Steps to Attain the CEO Position

Are you prepared to ascend the slippery ladder of triumph? If so, commence your journey with an engineering degree (and don't forget to join a fraternity along the way). After completing your studies, accumulate several years of pertinent work experience before returning to academia for an esteemed MBA program at a reputable university. Enhance your credentials further by securing a position at either Bain or McKinsey. Finally, transition to the organization you aspire to lead one day, ensuring you gain operational expertise and exposure to the international landscape.

These are the sequential steps I have unearthed through my comprehensive examination of Fortune 100 CEOs, as well as 222 CEOs from 18 enduringly successful companies. To substantiate my findings, I had the privilege of interviewing CEOs and experts on CEO succession from Egon Zehnder, Heidrick & Struggles, and Merryck & Co.

Education

Unless you possess founder status, attaining the pinnacle position without a degree is virtually unattainable. Slightly over half of Fortune 100 CEOs possess degrees in business, economics, or accounting, while 27% pursued engineering or scientific disciplines, and 14% ventured into law. Fortunately, there is no necessity to allocate substantial funds for enrollment at a prestigious institution at this stage. For instance, Alan Mulally of Ford completed his undergraduate studies at the University of Kansas. Randall L. Stephenson, the CEO of AT&T, is a proud alumnus of the University of Central Oklahoma. In his recent book, Malcolm Gladwell argues that individuals who attend lower-ranked institutions, despite having similar SAT scores, often fare better in life. He posits that attending such institutions fosters their self-assurance, whereas high-achieving students may struggle amongst their academically accomplished peers.

The situation differs, however, when it comes to MBAs, where grades are of lesser importance compared to the reputation of the institution and the networks forged. Roughly 40% of Fortune 100 CEOs possess MBAs, and 60% of them hail from elite institutions. If you have the opportunity, Harvard remains the go-to choice. In 2012, the world's most renowned business school produced 40 CEOs of Fortune 500 companies.

This trend is unlikely to alter in the foreseeable future. As markets continue to embrace globalization, it is highly probable that a greater number of CEOs of America's largest corporations will originate from overseas. Consequently, many of them will possess their initial degree from their home country. Nonetheless, earning an MBA from a prestigious American institution will bolster their credentials. We can also anticipate an influx of engineers assuming leadership positions. Globalization is a contributing factor once again. Emerging economies place a heightened emphasis on engineering and scientific degrees, channeling their talented youth into these fields. Consequently, the likelihood of an engineer from an emerging economy becoming a CEO is significantly higher. Additionally, engineers possess an inherent advantage in the realm of technology and digital markets. Andrew Roscoe of Egon Zehnder, an executive search agency, identifies this as a key consideration for selection committees. Consequently, it comes as no surprise that CEOs of prominent organizations such as Jeff Immelt of GE, Rex Tillerson of ExxonMobil, and Tim Cook of Apple possess technical backgrounds. Expect this trend to intensify further!

Career Path

Large organizations are intricate ecosystems, making it challenging for outsiders to adapt and navigate within them. The board members of Fortune 100 companies are well-versed in this dynamic, showing a preference for internal candidates in 79% of cases. Similarly, only 11% of the 222 CEOs in the long-standing organizations that I researched were external hires. In the most successful long-standing firms, this number dropped even further to a mere 3%.

This does not mean that CEOs have spent their entire careers in the same company. Some have worked for a few years at one of the prominent consulting firms. A survey conducted by USA Today in 2008 discovered that the chances of a McKinsey consultant becoming the CEO of a publicly traded company were the highest in the world, at 1 in 690. Take James P. Gorman from Morgan Stanley, for example. He was a senior partner in McKinsey's financial services practice before transitioning to Merrill Lynch and eventually Morgan Stanley. However, it's rare for individuals to make a direct leap from consulting to the role of CEO. In fact, it is more likely for such a move to occur from a law firm, where individuals can prove themselves by offering their legal services to the firm.

