strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: May 26, 2009

 
 

CEO Succession 2008: Stability in the Storm

The New CEO Career Path

By expanding our research this year to identify and decipher patterns in data about the incoming class of CEOs, we sought to shed light on what companies can do to enhance the career options they offer to high-potential talent, and what individuals can do to improve their chances of making it to the top of their organization. As we studied the demographics and job histories of the new class of CEOs, we paid special attention to the items in their resumes over which would-be CEOs — and the companies they work for — could exercise some reasonable control. These included job assignments, international experience, and participation in high-profile strategic projects.

First, a quick look at the demographics. The CEOs arriving in office in 2008 were, as indicated, older than the departing CEOs had been at the time of their ascension. All but four were men. The vast majority had a college degree; business degrees prevailed in North America, whereas engineering and economics degrees led in Asia and Europe. At the graduate degree level, business degrees such as MBAs were the most prevalent globally.

In addition to collecting demographic information, we looked at the career paths tapped by boards that recruited CEOs. For each incoming individual, we identified the highest position held prior to their appointment as CEO. (See Exhibit 7.) Naturally, most boards chose individuals who had responsibility for a P&L. Of the new CEOs, 65.6 percent had run a business; this included 18.9 percent of the total incoming class who had been CEOs before (generally, but not always, of another company); 27.4 percent who had been business unit leaders; and others who had been regional heads, presidents, or chief operating officers. Just over 14 percent had been board members, and only 15.2 percent had been promoted from a career that culminated in functional leadership, including the CFO position.

Alan Joyce, the recently appointed CEO of Qantas Airways Ltd., provides an example of a business unit head being promoted to the top job. Founding CEO of subsidiary Jetstar Airways Pty Ltd., the low-cost carrier that quickly became the fastest-growing profit center at Qantas, Joyce was a fast-rising star, and he now runs Australia’s flag carrier at the age of 42.

It is noteworthy that nearly all the incoming CEOs had held some functional role in addition to their general management experience. The most prevalent background was operations (56 percent). This was followed by finance (36 percent), strategy and planning (30 percent), and marketing and sales (24 percent).

Dirk Meyer, the new CEO of Advanced Micro Devices Inc. (AMD), is one of those who collected valuable functional experience en route to the top. In addition to playing a major line management role as head of AMD’s processor group (the company’s only business line after it spun off its flash memory group in 2005), he has been an R&D leader, serving as vice president of engineering. He is also one of the most experienced and prolific engineers in the chip industry, with more than 40 patents and many chip designs to his credit.

With rare exception, the 2,500 companies represented in this study have operations in multiple countries. So it stands to reason that international experience would be an increasingly important entry in any prospective CEO’s resume, and, indeed, 52 percent of the new CEOs we studied have held an international title, such as regional manager outside the country where the company is headquartered. That said, we have yet to see global diversity take root in the CEO suite in the form of an expatriate CEO. Only 13 percent of the new CEOs we studied were not nationals of the country in which the company was headquartered.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Corporate Leadership Council, “Creating Talent Champions, Volume I” (2008) and “Hallmarks of Leadership Success” (2003), Corporate Executive Board: The source of research on leadership development.
  2. Cyrus Friedheim, “Commit and Deliver,” s+b, Spring 2006: Reflections on the challenges of being an incoming CEO.
  3. Per-Ola Karlsson, Gary Neilson, and Juan Carlos Webster, “CEO Succession 2007: The Performance Paradox,” s+b, Summer 2008: Last year’s study shows that even those chief executives who deliver subpar returns show unexpected staying power.
  4. Thomas Neff and Julie Hembrock Daum, “The Empty Boardroom,” s+b, Summer 2007: The most desirable board members have always been those with CEO experience, but they’re in short supply.
  5. For more business thought leadership, sign up for s+b’s RSS feed.