CEO Selection, Performance and the MBA, Chartered Accountant and Business Studies Degree Almost Mandatory Requirements in Recruiting for CEO Positions.

A recent article published in the Zimbabwe and IODZ website argues that the dominance of Chartered Accountant Chief Executive Officers in Zimbabwe in general and especially on the listed companies is a major factor causing the underperformance and even collapse of companies. The article also argues that some of the Chartered Accountants heading these companies have poor track records as ceos including having collapsed other companies before. The other main argument is that when companies face severe trouble, it’s the same accountants who audit the companies and who also preside over their resuscitation efforts. The author says the problem is that the CA qualifications do not directly correlate with ceo performance and in many cases it is the CA qualifications that are the problem. His conclusion is that the CEOs position must be opened for people with other qualifications and not closed off to specific academic backgrounds especially the CA qualifications.

A similar argument still rages on regarding assumed mandatory requirement for a CEO to have a Masters in Business Administration (MBA) qualification. Henry Mintzberg, a world reknowned management scholar, has committed voluminous amounts of time on the subject arguing special attention given to MBAs and the assumed link between possession of an MBA qualification and managerial and business leadership performance has not been proven. Some radical scholars even argue that the possession of an MBA is at the centre of some of the worst CEO performances because some individuals begin to believe that since they possess an MBA they have all they need to become effective and they become complacent, stubborn and begin to believe that any failure and underperformance has nothing to do with their behaviours and competences but other factors such as the environment, economic policy and other factors beyond their control. Some studies have even pointed out a list of cases of highly qualified MBA’s from prominent business schools including Harvard and MIT who presided over the worst company collapses in history. In one of the studies, some top chief executive officers admit the lack of concrete evidence of a correlation between possession of an MBA and on the job performance including ceo performance. Interestingly, asked if the same chief executives would hire someone without MBA qualifications for a CEO position, the same chief executives officers who admitted to the lack of a link between MBA qualifications and ceo performance said they would not consider anyone without MBA qualifications for a top executive post.

The author’s argument is that the training of a CA prepares the candidate not for ceo’s position but for financial management, which is a specific role within a company. This assertion, though it sounds meritorious, requires more details on the curricula for the chartered accountants studies. In addition, there are many Chartered Accountants who might also have gone to do other studies such as the MBA and whose breath of business knowledge might have increased. Add to that the possibility of some CA ceos also doing self-study in business after qualifications. These twists may actually end up producing some great CA chief executive officers. This does not dismiss the main argument that the link between possession of a CA or MBA qualification and ceo performance has not been substantiated, neither does it dismiss the claim that there is an apparent pattern of the possession of either a CA or MBA qualification as mandatory for ceo selection even when ground reality and research refutes the logic of it. Instead it is key to point out that there are also some great ceos who are CAs or MBAs even when we can’t them attribute their high ceo performance to the possession of those qualifications.

While it is easy to focus on the CA and MBA candidates and blame them for the underperformance of businesses, companies and organisations, the main source of the problem is the general recruitment approach. First, despite numerous studies and researches pointing out that recruiting people in positions of management and leadership based mainly on academic qualifications and experience is grossly flawed, those who preside on helping companies and organisations on recruitment remain fixed on the same criteria, models and procedures that are proving to be ineffective. The majority of recruiters are using the same templates that are responsible for putting people into positions in which they will fail because they use criteria that have no direct link with on the job performance.

If you analyse adverts advertising top jobs including chief executive officers’ jobs, you most likely to see a list of competences assumed to be prerequisites for the job. However, you can see from the lists of competences that there is wide range of interpretations of the word competence and also that the majority of those interpretations are flawed. In addition, most of the so called listed competences are not the core of what drives ceo performance.

