CEOS' tenure has tended to decreaseCEOS' tenure has tended to decrease

TOP MANAGERS

Who are they? What are they like?

There have been many analyses of the leaders of large companies, both in the US and UK. There has been even more published on what top managers ought to be like and what they ought to do. We have drawn on many published sources in preparing these profiles and have supplemented these with our own research and impressions drawn from many meetings and discussions, plus many years experience of working with corporate leaders.

Who Are They?

Let's start with the Chairmen and Senior Non-executive Directors of FTSE 100 companies. The data presented are for 2003.

Poring through lists (as we did) compiled from a painstaking reading of company annual reports, a reader would take away the immediate impression that there is a limited field of choice when it comes to selecting people for these roles. Whilst there is no stereotype, chairmen and senior non-executives tend to be ex-chief executives of large companies, supplemented by ex-civil servants and politicians, plus some senior City luminaries. To add a little variety, there is a smattering of women who have been successful in business, civil service or politics and a number of foreign businessmen and retired US ambassadors to the Court of St. James.

That is it, really. There is no sense that companies have brainstormed creative ways of introducing fresh thinking into their boards. Nor is there much evidence that there has been a huge concern to tap into research or creative thinking about different forms of organization or better ways of unleashing employee creativity.

It is hard to shake off the feeling that there is a series of lists of safe, suitable and visible candidates held by the relatively small number of executive search consultants who perform the delicate and sensitive task of fingering the great and good for roles that have, up to now, not been very demanding.

All of this becomes understandable when you remember the chairman and senior non-executive's main job is to keep the 'shareholders' feeling comfortable that their interests are properly represented in the board. It is very unlikely that people who have radical or unconventional views about the purposes of industry or the powers of investors would be very popular!
Statistically, of 86 chairmen (and we mean men) of FTSE 100 companies, 34 have been awarded knighthoods and 7 are members of the peerage. Pretty well all of them come from business or financial backgrounds. Nearly all of them have multiple directorships, the 86 people that we analysed possessed at least 240 company directorships between them, in addition to a number of trusteeships of artistic or charitable enterprises.

Non-executive chairmen and directors tend to have greater longevity than CEOs. Many chairmen have survived through multiple changes of executives, although evidence is emerging that investors may press the chairmen of great disasters to resign alongside the executive incumbent.

Other Non-Executives

Moving on to senior non-executive directors, or deputy chairmen, as they are sometimes known, the profile remains the same. In fact, in many cases, the people are also the same! Quite a number of people are chairmen of one company and non-executive directors of others. We analysed the incumbents of 85 of the FTSE 100 deputy chairmen roles. This time, there are two women in their ranks!

Amongst this group of 85 people, 24 possess knighthoods and nine peerages, so once again, the great and good are well represented. This group is even more 'plural' than the chairmen, holding at least 270 directorships between them.

A third group of non-executive directors have past or current City backgrounds. These may be in banking, broking, investment management, accountancy and very occasionally consulting. Nearly all FTSE 100 companies have at least one director who would be able to supplement the experience of the other directors by a financial markets perspective.

Nearly all boards have between 5 and 10 non-executive directors with multiple interests. In the US, it is likely that non-executive directors will feel increasing heat, as Lord Wakeham, holder of multiple directorships and the unfortunate chairman of the Enron Audit Committee, may be able to testify. However, it is maybe a little bizarre that non-executive directors, who, according to Lord Young, (and certainly our observations) are unlikely to know much about the business, are the people with tenure, whilst Chief Executives move in and out of the revolving doors with increasing velocity.

A systematic analysis of the educational or social backgrounds of non-executive directors shows some noticeable features. First, a large proportion has financial or banking backgrounds. Amongst those with a university education, there is heavy representation from Oxford and Cambridge, followed somewhat distantly by London and then Durham and Bristol universities. Scottish based enterprises, mainly but not exclusively in the financial services industries, have a very heavy representation from Scottish universities, particularly Edinburgh.

Chief Executive Officers

The other role that features large in the eyes of the City, press and public is of course that of Chief Executive Officer.

Chief executives of large quoted companies carry more pressure than any other managers and are the most transient of all senior executives, with an average tenure of just over four years in FTSE 100 companies, (Cranfield University study, 1999), although this average obviously covers quite a range of different lengths of tenure.

A study by Booze Allen Hamilton published in June 2002 pointed to an average tenure of European Chief Executives as six and a half years, compared to the US of nine and a half years. (Considerably less in Fortune 500 companies, just on 5 years, in fact.). In all cases tenure is shortening, dramatically since 1995, with the incumbent more likely to be forced out than die in office or leave of his own accord. The report states that 'Today's Chief Executives are like professional athletes - young people with short, well compensated careers that continue only as long as they perform at exceptional levels'.

A large number of CEOs of FTSE 100 companies come from outside the company that they lead. In 2001, 12 CEOs had spent the whole of their working lives with one company and a further 10 had spent their careers within one industry sector.

In terms of educational and specialist backgrounds, twenty eight FTSE 100 CEOs had accounting or banking backgrounds, with a further five having actuarial qualifications. Nine were engineers and ten chief executives had MBA's. These days, most CEOs have higher educational attainments. Of those who went to a university, Oxford and Cambridge still supply the most top talent. (Sources, Company Annual Reports and 'Who's Who in Business and the City').

