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A Right Recruiting Newsletter, 1/2009
Since our recruiting assignments involve all levels of jobs, from C-level down to individual contributors, we are in a good spot to analyze what is actually required to move into a CEO or other executive slot. In 30 years of local recruiting, I first met a number of current C-level executives back when they were beginning their careers. This continual contact has allowed me to determine what they have in common. To prepare for this Newsletter, I interviewed about 15 local contacts who have made it to CEO jobs. I also looked at about 100 resumes of people who have made a similar rise. Here are some observations and comments.
First, an anecdote and explanation/definition. Once, back in 1987, I was speaking to what was then called a “Yuppie”. He was about 25 years old and had a very Type A personality. He said his goal was to run a company. I asked him why he didn’t buy a beer distributorship, grow it and then buy a few more. Within 5 years he might own and run a $20,000,000 company. Well, he didn’t like my advice. That was beneath him. He wanted to be a corporate CEO, you know, someone important. We had a disconnect.
As we begin this discussion, that anecdote tells us something. People mean different things when they say, “I want to run a company.” Some people want to move up the ladder in a traditional corporate environment and manage a business that fits their careers and education. Others want to have something that they own, ignoring any aspect of a career. These are two very different animals. While this discussion will be focused on those who want to move up the ladder and run a business in line with their career, it might help if you take a step back and determine your true motivations and goals.
In textbooks on executive compensation, they explain the difference between extrinsic and intrinsic compensation. Basically, intrinsic means the money and other quantifiable benefits you get from your job. Extrinsic means the psychological benefits or status you get from the job. Extrinsic benefits are hard to define but you know them when you see them. For example, someone who stays in a job for less money because they like their peers is getting extrinsic compensation from their work environment. A plush corner office is extrinsic. Working in a status industry can be an extrinsic benefit. Basically, an extrinsic benefit is something that you value but can’t sell or cash-in.
If you visualize a continuum, with a total intrinsic focus on the left and a total extrinsic focus on the right, most people are positioned in between, skewed to some degree individually to either side. We all have different wants and needs but it likely will remain a bell curve.
Here are two examples on the extremes. My offices are in a building owned by a fellow who also lives in Blue Bell. He bought the building because it is visible from one of the entrances to his estate and he wanted to be sure it always looked presentable. Obviously, he’s a successful fellow. Without getting specific, one of my friends called him a “B” as in billionaire, not just an “M” like in millionaire. I believe that he decided early in his life to be rich. He knew that the only way to do so was to have his own business. He had minimal extrinsic concerns and was almost all intrinsic. He started with a small printing/publishing concern that printed pulp magazines and puzzle books like those you see at the supermarket checkout. That was his first business and he grew related businesses from that, none very exotic or dramatic. His goal was not to get into publishing or printing. I doubt he cared about his eventual final products or industry. His goal was to get rich. If it wasn’t via one route it would be via another. He was very intrinsic oriented.
On the other extreme, my wife has a friend who runs a large non-profit. She probably makes 50% of what she made in the corporate sector but has a prestigious title, great offices and people are very impressed when told who she is. She has lots of status in the community and feels that she is performing a valuable service. Her focus is very extrinsic.
Most of us are somewhere between those two people. If you are like my landlord and are exclusively focused on the intrinsic aspects of your job, than you should stop reading. You need to start your own business and make it successful. The type of business should have nothing to do with your goals or interests. It should be about a product or service that people will buy. I don’t think Harold Katz really cared about diets when he started Nutri-Systems. He only cared about whether it was something that people would buy.
OK then, for those who want to be successful but within the confines of their personal goals and interests, how do we move up the corporate ladder and crash through the manager level to the executive level?
That last step is important. We are not talking about being a department manager. This is about a sustained effort to go beyond your current discipline area. We want to know what it takes to go past that and to be someone who makes strategic decisions about businesses and staff. Profit and loss and the plusses and negatives that go with it. The real deal. How do you become a big-shot?
Our starting place is education. Are there any common traits among C-level people relative to their education? Yes there are and they are interesting. Not only were these factors visible in the interviews and resumes I analyzed, I also saw them in other, more public figures, in the business world. The quality of the education is extremely important but not in the way people expect.
Of course, a BS/BA degree is expected for an executive level job. An MBA is also becoming very standard as well. I would say those are the “buy-in” criteria for being considered at that level. Beyond that, I looked at the quality of the degree - what school, GPA, etc. Here is what I found.
Within reason, the quality of the BS/BA degree does not have a lot of meaning. Penn or Temple, to choose two names randomly, it almost doesn’t matter which you attend. However, the quality of the MBA appears to be very very important. An elite, top-flight MBA (Wharton, Duke, etc) means more, even when packaged with a BS from West Chester, than a BS from Harvard with no MBA or a weak MBA. I just Googled Warren Buffet. Here’s his education. His BS is from a school local to him, the University of Nebraska at Lincoln. When he went to grad school, he was rejected by Harvard Business School (!) but eventually went to and graduated from Columbia. An average BS/BA and a top-tier MBA. From what I’ve seen, this is not an unusual combination. In other words, save your money on your BS/BA and invest it in a good MBA. Make sure the bachelor’s degree prepares you for the world and your GPA is good. Beyond that, your ability to get a top-flight MBA is critical.