There is a mistaken belief which is taken for a fact in the corporate world and it is that academic qualifications are the key driver of real world human performance. This may be largely true in technical disciplines like medicine, science, technology, engineering, mathematics, flying and accounting because in those disciplines candidates get both the theory and the practice. In addition, the practice they do while studying is exactly or similar to how they will do it in the real world. With non-technical disciplines, most of learning is theory designed to help the candidates understand the subject. For example, a typical MBA course will have the theory in some of the core disciplines that constitute business such as marketing, leadership, accounting, management and human resources. However, the duration of the courses do not provide candidates with time to get into detail, depth and scope. Candidates therefore leave with a good understanding of the theoretical aspects of the disciplines but with much less detail on the practical aspects. Writing a piece of how one would handle a certain business situation in school is very different from dealing with the same case in real life where there are so many variables and moving pieces that needs to be taken into consideration and decision making in an complex, unfolding situation. Pilots for example, get the theory of flying and also learn to fly through flight simulators whose behaviour is similar to real aeroplanes. In addition, they then practice flying using real aeroplanes under the guidance of an experienced tutor with practical experience in flying. The trainees do not get a qualification licence before they are, beyond the trainers’ doubt, able to fly an aeroplane safely by themselves. That model of training is not available to fields such as leadership and ceoship.

A major area the corporate world has never given serious attention is a studying what really drives ceo performance. In other words, what else apart from academic qualifications and past experience could be responsible for real world ceo performance and how much academic qualifications and past experience each contribute to current performance of the chief executive officer. The fact that studies of human performance in other disciplines such as sport show that theoretical knowledge of the sport does not seem to contribute much to the performance in those disciplines has never inspired the corporate world to explore far away from academic qualifications and experience in search for the difference that makes the difference in ceo performance and ceo results. Even pointing out that much of academic studying in business and commerce except for the technical discipline is knowledge acquisition, and even given that the curriculum for such studies is rarely directly linked to practical real world performance, has not to date inspired the corporate world to seriously review their recruitment especially that of top executives. Some studies on learning and memory point out that most of what is learning during formal studying including at university level is forgotten within two years after graduating. The studies also argue that most of examinations are samples and they do not determine how much each candidate has learnt in a discipline. This means that, especially in no technical disciplines, producing high quality marks and results does not necessarily measure how much the student learnt, but to what extent the student understood the concepts and the area being examined as well as the candidate’s ability to apply the knowledge to answering the questions. If the claim that most of what is learnt during academic studying is lost within two years has merits, what then is the relevance of academic qualifications especially the demand for an MBA and CA in selection of ceos and other top executive positions?

Another major area the corporate world has never invested much in is in pinpointing the key results areas of a real chief executive officer are. Instead, most job adverts for top positions tend to focus more on items such as the required academic qualifications and responsibilities, which responsibilities and a typically a list of action items the ceo is supposed to focus on. How exactly the prescriptive list of responsibilities and activities is established is subject to debate including whether such list is evidence-based. If then a candidate is smart enough and applies for the post and is invited for an interview, the candidate will prepare for the interview by focussing on the areas highlighted on the advert and if the interviewees use the criteria to select a candidate, it follows that the one who is more prepared for the interview will get the job even when the person is not necessarily the one who possesses the best credentials for be the most effective among the candidates. This points to a potentially serious flaw or loophole in the interviewing approach.

Some recruitment experts are trying to improve the accuracy of candidate selection for ceo positions by integrating psychometric tests and personality profiling in their selection. However, this approach is still not as effective because it is used mainly candidates prequalified through the possession of a CA, MBA of other business studies qualification which is already suspect in selecting against candidates that may possess better potential and attributes to be highly competent chief executive officers. In so doing, the selection pool for chief executive officers and other top positions is drastically narrowed, leading to the natural concentration of candidates who may have the demanded academic qualifications but lack what it really takes to be a highly effective top executive especially chief executive officer.

