO in the post is five years. There are certainly examples of 30 years and more, the classic ones, but they are rare, and becoming rarer. Short-term results lead to short-term decision cycles. And it is hard to avoid this cycle, or logic. The result seems to be clear. Professionals with purpose are searching for lifetime achievements of their own. Their calculations seem to be different and priorities change over time. Family, for example, starts to play a much larger role in their lives than they used to have.
The road ahead is not as easy as most people think. In The Founder’s Dilemma, an article written by Noam Wasserman for the Harvard Business Review, the author found out that by the time the ventures were three-years-old, “50 per cent of the founders were no longer the CEO; in year four, only 40 per cent were still in the corner office; and fewer than 25 per cent led their companies’ initial public offerings.” In a 2000 paper in the Journal of Political Economy and two years later in the American Economic Review, entrepreneurs seemed to tend to make only as much money as they could have if they had been employees. Meaning, they are not in for the money. Most of the times, entrepreneurs make less, if we account for risk. Very often, founders take decisions that conflict with their wealth-maximisation.
With the whole corporate world seeking environmental and social compliance policies, these new intrapreneurs play a larger role. They want to make part of businesses that look ahead. The 21st century is shifting paradigms beneath our feet, and these people do not want to ignore them, as most of the corporate world has, for centuries. They have kids who more often than not will not have financial problems for the rest of their lives, and yet, they want them to be in a better world. Even high schools are now teaching different values. When kids grow up looking up parents and start to question what they do, they are inclined to go beyond paying their bills. The Norton High School in Massachusetts, lists for instance, on its website their core values as respect, responsibility, intellectual curiosity, and creativity. Getting kids into schools like these and asking them to forget about what the future might be, is not an option anymore.
The five top reasons for start-ups to fail are as following: running out of cash or failing to raise new capital; no market need; getting outcompeted; having a flawed business model; and facing regulatory and legal changes. But former executives have gone through a lot of these hurdles, and have been able to anticipate what kind of problems they may face in the future. The other thing is that executives always have an exit strategy and think about their businesses as a bridge to something else. Another important point is that experienced professionals, especially CFOs, know how to have access to money and understand how to control costs. More often than not they will seek investors because they understand the mechanics of growth, and a new cycle will start.
Ultimately, beyond all that, professionals who have worked for others and have managed the purposes of corporations, want to own a territory of accomplishments with the values that they see unavoidable. It will be increasingly difficult for corporations to keep these people on their payroll. Freedom is becoming more expensive, and purpose is becoming even more.
Read more from the series Digital Legacies where our columnist Julius Wiedemann investigates the many aspects of digital life.