Anatomy of A CEO.The uphill trek traveled by top CEOs says much about what it takes to make it to the top today--and how that may change in the future. CE's sixth annual Route to the Top looks at exactly who's who's 1. Contraction of who is. 2. Contraction of who has. who's who is or who has who's short for who is, who has. running the Fortune 700 and how they got there. Consulting experience and MBAs are out; youth is in. Length of tenure is dropping, recruiting from outside is on the rise. But will it stay that way? To explore just how the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. role is evolving, we collected and examined the vital statistics--from age and education to company tenure and international experience--of the nation's current business leaders. What's in a number? Plenty. In addition to offering a detailed portrait of the men and women running Fortune 700 companies today, the data collected for this year's Route to the Top reveals the leadership trends determining who will become tomorrow's top CEOs. Each year, Spencer Stuart looks more deeply into the number that characterize a CEO. Medians, the midpoints in a series of numbers, were added to this year's calculations to prevent a few unusually large or small numbers from skewing the results. It was increasingly apparent that the use of averages was distorting the picture of what's happening to CEOs. For example, the few CEOs who remained in office a long time--up to four times both the average and the median--pull the average years of tenure in office up and distort the true typical length of tenure. As evident in the charts and tables on this page, when medians are taken into account, some results are dramatically different. While the statistics offer a comprehensive look at the contemporary CEO, the observations and predictions that follow peel away the numbers to explore the leadership trends shaping Fortune 700 CEOs. OBSERVATION: The median tenure of CEOs in office in 2000 was five years, a full two years below the median tenure of 1980. PREDICTION: We don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. see medians dropping much farther. Boards will give CEOs a reasonable chance to implement their programs. We also don't foresee fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. medians climbing again with the rapid turnover of CEOs today. OBSERVATION: The median tenure of CEOs in their companies shows a striking decline the farther down the Fortune 700 one goes. The median tenure in the companies of Fortune 100 CEOs is 20.5 years, while the median tenure in the companies of Fortune 700 CEOs is 14 years, a difference of more than six years. Comparing 2000 CEOs to 1980 CEOs, there's nearly a 10-year median difference in company tenure and a six-year average difference. Even more striking is that the median and average ages of CEOs have not changed as dramatically. Coincidently co·in·ci·den·tal adj. 1. Occurring as or resulting from coincidence. 2. Happening or existing at the same time. co·in , the median and average age of 2000 CEOs (56) is identical, as is the the median and average ages of CEOs in 1980 (59). PREDICTION: Executives are moving from company to company more in their early years before settling in. For the Fortune 700, just 26 percent of CEOs have stayed at their firms for their entire careers. This comes partially from a lack of opportunity with original employers and a need to get seasoning in different management jobs. (For the Fortune 700, just 25 percent of CEOs stayed in one function for their entire careers leading to CEO.) Clearly, most executives have to settle in at one company for an extended period before being considered for CEO. Overall, companies will continue to favor insiders--defined as having been with a company for 10 or more years--over outsiders, all things being equal. OBSERVATION: There's a growing CEO youth movement. There are many more CEOs below the age of 50 by comparison with the base year of the study, 1980. In the Fortune 300 today, about 15 percent of CEOs are below 50. In 1980, the Fortune 300 averaged about 5 percent. As you move down the Fortune 700, there's a slight increase in CEOs below the age of 50. Fortune 700 companies have 21 percent of CEOs below the age of 50. Even more noteworthy, few of the CEOs below the age of 50 are founders of their companies. PREDICTION: This trend will continue. Boards are looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. CEOs with the energy to drive businesses to the next level. Increasingly, they are turning to fast-rising management stars or managers recruited from the outside to get companies where they need to be. It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have noteworthy that fast-rising executives outweigh out·weigh tr.v. out·weighed, out·weigh·ing, out·weighs 1. To weigh more than. 2. To be more significant than; exceed in value or importance: The benefits outweigh the risks. those recruited as CEOs. Of 120 CEOs below the age of 50, 63 are fast-risers through the ranks. (Fast-risers are defined as CEOs who have been at their companies for at least seven years and have been CEOs for less than 50 percent of their tenure at the company.) OBSERVATION: Recruiting from the inside is still the preferred method of finding a CEO, and climbing the ranks to the top office is still the way to succeed. For all Fortune 700 CEOs, there are 223 parachuters (defined as those who became CEO within three years of their arrival at a firm and are not founders), which is equal to 32 percent. PREDICTION: While the number of recruited CEOs will rise, outside recruiting will not become the preferred method. Boards are worried about retention of star managers, and if the managers believe they have no chance at the top job, they may leave a company more quickly. On the other hand, given Wall Street's current tendency to punish pun·ish v. pun·ished, pun·ish·ing, pun·ish·es v.tr. 1. To subject to a penalty for an offense, sin, or fault. 