Executive decision: Study highlights role of AI in leaders’ choices

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Uncertainty places greater pressure on leaders. Chief executives must steer organisations, balance shareholder priorities, and pinpoint growth and weakness, all while navigating a changing environment. Uneasy lies the head that wears the crown – particularly when it also needs to weigh up large-scale challenges such as sustainability.

New research from IBM has explored the factors leaders take into account when making decisions. For 20 years, the firm’s Institute for Business Value (IBV) has been conducting interviews to explore demands on senior leaders and how the various roles within the c-suite are changing. For this year’s annual CEO study, CEO decision-making in the age of AI, IBM and Oxford Economics interviewed 3,000 CEOs and public sector leaders about their key decisions and processes, and what they think matters most now.

“We’re trying to make it a conversation over time,” says Haynes Cooney, research director at the IBV. “How are CEOs thinking about all these different challenges, particularly in this seemingly more unpredictable, uncertain time?

“Ten years ago, CEOs were more able to resort to financial and operational metrics to explain decisions and to measure themselves as organisations. If there were other externalities, that was fine, but their focus was on delivering shareholder value. That certainly has evolved as a conversation.”

Most CEOs interviewed for the research predominantly use operational and financial data to make decisions, but the majority also reported that the most important decisions cannot be made based on data alone: almost two-thirds said they turn to input from staff, and more than half stated that they include their own personal experience and intuition. The study also investigated a group of financially high-performing CEOs, finding that they were more than twice as likely as their peers ( 65% vs 28%) to strongly agree that metrics are driving organisational behaviours. They also reported that metrics give them a full understanding of their organisation’s performance and health.

Seeking standards

While received wisdom tells us leaders are awash with data, IBM’s research has found executives grappling with a lack of universal metrics and standards. One of the key challenges leaders highlighted in last year’s study, which focused on environmental sustainability, was a dearth of complete information around the issue. When IBM spoke to clients about the results, they were struggling with uncertainty over what to measure, what the standards are, what the payback period should be, and to which stakeholders they should pay most attention, says Cooney.

Yet the issue isn’t confined to sustainability, nor was it isolated to the 2022 study. Across this year’s research, 61% of CEOs said they lack consistent standards in one or more area of strategic focus, and 56% reported that they are delaying at least one major investment pending greater clarity on standards and regulation.

“Stakeholders are demanding more transparency and justification of why and how decisions are being made, even as areas in which they are asking for those decisions to be made are perhaps less clear and less data-driven all the time,” says Cooney.

This year’s study found, for example, that fewer than half of CEOs feel that they have the information necessary to respond to stakeholder demands for transparency around issues such as data security and privacy.

Generating disruption

There is also tension between a lack of standards and the desire to innovate. As IBM was preparing for this year’s report, generative artificial intelligence (AI) piqued the interest of businesses in every sector, offering the researchers an opportunity to use it as a case study in how CEOs are making decisions about major disruptions.

The research highlighted a gap between leaders’ ambitions for how AI could be used and how it could drive competitive advantage, and what is realistic for their organisation in terms of skills or responsibility. More than two-thirds ( 69%) of CEOs surveyed see broad benefits of generative AI, but only 29% of their executive teams feel they have the in-house expertise to adopt it. Cooney says: “We see a tension between the CEO as a changemaker, visionary, and chaser of opportunities, and other folks playing other roles around the c-suite table.” Additionally, 43% of CEOs reported that they are using generative AI to inform strategic decisions – however, fewer than one in three leaders has conducted an assessment of the potential impact of it on their workforce. Despite this, 57% are concerned about the security of data and 48% are concerned about bias or data accuracy.

“Even though CEOs are very optimistic and see a lot of value, they’re not myopic and they know that there are a lot of risks,” says Cooney. “There’s quite a conversation happening right now around how you seize opportunities and, to a large extent, first-mover advantages in a world where you also have significant consequences, and everyone is just waiting for the first company to have a massive breach as a result of generative AI.”

So, how do businesses balance that trade-off? “It makes for really interesting client conversations,” says Cooney. “Using proprietary data generates business value, but using it in generative AI amplifies all the risks you know are there.”

There is an inflection point when experimentation ends, and Cooney adds: “When we ask c-suite executives where the tipping point is between piloting and experimenting, and operationalising, around 25-30% feel like they are operationalising something, and that will flip in the next couple of years.”