Success express: They're getting younger all the time, but today's CEOs are fast-tracking their way to the top. (2002 Route to the Top).

Who Wants to be a CEO?

Don't all answer at once.

It's tougher than ever to be the top dog. Dreams hatched during the boom times of the late 1990s have been cut short by a plunging stock market and the ensuing recession. Today, CEOs are scrambling to keep grim reality from turning into a grisly nightmare. At the same time, activist shareholders and independent boards of directors are showing less tolerance for mediocre performance and no tolerance at all for poor results.

At one point in 2001, high-level departures seemed to occur weekly. "You're always expected to do better tomorrow than you did yesterday," says Conoco Chairman and CEO Archie Dunham. "A lot of CEOs haven't been able to accomplish that, and that's why they lose their jobs."

Rough waters, indeed. And, in a real sea-change, fully one-quarter of America's largest companies will be embarking under captain who is new to the helm in 2002. That's just one of the surprising statistics revealed in Chief Executive/Spencer Stuart's annual study of Fortune 700 CEOs. Other numbers analyze age, tenure with company, tenure CEO, educational background, career path history--including positions and companies -- military experience and international work experience.

These new CEOs are part of a new generation of leaders who have different backgrounds, different career histories and different approaches to their jobs from their predecessors. The numbers hint at a gradual but inexorable shift: CEOs are taking office at a younger age, after having sampled several different companies and amassed general managerial experience in a broad range of functions and disciplines. Ivy League diplomas and military stripes no longer predominate. Instead, the number of CEOs with MBAs has taken a radical jump upward, implying that more and more ambitious young prospects see an advanced management degree as a way to leapfrog lower ranks.

What will these changes mean for American business? Some trends are just emerging but, on the whole, a clear picture has yet to develop. These results should provide some idea of what to expect as new leaders face new challenges in the early years of the millennium.

Age: They're getting younger all the time

The 50s are still seen as the prime time to be CEO, with the average age of 56 years old holding steady from last year. However, while more than half of all CEOs of Fortune 100 companies--and of all the Fortune 700 companies surveyed, for that matter--are between the ages of 50 and 59, the numbers mask a steady downward trend: 15 percent of Fortune CEOs--an increase of 2 percent from last year--have yet to celebrate the big Five-Oh.

One might expect technology companies to have catapulted younger faces into the corner office, and it's true that eBay's Meg Whitman, Hewlett-Packard's Carly Fiorina, Compaq's Michael Capellas, Texas Instruments' Tom Engibous and Sun Microsystems' Scott McNealy are all in their 40s, while Michael Dell, Gateway founder Ted Waitt and Amazon's Jeff Bezos are still within sight of 35.

But what's significant is that new CEOs are taking charge at major, non-tech companies at ages that would have been considered post-pubescent in 1980, a time when nearly half of Fortune 200 CEOs were over 60. (Today, barely one-third are eligible for Social Security.) This new generation includes Charles Conaway at Kmart, Jamie Dimon at Bank One, Peter Dolan at Bristol-Myers Squibb, Alan Lacy at Sears and James McNerney and Robert Nardelli, who took over at 3M and The Home Depot, respectively, when their other 40-something colleague, Jeff Immelt, won the gold ring at GE.

Moreover, there is no significant difference between Fortune 100 CEOs and CEOs in the Fortune 601-700 range. The largest number of young CEOs are employed at Fortune 201-400 companies, where a solid 20 percent are in their 40s.

"I wouldn't be surprised to see the trend continue downward," observes Tom Neff, U.S. chairman of Spencer Stuart. He points out that the average numbers are being skewed upward by unusual circumstances at companies like Lucent and Honeywell, where the former CEOs have been pulled back from retirement to fill the slot on a temporary basis.

Nonetheless, conventional wisdom has held that it usually takes an individual until his or her 50s to gain the breadth of experience needed to run a company, especially with the performance demands on today's CEO. So why is the gravitational pull downward stronger than ever before?

Neff and Spencer Stuart president Dayton Ogden believe there are other factors at work; chief among them is the flattened hierarchy at old-line companies. As productivity increased in the 1990s, layers of organization were removed. One result was that well-managed companies gave people a chance to run business units sooner in their careers than they used to. "It used to be that you went up through functional disciplines until you got close to the top," recalls Ogden. "But the decentralized approach to creating strategic business units has created more opportunities to run something earlier in your career."

