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Thursday, April 28, 2016

How To Become A CEO

How To Become A CEO

How To Become A CEO: These Are The Steps You Should Take


Are you ready to clamber up the greasy pole of success? If so, you should start with an engineering degree (and, yes, join a fraternity while you’re at it). After graduation, grab a few years of related work experience before heading back to school for an MBA at a top university, and then follow that up with a stint at Bain or McKinsey. Finally, make the jump to the company you hope to lead one day, and be sure to get some operational experience and international exposure.


These are the steps I identified while studying Fortune 100 CEOs and 222 CEOs from 18 companies which survived for more than 100 years . I also interviewed CEOs and experts on CEO succession from Egon Zehnder , Heidrick & Struggles, and Merryck & Co .


Education

Unless you’re a founder, your chances of making it to the top job without a degree are virtually non-existent. Just over half of Fortune 100 CEOs have a degree in business, economics, or accounting, while 27% studied engineering or science, and 14% law. Fortunately, there’s no need to spend your money on a top-school at this stage. Ford’s Alan Mulally, for example, did his undergrad degree at the University of Kansas.  AT&T’s Randall L. Stephenson is a graduate of the University of Central Oklahoma. In his latest book, Malcom Gladwell argues that among people with similar SAT scores those who attend a lower ranked school do better in life. He argues that it allows them to maintain their confidence, while even smart kids can struggle in a classes stocked full of academic overachievers.

It’s different for MBAs, though, where grades matter less than the school’s brand and the networks formed. Close to 40% of Fortune 100 CEOs did an MBA, and 60% of them went to an elite school. If you have the option, Harvard is still the place to go. In 2012, 40 Fortune 500 CEOs had an MBA from the world’s best known business school.

This is unlikely to change anytime soon. As markets become more globalized, more CEOs of America’s largest companies are likely to come from overseas. Hence, many of them will have their first degree from home, but in order to burnish their U.S. credentials, an MBA from a top school will be helpful. We can also expect more engineers at the helm. Partly, globalization is at play again. Emerging economies often put greater emphasis on engineering and science degrees, funneling more talented youngsters into those fields. So, the likelihood that a CEO from an emerging economy is an engineer is going to be higher. Moreover, engineers tend to have an advantage when it comes to technology and digital markets. According to Andrew Roscoe from Egon Zehnder, an executive search firm, this is one of the issues high up on the agenda of selection committees. It is therefore not surprising that CEOs at some of the most prominent companies, such as GE’s Jeff Immelt, ExxonMobil’s Rex Tillerson, or Apple’s Tim Cook, have technical degrees. Expect more of this!


Career path

Large organizations are complicated ecosystems, proving difficult for outsiders to adapt and navigate within them. The board members of Fortune 100 firms are intimately familiar with this dynamic,  preferring to select internal candidates in 79% of the cases. Similarly, only 11% of the 222 CEOs in the long-living organizations that I studied were outsiders. In the most successful long-living firms, the number was even lower: 3%.

This does not mean that CEOs spent their entire career in the same company. Some work for a few years in one of the big consulting firms. A 2008 USA Today survey found that the odds of a McKinsey consultant becoming the CEO of a public company were the world’s highest at 1 in 690. Morgan Stanley’s James P. Gorman, for example, was a senior partner in McKinsey’s financial services practice, before moving to Merrill Lynch and then Morgan Stanley. Operational experience is important, though, as a direct move from consulting to CEO is a rare exception. In fact, you’re more likely to make such a move from a law firm after proving yourself by helping the firm with your legal services.

Eventually, most future CEOs move into substantial operational roles, typically running the largest division or the most important international business, before they get offered the top spot. Three-quarters of Fortune 100 CEOs come from operations. In a recent article, Adam Kleinbaum, a professor at Dartmouth College, highlighted the potential downside of such a career trajectory. Moving straight through the ranks of the core business translates into narrow interpersonal networks and limited opportunities to connect with people in different parts of the organization. And this matters as the CEO’s job is often a lonely grind, where it helps to have trusted friends and allies you can consult to find out what’s really happening at the ground level.

The alternative career path is finance, as 32% of Fortune 100 CEOs previously held the post of CFO. Usually, these careers are even more confined, creating the danger of viewing the entire organization through the prism of figures. On the other hand, Will Moynahan from Heidrick & Struggles, an executive search firm, points out that CFOs are typically the only ones with substantial experience in communicating with shareholders. Being fluent in the language of high finance with all manner of external stakeholders is a valuable attribute in public company CEOs.

As we expect the world to become more global and interconnected, future CEOs will be confronted with countless unforeseen issues and challenges. Boards are aware of this and will put a premium on track records which reflect a wide breadth of experience. This does not mean that a solid finance or operations background will be dismissed, but throwing something else into the mix is certainly useful. A few years spent working as a consultant obviously comes to mind. IBM’s Ginni Rometty is a good example of someone with a variety of different postings. She started her career in General Motors before she joined IBM as a systems engineer. After a job in IBM consulting – where she spearheaded the acquisition of PricewaterhouseCoopers – she became head of marketing and strategy, before taking the top job.


Personal characteristics

Selection committees need to examine the full package, meaning both personality and track record will be taken into account. Recent research by Egon Zehnder goes a step further. In a survey of 800 executives, 78% stated that a person’s track record is actually a poor indicator of future success, while 87% believe that personal traits explain the difference in performance between good and great. Considering how difficult it is to measure personal traits, this is not necessarily reflected in the decision of who will be appointed. After all, if a CEO decision turns out to be wrong, the members of the selection committee want to deflect the blame. Still, even during the gruesome climb to the top, some personal characteristics are helpful.

On top of the list comes personal drive and ambition. Climbing to the top translates into stress that not everyone is cut out for combined with extremely long working hours. Bill Gates, for example, spent 10,000 hours programming on a high-school computer from the age of 13 . Sears’ Edward Lampert lost his father at the age of 14, and helped to support his family by working after school and on weekends, while still earning good grades. In 2003, he was kidnapped in a parking lot outside his office. Two days after his release, he was back in the office to negotiate an important deal. It’s people like these that you’ll have to compete with for the CEO job.

Communication skills are also high up on the list of requirements. At a time when every gesture and utterance can quickly be shared through social media, small gaffes can cause major harm to a firm. Not all future CEOs possess natural talent. So for some of them it comes back to hard work. Chris Beer from Merryck & Co, a company organizing CEO mentoring by former CEOs, and a Professor of Practice at Warwick Business School, recalls a client who was a strong performer, but simply did not get along well with any of his colleagues. He was about to be side-lined but then learned through mentoring how to adapt his style and has since thrived in the organization.

In my own study on CEOs from long-living companies, I found that the ability to listen is equally of high importance. Margaret Heffernan, who has mentored numerous CEOs, refers to a capacity to understand the needs of others and the business. Sometimes this requires tough decisions. She recalls that as the CEO of InfoMation Corporation, she recommended her own dismissal to the board when this was necessary for the business to excel. The company had shifted from B2C to a B2B, an area she did not feel she had sufficient expertise.

Finally, it will not come as a surprise that the ability to build connections both with peers and bosses matters. 15% of Fortune 100 CEOs were members of a fraternity . In a globalized world, the nature of networks might change, but connections will matter even more. In fact, the ability of former McKinsey’s consultants to arrive at the top can partly be explained by the firm’s unprecedented alumni network. It even has its own exclusive job offers.

So is there a pathway to CEO?

There’s no guarantee you’ll ever reach the top job of a large organization, because chance and circumstance also plays a substantial role, but if you follow these steps, then you’ll certainly increase your chances.

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