McKinsey: How have demands on infrastructure CEOs changed over the past five years?
Hugh Thorneycroft: There is considerably more private equity money in infrastructure than there was five years ago. This has led to more severe financial pressures for CEOs because many funds are now looking for returns over a shorter period of time.
There is also more scrutiny on infrastructure organizations from the public and in the media. With the spotlight intensifying, organizations are more vulnerable than they used to be—and CEOs need to respond mindfully.
Greg Stanmore: An increased flow of private capital has led to bigger projects as well as more joint ventures [JVs] and club deals. This means that infrastructure CEOs must now be familiar with running companies or projects governed by JV arrangements.
Balancing increased governance oversight and regulation with the ambitions of JV partners is challenging, but it’s critical for CEOs to master stakeholder management so they can wholly consider the needs of different groups with different agendas.
David Cowan: The fundamental role of the CEO hasn’t changed, but the necessary skills and attributes have. Aspiring infrastructure CEOs now have to be more technology savvy and have a deep understanding of the type of collaboration and partnership needed to work with multiple companies at the same time. This knowledge can typically come only from the direct experience gained from working with joint ventures, however, which complicates CEOs’ roles and the breadth of experience they need to be successful.
Today, the context in which CEOs are operating is critical to consider. To navigate a changing industry, the infrastructure CEO of today may be the sole person balancing the needs of the investor, the regulator, the public stakeholder, and the employee, often at the same time.
McKinsey: What attributes can help infrastructure CEOs succeed?
David Cowan: CEOs must manage complex ecosystems with many moving parts. A power development CEO, for example, might be under pressure from the local utility to get gigawatts into the ground but might have a four-year interconnection queue to deal with. This type of issue applies to every element of infrastructure.
In this world of complexity, no one can have all the answers, which means it’s increasingly important for CEOs to be like the conductor of an orchestra: they must be able to extract the maximum value from their team in an inclusive way.
Hugh Thorneycroft: The future CEO role will look quite different than it does now and how it looked in the past. There are so many competing demands when it comes to this position, but chief among them is the ability to be a “systems thinker.”
Being a systems thinker means strategizing, recognizing overwhelming interconnectivity, and thinking big to develop big ideas. Systems thinkers can strategically move between multiple angles, time horizons, and scenarios, zooming in and out when needed. An infrastructure CEO who is not a systems thinker may end up thinking too narrowly and fail to connect the dots when determining what matters most for a project.
Greg Stanmore: Valuing soft skills is also important. The most effective infrastructure CEOs don’t need to appear to have all the answers or be the smartest person in the room. Instead, they are all about visibly self-critiquing, seeking feedback, and incorporating others’ views and then adapting their approach, if necessary.
While CEOs hold their organization accountable for results, their approach is also shaped by empathy, inclusivity, and social intelligence. As a result, they are better able to engage and rally people than leaders who lean too heavily on hard skills. Leaders who focus on these technical skills might also achieve results, but their success might become unsustainable if employees feel disempowered or disengaged. CEOs should find a balance between both sets of skills.
McKinsey: What skill set or background does an effective infrastructure CEO need to have?
Greg Stanmore: CEOs now require a different skill set and different knowledge than they did 20 years ago, when projects often had less risk and were of a smaller scope.
Back then, CEOs leading companies with exposure to a range of capital projects typically had some construction or project delivery skills, but that is not always the case today. More organizations today have a delivery director, who has the construction knowledge, and a CEO, who presides over everything at the company. Therefore, CEOs no longer need to have a true infrastructure background.
Hugh Thorneycroft: Whether a CEO needs an infrastructure background to be successful also depends on the type of infrastructure in which a company specializes. If an organization’s core business is building something, a CEO who doesn’t understand program and project management or lacks megaproject experience might struggle to understand effective strategies for execution. At the same time, so much of a CEO’s job is now about stakeholder management and partnering, rather than executing projects, so those relationship-building skills are supremely relevant.
McKinsey: What pitfalls should infrastructure CEOs avoid when leading a large project?
Greg Stanmore: CEOs need to be aware of the money that is made and lost during the tendering and bidding phase, which can be ample, especially for large-scale, high-stakes projects. Once the bids are in place, it’s important to craft contractual arrangements that ensure costs will be managed, the right delivery strategy is in place, and the right risk-sharing expectation is set among all the consortium partners. The projects that get the contractual agreements right do the best and make money in the end.
Hugh Thorneycroft: The up-front design, ambition, and tactics can also contribute to a project’s undoing. Infrastructure CEOs should be aware of pitfalls and tactics like these early on to complete large projects smoothly.
David Cowan: Many pitfalls can be avoided if the CEO is an effective communicator. CEOs need to be able to motivate people, up close or from afar, and tailor their approach to their audience. Successful CEOs know how to make the vision seem real to win hearts and minds and instill confidence in teams across their organizations.
At the upcoming Global Infrastructure Initiative Summit in Dubai on February 27–29, 2024, McKinsey and Spencer Stuart are leading a panel discussion that will explore the evolving skill sets needed by infrastructure CEOs.
This article was first published in Voices/February 2024 (McKinsey Publication).