Paradoxically, the same increases in productivity that led to leaner, streamlined corporate structures also drained companies of jobs that once served as petri dishes for developing talent. With a smaller pool of CEO candidates, the organization is at risk if one of the anointed goes elsewhere. The war for talent sparked by the dot-com boom put a further demand on the supply of general management, as maturing dot-coms realized they needed a professional manager to take over from the entrepreneur-founder. "Actually, a lot of people got a chance to manage faster during the Internet bubble than they otherwise would have," says Ogden. Just consider Whitman, who was an executive at Hasbro's preschool division when a headhunter came calling on behalf of a fledgling dot-com called eBay, that she has since helped turn into one of the most successful Internet companies and, in the process, made herself into the first woman Internet billionaire.

The dot-com bust hasn't changed the trend, either. If anything, increasingly independent boards of directors are overseeing the succession process and are less likely to confine their search to the best candidate within the company. "That's why more companies have to look outside for leadership," explains Neff.

Another point in favor of outsiders: When the board wants to change the strategic direction of a company or improve its performance by shaking up its culture, it's easier to assign the task to an industry outsider than to someone steeped in the company's lore. Witness the choice of Dick Brown to turn around EDS and Jim Kilts to goose Gillette out of the doldrums. And, of course, one of the best examples is what former Nabisco chairman and CEO Lou Gerstner accomplished at IBM.

Meanwhile, the battle-scarred veterans of the dot-com debacle may find that they're eligible for another chance at the corner office in another company. "Since the pressure is off on the war for talent, the smart, well-managed companies are using this period to quietly acquire talent from outside the company," notes Ogden. "It's a great time to stock up. It's easier to pry people loose."

Company tenure: Buy your own gold watch

For years, many companies rewarded their long-time employees with a gold Rolex inscribed with thanks for a lifetime of service. But according to the trend tracked in this survey, if today's CEOs want a watch, they might have to buy it themselves.

It's the rare CEO who is a lifer anymore. In 1980, the average tenure with the same company of a Fortune 100 CEO was 26 years and it's been dropping ever since.

Today, the median tenure of Fortune 100 CEOs is 20 years; for the rest of their Fortune 700 counterparts, it's just 16 years.

"It's not like the old days," says Neff. "There aren't many people who work for one company these days." One reason is that the concept of lifetime loyalty disintegrated when companies broke their part of the compact in the giant restructuring waves of the late 1980s and early 1990s.

Another, more compelling reason is opportunity. Ambitious prospects go where the opportunities are. For some, that means staying at one company and moving around within different divisions to get more experience as a general manager. Highly diversified companies like Colgate, Emerson, GE and Johnson & Johnson are by definition going to have plenty of openings for general managers, and will produce a deep bench of experienced executives with international experience and global skills. Some of the retail companies, such as Federated Department Stores, have a dozen different chains, each of which names its own CEO. Although Citigroup and American Express are financial services companies, their range of businesses - such as insurance, credit cards, investment banking and asset management-is wide enough to serve as a CEO candidate incubator. In fact, Amex's present CEO, Ken Chenault, came up through the ranks, as did his predecessor, Harvey Golub.

By contrast, companies with a relatively small range of different product lines or whose functional organization precludes interdisciplinary managerial experience are likely to lose hot prospects once they see which way the wind blows.

Neff believes that these actions portend a trend in personnel development. "You need to focus early on your stars and make sure you have a tailored program for your high-potential players. When you've got stars, move them early and often within the company.

Many of today's CEOs sampled a variety of different companies before settling down. Some simple mathematics show an interesting fact: When you subtract the median tenure from the median age, it appears that most CEOs arrived at their companies in their early 30s and stayed there.

That's understandable. But while it's perfectly respectable-and even commendable-to jump around to build experience at the beginning of a career, Neff notes, "We would be suspicious of someone who had moved around too much, and especially if they moved around with much frequency." In mid-career, for example, five jobs in 10 years "signals a potential problem," Neff says.

Conoco's Dunham is more blunt. "If a person I'm looking at has had excessive moves, why do I want to invest in that person? I'd fear that they may stay here only two or three years, and then I've wasted my time and my shareholders' money. I want to be pretty sure that an individual wants to contribute to the company, not just take from the company.

"Young people have to be careful," he warns. "If they move too many times, they won't have a job."

CEO tenure: Don't bother to redecorate 

CEO candidates aren't just spending a shorter amount of their careers at one company; they're logging briefer tenures in the corner office, too. Nearly two-thirds of Fortune 100 CEOs have been in charge for less than six years; more than a quarter of this year's Fortune 700 CEOs have held the position for one year or less. The latter figure could be ascribed to consolidations and an abnormal number of retirements of Old Guard CEOs-but don't expect the New Guard

to stick around and get comfortable: The median tenure of both Fortune 100 and Fortune 700 CEOs is just four years. At hard-charging, mid-range companies between Fortune 201 and 400, it's a meager three years.

