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Executive Interviews: Interview with Margarethe F Wiersema on The Making of a CEO
January 2009
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By Dr. Nagendra V Chowdary
Dr. Margarethe F Wiersema Dean’s Professorship in Strategic Management at The Paul Merage School of Business, University of California 
What according to you should be
the minimum qualifications and
qualities for someone to be appointed
as a CEO? Will the changes be based
on the size of the company, nature of
the industry that the company operates
in, the environment that it operates
in, the domicile status of the company
(domestic/MNC), etc?
I don’t really think you can specify a
set of minimum qualifications for the
CEO of a company. It obviously
would depend to a large degree on the
nature of the job, the organization,
and the competitive environment that
the company competes in.
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Even with
the same organization, the qualities of
a CEO may need to change over time
to deal with different circumstances.
At times, companies need to undergo
change and the type of individual that
can best lead that change may have
very different qualities than a CEO
during more stable times. Certainly,
the type of company (e.g. publicly
traded or not; global in scope or local;
single business or multi; family
owned or investor held; stable or dynamic
industry; technology driven or
not, etc….) will in large part drive the
qualifications needed in the CEO. As
a result, you cannot really identify
what constitutes an “ideal” set of
characteristics of background for a
CEO. However, having said that, one
of the key requirements of a CEO is to
be to quickly make sense of the competitive
environment in which the
company operates in and the skills
and capabilities within the company.
The CEO is in charge of setting the
strategic direction of the company
and in that capacity it is essential that
he or she guides the company to an
appropriate strategy given the environment
and the skills residing
within the company. Thus, being an
astute listener, and having an analytical
perspective can assist greatly with
assessing the situation and grasping
the issues that are of fundamental importance.
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Is it better to promote a person from
within the organization to the post of
CEO or is it better to hire an outsider
as the CEO? Is there any evidence
supporting either of these perspectives?
Under what circumstances do
you think it makes sense to adopt
each of these policies? For instance,
GE’s CEOs are always chosen from
the internal candidates, while many
other companies hire an outsider. Are
there any patterns that you have observed
over the last few decades
across several major
global companies?
This is a very topical question given
that the boards of public companies
in the US and Europe are increasingly
selecting outsiders as replacement
CEOs when the prior CEO leaves or
is fired. The increasing reliance on
outsiders which now represents 80%
of new CEO appointments after a
CEO dismissal, sends a clear message
to the investment community—that
the board not only believes the prior
CEO was not the right person to lead
the company, but that a break from
the past is needed and therefore the
boards have opted for the selection of
a CEO from outside the company. We notice that in certain companies,
after the founder CEO has relinquished
the top job in favor of a new
CEO, the company falters in all the
perceptible areas of performance as it
happened with NIKE, Southwest
Airlines, Starbucks, etc. Why do you
think it happens that way? Or is it
bound to happen this way? What’s
your reading into this phenomenon?
How do you characterize such occurrences?
Taking over after a founder CEO steps
down is never an easy job. In many
circumstances, the transition to the
first non-founder CEO occurs because
the firmis beginning to struggle
with competition or is facing a change
in competitive circumstances. Thus,
the new CEO inherits a situation that
is not of his doing. Bob Nardelli was
the first non-founder CEO of Home
Depot and was subsequently fired.
However, the competitive dynamics
of the industry had changed considerably
and the investment community
had already raised serious concerns
regarding the decline in Home
Depot’s historic profit growth prior to
his appointment. The board actively
recruited Nardelli because they saw
the writing on the wall. For organizations
to change and adapt to is never
an easy task and a new CEO is often
brought in to do just that. When the
transition does not go smoothly, inevitably
the CEO will be held accountable.
1.
The CEO Compensation Controversy Case Study
2. ICMR
Case Collection
3.
Case Study Volumes
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