Is Your Next Great CEO a Management Consultant?

November 20, 2013 Editor 0

There are a variety of places where corporations and boards look for potential CEOs, but the leagues of management consulting generally isn’t one of them. However, new unreleased research from Spencer Stuart, a global executive search firm, suggests that we’re giving this sector short shift: There may be specific cases when a consulting background can actually boost company performance, even more so than a more traditional candidate.

Below is an edited exchange I had with a team at Spencer Stuart, led by consultants Janine Ames and Jim Citrin, who describe what they’ve uncovered about this topic — and what they’re still learning about consultants-as-CEOs.

So why should a company consider hiring a management consultant to be their CEO?

While former management consultants are not frequently chosen as CEOs — our research noted 28 former management consultants with five-plus years of consulting experience out of a total of 541 CEO transitions between 2004 and 2010 — the evidence we’ve uncovered here would suggest that, as a class, they are fully worthy of consideration. When they did take the helm of a company, they tended to improve the condition of the company over the course of their tenure more often than other leaders — 71% of the time versus 42% for those without management consulting backgrounds.

In the subset of cases where the company’s condition was classified as “Crisis” or “Challenged,” a similar difference was also evident, moving the companies to the “Stable” or “Growth” category 92% of the time, versus 70% for non-management consultants.

Leadership choices depend on many factors, of course, and need to be incredibly nuanced. But this evidence perhaps further legitimizes the option.

It can’t be the case that any old consultant should lead up a company. Did you find any characteristics that set effective consultants-to-CEOs apart?

Not every consultant is an appropriate CEO-level leader, just as is true in the broader executive population.  The nature of consulting suggests some particular factors to consider. And it certainly is possible for a person to be a highly successful consultant but not succeed in a CEO role.

For instance, consultants who are gifted at analyzing complex problems and identifying a range of possible solutions, but don’t have the drive to implement those solutions, do not make strong chief executives.  Even strong “people leadership” in a consulting context may not necessarily translate — leading teams of highly educated, motivated MBAs in the “up or out” environment of most management consulting firms is quite different from leading an employee population with a mixed set of skills and backgrounds.

Finally, it is less risky to advise than it is take direct action — those consultants with the courage to be the decider and accept the personal risk of those decisions are more likely to be great CEOs.

In terms of other specific characteristics within the study, leaders who have worked at the partner level for a top strategy firm appear more likely to succeed.  This makes sense given that they have probably worked most directly for CEOs of client companies and therefore appreciate the issues and levers of the top executive.  They also are likely to have had deeper experience tackling some of the most complex and important challenges organizations face.

Does it matter if the consultant has done work for the company doing the hiring?

No, we did not see that relationship.  There are certain industries where deep knowledge and expertise are needed, and consultants working in the industry are therefore more compelling candidates.  However, it was not the case that consultants simply crossed over from serving a specific client to being that company’s top executive.

You found that management consultants were better able to turn poorly performing companies around. Since that’s often the job of a consultant to begin with, should we be surprised?

No, probably not.  Consultants are trained to analyze and address problems, and focus on improving the value of a company over a short time frame — exactly what is needed in many turnaround situations.  They are often adept at connecting the dots between complex sets of issues and crafting phased, comprehensive programs of attack — targeting the initiatives that are most likely to deliver impact.

And what happens after the turnaround — do consultants have the skills to lead companies during good times as well as bad?

Our study did not answer this question specifically, but we have no reason to expect that they did not perform at least as well as their non-consulting peers.  Given the growing complexities of businesses today — in terms of global footprint, changing business models, more complicated constituency networks, risk management, digital technology forces, evolving competitors and other societal shifts — any company in good times is still facing a pretty daunting array of potential challenges.

What can CEOs who don’t have consulting backgrounds learn from those who do?

The main thing to learn is the urgency with which consultants naturally operate.  Having been in project settings where the clock is ticking on delivering value, consultants are often able to analyze the situation and quickly focus on the levers that matter most.

The other message is around the importance of clear and transparent communication — management consultants are trained in communicating complex ideas simply, creating a story that can be followed and remembered, and tying recommended actions back to a central strategic framework that clarifies where the company is headed.  This skill in communication is becoming more important in the transparent, multi-constituent world in which we now live.

Are there any dangers in hiring a consultant to run your company?

There are dangers in any leadership decision, and all people decisions are complicated.  The stakes are enormous and not all the evidence is visible to the naked eye. On top of that, any set of leadership requirements is going to be highly dependent on the company, its situation, strategy, business model, condition, and scores of other factors.

Beyond that, there are certainly dangers in hiring the wrong kind of consultant.  As mentioned above, not every highly successful consultant will make a great CEO.  Careful assessment of the person’s executional drive, well-rounded leadership ability and risk tolerance are important to ensure that a particular consultant will potentially be a capable CEO.  Then there are all the other factors to assess.

What unanswered questions are you still looking into?

One thing we would like to investigate further is whether the trend of choosing former management consultants as CEO is one that is accelerating.  There are some early indications that that could be the case, but we don’t yet have the sample size to prove that.

Our interest in this area is largely about continually evolving our understanding of the characteristics of high-performing CEOs, so we will continue to explore how the valuable skills or competencies that consultants have may be found in, or cultivated in, the corporate environment.

We’re also interested in expanding our research in order to understand the performance of management consultants in a number of other roles — not just as a CEO. 

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Categories: HBR, Insights

Tags: Business_Finance, Environmental consulting, management consulting