There still remains the question of what BS/BA to get. I am going to table that for a different newsletter titled – “Why Don’t Engineers Run The World – Or Even A Company Now And Then?” In other words, there are not a lot of engineers or technical people in the executive suite and the reasons why will take too long to discuss in this Newsletter. In short, however, Accounting/Finance seems to be the most common, general liberal arts or business next and only then a technical degree. Somewhat disturbing to me but, as I said, something worth exploring later. I have strong opinions of the subject. Too strong and too long for one Newsletter.
Do any jobs that prepare you for the CEO chair? Yes, but they vary from industry to industry and market to market. The most common entry career track for CEOs is either in accounting or in sales/marketing. There are some industries like basic chemicals, steel, paper or other production driven, commoditized capital intensive industries where operations people can eventually get to the top job. However, that’s unusual. And, even in those industries, the grooming process for an upper management slot often involves a stint in sales to round out the person’s background. In general, however, it’s not where a person starts that’s important. It’s the body of work and broad exposure during the first 10-20 years of your career. Virtually every CEO I interviewed, and most resumes I saw, showed at least 2 and sometimes 4, transfers into different departments. A typical example would be to start in product development, a move to sales and then to marketing while getting an MBA. These varied roles must be substantive, not just part of some junior management training program. How do you define substantive? I think that in at least two of these areas you should have gotten a promotion.
Using the example above, here is a typical career ladder. Someone starts as an entry-level engineer or accountant and 6 years later runs a small group. He then transfers to a Sales or Business Development role for 3 years and moves to a Marketing role. After 3 years he becomes a Product Manager. Now, he is 33 years old and is responsible for strategic decisions for a $20,000,000/yr product line in a $300,000,000/yr company. He also has an MBA from Penn. Three years later, at the age of 36, he has grown his product to $40,000,000/yr and taken on other products. A year later he is contacted by someone like me about a newly created Director of Sales/Marketing job at a $50,000,000/yr company. It has a small staff, reports to a CEO and, most importantly, gives him sales management experience, which he does not have now. Within 5 years the company grows to $90,000,000 and he gets a VP of Sales/Marketing title. Now, we have someone in their early 40’s who has contributed to top line growth both operationally (sales management) and tactically (marketing). This individual also has a good foundation since he began in engineering or finance. He’s not baffled by numbers or technology.
A few things can happen now. His CEO can leave and the board may think enough of him to give him the slot. The CEO may plan his retirement in 4 years and groom our friend to replace him. A $50,000,000/yr company with weak sales management and marketing but a strong finance and engineering team may want a CEO with strong sales and marketing credentials may consider him. Any of these things, all good, may occur.
I hope you noticed something in that example. Almost every time the person jumped up a job level, it was to a smaller company. He was a Product Manager at a $300,000,000 firm and moved to a more senior slot, a VP Sales/Marketing, at a $50,000,000 company. If that company grows to $90,000,000, his next step might be CEO or COO at a $40,000,000 firm. In this model, the person gains deep experience at a company and achieves success and then leverages that deep experience with a promotion at a smaller firm that broadens their background by giving them responsibilities in new areas. If working at a small company is not your cup of tea and your exclusive goal is to be a CEO at a Fortune 500 company, good luck. I hope you are successful but remember; statistically you have a better chance of playing major league baseball. By definition, there are 500 CEO jobs in the Fortune 500. I think there are more players than that in the big leagues.
Of course, you should also notice that this person will change employers 3, 4 or 5 times within a 20 year career to get close to a CEO slot. It’s very difficult to get multiple promotions in one company. Basically, it means that every person above you must die, retire or leave and you must beat out every other person for every one of the promotions. Even if you get a series of promotions at one company, it’s very hard to stay at a company for 20 years and then move to a CEO slot at another firm, unless it’s a closely related company and product. You become too entrenched in one industry and one way of doing things. Also, if it’s too closely related, you might have contractual issues preventing you from moving to another employer within your industry anyway. Lastly, don’t forget another thing. Our candidate above worked for companies that grew. If you are working in a company or job that cannot demonstrate any growth, you are wasting your time. Growth lubricates careers.
So far, we’ve talked about two factors, education and career management, and how they affect your march to the top. Lastly, let’s talk about character and personality. Are there common personality traits to CEOs?
I am going to include a caveat here. Frankly, there are two types of CEOs. Those who have run and grown companies and those who are legacy or caretaker CEOs who have gotten, or maybe just lucked into, a CEO slot and will never get another shot at it because they are failing. Let’s assume you are more interested in being a successful CEO than a failed CEO, shall we?
Here I see some definite common strengths in these people. They are so well defined that I am going to use bullet points:
1) Ambitious - They knew very early that they wanted more responsibility and wanted to move up into senior roles, beyond a department management job. That last point is important. It’s great to work 20 years and then get promoted to Department Manager, BUT, the level of ambition we are talking about to be a CEO is significantly greater than that. There should be an early recognition of your goals.
