header.gif

Don’t look to the biographies of last century’s leaders to tell you how to run a business. The business world has drastically changed — and so has what companies expect of their top-level management

A seat within the C-level comes with recognition, remuneration and, most of all, the chance to make a lasting mark on a company, a category or even an entire industry. Ascending to those heights has always been perceived as the pinnacle of career performance and achievement. But if you’re hoping the advice of 20th-century CEOs will lead you there, you’re likely to lose your way. The qualities that rocketed yesterday’s leaders to the top aren’t necessarily those that companies are seeking for today’s leadership ranks.

The career trajectory of yesterday’s top executives had certain traits: They may have started at the bottom of a specific organization and spent 30 years climbing the ladder, perhaps getting an MBA along the way, and reaching the peak of the organizational chart with skills that were broad but perhaps not transferable to other organizations. Alternatively, they may have emerged from graduate school and moved directly into a management position somewhere, with lots of theoretical understanding but little to no frontline experience managing the profits and losses of a business.

Either way, the typical 20th-century leader likely viewed management as more of an art than a science, basing their motivational tactics and even their strategy on decisions that owed more to case studies and gut instinct than to analysis or hard data. If you asked most people (in the U.S., at least) to describe a CEO, they would more than likely describe a well-connected, upper-middle-class white man with an Ivy League degree.

Well, your father’s CEO isn't running the show anymore.

 

Data Changed Everything

The first signs of the shift came in the 1980s, says Sridhar Tayur, Ford Distinguished Research Chair, professor of operations management at the Tepper School. As margins dropped, management evolved from an art to a codified, professionalized science in which decisions depended on metrics and provable business cases.

The shift accelerated in the 1990s with the rise of the internet and technological innovations that made it possible for the first time to collect and dissect enormous amounts of data to drive business decisions. From that, it took just a few years before long-established business models began to be transformed and even obliterated, seemingly overnight: “Print media, department stores, taxis, bookstores — many industries have been entirely competed away,” says Gunjan Kedia, MSIA ’94, vice chair of Wealth Management and Investment Services at U.S. Bancorp.

quote-one.gif

In this age of the data-driven business, knowing and understanding the numbers is no longer just a competitive advantage but a necessity. Organizations of all types are now gathering immense amounts of data about customers, and they need to determine how best to use that data. At the same time, digital products and on-demand services are supplementing or even replacing physical products in many areas.

“Whether we’re monitoring our health with wearables, or we’re shopping at the supermarket, or our washing machine knows when to order more detergent, everything IoT-enabled rides on analytics,” says Stephen Rakas, executive director of the Career Opportunities Center at the Tepper School. And that calls for leaders who not only need to know how to think analytically, but also are comfortable using analytic tools to speed up the process of drawing inferences from data and making better decisions.

 

Diversified C-Suite

As goes society, so goes the marketplace. Companies have recognized that if they want to compete in an increasingly global economy, they need to understand an increasingly diverse potential customer base. In response, they’re building leadership teams with a far more diverse array of backgrounds, experiences, nationalities, ethnicities and — crucially — genders.

Women wield more earning and purchasing power than ever before, and they’re climbing the corporate ladder right alongside men. Indeed, Per Lofberg, MSIA ’73, who recently retired after serving in C-level roles at companies including CVS, Merck and Generation Health Inc., says he remembers only one female classmate at the Tepper School, but MBA programs today are fairly evenly split between men and women. The results speak for themselves: A massive study of publicly traded companies conducted by the Peterson Institute for International Economics and EY has revealed that businesses with more women in the C-suite than their peers have higher profits.

Technology and the global marketplace also work together to make it easier than ever for scandals, crimes, complaints and challenges to filter out to customers and potential employees around the world. That has led organizations to increase their emphasis on ethical behavior and leadership, says Leanne Meyer, executive director of the Accelerate Leadership Center at the Tepper School. Even companies in more conservative legacy industries such as banking and insurance that once focused exclusively on the bottom line are now actively trying to attract candidates with promises of inclusivity, work-life balance and integrity.

quote-2.gif

And in one more striking sign of change, C-level positions themselves are changing and proliferating. The chief executive officer, chief operating officer and chief financial officer have been joined not just by the chief innovation officer, chief marketing officer, chief technology officer and chief information security officer, but by the chief talent officer, chief experience officer, chief learning officer, chief sustainability officer and so on. And while Tayur argues that “putting a C in front of a title doesn’t mean anything if you don’t matter in terms of P&L decision-making,” Robert Kelley, Distinguished Service Professor of Management, counters that all business-critical functions deserve representation and attention in the C-suite.