One reason for this is simple: The job's a lot tougher now. Today, top executives are expected to be on call 24/7. That's in addition to the normal pressures of dealing with shareholders, visiting customers and maintaining an often brutal travel schedule that results in a lot of lost weekends and family time.

The pace of change has accelerated beyond what many CEOs have ever experienced. "Events can overtake you not over a period of years but over a period of days," Ogden observes. "I suspect Enron never thought they couldn't get capital with a snap of their fingers."

Leadership is a pragmatic skill, but a CEO may not have all the skills it takes to keep a company on course in today's turbulent times. A CEO who is highly effective at running a $5 billion company might flounder trying to grow the company to $10 billion. Someone who is a whiz at operations may not have the antennae to project what the world is going to look like in two years or how emerging technology will affect a certain sector or which new competitors are likely to pop up. "A guy who's a hero today can be an absolute bum tomorrow," Ogden says.

And there may be more bums than usual in the coming months. The new class of chief executives who matriculated last year are taking over at an unusual time: a genuine recession. Thanks to the long bull market of the 1990s, few have had the experience of being a general manager during a recession, let alone the head of a company. "Most haven't been a CEO before, so a lot of them are learning on the job and being tested like nobody expected they would be tested," says Neff. "A lot of them probably won't make it."

Career history: General management trumps functional expertise

Compared to last year, there has been a significant decrease in the number of CEOs who have stayed in one functional path their entire career; among chief executives in Fortune 300 companies, only 15 percent had no experience outside of one function. In part, that figure is the result of changes in corporate structure that have replaced silos with cross-functional divisions. But it also reflects a demand for general managers' packing a broad range of disciplines and skills into their portfolios.

To be sure, certain disciplines are still seen as the fast-lane up the ladder. Fortune 700 CEOs' top three work areas are finance, operations and marketing, with sales a close fourth. Among the heads of Fortune 100 companies, though, there are some significant trends. A hefty 27 percent of CEOs know their numbers, in line with last year's findings that more CEOs are moving up through the financial ranks than through any other function. And 16 percent have experience in planning and development-double the number with sales experience.

"I think that broad immersion shapes a great deal of someone's background and character," says Jim Hackett, CEO of Steelcase. That immersion coalesces in what he calls "relevant experience," an ability to bring something-whether it's a new product, an operation or a strategy -- to market. "It's the one variable that's very difficult to do and do right."

Hackett himself had started in Steelcase's sales department, then jumped off the functional track to participate in a startup division of the company. "It taught me a ton about how you take a blank canvas and create concepts and innovate a team process under a time frame and under a budget," he says. It took three iterations before the Turnstone products were deemed successful, but Hackett is convinced that the overall experience was more important than getting the products to work the first time. "It builds confidence that you can handle very complex problems and that you can, with a group of people, figure out a direction and implement it," he says. "It's important that someone who's sitting in the CEO's seat has had the experience of bringing something to market. You won't have the respect of your peers if you're allowed to sit back and theorize about a problem without having to do it."

The vanishing solo act

The demands of running a large company today might seem to be almost too much for one person to handle. And, in fact, Spencer Stuart is seeing a change in how top managers approach mega-management. The paradigm of a strong and solitary leader of the pack is changing. "Jack Welch was a unique breed," says Neff. "There aren't too many one-man shows anymore. [They can't] deal with everything that needs to be dealt with."

While the CEO title is still held by one person, the "office of the CEO" is increasingly a partnership. It may be shared by co-CEOs, as in the case of Kraft Foods' Betsy Holden and Roger Deromedi, or by co-COOs, such as prevailed at AOL Time Warner before Richard Parsons stepped past Robert Pittman. Or it may be an informal but tight coalition of top managers. Consequently, there's a real premium for CEOs who have the people skills to recruit and develop a top-notch team.

Neff predicts a shift to a less dictatorial, more inclusive style of management. "The sharing of information, decisions and responsibilities is more necessary than ever before," he says. "Otherwise you'll drop dead from exhaustion."

