CEO Career Breadth Creates Novel Strategies

Companies thrive or die off their ability to find the right type of leadership to manage their daily operations. Investors would be wise to consider the background and depth of experience when hiring their next CEO. A study of CEOs at 250 Fortune companies found that CEO career variety is positively associated with firm-level novelty that offers strategic dynamism and strategic distinctiveness that can help firms change and grow (Crossland, et. al. 2014). 

Strategic novelty is the ability of CEOs to think out of the box and beyond the medium of traditional strategies of those firms within their field. Instead of using only the same strategies, as other firms, they often seek out alternative strategies that could potentially have more lucrative outcomes. Novelty can make the difference between a market leader and market follower.

Career breadth is the multiple industries and places that people have worked over their careers. A CEO who worked in a single industry throughout their career will naturally be indoctrinated into those beliefs and have difficulty thinking about new ways of doing things. A person with wider experience has the ability to think creatively that leads to different results. 

Such CEOs are more likely to seek out experimentation and change as a method of managing the business. As problems arise they aren’t stuck with the status quo and often try and find new ways of doing things. This can help organizations find a way to transform themselves when market difficulties arise. 

The advantages of hiring the right CEO can make a huge difference in the growth potential of a business. Businesses naturally face internal and external challenges that can hamper their growth. CEOs that have a wider breadth of knowledge can put their mind to work on solving these challenges in new ways and hence lead their company to a new level of performance. 

Crossland, C., et. al. (2014). CEO career variety: effects on firm-level strategic and social novelty. Academy of Management Journal, 57 (3).

U.S. CEOs Optimistic About the Economy and Plan on Hiring

America is pulling ahead as CEO's project a much brighter future with more hiring and greater investment. According to a report by the Young President's Organization (YPO) the U.S. bucked trends of other nations by raising their confidence index from 64.2 to 65. This optimism is a full two points above other countries and has prompted some positive decisions in company strategic planning that will bode well for the American worker.

Net importers of oil were more optimistic than net exporters. The reason this is the case is because exportation of a natural resource can be lucrative but is also unsustainable and limited. Those nations that reaped the rewards in the past may find their economies struggling now that prices are changing and demand is less. Importing nations find the cheaper oil prices an advantage for their production and economy through lowered input costs.

The report had three interesting expectations over the next 12 months that include:

-70% Sales to Increase/26% Sales to Stay the Same/4% to Sale to Decline
-47% Fixed Investments to Increase/48% Fixed Investments to Stay the Same/5% Fixed Investments to Decline.
-45% Expect to Hire/51% Hiring to Stay the Same/4% Hiring to Decline.

The optimism among key decision makers, such as CEOs, help to push additional investment and hiring. You will notice that only a few believe sales, investments, and hiring will decline over the next 12 months while the far majority either believe it will stay the same or improve. Most CEOs feel that sales will improve and this in term could fuel additional investment and hiring.

Those companies that are working with less than full capacity are likely to soak up that slack before deciding to hire. Many companies have adjusted and transformed during The Great Recession and are in a lean position to grow. Future profits are expected as consumer confidence rises and additional economic activity experienced.

http://www.ypo.org/4q14us/