Kelley — who teaches courses at the Tepper School on developing star performers, organizational change and the new rules of business — sums up these tectonic leadership shifts succinctly: “Thirty years ago, the approach to business was ‘the machine is running, so let’s keep it humming along.’ But today, there’s disruption coming from not only your traditional competitors, but competitors you didn’t even know existed. So companies need analytics to compete and C-level executives who can help guide the analytics that keep you ahead of the disrupters, which inevitably means you need a diversified C-suite that’s aware of threats and opportunities in all the spheres that can impact the business.”

 

Meeting Expectations

Today’s ambitious business school student and graduate still needs leadership skills. The ability to implement strategy and indicate how it fits into the company’s broader goals, without hand-holding, will never go out of style. But companies now expect much more from a 21st-century business leader.

Confidence with analytics and complexity. A good head for numbers is now, as they say, table stakes. Brian Olsavsky, MSIA ’89, senior vice president and CFO of Amazon, insists that anyone aiming for a C-level position must be comfortable with large data sets and the need to distill them into usable information. “Amazon has always had to do this, because turning data into usable information to take action on behalf of customers is the core of our business,” he says. “I think that trend is true across every business. You may not need to be a machine learning expert, for example, but you had better know what machine learning is and what it implies for you and your competitors.”

Actual work experience. The future CxO needs to rise through the ranks, not just come right out of business school or a leadership training program and expect to stroll directly into a corner office, says Sujal Shah, MBA ’04, who started his career as a biomedical engineer in a laboratory. Between June 2012 and April 2017, he rose from CFO to CEO of biotech startup CymaBay Therapeutics.

“Some of the most effective C-level executives these days tend to be the people who were once in the trenches solving day-to-day technical challenges,” he explains. “In tech, they’re often former programmers. In biopharma, they’re former researchers. It gives them credibility, both internally and externally, and the understanding of what it truly takes to set and accomplish goals.”

quote-3.gif

Continuous learning. Showing that you’re pursuing opportunities to learn and grow on the way to the top is also key. “For me, it was working in manufacturing and logistics, in positions that married finance with operations,” Olsavsky says. “I didn’t know Amazon would be looking for operational finance skills, but in 2002, they were, and they hired me.”

“You have to be aware of external trends and how they impact your work and your career prospects,” he adds. “For my generation, it was computers, automation and global competition. Now it’s also machine learning, artificial intelligence, and sustainability and renewable energy.”

Empathy, not ego. The experience of working on the front lines has to be paired with a willingness to return there as needed. Shah praises people who will roll up their sleeves and help their direct reports instead of feeling entitled to opt out because they’ve been promoted, while Lofberg pointedly criticizes “freshly anointed MBAs” who think they’re superior to employees who lack advanced degrees but have valuable skills and experience.

Attention to cultural diversity. The bigger your potential customer base, the more important it is to have leadership that resembles and relates to it, which flings the door wide open to C-level executives who don’t fit the traditional mold. It’s also a reminder that companies now expect even those who do reflect the stereotype to remember that the world is large and wide. Your best customers might come not from Europe or North America, but from China, India, Africa and the Middle East — and the more you know about them, the more you’ll be perceived as an asset.

“If you're going to be successful in a global economy, you need to have exposure to other parts of the world and other cultures, so take the chance to work internationally if you get one,” Lofberg advises.

Gender equity. Companies are more avid than ever to recruit women for leadership positions, Meyer says, but the pipeline often breaks down at the middle management level because the recruiting systems themselves are inherently biased. Even organizations that know they need fairer processes for recruitment, interviewing and performance review also need C-level executives who can advocate for those processes and explain to the rest of the company why they’re important — for example, placing women in high-level operational roles in an industry with a largely female customer base.

“You can’t just say that your entire male board of directors recognizes that gender doesn’t matter,” Shah says. “Companies have to make a conscious effort to promote diversity, and it’s hard to get there until you force yourself to bring in and evaluate more qualified candidates who are women. Even we still have work to do on this front.”

An ethical compass. Companies can no longer ignore socially impactful issues or pretend that their daily operations have no larger context. In fact, Meyer says, employees and customers alike are starting to think of business leaders as having an obligation, by virtue of both their individual influence and their authority over a company, to act for the greater good where others can’t or won’t. This is true even in complicated situations where the ethical choice isn’t clear — which makes some kind of formal training in ethics a highly sought-after trait among C-suite prospects.

