No industry finds itself immune from change as the world transforms at a
breakneck pace. With technology rapidly improving, for instance, the infrastructure
sector is likely to see greater productivity — but also a higher risk
of obsolescence. Understanding consumer behavior is increasingly key to
infrastructure planning and management, and globalization means that
end-user expectations are shaped by best-in-class infrastructure projects
and operations globally. These are just some of the issues facing companies
in the infrastructure sector, underscoring the importance of strong and
adaptable leadership.
To gain insight into how infrastructure companies might respond to
these trends, we analyzed the career path of 150 CEOs from some of the
largest infrastructure companies around the world. Sixty-five CEOs are
based in Europe, the Middle East and Africa; 47 are in Asia Pacific; and
38 are in North and South America. This CEO population reflects a
broad cross-section of sectors: utilities, engineering and construction,
rail, airports and ports.
A conservative industry — with some sub-sectors challenging the status quo
Nearly two-thirds of the infrastructure CEOs in our study were appointed
internally, which indicates the industry does a solid job at succession planning.
However, another way to look at it is that infrastructure boards favor
continuity and don’t see an urgent need to bring in fresh outside thinking.
In absolute numbers, the airports sector had the highest number of external
CEO hires (17). Many airports have been privatized in recent years as
governments in developed markets face “the reign of empty coffers.” The
infrastructure and private equity funds that often acquired stakes in these
airports are looking for more commercially oriented CEOs, who in turn
are able to relate to financially savvy shareholders looking for returns.
Consistent with that logic, our research also found that a career path
through finance is the most frequent functional route for airport CEOs.
Internal and external appointments
Diving into specific infrastructure sub-sectors, we start to see differences in
the appetite for challenging the status quo. The engineering & construction
and utility companies are the most conservative and likely (>85%) to
appoint a CEO from within their sub-sector, followed by rail companies
(65%). At the other end of the spectrum, port operators were far more likely
to appoint a CEO from another industrial sector — more often than not
from third-party logistics companies.
Liklihood to appoint CEO from own sub-sector
Runway vs. experience — the incoming CEO trade-off
Our survey found the average age of the infrastructure CEO at the time of his/her appointment in the role to be 53,
which aligns with our 2016 research of S&P 500 CEOs and strikes a balance between experience and future career
runway. And while the average tenure of an infrastructure CEO is 4.5 years, we observed a wide distribution of
tenures: almost one in five of the CEOs we studied had been appointed within the last 12 months, suggesting a
generational turnover in the making.
The route to the top
Over 40 percent of infrastructure CEOs rose from two distinct functional areas: 22 percent had roots in operations
and supply chain, while 21 percent came from commercial. Only finance came close at 16 percent (often in the
airports and rail sub-sectors), while the remaining functional paths such as engineering tallied far less than 10
percent each.
Functional route to the top
Diversity — or lack thereof
One of the most pronounced issues facing the infrastructure industry is a lack of diversity. Gender diversity, in
particular, is extremely low throughout infrastructure. It is also very prevalent at the top — only 11 (7 percent)
of our 150 CEOs are female. The male-dominated makeup of infrastructure leadership tends to perpetuate itself,
preventing females from rising to the top.
This issue has bottom-line ramifications: According to McKinsey research, companies in the top quartile for gender
diversity are 15 percent more likely to post financial returns above their respective national industry medians. This
should give serious pause to infrastructure leaders worldwide.
Lack of diversity at the top was manifest in other ways. For instance, while our study covered infrastructure CEOs
from across the globe — from APAC to EMEA and the Americas — less than one-third of these executives had
ever lived or studied outside of their country of origin.
As most of the world globalizes at an increasingly rapid pace, one might wonder if infrastructure companies will
have the necessary diversity in their leadership ranks to respond nimbly to these changes. Leaders should think
of diversity across all of its dimensions (gender, culture, etc.) as a way to bring diversity of thought. By opening
itself up to new ideas and opportunities, the infrastructure industry globally will more quickly and more effectively
respond to the pressing demands of a changing world. The good news is that part of the industry is starting to
change — but more needs to be done.