Monday, January 30, 2012

How Hard Times Affect a CEO’s Career and Management Style

Virgil Carter

Interested in becoming a CEO?

Authors Antoinette Schoar and Luo Zuo, from the MIT Sloan School of Management, write about the impact of challenging economic times on CEO career paths and management styles.  Published in a recent S+B newsletter, the authors write that “the economic conditions at the beginning of a manager’s career…have lasting effects on the career path and the ultimate outcome as a CEO”.

Starting a career in a recession “also affects a CEO’s approach to management”, the researchers say.  Such CEOs tend to “run thins in a more conservative way, investing less in capital expenditures and in research and development, for example”.  Those who begin in harder times, and thus can be seen as more recession-minded, reach the top more quickly, and are more likely to rise through the ranks at a single firm than to move across companies and industries.

The researchers also note their findings that these same CEOs “tend to lead smaller firms and receive lower compensation than their peers who started during brighter economic times”.  The findings point to the uncomfortable reality that the careers of recession-minded CEOs are not as successful as CEOs who begin in boom times.

The challenges between leading a company during extended periods of pronounced growth and turning around a distressed company may be quite different.  Yet, according to the researchers, “recession-minded CEOs do not perform differently during down times or booms”, the authors argue that their managerial styles, once formed, are relatively fixed over time.  For the full article, go here:

This may be a great time to become a CEO!

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