 

C-Suite Survival

In a smaller, less insular world where markets are global, communication is instant and minor decisions can have major impact, companies need to think strategically across both literal and metaphorical boundaries.

“If the C-level doesn’t get it, the company doesn’t survive,” Kelley points out. “And with the rise of private equity firms and activist investors who are willing to say, ‘We can run this business better than you can,’ companies are looking for C-level leaders who can reply, ‘Actually, no, you can’t.’”

The Tepper School’s Edge. . .

In a complex, uncertain global market, case studies about what organizations have done in the past aren’t the firmest foundation upon which to build a strategy for the future. How do you solve a problem that has never existed? Companies are increasingly looking to hard data for clues about what to do next — and seeking out job candidates with the proven ability to handle uncertain variables and data and to draw the inferences that drive companies forward.

Students at the Tepper School are especially well-positioned in this new world where business, technology and analytics have converged.

“Recruiters are seeing proficiency in technology and analytics as a driving force even outside of tech companies,” says Stephen Rakas, executive director of the Career Opportunities Center. “The Tepper School offers a hopeful glance into what the future is going to look like — over the last five years, for example, we’ve had more women than men MBA grads successfully enter the tech sector, which is notable given how much that industry has been criticized for lacking women in leadership roles.”

To get students on a leadership path right away, the Tepper School supplements its classroom curriculum with workshops and one-on-one coaching through the Accelerate Leadership Center and the new Business Leadership Endeavor.

Every MBA student spends the first day of the program taking a four-hour assessment and exercising interpersonal communication skills. The results determine what they work on individually with leadership coaches. The Accelerate Leadership Center hosts mandatory and optional workshops on topics ranging from conflict management and design thinking to team building and generational differences in the workplace, says Executive Director Leanne Meyer.

This spring, undergraduate business students began a new course sequence titled “Business Leadership Endeavor.” Students begin the sequence in their sophomore year with a similar self-assessment as offered by the Accelerate Leadership Center and develop leadership skills in collaboration, innovation, critical thinking, network building, self-reliance and global citizenship through their junior and senior years.

“Leadership today goes beyond building vision and thinking strategically,” says Meyer, who is also program director of the Carnegie Mellon Leadership and Negotiation Academy for Women, a program open to non-students. “They need to create environments where all employees can thrive, and CMU is trying to give students those skill sets.”

The Business Case for Women. . .

How do you bring a critical business issue to people’s attention if showing them the data and the business case isn't enough to persuade them that it’s an issue at all?

Even Tepper School students and alumni, who are trained to look closely at data, often question the famous Peterson Research study that found companies with more women in leadership positions are more profitable. And that’s a big problem, says Leanne Meyer, executive director of the Accelerate Leadership Center, who has spent much of her career talking about gender equity as an issue with a direct impact on the bottom line.

“When I present the data about profitability and gender diversity, the first thing people do is ask if maybe it’s correlation and not causation,” she explains. “They simply don’t want to believe there’s a link, even when they believe that link exists for other forms of diversity. But the fact remains that these companies are more profitable in a data-driven environment, and we can’t just choose the data we want to believe while letting the rest fall by the wayside.”

The Tepper School can’t currently bolster the Peterson Research study with its own statistics, since it doesn’t currently collect information about the relative success of companies with Tepper School alumnae in leadership roles. That said, Tepper School students have repeatedly told Meyer that they want to be the kinds of leaders who create inclusive, fair environments. She’s watched women graduate with confidence in their leadership skills and go on to create women’s groups so they can help their colleagues advance as they do. She’s seen an increasing number of male students identify as strong allies and advocates in support of female co-workers.


“We can argue about correlation versus causation all we want, but creating a more inclusive environment is valid for its own sake,” she adds. “The more diversity of thought you have, the more voices you’ll hear that you might not otherwise acknowledge. And that broadens your perspective on products, markets and trends to make your company more productive and successful.”

by Fawn Fitter

city.jpg

Related Reading from the Archives

Fall 2017 Cover Story.jpg

AGING OUT

FALL 2017
 

The-Fintech-Insurgence.jpg

THE FINTECH INSURGENCE

SUMMER 2017

Ripe for Change.jpg

RIPE FOR CHANGE

FALL 2016