Young CEOs are becoming much more commonplace in today’s business world. It used to be that young CEOs were the exception and not the rule. However, it is not at all uncommon to see 20 something and 30 something CEOs running very large and successful companies in today’s technology-driven, global business environment. Regardless of how bright and talented these young CEOs may be, there are nevertheless certain challenges and obstacles they will face for the first time that more seasoned executives have encountered numerous times over the course of their careers. In today’s post, I’ll share some thoughts on how to leverage the strengths of younger CEOs, while mitigating the inherent risks associated with inexperience… In working with a number of Private Equity and Venture Capital firms who have young CEOs at the helm of their portfolio companies, or boards that have recently hired young CEOs, it is clear to me that most organizations realize the upside of younger talent. That being said, these engagements also serve as evidence that they are looking to hedge their bets by using me to help mitigate the risk associated with young CEOs. While boards and investors like the intelligence, commitment, enthusiasm, and boundless energy that young CEOs bring to the table, it is perhaps their relentless drive to make their mark on the world that can be most attractive.On the positive side of the equation, young CEOs sometimes accomplish great things because they don’t have the experience to know what they are not supposed to be able to accomplish, and as a result, sometimes appear to achieve the impossible. However more often than not, young CEOs operating outside of experiential boundaries are met with frustration, if not failure, by having what appear to be great ideas eventually unwound by unforeseen factors that were only unforeseen to them due to their inexperience or lack of discernment. It doesn’t matter whether a young CEO is a college dropout, whether they possess an Ivy League MBA, or whether they spent a few years as a consultant at a top strategy firm…they are still likely sailing in uncharted territory more often than not. The simple truth is that everyone, regardless of their age or title, needs sound advice and counsel. However, this is particularly true of younger executives. If you were to speak with a 50-year-old CEO and ask them how much he or she has learned over the last 20 years of their career, they would most certainly say the experience gained during that time was invaluable. Let’s use the current state of the economy as an example…20 something and 30 something CEOs have never experienced a sustained period of slow economic growth, much less a global recession. They have no experience in growing a business in a declining market. Contrast this with a more seasoned executive who has lived through a few different business cycles and the experience gap becomes very clear… The purpose of this text is not to discourage investors and board members from placing a young CEO at the helm, but rather to encourage setting them up for success as opposed to failure. A bright and talented CEO is only going to be that much better with someone in their corner charged with helping them navigate the complexities of situations they have yet to encounter. My strongest recommendation is to provide your chief executive with a dedicated resource to develop their professional skills through mentoring and coaching. Not only will you be happy with your decision, but the young CEO will shave years off their learning curve. Image credit: Getty Images
Our executive search practice focuses on senior executive, board and C-Suite searches. The world’s leading brands seek our counsel to build best-in-class leadership teams, to manage performance, and for succession planning. Find LeadersOur broad portfolio of executive coaching & leadership development services pushes companies and teams to greatness, whether through 1:1 executive coaching or enterprise-wide leadership advisory. There actually is a silver bullet in business – it’s called great leadership. Develop LeadersWhy oldest and only children have better odds of running a company When corporate boards pick out new CEOs, they scrutinize candidates’ qualifications, studying their performance in previous jobs and vetting their academic credentials. But a recent study suggests they might want to look even further back in the histories of corporate hopefuls: CEOs’ experiences in childhood seem to shape what kind of leaders they grow up to be. The study—co-authored by the University of Chicago’s Todd Henderson and Florida State University’s Irena Hutton—looked at more than 650 CEOs’ birth order, family size, and history of childhood trauma, as well as their parents’ occupations and socioeconomic standing. This information covered a range of CEOs who held their positions in the ’90s, ’00s, and ’10s, and was assembled from a smattering of sources, including newspapers, biographies, trade publications, and alumni magazines. Not every element of family history seemed to be linked to CEOs’ later-in-life job performance, but many were relevant. “If I were a board member and I was in an interview with a [potential] CEO, I would ask them, ‘Tell me about your family history,’” Henderson told me. (The study has been submitted to an academic journal but has not yet been peer-reviewed.) One pattern that emerged from Henderson and Hutton’s data was that firstborn and only children seemed to have better odds of becoming CEOs than latter-borns did: Nearly half of the CEOs they studied were the oldest sibling or an only child, which is, the researchers note, higher than this group’s share of the population born between 1920 and 1959, when most of these CEOs entered the world. (The CEOs were also overwhelmingly male and white.) Other research has also found firstborns to have a professional edge: They’re more likely to hold managerial positions, and they tend to make more money. There’s some evidence that this has to do with household dynamics. “Firstborns are more likely to have college degrees, and even before that get lots of mom-and-dad time early on, which might make them more successful later,” Henderson said. “That explains why more firstborns are CEOs—they get a bigger investment in their human capital.” Once hired, CEOs—firstborns or not—tend to run companies in ways consistent with their upbringing. Children with higher socioeconomic backgrounds have been shown to be more risk-averse, and indeed, Henderson and Hutton find that CEOs who grew up well-off seem to be more cautious executives, investing less money in higher-payoff corporate initiatives and spending less on research and development. Meanwhile, CEOs from less affluent backgrounds were more willing to take risks with company spending. Researchers aren’t certain why this dynamic exists, but they have some guesses. “CEOs who grew up with successful parents may feel that they have access to winning formulas; therefore they may feel less need to alter their blueprint for success,” Sharna Olfman, a developmental psychologist at Point Park University, wrote to me in an email. “CEOs who are the first in their family to achieve significant economic success are by definition charting their own paths and do not have a surefire path to follow, freeing them up to be more original and creative in their approach.” Henderson, who specializes in corporate and securities regulation, noted that from the perspective of maximizing a company’s value, making bigger gambles leads to higher payouts. “If what you’re interested in is stock returns, you want to take risks,” he said. Socioeconomic background was the strongest determinant of executives’ risk-aversion that the researchers found, but it wasn’t the only one. “Trauma” is a catchall category the study used to refer to adverse events in CEOs’ childhoods, from the genuinely traumatic (having a serious illness or abusive parents) to the merely difficult and disorienting (moving to a new city). The former types of experiences were linked to more conservative corporate leadership, while the latter seemed to induce an amount of risk-taking that was good for the bottom line. Previous social-science research has suggested that being a firstborn might also give one less of an appetite for risk. But Henderson and Hutton found that this largely does not extend to corner offices—except when CEOs were selected to run their own family’s business. In these cases, the researchers write, “firstborns, relative to the laterborns, prefer more cautious policies that lower firm value.” Henderson thinks that corporations owned by a particular family might pick the oldest child to run things because firstborns’ personalities tend to resemble those of their parents more closely. “The parents are more likely to choose the person that’s like them—the firstborn—to run the firm, and that firstborn person may not be the best choice,” Henderson said. “Businesses like IBM, they’re not subject to this kind of family dynamic. They just choose the best person for the job”—and therefore they may be less likely to install overly cautious firstborns as leaders. Why the obsession with uncovering any variable that might affect corporate executives’ job performance? Perhaps overeager parents will sift through the results of studies like this in search of things they can do to prepare their children for success in the business world. But the most attentive audience of research like this is the people tasked with hiring CEOs. Other researchers in the past have examined how CEOs’ behavior is tied to their personalities, their experience with industry turmoil early in their careers, and even the terms of their mortgages, so family history is just another cache of potentially useful information. Everyone’s upbringing probably seeps into their working life in one way or another—it’s just the case that with CEOs, companies care a whole lot more about the consequences of that seeping. |