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Route to the Top

Our next issue will feature CE’s 1995 Chief Executive of the Year. This is the 10th anniversary of this award, …

Our next issue will feature CE’s 1995 Chief Executive of the Year. This is the 10th anniversary of this award, which is unique in that the selection process is completely peer-driven. (The list of finalists, in case you missed it last issue, is repeated here.) Each year, we ask our CEO readers to nominate candidates they believe have excelled when measured against various criteria. In April, the 10 most frequently nominated are reviewed by a panel of distinguished CEOs and former CEOs, which ultimately chooses the award recipient.

Identifying a common thread among this year’s finalists is not easy. They represent a variety of industries, including computers, telecommunications, chemicals, utilities, heavy manufacturing, and retailing. The geographical mix is even more diverse. Only in their backgrounds does a unifying factor emerge: More than half followed an operational or technical career path to the CEO position.

This phenomenon is more than a reflection of this era of so-called business reengineering. It seems fewer CEOs are being appointed from finance, legal, and marketing/sales positions. The big news is that operations and manufacturing experience is vying with technical and scientific expertise as qualifications for the top job. This trend is confirmed in the results of annual surveys conducted by Management Practice, a management consulting firm started by former McKinsey consultants. Over the last 22 years, MPI has tracked CEO backgrounds and career paths within the Forbes 500 largest publicly held U.S. companies. MPI’s latest studies indicate that 24 percent of all current CEOs have a technical/scientific background, followed by operations/manufacturing with 20 percent; finance/accounting with 18 percent; administration with 15 percent; marketing/sales with 15 percent; and legal with 8 percent.

MPI’s tracking over the last two years showed that 30 percent of newly appointed CEOs had an operations/manufacturing background, and another 30 percent had technical/scientific backgrounds. In the 1990s, technological savvy and operational know-how are becoming the dominant ingredients for advancement and success. Fundamental understanding of production and technical capabilities are prized above financial, legal, administrative, and even marketing/sales skills. The reasons for this, says MPI Managing Principal C. Meyrick Payne, is “that most companies are trying to keep marketing skills closer to the customer, largely decentralizing marketing and sales responsibility to units that directly touch the customer.” Technology and operations, on the other hand, increasingly are found at the center of today’s re-engineered company. They are certainly more visible and important to directors when potential successors are considered. “Competitive advantage no longer comes from repackaging a product in a different way and selling it,” Payne says.

This doesn’t mean finance or marketing CEOs don’t have a shot at being selected Chief Executive of the Year. But competition from those with operational or technical backgrounds is getting more intense each year.

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.