Most future CEOs ultimately move into significant operational positions, often overseeing the largest division or the most crucial international branch, before being offered the top spot. Three-quarters of Fortune 100 CEOs come from a background in operations. However, this career trajectory does have its drawbacks, as highlighted by Adam Kleinbaum, a professor at Dartmouth College, in a recent article. Ascending the ranks solely within the core business leads to a limited network of interpersonal connections and limited opportunities to engage with individuals from different areas of the organization. This becomes significant as the role of CEO can be isolating and demanding, necessitating trusted confidants and allies who can provide insights into the ground-level realities.

Another alternative career path is finance, with 32% of Fortune 100 CEOs having previously held the position of CFO. However, individuals in this path tend to have even narrower perspectives, potentially viewing the whole organization through a financial lens. On the other hand, as Will Moynahan from Heidrick & Struggles, an executive search firm, points out, CFOs are usually the only ones with substantial experience in communication with shareholders. Possessing fluency in the language of high finance and having established connections with various external stakeholders are valuable qualities for CEOs of public companies.

With the world heading towards greater global interconnectivity, future CEOs will face numerous unforeseen challenges. Boards recognize this and place a premium on track records that reflect diverse experiences. This doesn't mean that a strong background in finance or operations will be disregarded, but having something else to bring to the table is undeniably beneficial. A few years working as a consultant naturally springs to mind. Ginni Rometty from IBM serves as a prime example of someone with a wide array of different roles. She began her career at General Motors before joining IBM as a systems engineer. After a stint in IBM consulting, during which she spearheaded the acquisition of PricewaterhouseCoopers, she assumed the positions of head of marketing and strategy before finally becoming CEO.

Personal Characteristics

Selection committees must consider the complete package, encompassing both personality and track record. Recent research by Egon Zehnder takes this a step further. In a survey of 800 executives, 78% stated that a person's track record is a poor indicator of future success, while 87% believe that personal traits explain the performance gap between good and great leaders. Despite the challenge of measuring personal traits, this perspective may not necessarily translate into the appointment decisions. After all, if a CEO appointment turns out to be unsuccessful, the members of the selection committee would prefer to shift the blame. Nevertheless, certain personal characteristics prove helpful throughout the arduous climb to the top.

At the top of the list is personal drive and ambition. Reaching the summit entails a level of stress and long working hours that not everyone is suited for. Bill Gates, for instance, dedicated 10,000 hours to programming on a high-school computer starting at the age of 13. Edward Lampert from Sears faced hardship at a young age, losing his father at 14, yet continued to support his family by working after school and on weekends while maintaining good grades. Furthermore, in 2003, he was abducted in a parking lot near his office, but only two days after his release, he returned to the office to negotiate an important deal. People like Gates and Lampert are the type you will be competing with for the CEO position.

Effective communication skills are a crucial requirement in the corporate world. In today's age of social media, a single misstep can have detrimental consequences for a company. Not every aspiring CEO is born with a natural talent for communication. For some, it boils down to sheer hard work. Chris Beer, who arranges CEO mentoring programs through Merryck & Co and is a Professor of Practice at Warwick Business School, recounts the story of a client who was a competent performer but struggled to get along with colleagues. This individual was on the verge of being sidelined, but with the help of mentoring, they learned to adapt their style and subsequently thrived within the organization.

In my own extensive research on CEOs from long-standing companies, I discovered that the ability to listen is equally crucial. Margaret Heffernan, a mentor to numerous CEOs, emphasizes the importance of understanding both the needs of others and the needs of the business. Sometimes, this necessitates making difficult decisions. Heffernan recalls her time as the CEO of InfoMation Corporation when she recommended her own dismissal to the board, recognizing that it was necessary for the company to excel. The organization had transitioned from a business-to-consumer model to a business-to-business model, an area in which she felt she lacked sufficient expertise.

Furthermore, it should come as no surprise that establishing strong connections with peers and superiors is vital. A noteworthy 15% of Fortune 100 CEOs were members of fraternities, underscoring the significance of networks. In our increasingly globalized world, the nature of these networks may evolve, but the importance of connections remains unyielding. In fact, the prominence of former McKinsey consultants in executive positions can partly be attributed to the unparalleled alumni network of the firm, which even offers exclusive job opportunities.

So, is there a definitive path to becoming a CEO?

While chance and circumstance undoubtedly play significant roles in reaching the pinnacle of an organization, following these steps will undoubtedly enhance your prospects.