The President of a country is the national Chief Executive Officer (CEO). His job is unique: he gets it through voting.
After every five years, he is assessed, gets another term or is fired. It’s the method of recruitment that gives them so much power.
What of the corporate sector? Suppose we introduced voting for CEOs too?
That would be harmless entertainment, but the owners of the firms are unlikely to allow that. Acrimony would bankrupt many firms. Infiltration by outsiders would make matters worse.
It is, however, worth noting that shareholders vote for board members of listed firms. The board members then hire the CEOs competitively using the laid down procedures
Let’s leave out the voting part and ask who should be hired as CEO, focusing on listed firms and public entities. Private firms often have their own criteria like family membership or inheritance.
The simple question is: what should be the functional background of the CEO?
Traditionally, they were the money people like accountants and financial analysts. Later marketers joined the fray and lately operations managers. In the West, the chief operations officer (COO) is often the heir apparent.
Why the changing pattern? In the past, the environment was stable with steady and predictable income.
Then came the post-WW II changes and competition, just like the markets, was liberalised. Marketers had their day. The entry of technology and the demand to focus on the core business brought in the operations managers.
They are the “do people” and understand how value is made or lost. Accountants keep track of money, not so much how it’s generated. Marketers are also not very focused on the nitty gritty. Once you combine ICT and operations, you can easily explain why COO are becoming CEOs.
In Kenya, there are new kids on the block - lawyers and human resource (HR) experts. Why? Who will be next?
The 2010 Constitution ushered in a new era where lawyers hold sway over our lives. To navigate the new litigious territory, firms are looking for lawyers as CEOs.
Company secretaries, most of whom are lawyers, are becoming CEOs. Their rise can also be explained by the fact that they are insiders and know the real details of how a firm is run. What of HR experts?
They are also insiders and are best positioned to influence succession with their insider knowledge of who is who in the firm.
The entry of lawyers and HR experts into the CEO’s position makes it seem “soft and compassionate.” But how do they compensate for their lack of technical skills? We could argue they can rely on other functional experts.
Other considerations in getting the next CEO of a company include the incumbent, who often loves to clone themselves.
The level of education is becoming a big factor. The love of higher degrees like master’s and PhD is seen as a conveyor belt to the CEO position and less for the love of knowledge or fascination with new ideas.
Does the school one went through matter in becoming a CEO? In Kenya, such positions were dominated by public university graduates. The private universities are slowly chipping into that group. Add a foreign education or a mixture of the two.
In the West, going through elite universities like Oxbridge or ivies make a big difference. The old boys’ network also seems alive. Which are the elite universities in Kenya?
The industry seems to matter too. A manufacturing firm would love someone with an engineering background.
But that can be waived in the public sector. The gender card is coming in handy in getting CEOs when candidates have the same qualifications.
Can someone do a study of Kenya’s listed firms and see if a pattern emerges? What of State corporations where other factors like regional balance and voting matter?
Will the new CEOs be more successful than the old ones? Some think with so much automation, the key issues are regulatory, legal or relations. Technical issues are no longer that critical. My view is that the lack of technical skills remains a black spot and firms could easily sub-optimise.
Could a lack of technical skills make such CEOs defensive and feel insecure? It’s easier to acquire “people skills” than technical skills such as accounting, statistical analysis or pricing a derivative.
Others argue lack of technical skills makes it easy for such CEOs to be manipulated by appointing authorities or other external agents. And they could be placed there purposely for that.
Which functional area will produce the next generation of CEOs? Will the rise of AI (artificial intelligence), chatGPs or 4IR give ICT a chance to give us the next CEOs?
Will the next CEOs be the chief IT or information officers? Note that in some organisations, IT and operations are merged, which makes lots of economic sense. But the CEO of the future will need to be multidisciplinary, more like a spider with compound eyes
What is the functional background of your current CEO? What is the functional background of the heir apparent?