The Newer, Younger Leaders
Today’s top leaders tend to come further faster than their counterparts did two decades before. But are some of them coming up too fast, stepping into positions for which they aren’t quite ready? It’s a question worth asking because the trend toward younger, less-experienced top-tier executives will become even more pronounced once today’s generation of leaders leave the workforce.
The most recent evidence that leaders are taking a different road to the top comes from a study that compares 1980-vintage executives from Fortune 100 companies with their counterparts in 2001. In January 2005, Prof. Peter Cappelli of the Wharton School and Prof. Monika Hamori of the Instituto de Empresa reported in Harvard Business Review that 2001 execs not only tended to be younger – an average of 52 years old compared with 56 in 1980 – but spent less time in each job they held, took fewer jobs on their way up the ladder, and spent considerably less time in their current companies: an average of 15.2 years compared with 20.6 years in 1980.
Similarly, a Chief Executive/Spencer Stuart study of Fortune 700 CEOs found that they tend to get younger every year. As Chief Executive puts it, “Older executives are rapidly becoming extinct. In 1980, more than half of the CEOs of Fortune 100 companies were in their 60s; today, it’s barely a quarter” (Fredman, 2003, p. 30).
This trend has various causes, but perhaps chief among them is the high turnover rate – often forced turnover – at the top of many companies, both in the U.S. and abroad. A recent Booz Allen Hamilton study of the world’s largest publicly traded corporations shows that involuntary turnover among CEOs is near record-high levels. In fact, the rate at which they’re dismissed surged by 170% from 1995 to 2003 (Booz, 2004). Given higher churn rates among CEOs, many companies might be obligated to tap into a younger pool of potential chief executives.
But the Booz Allen Hamilton study suggests that some of the younger executives may not be quite ready for the top job. It’s true that today’s execs tend to be slightly better educated than their counterparts of 20 years ago: years of education averaged 17.02 in 1980 compared with 17.26 in 2001. But their experience levels are lower. Cappelli and Hamori found that today’s career ladder has fewer rungs on it, executives stay for a shorter time on each rung, and “the average promotion entails a greater leap in responsibility” (p. 28).
It’s possible that the experience gap hinders the success of some executives who make it to the top spot. Booz Allen Hamilton reports, “The younger the CEO when hired, the higher the likelihood of being fired. Chief executives forced from office [in 2003] were, on average, 49 years old when they were hired; CEOs who retired voluntarily were five years older when they started” (2004). The study also found that, on a worldwide basis, “the mean age of a CEO forced from office in 2003 was only 55, whereas those with regular successions were, on average, 62.1” (Lucier et al., 2004, p. 10).
Of course, correlation is not causation. There may be factors other than youth at work. Cappelli and Hamori found, for example, that among younger companies, the executives were also younger and had fewer years of experience in those organizations. Maybe the task of leading younger companies – whatever your age – is simply a higher-risk proposition than leading more established ones.
Or younger executives might be moving up faster in more turbulent industries, where success is harder to attain. In recent years, the highest rates of “involuntary succession” have occurred in industries such as telecommunications and information technology, where corporate stock performance has generally been less than stellar in recent years.
Despite these caveats, companies should bear in mind that the trend toward promoting less-experienced people to top jobs might carry higher risks. The question is, What choice do companies have? After all, a 2004 Human Resource Institute survey of corporations showed that the most commonly cited obstacle to good succession planning is a shortage of qualified candidates. If scarcity was a problem in 2004, then think of what the situation will look like when the large cohort of Baby-Boomer leaders have to be replaced by a considerably smaller population of Generation Xers.
There’s no silver bullet, of course, but the long-term success of many companies will probably hinge on telescoping the leadership development process for high-potential managers. Among the available strategies are a faster identification of leadership candidates, a more systematic mentoring process, a better executive onboarding program and a more sophisticated use of e-learning technologies. Most likely, companies will use all of the above, as well as a range of other strategies. But corporate culture is probably the single most important factor. The companies that succeed best in this area tend to have an ingrained and focused long-term commitment to the leadership development process.
To read an article printed in Workforce Magazine called “The CEO's Path to the Top: How Times Have Changed,” click here.
For more information on how to get a copy of “The Path to the Top” paper by Peter Cappelli and Monika Hamori, click here.
To hear a National Public Radio interview with Peter Cappelli about his research, click here.
For a PDF article called “The Perils of ‘Good’ Governance,” which looks at the Booz Allen Hamilton research on CEO turnover, click here.
For a Chief Executive magazine article about the changing route to the top, click here.
Documents used in the preparation of this TrendWatcher include:
Booz Allen Hamilton. “Forced Departures of CEOs Declined in 2003 but Remained Near Record Levels.” May 17, 2004. Retrieved from http://www.boozallen.com/.
Cappelli, Peter and Monika Hamori. “The New Road to the Top.” Harvard Business Review, January 2005, pp. 25-32.
Fredman, Catherine. “White-Collar Climb.” Chief Executive, March 2003, pp. 28-37.
Human Resource Institute. “Succession Planning Survey Results.” January 2004.
