What does it take to become a CEO?
There is no sure-fire formula for becoming a Chief Executive Officer (CEO). However, there are clear correlates of success for men and women who are powerfully motivated to reach the top of the corporate ladder.
The personality profile of a typical CEO
Strong leadership skills are requisite for advancing to a C-level position. That said, while some individuals may be born leaders, most are made. Becoming a CEO takes years of exceptional achievement in one’s industry with demonstrated high energy, resourcefulness, and adaptability. It also requires superb communication skills—including the ability to inspire employees with one’s vision, having strong deal-making abilities, and the ability to gain the respect of others. While extroverts have an advantage, new research demonstrates that introverts (who need more ‘alone time’ to reflect on issues) can also be outstanding CEOs.
Education and industry experience
As you would expect, MBAs graduating from an Ivy League school or other top-ranked institution are more likely to achieve C-level responsibilities. This is because they have had the best training available and the support of a high-tier network in finding employment. –While getting an MBA often helps a business professional advance, many CEOs have succeeded with a BA (usually in business administration, economics, management, or some other business-related discipline).
Unless you’re in high tech and aspire to found your own company, it’s unrealistic to focus on iconic college dropout CEOs like Bill Gates and Mark Zuckerberg as your role model. –The majority of CEOs rise to the top through the ranks. Most in this category switch employers in their 20s but remain with one company beginning in their 30s. It takes an average of 16 years to reach the top position—enough time for an individual to gain the rigorous industry background required to lead a company.
More than 75% of CEOs advance internally. Why? Internal candidates know the company culture, key stakeholders, and already have relationships with C-level executives and board members. Hiring someone from outside is seen as more of a risk.
For aspiring CEOs, there’s no better professional development experience than serving on a board of directors. About 45 percent of Fortune 500 CEOs previously served as non-executive directors on company boards. This helps a person gain corporate governance experience while working with other high-caliber executives.
The critical importance of financial and cultural literacy
About 30 percent of Fortune 500 CEOs have a strong foundation in finance. Twenty percent began in sales and marketing. Bottom line– large companies prefer CEOs who understand the financial drivers of corporate success. But there’s more to the story: over half of CEOs were appointed from the position of Chief Operating Officer or President, rather than CFO.
Regardless of originating position, financial acumen is an increasing necessity in an interdependent world, one that also places a high value on cross-cultural knowledge and organizational skills.
Becoming a CEO. Are you up for the challenge?
I described the archetypal successful CEO as high-energy, resourceful and adaptable, usually one degreed by a top-ranked university. Typically, a business professional needs to establish a record of outstanding performance within a company for 15 or more years to rise within the ranks to the top. The iconic college dropout CEO is far from the norm, limited primarily to high tech startups.
The CEO is more critical to company success than ever
Before the digital revolution, most CEOs kept a low profile. In the 21st century, getting the attention of stakeholders and potential customers requires a completely different mindset. CEOs now bypass traditional media, taking their ‘storytelling’ directly to their customers and stakeholders via social media and other digital marketing venues.
In a survey of over 400 executives by KRC Research, nearly half attributed a company’s standing as strongly influenced by the CEO’s performance and public persona. They estimated that 44% of a company’s market value was attributable to the reputation of a CEO.
To put this in perspective, “company leader reputation” placed fourth among the factors that have a strong influence on a company’s overall reputation, 49% of those executives surveyed citing it. The No. A 1-cited factor was “quality of products and services” at 66%, followed by “financial performance” at 57%, with the company’s industry’s reputation at 50%. “Marketing and communications efforts” were cited by 49%.” (KRC Research, 2011)
The 21st century CEO must have exceptional change management skills
The vast majority of 1990 industry leaders no longer exist, reversing the long-standing 20th- century norm of corporate stability. The turning point came with the global trade, tech, and industrial transformations in the 90s. Bottom line—an effective CEO in the 21st century must have in-depth change management skills to master this dynamic. –If you can imagine thriving on complex challenges like these–essentially bringing order out of chaos–you may have what it takes.
A CEO with deep industry knowledge and the keen analytical abilities has a much better shot at anticipating the future. That capability allows them to design innovative strategies which generate winning new products and services.
A CEO must research all viable options before taking necessary calculated risks, at the right time, within the constraints of shifting environmental forces. This is a challenging balancing act. What’s at stake is the profitability, even the survival of a company. –One example, in the 1990s, downsizing, aka ‘right sizing,’ became popular among CEOs as an easy way to quickly improve the bottom line. In many cases, this was a necessary strategy to survive in the increasingly competitive global economy. However, some executives made cuts so deep that they eviscerated their company’s core functions, resulting in complete business failure.
In the next installment in this post, I’ll discuss collaboration and other remaining key competencies that account for CEO success.