While personality profiling and psychometric testing helps improve the chances of recruiting the right candidate, much also depends on the relevance and accuracy of the personality and psychometric tests in the real world performance of chief executives. In many cases, recruiters often fall way behind the cutting edge in research in the areas related to human performance in general and to high performance in executive positions. They many continue to use psychometric tests and personality profiling models that may have been deemed irrelevant or inaccurate in predicting candidate suitability because they do not link to the real elements that directly relate to ceo performance. In other cases, recruiters are using good models but are oblivious of newer models, methods and approaches that produce better results in selecting the best candidate.

There are more than seven elements that combine to determine performance at ceo and top executive levels. Experience plays a part but again more and more studies are arguing that over emphasising experience for top executive positions is a serious oversimplification of what it takes to succeed at that level especially in the twenty first century where the drivers of human performance are being pinpointed with higher precision and are being reduced to a science, in other words performance is being reduced to specific patterns of thinking, emotions and behaviours which can be decoded from the high competent and used to boost performance in other people who may be performing at lower performance levels. This means that ceoship and leadership can now more and more be taught and trained in the same way people are taught to drive a vehicle or to cook a meal, thus reducing the importance of previous experience.

Regarding the mandatory demand for MBA and other business studies as a prequalification for top executive positions, I have already pointed out the forgetting curve and how what is acquired through academic learning is lost. This in no way means business studies are have no relevance; what is flawed is assuming that if someone does not possess an MBA or any other academic qualification in business studies, then the person is not fit to qualify for selection. This is based on the assumption that if you do not possess an MBA or a business studies qualification, they you do not have the job-related knowledge that those with an MBA or business qualifications possess. The truth of the matter is many people are engaged in serious self-directed learning and some acquire a lot more knowledge in the fields related to business and leadership, over time, than those who possess formal MBA and business courses. Some of these even possess more knowledge in business and leadership that is more practical because they acquire most of the knowledge from those with real world experience in the disciplines as well as from those who are studying critical areas such as the gaps between theory and application in the various disciplines such as leadership, business, marketing and management.  It appears that that one’s attitude to learning is way a more variable attribute in predicting CEO performance than the possession of the academic qualifications mandatorily prescribed by traditional approaches to ceo recruitment. 

In conclusion, the following are seven specific failure points in the traditional candidate selection and appointment of candidates to the ceo position.

Job Description

The job descriptions of a chief executive officer miss many of the key requirements for the post largely because little attention is paid by the corporate world establishing the functional importance of the role of the ceo and how it is unique to other job functions. In other words answers to the following key questions about the ceo function have remained largely vague.

  1. What do ceo’s do that is uniquely different from other corporate roles?
  2. What key results must the ceo deliver in her area of responsibilities and why?
  3. What must be the ceo pay attention to and not pay attention to in her day to day activities to be highly effective?
  4. What are real links and any similarities and differences between ceo performance and organisational performance?

Key CEO Attributes Determination

If you examine most job advertise for ceo positions, the overwhelming majority heavily emphasis the only two attributes of academic qualifications and experience. All the other attributes and elements listed on the job adverts are predominantly secondary. As stated before, the majority of these attributes are fashionable but they have direct link with ceo performance; they are largely to do lists as well as lists of qualities the specific company assumes drive ceo performance. In many cases, these attributes historical and do not represent the cutting edge and recent revelations in what drives ceo performance. Infact, the emphasis on knowledge and experience is flawed in that it leaves far more important parameters such as potential, qualities and skills, which have more direct impact on ceo performance than academic knowledge.

Interview Design

The structured interviews based on the candidates answering predetermined questions is not the best format for interviewing people for non-technical jobs such as executive positions especially is the questions are designed to test theoretical knowledge is specific disciplines like leadership, marketing, strategy and so on. Effectiveness in executive positions, unlike in technical areas such as IT and accounts, is not premised on theoretical knowledge but its application. It is not theoretical knowledge of specific disciplines per se that is critical for executive success but acumen. Acumen is more to do with judgement and decision-making than with general theoretical knowledge. In other words acumen is about thinking, meaning a person must possess the right thinking with which to combine the knowledge in order to make sound judgements and decisions.