Lucier, Chuck, Rob Schuyt, and Junichi Handa. “The Perils of ‘Good’ Governance.” strategy+business, Summer 2004.
The most recent evidence that leaders are taking a different road to the top comes from a study that compares 1980-vintage executives from Fortune 100 companies with their counterparts in 2001. In January 2005, Prof. Peter Cappelli of the Wharton School and Prof. Monika Hamori of the Instituto de Empresa reported in Harvard Business Review that 2001 execs not only tended to be younger – an average of 52 years old compared with 56 in 1980 – but spent less time in each job they held, took fewer jobs on their way up the ladder, and spent considerably less time in their current companies: an average of 15.2 years compared with 20.6 years in 1980.
Similarly, a Chief Executive/Spencer Stuart study of Fortune 700 CEOs found that they tend to get younger every year. As Chief Executive puts it, “Older executives are rapidly becoming extinct. In 1980, more than half of the CEOs of Fortune 100 companies were in their 60s; today, it’s barely a quarter” (Fredman, 2003, p. 30).
This trend has various causes, but perhaps chief among them is the high turnover rate – often forced turnover – at the top of many companies, both in the U.S. and abroad. A recent Booz Allen Hamilton study of the world’s largest publicly traded corporations shows that involuntary turnover among CEOs is near record-high levels. In fact, the rate at which they’re dismissed surged by 170% from 1995 to 2003 (Booz, 2004). Given higher churn rates among CEOs, many companies might be obligated to tap into a younger pool of potential chief executives.
But the Booz Allen Hamilton study suggests that some of the younger executives may not be quite ready for the top job. It’s true that today’s execs tend to be slightly better educated than their counterparts of 20 years ago: years of education averaged 17.02 in 1980 compared with 17.26 in 2001. But their experience levels are lower. Cappelli and Hamori found that today’s career ladder has fewer rungs on it, executives stay for a shorter time on each rung, and “the average promotion entails a greater leap in responsibility” (p. 28).
It’s possible that the experience gap hinders the success of some executives who make it to the top spot. Booz Allen Hamilton reports, “The younger the CEO when hired, the higher the likelihood of being fired. Chief executives forced from office [in 2003] were, on average, 49 years old when they were hired; CEOs who retired voluntarily were five years older when they started” (2004). The study also found that, on a worldwide basis, “the mean age of a CEO forced from office in 2003 was only 55, whereas those with regular successions were, on average, 62.1” (Lucier et al., 2004, p. 10).
Of course, correlation is not causation. There may be factors other than youth at work. Cappelli and Hamori found, for example, that among younger companies, the executives were also younger and had fewer years of experience in those organizations. Maybe the task of leading younger companies – whatever your age – is simply a higher-risk proposition than leading more established ones.
Or younger executives might be moving up faster in more turbulent industries, where success is harder to attain. In recent years, the highest rates of “involuntary succession” have occurred in industries such as telecommunications and information technology, where corporate stock performance has generally been less than stellar in recent years.
Despite these caveats, companies should bear in mind that the trend toward promoting less-experienced people to top jobs might carry higher risks. The question is, What choice do companies have? After all, a 2004 Human Resource Institute survey of corporations showed that the most commonly cited obstacle to good succession planning is a shortage of qualified candidates. If scarcity was a problem in 2004, then think of what the situation will look like when the large cohort of Baby-Boomer leaders have to be replaced by a considerably smaller population of Generation Xers.
There’s no silver bullet, of course, but the long-term success of many companies will probably hinge on telescoping the leadership development process for high-potential managers. Among the available strategies are a faster identification of leadership candidates, a more systematic mentoring process, a better executive onboarding program and a more sophisticated use of e-learning technologies. Most likely, companies will use all of the above, as well as a range of other strategies. But corporate culture is probably the single most important factor. The companies that succeed best in this area tend to have an ingrained and focused long-term commitment to the leadership development process.
To read an article printed in Workforce Magazine called “The CEO's Path to the Top: How Times Have Changed,” click here.
For more information on how to get a copy of “The Path to the Top” paper by Peter Cappelli and Monika Hamori, click here.
To hear a National Public Radio interview with Peter Cappelli about his research, click here.
For a PDF article called “The Perils of ‘Good’ Governance,” which looks at the Booz Allen Hamilton research on CEO turnover, click here.
For a Chief Executive magazine article about the changing route to the top, click here.
Documents used in the preparation of this TrendWatcher include:
Booz Allen Hamilton. “Forced Departures of CEOs Declined in 2003 but Remained Near Record Levels.” May 17, 2004. Retrieved from http://www.boozallen.com/.
Cappelli, Peter and Monika Hamori. “The New Road to the Top.” Harvard Business Review, January 2005, pp. 25-32.
Fredman, Catherine. “White-Collar Climb.” Chief Executive, March 2003, pp. 28-37.
Human Resource Institute. “Succession Planning Survey Results.” January 2004.
Lucier, Chuck, Rob Schuyt, and Junichi Handa. “The Perils of ‘Good’ Governance.” strategy+business, Summer 2004.