Career Analysis

                                                          % CEOs who
                                                         worked at one
                              % CEO with   % CEOs with   company only
                               military   international   throughout
                              experience   experience       career

INDUSTRY

Business Services                 8%           24%            24%
Chemicals                        15%           44%            38%
Communications                    --           24%            10%
Elec., Gas, Sanitary             29%            7%            22%
Electronic Components            13%           22%            34%
Food Products                    13%           19%            34%
General Merchandise Stores       22%            6%            17%
Health Services                  20%           --             13%
Holding, Invest. Offices         17%           10%            33%
Ind., Commercial Machinery        3%           26%            26%
Insurance Carriers                8%            9%            25%
Measuring Instruments            31%           25%            25%
Oil, Gas, Extraction             15%           10%            30%
Transportation Equipment         13%           46%            33%
Wholesale Trade (Durable
Goods)                           20%           30%            45%
Wholesale Trade (Non-Durable
Goods)                           18%           14%            32%



                              Most
                              common
                              functions

INDUSTRY

Business Services             OPERATIONS  24%
Chemicals                     OPERATIONS  26%
Communications                FINANCE     38%
Elec., Gas, Sanitary          MARKETING   29%
Electronic Components         FIN / OPER  16%
Food Products                 MARKETING   31%
General Merchandise Stores    FINANCE     28%
Health Services               FINANCE     20%
Holding, Invest. Offices      MARKETING   26%
Ind., Commercial Machinery    FINANCE     16%
Insurance Carriers            FINANCE     26%
Measuring Instruments         FINANCE     31%
Oil, Gas, Extraction          OPERATIONS  25%
Transportation Equipment      OPERATIONS  25%
Wholesale Trade (Durable
Goods)                        OPERATIONS  20%
Wholesale Trade (Non-Durable
Goods)                        OPERATIONS  23%

GLOBETROTTERS

Industries attracting the highest percentage of globetrotting CEOs:
transportation equipment, with 46% of chiefs having had International
experience; chemicals, with 44%; and wholesale trade in durable goods,

with 30%.

INSIDERS

A full 38% of chemicals CEOs have never worked outside their company, as
compared with 13% of health services cheifs and 10% of communications
industry chiefs.

RELATED ARTICLE: Facts and Figures

Harvard is the most common university attended for an M.B.A who becomes CEO of a Fortune 700 company.

34% of Fortune 700 CEOs have earned an M.B.A. up from 52% last year.

23% of Fortune 100 CEOs have a degree in some type of engineering field, up from 19% last year.

11% of current fortune 700 CEOs earned an League undergraduate degree at 1997 14% held an Ivy diploma.

Undergraduate degrees most likely to lead to CEO slot

Fortune 700


HARVARD             4%
STANFORD            2%
PURDUE              1%
U OF WISCONSIN     1%
CORNELL             1%
PRINCETON           1%
U OF PENNSYLVANIA  1%
YALE                1%

Note: Table made from bar graph.

CEO Tenure

26% of all Fortune 700 CEOs looked at this year have been CEO for one year or less.

62% of Fortune 500 CEOs have been CEO for less than "" years compared to 45% in 1988.

                  CEO Tenure         CEO Tenure
               1980, Fortune 300  2001, Fortune 300

UNDER 6 YEARS         43%                62%
6-10                  36%                16%
11-15                 14%                12%
16-20                  3%                 5%
21+                    4%                 5%

Note: Table made from pie chart

The Fountain of Youth 

15% of Fortune 100 CEOs an under age 50 up from 15% last year and 2% in 1980.

25% of Fortune 100 CEOs are 60+ down from 27% last year and 51% in 1980.

                 Age                Age
          1980, Fortune 300  2001, Fortune 300

BELOW 40          1%                1%
70+               3%                2%
60-69            45%                24%
50-59            46%                --
40-49             5%                --

Note: Table made from pie chart

Functions Leading to Come Office

21% of this year's Fortune 700 CEOs focused on the same function through out then career as 25% last year.

Disciplines leading to highest echelon

Fortune 700


ACADEMIA                 3%
BANKING/ INVESTMENT      4%
BANKING
CONSULTING               5%
ENGINEERING              8%
FINANCE                 23%
LAW                      6%
MARKETING               16%
OPERATIONS              20%
PLANNING & DEVELOPMENT   9%
SALES                   12%

Note: Table made from bar graph.

More: Fortune 700 CEOs -- 18% have international work experience up from 15% last year.

Fewer: Fortune 100 CEOs -- 14% -- have military experience, down from 17% last year.

Source: Marquis Who's Who in America, 1980-1981; The Corporate Yellow Book, Spring 2001 edition; 50,000 Leading U.S. Corporations-Business Trends, 1980; S&P's Register of Corporations, Directors & Executives, 1980; QuestNT (Spencer Stuart's proprietary database); company proxies; Dow Jones articles/company press releases; OneSource.com; Hoovers.com; corporate Web sites. University registrars and company headquarters were called to request/verify information. In some of the Fortune ranking categories, the total number of CEOs adds up to more than 100 due to companies which have co-CEOs. In some instances, the total may be less than 100, as information may not have been available for all CEOs in a category. All 2001 figures were compiled based on 2000 data. Research was prepared by Spencer Stuart Marketing Information Specialist Kelley Allen.