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).
