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Friday, February 6, 2015

CEO Career Breadth Creates Novel Strategies



Companies thrive or die off their ability to find the right type of leadership to manage their daily operations. Investors would be wise to consider the background and depth of experience when hiring their next CEO. A study of CEOs at 250 Fortune companies found that CEO career variety is positively associated with firm-level novelty that offers strategic dynamism and strategic distinctiveness that can help firms change and grow (Crossland, et. al. 2014). 

Strategic novelty is the ability of CEOs to think out of the box and beyond the medium of traditional strategies of those firms within their field. Instead of using only the same strategies, as other firms, they often seek out alternative strategies that could potentially have more lucrative outcomes. Novelty can make the difference between a market leader and market follower.

Career breadth is the multiple industries and places that people have worked over their careers. A CEO who worked in a single industry throughout their career will naturally be indoctrinated into those beliefs and have difficulty thinking about new ways of doing things. A person with wider experience has the ability to think creatively that leads to different results. 

Such CEOs are more likely to seek out experimentation and change as a method of managing the business. As problems arise they aren’t stuck with the status quo and often try and find new ways of doing things. This can help organizations find a way to transform themselves when market difficulties arise. 

The advantages of hiring the right CEO can make a huge difference in the growth potential of a business. Businesses naturally face internal and external challenges that can hamper their growth. CEOs that have a wider breadth of knowledge can put their mind to work on solving these challenges in new ways and hence lead their company to a new level of performance. 

Crossland, C., et. al. (2014). CEO career variety: effects on firm-level strategic and social novelty. Academy of Management Journal, 57 (3).

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