Companies take risks with cross-sector CEOs
Sep 6, 2022
Leadership is transcending sectoral boundaries with several companies betting on the innate abilities of candidates over same-industry experience.
An Executive Access (India) study of 330 CEO movements over the last 10 months found that 27% of their hirings was cross-industry. The study, which was conducted exclusively for TOI, also shows 23% of the total hired are first-time CEOs. Moreover, 69% of these first-time CEOs are from a different industry, revealing the increased risk-taking abilities of both India Inc and the candidates themselves.
Executive Access (India) MD Ronesh Puri said, “About a decade back, hardly 10-12% of CEOs used to be from a different industry as hiring from the same industry used to be the norm. Today, the lines between one industry and another have got substantially blurred. Acceptability of talent from a different industry is increasing and talent today has much more risk appetite and prefers experimenting. Quite a number of candidates tell me: ‘There is no fun in doing more of the same’. What will be exciting for them would be using their learnings in a new industry by challenging old paradigms.”
This also appears to be a reflection of age playing a far higher preference in decision-making today than in the past. “It is indicative of organisations preferring talent which is far younger, with 45 years (age) being the sweet spot,” said Puri.
However, a large number of companies still have a sectoral preference when looking for a CEO. Santrupt Misra, group HR director of Aditya Birla Group and who also leads Aditya Birla Carbon Black & Chemicals, said it would be hard to generalise the trend as some businesses that are highly regulated & technical would rely on leaders who bring sectoral experience. Additionally, a company that controls a lion’s share of the market may not want to get a CEO from a smaller player in the same field.
“It’s a ‘horses for courses’ issue. For many, sectoral experience alone is too narrow a requirement for a CEO candidate. Such companies would prefer outstanding leadership capabilities, and if the candidate also brings in sectoral experience, that would be like icing on the cake. However, if the business is too technical and is highly regulated, like pharmaceuticals, then the domain experience in a leader becomes important,” said Misra. The Aditya Birla Group has had CEOs coming from different sectors to helm some of its flagship companies. This would be the case in most diverse conglomerates globally.
Sanjay Khosla, senior fellow & adjunct professor at Kellogg School of Management at Northwestern University, said, “For many years, I was on the board of Best Buy, a public company based in the US. As a board, we decided to hire a CEO with no retail industry experience. We hired him because he had a track record of transformation and was a team player. The risk we took paid off. Best Buy was turned around.”
In his work with a number of companies, Khosla uses the ‘Three T’ framework — transformer, team player & trust — to choose leaders. “Is the leader someone who is humble, vulnerable, and able to unleash the potential of people? Having these innate abilities is the difference between a good and a great leader,” said Khosla.
According to the Executive Access study, the industries that have attracted significant cross-sector CEOs are technology and industrial at 23% each. On the other hand, the sectors which have been tapped for CEO talent by other sectors are technology (16%), financial (14%), consulting (13%), e-commerce (12%) and industrial (12%).
[The Times of India]