2. To inflict a penalty for (an offense). 3. underperformance rapidly and severely, company performance is essential. Boards will continue to scan both internally and externally for the kind of talent that can drive a company to success. OBSERVATION: The number of CEOs who serve in office 20 or more years is about equal to 1980 baseline The horizontal line to which the bottoms of lowercase characters (without descenders) are aligned. See typeface. baseline - released version figures and hovers at about 5 percent. PREDICTION: This will decline. It's difficult for any CEO to serve successfully for a long time. Companies face market conditions that require new skills. Boards get impatient im·pa·tient adj. 1. Unable to wait patiently or tolerate delay; restless. 2. Unable to endure irritation or opposition; intolerant: impatient of criticism. 3. with a CEO's performance. Reaching five times the median tenure in office may be the result of unusual circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or more than gifted leadership. Among the mix are several founders who have grown with their companies. OBSERVATION: The percentage of CEOs who have received an MBA MBA abbr. Master of Business Administration Noun 1. MBA - a master's degree in business Master in Business, Master in Business Administration degree has risen since last year's report; 37 percent of current Fortune 300 CEOs have an MBA, as compared to only 33 percent of 1999's Fortune 300 CEOs. The number declines to 28.5 percent among the remaining Fortune 700 companies. While Harvard Harvard, town (1990 pop. 12,329), Worcester co., E central Mass.; inc. 1732. A Shaker house and cemetery, a Native American museum, and a Harvard observatory are there. was the most frequent source of MBAs, CEOs with Harvard MBAs comprised little more than 8 percent of all CEOs in the Fortune 700. PREDICTION: The number of CEOs with MBAs will rise because more managers are going through MBA programs, but an MBA will not be an important criterion for rising to CEO. Boards and recruiters look for individuals with a track record of success in a variety of general management jobs. It's interesting to hypothesize hy·poth·e·size v. hy·poth·e·sized, hy·poth·e·siz·ing, hy·poth·e·siz·es v.tr. To assert as a hypothesis. v.intr. To form a hypothesis. what young managers might do as the cost of MBA schools rise and the probability of rising to the top ranks remains low. OBSERVATION: Nearly 60 percent of Fortune 700 CEOs have worked in one of four functions at some point in their career: finance (22 percent), operations (14 percent), marketing (12 percent), or sales (11 percent). Interestingly, just 5 percent worked in consulting at some point. PREDICTION: This ratio is likely to continue. CEOs need experience in key business functions, and the four functions above are key. We expect to see more CEOs with consulting in their backgrounds over time, partially due to the high number of MBAs recruited into consulting first before moving into general management. Because consultants often lack managerial experience, we don't expect to see a high number of CEOs who have predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. consulting backgrounds. Tom Neff Thomas Linden Neff (known as Tom Neff) is the founder and CEO of The Documentary Channel, the United State's first channel to show documentaries on a full-time, 24/7 (24 hours per day, 7 days a week) basis. is chairman, U.S., of Spencer Stuart and Dayton Ogden is co-chairman of Spencer Stuart.
1980 2000
How old your are ...
Avg. age of all CEOs 59 56
... how long you've been chief
Avg. tenure in office of all CEOs 8 7
... and how long at your company
Avg. tenure of CEO within company 24 18
Painted By NUMBERS If a picture is worth a thousand words A picture is worth a thousand words is a proverb that refers to the idea that complex stories can be told with just a single still image, or that an image may be more influential than a substantial amount of text. , one composed of hard facts and distilled by expert analysis should be priceless--or at the very least illuminating il·lu·mi·nate v. il·lu·mi·nat·ed, il·lu·mi·nat·ing, il·lu·mi·nates v.tr. 1. To provide or brighten with light. 2. To decorate or hang with lights. 3. . Here's a snapshot (1) A saved copy of memory including the contents of all memory bytes, hardware registers and status indicators. It is periodically taken in order to restore the system in the event of failure. (2) A saved copy of a file before it is updated. of today's CEO, based on the data collected in the Chief Executive/Spencer Stuart Route to the Top study. |
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