2) Risk Taker - Changing employers, especially moving into a new role, can be risky. Every person I spoke to admitted to occasional flutters in their stomach but all were confident that they could override any mistakes that their career might throw at them. They did their own risk/reward calculations. They recognized that they would, at some point, make a mistake. It still didn’t paralyze them.
3) Hard Work - Don’t fall for the myth that executives spend half their time golfing. These people always work like dogs, at least the good ones do. Expect to work 60 hours a week or more.
4) Sacrifice - All these folks travel a lot, some as much as 30% of the time. Also, at some point in their career, most had jobs in which they had to travel at least 50%. Most also had to move their family at least once for a good job. After all, there are only so many companies within any geographical area. You increase your odds for a promotion by being mobile.
5) Polite - This may strike you as strange. In my experience, the higher up the ladder, the more polite the person. I get more call-backs and referrals from C-level people than anyone else. It’s not uncommon to have an HR person or Department Manager ignore my call or rudely dismiss me while at the same time have the CEO of the same company call me back with some information. Courtesy is a tool of leadership. These people know that. A fellow who used to work for me is now reasonably high up the corporate HR organization at a large pharma company. I once asked him what surprised him the most about the change from outside vendor to inside professional. Here’s his answer. Please keep in mind that he works for a $10,000,000,000 company. He said that in 1999, when he was an agency recruiter working for me, he never would have thought of contacting, either by phone or email, a CEO or senior person at any company, much less one as large as the one he works at now. Yet, every week, he gets forwarded to him from the CEO an email or voice message from a potential vendor or outsider trying to make contact. Not only does the CEO pay attention to those requests or solicitations, he wants them to be explored. My friend eventually realized that there were two driving forces behind this. One, the CEO is always looking for improvements and one of these solicitations may have a positive impact on his company. They shouldn’t be ignored. Two, it’s polite and good PR. A company that sells it’s product by sending an army of salespeople into millions of doctors offices worldwide understands that they themselves should be receptive to potentially good ideas. To do otherwise would be hypocritical.
6) Calculating - This is not the opposite of polite. Calculating means that they recognize that they may need to make difficult decisions and don’t hide from their responsibilities. They have to deliver bad news. They have to fire people. They have to lay people off. They have to manage businesses through bad times. They know that this is a part of their job. One of the most unpleasant things I have ever done is to fire people. A good CEO knows when unpleasant things are unavoidable and does them in a graceful and polite way and then moves on.
The last trait is hard to define and best told in an anecdote. One of the fellows I interviewed for this Newsletter is a prototypical example of out template for success. He has an impeccable education, Ivy League BS Technology and MBA. He began in small companies and then for 10 years worked in a variety of capacities for two of the largest technology firms in the world. He is now the CEO of a series of firms locally, totaling about $100,000,000 a year. When I spoke to him I asked him how he made the transition from technologist (his BS and first job was in engineering) to business. I suggested that possibly he had moved into a series of progressively more focused business roles to prepare himself to eventually run a company.
He was silent for a minute and thought about it. His answer was interesting. He said that he doesn’t think that it was initially an overt plan. Rather, he was drawn to positions outside of technology because he had genuine interest in learning more about marketing or about business planning or other non-tech business focused parts of the company. His movements throughout his career, into different areas, were more driven by his interests than a career need to “punch his ticket” in a job and then move on. He admitted that he probably had an internal, unrecognized desire to move into an executive role that but it wasn’t something he recognized until he was in his 30’s.
From that statement, we get to personality trait number 7.
7) Sincerity - most CEOs I know have a sincere interest in the functions throughout their company. They don’t shrink from dealing with finance because it’s boring. To them it’s interesting. They don’t avoid sales because they don’t like sales people. They respect it as an important department. If you are in technology and don’t like working for a CEO who doesn’t respect engineering or operations, then make sure you don’t become a CEO who doesn’t like HR or accounting. Every department has an important function and you should have sincere interest in and respect for those parts of your organization too. You can’t skate around some parts of your job.
In general, the impressions I got from those I spoke to was that being a CEO was hard work. Being a CEO was stressful. Being a CEO was also very satisfying and, at times, a whole lot of fun. To get to that level you need to start planning when young and you need to be resourceful. You need to be alert to opportunities that will put you closer to your goal without being so manipulative as to turn people off. You also need to be good at what you do throughout your career. I made one statement to every CEO I talked with and they all agreed.
A CEO at a small or mid-sized firm, $40,000,000/yr, is really the VP of every department with a Manager reporting to him. It doesn’t matter what the business card says. He needs to be hands-on operationally in every facet of the company. Since many CEO’s get their first true operational leadership jobs in companies or business units at that level, you need to ask yourself whether you want to be VP of HR for 3 days a month, VP of Sales for 5 days a month, etc. If not, the breadth of responsibilities in running a company may not be right for you. Perhaps your ambitions are best suited to leadership roles within your discipline like VP Engineering or VP Finance. There is certainly nothing wrong with that.
Hopefully, this has helped you focus your career and ambitions. The first step in career management is to identify what it is that you actually want. Of course, if you do reach your goal of becoming a CEO, please remember Right Recruiting for all your employment needs. Thanks.
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