As executive search consultants, we are tasked with finding chief executives with pedigrees that are indicative of success. This sounds simple enough, save for the fact that the backgrounds and career paths of proven CEOs are as varied as our clients’ definitions of said success.
Consider these examples: Indra Nooyi is an Indian-born American with a background in consulting. Jack Welch, the only child of a railroad conductor and homemaker, began his career as a PhD-educated chemical engineer and rose through the ranks at GE. Steve Ballmer, of Swiss and Jewish ethnicity, was born into an affluent family and dropped out of Stanford graduate school to join classmate Bill Gates’ new venture and later lead Microsoft.
Countless studies have been conducted in order to gain better insight as to what mixture of diplomas, career trajectories, and life experiences create the “perfect” corporate leader. Of course, the answer is that there is no magical formula, no industry standard, as to what makes a successful chief executive… which is good for us in the executive search industry.
What we are able to take a deeper look into, however, are the similarities and common themes seen in the lives and careers of successful chief executives.
First, the College DegreeThe law of averages shows us that most Fortune 500 CEOs have a formal education. While a bachelor's degree and a graduate degree of some kind are more than common, there is no one major or graduate degree that they all share—and no one college or university that dominates.
While business and computer science degrees are solidly represented, according to Investopedia, there are some unexpected inclusions, such as Jeff Bezos’ electrical engineering degree, Michael Dell’s incomplete pre-med degree or—my personal favorite—Overstock.com CEO Patrick Byrne’s Chinese studies degree. Byrne later went on to study philosophy at Stanford, earning him the moniker “our liberal arts poster child” from colleague Sarah Mitchell in her study of CEOs with liberal arts backgrounds. Roughly half of the CEOs in Investopedia’s report obtained an MBA.
Next, the Career PathThe position of CEO requires one to be the ultimate generalist, say Elena Botelho and Kim Powell in their book The CEO Next Door. Early in their career trajectories, CEOs “build a wide breadth of skills and experiences early on by moving across functions, industries, companies, and geographies.”
In the mid-stage of their career path, the typical chief executive holds a general management position that allows her or him to demonstrate measurable success in directly driving top line and/or bottom-line revenue or profits. And while financial experience is important—one study revealed that nearly 30 percent of Fortune 500 CEOs had a strong financial background—only about five percent are actually promoted to the top job out of a CFO position.
The largest share of Fortune 500 CEOs is selected from the positions of COO or President. These positions give executives a platform to prove their ability to set strategic vision, be an effective leader of people and interact with the board and key stakeholders. These positions also typically weed out those who are unable to handle the pressure of managing a large organization; it is much easier for a board to promote a proven operator.
Socioeconomic InfluencesAcademic and professional backgrounds are somewhat straightforward to assess. But by going deeper, we can look at how the socioeconomic backgrounds of corporate leaders shape the way they perform.
A study published in the Academy of Management Journal states, “social class origins of top executives help to explain their risk-taking preferences… In general, CEOs raised in the two top and two bottom family categories exceed those in the middle in terms of strategic risk-taking, with chief executives from upper- and upper-middle class backgrounds the biggest risk-takers of all.” Why?
The authors of the study explain that CEOs from the upper and upper-middle classes grew up with “an abundance of resources” that acted as a safety net of sorts for them, affording a confidence to make higher risk decisions. Concurrently, those from the lower-middle and lower classes have the same propensity to make these same decisions based on a “nothing to lose” mentality.
In comparison, “the middle-class safety net is smaller and less secure...such that those from the middle classes are especially motivated to maintain their current position and minimize the likelihood of status loss."
Of course, even someone from the middle classes can have learned to take strategic risks, which leads us to the next theme…
Foundational ExperiencesChildhood experiences—hardships, extraordinary responsibilities, independence—forge future leaders by teaching them to be reliable for even the toughest tasks, and to learn and recover from mistakes.
“Over and over, the business leaders we interviewed shared foundational stories of how the seeds of future success were sowed in childhood,” says Ms. Botelho. “They forged the skills needed to succeed … from what they learned on their own, when their parents would not (or could not) assist. Sometimes exhilarating, often chaotic, and sometimes disconcerting, it was their autonomous childhood experiences that gave them the coping skills and resilience to take on the toughest challenges today.”
All of these influences and experiences help define a leader. Yet, outside of politics, you will hardly ever see an executive’s biography mention their social class or upbringing on their company’s website. The life and early careers of corporate executives help inform their decision making, their propensity to take risks, and their ability to connect with all of the major stakeholders of the company.
Understanding the whole of the executive is crucial in helping to determine who is the best fit for your organization.