Another caveat on traditional interviewing for top positions relates to the difference between knowledge and skills. A person may pass an interview on the basis of knowledge, but then fail on the job performance because the person lacks the skills and qualities that contribute to effectiveness. Theoretical knowledge rarely equates to practical effectiveness especially in non-technical areas. This is difference between knowledge and know how.

The performance of a ceo or any other top executive is more related not to experience and academic qualifications per ser, but more on her theory of what it means to be a ceo and more importantly a theory of how to do the ceo job. This theory is rarely a direct equivalence of academic qualifications and experience but also other factors including mindset, philosophy and role models as well as knowledge acquired outside the formal academic environment. It is by far more powerful to understand a candidate’s theory, attitude, mindset and philosophy than to assess subject matter knowledge. One does not get one’s theory, especially one’s unconscious theory of things through direct, structured questions.

In addition to sound ceo acumen, the candidates with the best potential for high performance ceoship are the ones who have the most complete, most accurate and most relevant theory of ceoship combined with the most powerful ceo mindset, a strong pro-performance attitude and philosophy as well as the best minimum set of minimum qualities and skills required for ceo effectiveness.

Interviewing Panels

In many cases, the corporate world seem to grossly underestimate just how important the ceo role is to the organisation. Whereas blame for ceo underperformance is heaped on the chief executive officer concern, the epicentre of the problem often lies with the boards as well as those who lead in the recruitment of the chief executive officer. Many ceo selection interview panels often consist of peer leaders most of whom without well establish theory of what makes effective ceos and therefore the most powerful questions to ask in order to ascertain a candidate’s suitability. Even many exceptional ceos often lack the accurate consciousness of what makes them successful in their roles, making their possible inclusions on ceo interviewing and selection panels largely irrelevant. The result is that many ceos are set up for failure because they are allowed by the interviewing and selection process to assume positions and responsibilities for which they may lack the capacity and capability to handle. Even in many cases where the ceo may have previous experience in ceoship there are many context and situational factors that may militate against her effectiveness in the specific position and many candidates even lack this awareness that context and situations factors are as critical for their effectiveness as other attributes. If the interviewees have little knowledge of what makes a great ceos and what questions to ask inorder to accurately assess potential the probability of getting the right candidate for the right ceo taking into the account the specific situation and context in the organisation that is recruiting a ceo, the natural probability of getting the right candidate is 25 percent.

CEO Personality Types

There are many other factors that are often ignored in choosing the right ceo, many of which have to do with the ceos personality and psychological constructs. Some studies indicate that a correlation between ceo personality and psychological constructs and the strategic requirements of an organisation. The studies argue, for example, some ceo types are best suited to deal with situations that need turning around while some ceo types perform best when they assume positions in companies are stable, growing and require maintaining the performance.  In the same vein, the argument goes, some ceo profiles are best for companies that require major transformation and the same ceo profile may not be the best when recruiting a ceo for a company where no immediate, major transformation is required.

In conclusion, the challenges of selecting the right ceo are way beyond the argument that chartered accountants and MBA are responsible for company and organisational failures. No doubt throwing away the discredited assumption that people without academic MBA, CA and business studies qualifications lack the potential to become effective ceos will dramatically improve the selection pool and lead to a richer pool of high potential candidates and lead to an increase in highly competent ceos, the whole spectrum around the ceo role needs a complete overhaul. It is a rigged system and unfortunately calls for a major overhaul is likely to meet stiff resistance because the same system is dominated by leaders who were appointed by the same criteria that needs the overhaul. The hope for that change comes from those among those who MBA, CA and Business studies candidates who are open-minded and take issues objectively without being offended and without taking defensive positions.

simonsbere@gmail.com

©Simon Bere, 2010

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