The value of industry experience

I was chatting to an entrepreneur at a wedding the other night and quickly became engrossed in his dilemma. He had reached the stage where he wanted to be chairman and appoint a CEO to run the daily operations. He had two candidates. A recruiter had turned up several likely candidates who had MBAs and who has had experience being a CEO in other industries. They knew about capital raising, acquisitions and so on, but had mixed track records in the companies they had been running. Neither had been highly successful which the recruiter brushed away with the excuse that they had done well in a bad economy.
His other candidate was someone who had climbed the ranks and understood the mechanics of the industry in a way the MBA candidates never could. She had a good world view, was socially intelligent, understood what the shareholders wanted, how the management team ran and how to communicate with staff. Her problem was her vision, as hers was not as rosy as the ones put forward by the MBA candidates.

The entrepreneur was sold on her. But his board wanted either of the MBA candidates. What did I think?

I have always marveled at companies that could put together an entire board and hire a CEO who had no experience in the industry. While there is money to be borrowed in debt fuelled binges, it is easy to go on an acquisition buying spree, talk big, boosting revenues and short-term profits and ignore the underlying business fundamentals that go towards progressing a business day by day, inch by inch.

Rob Burke from Mt Eliza Executive Education has also blamed universities and business schools for creating the myth of the professional manager. In Boss magazine, he describes them as a breed with short-term goals and a transferable set of skills that can be applied regardless of sector or experience.

Burke reckons it’s a myth due for an overhaul because this model has contributed to the broad problems triggered by the GFC because the short-term approach only looks after the top tier.

Burke goes on to say that business schools and students are raising their eyes from the short-term and are beginning to see the need for a corporate checklist that includes – along with a focus on financial – social, political, economic, legal, ethical and so on.

New professional managers will not just look after the elite – those in the top tier – but increase the wealth of all. He argues that those executives who have a broad education before they specialise are more likely to succeed because they are more worldly and have a sense of history.

After reporting all this to the entrepreneur, he pointed out that he didn’t want Nelson Mandela. He just wanted a CEO who could “do the job” and which one should he bloody well choose?

Go with the woman, I muttered as the couple by this stage were exchanging their vows. Far better off to have company and industry experience than have the professional manager at the helm.