Wednesday, November 13, 2013

Looking at the Top

What does it take to become a great CEO?  There are many studies out there that compare training programs to MBA schools.  There are profiles of great leaders and their key personality traits.  But who are these people?  Why is their influence so great in the business world?  How did they get to where they are?

In going through the Harvard Business Review’s list of the 100 best CEOs, certain characteristics start to emerge.  I would like to preference the following list with saying that I am not implying that any of these are indicative of a good leader.  The list just shows the breakdown of characteristics using percentages.

-       98% are male
-       97% are married
-       63% do not wear glasses
-       99% have a bachelors degree
-       Only 29% have MBAs
-       79% were promoted from within

That last figure is striking.  79% of the world’s leading CEOs were promoted from within the company.  That would indicate that it is important to have a strong executive leadership-training program.  So who has the best executive leadership program?  According to the Chally Group, a management consultancy firm, there are five companies that do it the best.  They looked at four indicators:

1.     Having a formal leadership process in place
2.     The commitment level of the CEO, as measured by the time and quality of involvement with the leadership process and development program
3.     The depth of the leadership funnel as measured by the percentage of senior management positions filled by internal candidates as well as the percentage of middle management positions filled by internal candidates
4.     The number of other companies that report recruiting from the company being evaluated.

According to these measures, P&G ranks at the top.  They are considered the “Navy Seals” of management.  Their focus on internal development is highlighted by a unique promotion system.  You cannot get promoted until the people who work for you are ready to be promoted.  This creates a system and culture that promotes management refinement at all levels.  IBM ranks number 2 on the list.  Its Basic Blue for IBM Leaders, Shades of Blue and Accelerate Executive Leaders Program for New Executives, and Executive Insights for Newly Hired or Acquired Executives are all training/development programs.  Combined, these schools develop 60,000 high potential mangers.  

America’s top CEOs have done extraordinary things.  They are usually rewarded well for their efforts.  But money is not the only indicator of a good leader.  Amazon’s CEO, Jeff Bezos, made $1.4 million in total compensation last year.  His salary was a humble $81,840.  He also brought a 30% return on investments for shareholders.  The worst rated CEO, Michael Fraizer from Genworth Financial, made $10.5 million a year.  His return to investors was -19%.

A lot of debate has done into the idea that a good leader can influence the outcomes for a company.  Evidence shows that a good boss does have a significant impact on the work culture and profitability.  There is a profile of good leaders, but it is not all-inclusive.  Having an MBA does not make you a great leader.  Often internal promotion is the way to the top.  Compensation for good leaders does not indicate their level of success in the market place.  While there are some common characteristics of great CEOs, there is a lot of diversity in the top 100 leaders


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