As a professor of strategy at Cornell University’s School of Hotel Administration in New York, Cathy A Enz, PhD, teaches in an industry-focused business school and continues to find that her students are comparatively more successful in their early career years because they can quickly and easily use their education in a setting they are familiar with. Over time, this understanding of setting becomes valuable, deep knowledge and presents the question of leadership: is it built upon industry experience or something else?
What does it take to be a great CEO? Leadership at the top of any organisation is fundamentally a process of making strategic choices. If strategy is a process of making coherent and integrated choices, then the most successful CEOs will need to have a deep understanding of their own business activities, a tool-kit of models and theories, and an ability to conceptualise and abstract the specific knowledge into overarching themes and patterns. Some argue it is the context-rich industry experience that is most important; others favour management education and the power of strategic tools. A third contingent focuses on the individual qualities or traits that are embedded in the person.
Conventional wisdom suggests that a good CEO needs to have a background in the industry sector. This view was certainly the case historically in many industries where senior managers who did not start their own business only rose to the top after working their way up from junior levels. Andrew Carnegie started on the factory floor; yet, more recent senior leaders also characterise this path to the top. Ursula Burns, CEO of Xerox, started her career as a mechanical-engineering summer intern in 1980, followed by a series of roles ultimately leading to critical senior positions and the championing of a turnaround strategy.
What industry experience provides is a path to learning on the way up that can ground future strategic choices in a clear understanding of organisational routines and norms - making it easier to select the best choices to implement. By understanding the specific activities of the firm, these 'home-grown' CEOs can make realistic and actionable choices that others in the company can clearly and precisely execute. The journey within the industry sector affords senior leaders the opportunity to understand the subtle details of the business. So the argument for industry experience is solidly grounded in the recognition of the value of making strategic choices that fit with the history and culture of a firm and industry, and deep knowledge is hard to acquire without investing time.
However rapid the change, shifting business models or mergers and acquisitions can make much of what was learned on the way up less relevant by the time a manager arrives at the top. While the path to learning was once grounded in the years of observation within a specific context, the value of this knowledge has depreciated. CEOs that 'parachute in' from other industries or possess other professional credentials such as a law degree or an MBA, may be better suited to the task if the organisation has evolved or a fresh or unique mindset is called for.
Education for success
Management education can often provide the frameworks, theories and methodologies to help a CEO navigate, particularly if they lack deep context knowledge. Business knowledge and research findings consumed during periods of university study are valuable to CEOs because they provide the analytic toolkit that assures thoughtful diagnosis of complex business situations. Working in teams and studying group dynamics help graduates to work cooperatively. Data analysis and honing quantitative skills can also serve as a foundation for problem-solving and future growth. As data analytics and big data continue to offer new understandings, a CEO who does not have a grasp of statistical methods, and data analysis techniques is vulnerable.
That said, picking the right time to get a degree and the right institution are important factors. The debate over the ROI on a graduate degree, particularly an MBA, will continue as higher education works to innovate in ways that will revitalise and legitimate the value of professional management education. Technology has clearly changed how, when and where we can learn. While education can offer new ways of thinking and understanding, the traditional on-campus approach to learning may be shifting to lower cost and more convenient online learning opportunities. One thing is certain, successful CEOs need to learn and see differently.
Furthermore, having skill in understanding and interpreting large quantities of information will be essential, even if subordinates are charged with the mechanics of assembling the information, turning information into knowledge that guides strategic choices will need to reside within the CEO. Learning to see large amounts of data with clarity will require additional education and training for successful CEOs.
A leader who is results-oriented, customer-focused, strategic, honest, a visionary, creative, a team player, a delegator, enthusiastic and self-assured, may be viewed as more successful, according to the long and voluminous leadership research. However, a laundry list of personal characteristic can be viewed as too simplistic and not strongly predictive of leadership effectiveness. In the 1940s, Ohio State University leadership studies questioned the trait approach to understanding leaders and suggested a shift from personality to situational models, in which CEO success is a combination of individual qualities and their application in a specific setting.
Since this early work on leadership, a distinction has been made between the dispositional characteristics of leaders, and the more malleable and learned cognitive and social skills such as problem-solving or communication. Behavioural models have replaced those that argue for traits, suggesting it is how we act in a given setting, not who we are that matters. However, a deeper understanding of personality has shown us that CEOs who are extraverts and agreeable are perceived as more successful, and those with high levels of narcissism are often ineffective. It is premature to rule out the important interplay of behavioural qualities and personal values in shaping those who lead.
CEO competency in the hospitality industry
In an industry-focused study conducted by Cornell colleagues, the competencies of existing leaders in hospitality were explored to determine what was essential. The competency model was a descriptive tool that identified the knowledge, skills, abilities and behaviour needed to perform at senior levels. Using 99 different competencies, we learned that self-management was the most critical overarching competency followed by knowledge of strategic positioning, implementation skill and critical thinking. Interestingly, industry expertise paled in comparison to ethical behaviour and strategic management acumen.
If we put these factors together and rely on the views of current CEOs, the case would be made that a successful CEO requires first and foremost a level of introspection, integrity and self-knowledge that is an attribute of the individual. Analytic and critical thinking skills that are often the result of educational experiences are the next element that current industry leaders believe matters. At the bottom of their list is the ability to possess industry knowledge.
Determining what makes a CEO the perfect appointee is complicated and no doubt involves all of the elements previously discussed. While industry knowledge is low on the list of critical competencies based on the study of existing CEOs in hospitality, the benefits of understanding context and culture can and should not be ignored. Education can often provide important critical thinking, communication and interpersonal skills that rank high on the list of needed competencies; however, they are best refined when applied appropriately. Generic knowledge, which is often the nature of broad business education, is often hard to apply.
For CEOs to be successful they too must have the ability to understand and respect the setting they operate in, particularly if they are charged with change. Getting deep knowledge of an industry, without investing years in acquisition, is extremely important. Before changing what is, a CEO must understand how and why things work or don't work in a given context. The trick for a successful CEO is to not be the 'perfect' leader - only a few are truly great - but to be the CEO who tries to understand the situation they are in, the people they work with, and then seeks to make those ongoing strategic choices that fit. By fit, this means making the difficult trade-offs that bring needed new ideas into an industry or firm by using the talents and deep knowledge of others to help find the ways to improve and grow a firm.
Building on what works and respecting those who possess this deep knowledge is essential. Successful CEOs don't have to begin their careers in an industry to appreciate or learn the setting, but if they fail to understand context, the other factors that make for CEO success may not be fully leveraged.
Five things to do as a new CEO
Being a CEO is like running a marathon, but these five steps will help you get off to a good start:
- Begin by not changing anything: this is the pay-attention stage; use it wisely. Listen carefully and work to understand the context, social network and cultural core of the firm. The only thing that is changed at this time is you. Work to see it differently.
- Conduct a strategic review: identify key customer expectations, industry trends, competitor strengths and other external factors that will impact the company. Then, outline the firm's core capabilities and unique resources. An external and an internal analysis are essential.
- Put together teams of credible experts: you don't have to do everything alone. Structure and seek the advice of individuals who bring expertise, diverse work experience, and position power to help you lead intelligently and with informed insights.
- Create a shared vision: it is your job to devise a focused, sensible and appealing picture of the future. Share your vision and keep the communication simple through examples.
- Get into the details: formulate specific goals to get early wins and move the company closer to the vision.