Apr 6, 2005

The (new) route to the top

HBS working knowledge shows the way how people are reaching the top these days compared to the 1980s.

A recent historical study of the paths taken by executives who make it to the top sheds much light not only on what personal attributes are needed, but also on how organizational dynamics contribute. Are you more likely to charge into the executive suite by working in a small company or large? Does it help to have handled many responsibilities or just a few?
The report, presented in a recent issue of Harvard Business Review, was called "The New Road to the Top." It compared Fortune 100 executives in 1980 with their counterparts in 2001. We excerpt a section on how the changing face of corporations and corporate life over the last few decades has impacted career movement.

Some important findings are (my emphasis is added)
  1. Executives are much more likely to be promoted in firms with healthy growth rates than in stagnating companies. (Isn't that obvious??)
  2. Further evidence from the data suggests that, other things being equal, younger firms offer faster advancement, perhaps because of their tendency to have flatter hierarchies.
  3. The firms that have been big for a long time—those in the Fortune 100 in 1980 and again in 2001—seem to handle career advancement and development differently from others.
  4. General Electric, Procter & Gamble, and the like provide extensive training and development opportunities. They also offer relatively long promotion ladders—hence the common notion that these "academy companies" are great to have been from.
  5. Prior research suggested that through the 1970s, marketing was the preferred track into the executive suite, but the results here suggest that finance now offers by far the best path (it offered the best path in 1980, too, but consulting and—surprisingly [why surprising??]—human resources were closer behind).
  6. The finance track will remain the dominant path to the C suite as long as the investor community wields a powerful influence on corporations. (ahah ! that explains it!)
  7. Research suggests that the odds of advancement fall as a person's tenure in a job grows. Individuals who advance to the top tend to be among the youngest in their cohorts—possibly because talent and ability get spotted early, possibly because of "halo" or reputation effects. (so people tend to pick on the guy who's moving around in the company, getting to understand the business better than the person who is building the "expertise" in one job?)
  8. Therefore, it may be easiest to move toward the top by doing well in a small company—as CFO, say—then taking the same job in a larger one.
  9. Another important point is that holding a general manager job with profit-and-loss responsibility seems to be a prerequisite for the highest positions, perhaps because the ability to run a business is considered transferable; success in running a $10 million organization is a powerful recommendation for a job running a $100 million organization.
  10. But the data are not clear on whether people should jump from company to company to get ahead. Executives who stayed in the same corporations for their entire careers got to the top as quickly as their firm-hopping colleagues—a change from the situation a generation ago—but far fewer executives are spending their careers in one company. So perhaps only those who are advancing quickly choose to stay put.