Women are no better represented in the ranks of top 100 company CEOs. We counted one, Marjorie Sciardino of Pearson plc.

As might be expected, the average age of CEOs, at 49, is considerably lower than that of their non-executive colleagues.

What are they Like? What do they Value?

Of course, this question is impossible to answer objectively or completely accurately. Top executives are human beings and therefore each one is unique and different.

What we can do, however, is to identify a number of factors from comments made by people who are used to observing and assessing top managers, in particular, executive search consultants and business psychologists. We can then draw attention to a number of behavioural factors that can be observed from top executives actions in recent times, add in our own observations and experience and let you, the reader, make your mind up about the kinds of people we have described.

In doing this, our main focus is on the holders of chairman, chief executive and finance director positions, as these people are the most visible to external observers.

At this stage, it is worth mentioning that there is no such thing as a "Man (or woman) for all seasons". A company in crisis and facing immediate ruin will require quite different leadership to one that is well-founded and plans to spend the next ten years building solid organic growth. It is our experience that most top managers who love the drama and immediate challenges of a crisis become a dangerous liability if put into situations requiring patient attention to detail and relentless consistency.

Successful Top Managers

Successful top managers have an unusual amount of energy and stamina. They can absorb, and frequently dish out, amounts of pressure and stress that would make many people give up, and they often enjoy it!

Most people that have reached the top job in a large quoted company did not do so by accident. At some stage, they decided that they were going to get to the top and devoted sufficient energy and attention to making sure that they did. They are therefore quite capable of taking tough action against others if the situation needs it. Of course, they will all have different styles of being tough, from downright confrontational to positively subtle, but be certain, they are capable of taking care of their own interests.

Nearly every successful top manager will have well developed political antennae. Life at the top is very political, not necessarily in the sense that we might expect from professional politicians, but because at the top of large organisations there are no even more senior people to set the rules of behaviour. Because most of a top manager's colleagues are also strong-minded, when it comes to making decisions and taking action, it is often less a matter of what is rational or 'right' and more a matter of 'who is for and against what'.

They are also likely to be confident and able to be 'out there on their own', with a desire to challenge the status quo and keep the organization moving ahead.

Top Characteristics

Research conducted by YSC Ltd., a leading London based business psychology consultancy indicates a number of characteristics and conditions that will determine success in CEO roles.

Successful CEOs tend to have good networking and communicative skills and to use them to promote themselves and their agendas, inside and outside the organization. They can balance opportunistic deal doing with developing the strengths of their organizations and teams. Some very successful top managers have made it up the ladder because they have had an influential patron.

Prospects of success are markedly increased if they are internally grown and know the industry and the organization that they lead. Then they will be able to understand where the levers of power are and how to use them. They will be able to understand the competitive structure and cyclical dynamics of their industries and make informed judgments about the timing of strategic actions.
They will have come to the top job via a variety of functional and middle management roles and not have missed out on experience in the middle of organizations.

The evidence is that transplanting managers at the top executive level from one organization to another is quite risky, but there are ways of reducing the risks.

An organization that has become run down or degenerate will almost invariably benefit from a fresh perspective and new blood at the top. When managers are transplanted, it is often helpful to appoint a duo with complementary skills. The case of Archie Norman and Allen Leighton in Asda is often cited as one such successful example. The consultants also commented that a good grounding in business analysis, combined with open-minded curiosity, is likely to be a positive feature in 'transplants', as these characteristics reduced the risks of individuals seeking to exactly replicate experience that has worked elsewhere.

Difficulties experienced by transplants are exacerbated by not understanding how to work the organizational levers in the new company, not really understanding the industry or the specific roots of under-performance. Newcomers, especially those in a hurry, tend to initiate changes that do not percolate down the organization and go for 'solutions' that have quick impact but may not be sustainable.

Changing Profile.

So whilst the profile of a top manager is rather complex and contingent, it is almost certainly valid to say that certain characteristics have become more marked in recent years. Some of these are:

An experienced business psychologist, who specialises in assessing top managers summarised contemporary trends succinctly. He commented that management was becoming more like politics in the senses that timescales were compressing, that image was becoming as important as substance and that many top management careers were likely to end with 'failure', increasing the pressure to cash in on the good times quickly.

At the end of 2001, tenure in top management roles was still decreasing, supporting a tendency on the part of managers to try and make a quick impact through deals and transactions. There was also some evidence, he said, of a convergence between the personal characteristics of people in the financial markets and those in management, especially in roles such as finance director. Thus it is possible that top managers are becoming more individualistic and self-seeking, with a decreasing concern for the long-term well-being of a wider community.

 

There is some evidence that more young people from the 'elite' universities are interested in entering management. The majority of those who do are coming in after qualifying as accountants or a Masters in Business Administration. There is a marked tendency still for such people to try to avoid the grind of working up through the organization by taking a functional fast track and entering general management via such roles as finance or strategy director. However, the vast majority of graduates from business schools such as Insead and London Business School still tend to go directly into jobs in the financial markets or consultancy where it is possible to attain high earnings at an early age.

These analyses are supported by several very experienced top managers. One said, "There is no longer support for people who want to build a business over the long term", whilst another thought that "There are 'growers' and there are 'dealers', buyers and sellers. The growers don't get much of a look in these days".

 Section index:
The Bosses		 
Go to top