Article by Stefan Stern, The Financial Times 30 Mar 2010
THE PROBLEM
Carolyn McCall announced last week that she was leaving Guardian Media Group to become the new chief executive of EasyJet, the low-cost airline. Is it wise for business leaders to switch sectors in this way? Can good managers function well in any industry? Or do business leaders require expertise to prosper in their chosen industry?
THE ADVICE
The authorWill Hopper
Good CEOs in all businesses are definable as those who have both learnt the craft of managing and acquired “domain knowledge” of their business, as they rose through the ranks. How will Ms McCall score? Ten out of 10 against the first criterion and zero against the second. Zero matters. The global credit crisis arose in large part because banks were run by people lacking domain knowledge of banking, resulting in catastrophe for the banks and society. If no good candidate is available, a company may appoint a CEO who meets only the first criterion, provided that domain knowledge is available throughout the senior team and a collegiate outlook prevails. The craft of managing is chiefly about handling people. Ms McCall will have a lot of people-handling to do at EasyJet.
The writer is co-author, with his brother Ken, of ‘The Puritan Gift’
The adviser Tom Bonham Carter
The Financial Reporting Council suggests that directors of companies need to have relevant skills, experience, independence and knowledge. For the chief executive, independence is clearly not a requirement. Often new CEOs are not the finished article. They may not have been a CEO of a listed company before, or led a business of that size. So it is imperative that the CEO builds both sector and company knowledge as quickly as possible. For the board, the first test should be the new CEO’s strategy, which must cover what they intend to do, how they intend to achieve success, and why. This exercise must be assessed to discover whether the new CEO has won the hearts and minds of all their stakeholders.
The writer is co-founder of Armstrong Bonham Carter
The deanRichard Gillingwater
It is conventional wisdom that business leaders need a deep knowledge and experience of the industry they work in. As someone who has moved “industries”, I don’t share this view. Some of the most inspiring leaders come from different industries and bring important new insights. The founder of EasyJet, Sir Stelios Haji-Ioannou (an alumnus of Cass) pioneered the low-cost approach precisely because he had no background in airlines, but a strong sense of what the customer wanted. The low-cost model is evolving to put more emphasis on air travel meeting environmental concerns and the quality of the customer’s experience. Because of her experience, hiring Carolyn McCall will be an astute move.
The writer is the dean of Cass Business School in London and a former investment banker
Copyright The Financial Times Limited 2010