What boards of directors look for in CEO candidates
In this article’s first two installments, I described the CEO career path and key correlations of CEO success. I commented that earning an MBA from a top-tier university provides a significant advantage in the job market. That said, only 10% of CEOs overall are in this category, while Fortune 500 corporations report a much higher 30%.
Boards of directors place highest priority on the following when hiring CEOs-
- Superior operational abilities – Besides financial acumen, boards are looking for candidates with strong operational skills. They want to ensure a potential CEO has a clear record of overseeing smooth operations, especially during times when hit by internal and external disruptions. Boards also strongly prefer candidates with who are action-oriented.
- Exceptional fit to culture – Is a candidate a good fit for where you see your company in 2 or 3 years? Are they capable of envisioning and adapting to other possible cultural shifts? -An otherwise outstanding internal candidate will be a poor choice if they have no change management experience or are averse to change.
- Capacity for putting top priority on company goals – Does the candidate resonate with your company’s goals? – Effective CEOs internalize a company’s key objectives as their ‘prime directive.’ Are you among the few professionals capable of making this kind of radical commitment?
- Strategic and tactical competence – Strategic and tactical competence are integral. Both are required for effective project development and implementation. A CEO normally begins with research to assess the pros and cons of their best options. However, a CEO often must take quick, decisive action with time to complete any research. So, a successful CEO must be both collaborative and decisive.
- Strong communication and motivational skills – A CEO is tasked with getting employee feedback within a team-based environment. This requires engaging employees face-to-face at their work locations and also via internal messaging–the latter to reinforce project goals and establish work schedules. This interactive approach generates a more comprehensive range of options while increasing employee support for company decisions.
- Realistic optimism and self-confidence – Interestingly, one of the strongest determiners of long-term CEO success is experiencing failure as a learning experience. By contrast, those who feel ‘damaged’ by setbacks are much more likely to fall into a downward career spiral. Finally, while self-confidence is essential to success, if not reality-based, it will come across as delusional arrogance.
- Control of emotions – A CEO must be able to contain anger–especially in response to minor mistakes. Wrathful behavior in a leader is toxic, undermining employee morale and damaging one’s credibility and authority. That said, CEOs are only human and, when justified, may need to express anger to underscore an important point. Of course, this only works if your colleagues and subordinates can relate to your stated reason for getting upset.
Next, I’ll describe additional CEO practices that increase the odds of success.
Attributes of high-performing CEOs
So in all, I provided an overview of the CEO career path and CEO candidate selection by boards of directors. In this segment, my focus is on additional attributes that distinguish high-performing CEOs.
The following are strong predictors of CEO success-
- Political and cultural savvy – CEOs who rise through the ranks usually have an exceptional understanding of their organization’s politics and culture. In-depth knowledge of these dynamics gives them a significant advantage. By contrast, external hires often lack awareness of an organization’s political fault lines and the informal, unwritten cultural norms that govern how things actually get done.Organizational politics encompasses competition between individuals and departments for authority and resources. – Depending on the environment, effective political strategies may include – (1) developing an informal coalition to drive required change when ‘legitimate’ interests are in opposition; (2) persuading formal authorities to take action who have been resistant; (3) creating cross-functional teams to bridge silos, and (4) performing organizational assessments to reveal how things actually get done (which helps legitimate what works and brings hidden dysfunctions to light).
- Laser focus on company objectives and values – A new CEO must be dedicated advancing a company’s existing competitive advantages while spearheading change. Depending on the organization, required change may include, for example, a new customer service model, a greater emphasis on open communication or improving workplace safety.
- Leading by example – When breaking old, dysfunctional ways of doing business, a leader must “walk the talk.” Without that kind of role modeling, employees will not take a change initiative seriously. Employees notice everything—from a manager’s posture and demeanor when arriving at work in the morning to their subtle non-verbal cues when communicating with others. In fact, more than any other factor—a CEO sets the ‘tone’ (positive or negative) for an entire organization.
- Selecting the right people – According to research, 60% of new CEOs fail to select the right people for their teams/staff in a timely manner. This is the single most common error. Individuals selected for teams must be aligned with the requisite technical and interpersonal skills, as well as being dedicated to a company’s objectives and values.
- Facilitating employee development – High-performing companies coach and train leaders from the bottom up. A rich array of training and development opportunities is required for employees to reach their full potential. This is a strong predictor of innovation, long-term employee retention, and a company’s ROI.
- Developing new leadership – A CEO helps develop future leaders through coaching, training, and delegating authority to strong performers. It’s empowerment, not command and control that helps ensure the competence of an organization’s future leaders. One compelling correlation–those companies investing the most in leadership development, advance business performance more than any other factor.